RNS Number:5378G
Moorfield Group PLC
2 March 2000
Moorfield Group PLC
Preliminary Results for the 12 months to
31 December 1999
Highlights
- Pre-tax profit up 491% to #13.06 million
(1998: #2.21 million)
- Earnings per share up 385% to 5.24p (1998: 1.08p)
- Net asset value per share 42p, up 16.7% after adjusting
for share issue in the year
- Dividend per share up 10% to 0.6655p (1998: 0.605p)
- Ongoing reduction in gearing to 47% as cash resources
continue to build
- Formation of Moorfield Capital Partners (MCP)
Sir Brian Corby, Chairman of Moorfield Group, commented:
"The results for the year to 31 December 1999 conclusively
present the benefits of the Group's strategy. Moorfield is
in a strong financial position with significant cash
resources and almost #450 million of assets remaining under
management.
"With its venture capital approach, Moorfield believes in
investing in property and related opportunities and, as
such, will continue to refocus its activities as directed by
the returns it can achieve. It has been an exceptionally
good year for the Group".
Marc Gilbard, Managing Director said:
"The past year has been the most active in Moorfield's
history, as we have continued to successfully pursue our
stated strategy for growth. The MCP investment was a
landmark deal for the Group and has been followed by a
number of other transactions across the portfolio. The
future is exciting as we look to continue to invest in both
traditional and internet based businesses".
Press Enquiries:
Marc Gilbard/Graham Stanley
Moorfield Group
Tel: 020 7399 1900
Jonathon Brill/Charlotte
Bell Pottinger Financial
Tel: 020 7353 9203
STRATEGY
Moorfield Group PLC is a quoted property investment, trading
and development Company that combines the advantages of
being a listed public company, including access to the stock
market and investment liquidity, with some of the key
structural advantages available to private equity funds.
Shareholders' returns are derived from a combination of
returns on assets both wholly owned and under management,
income from management fees and income from profit sharing
arrangements negotiated with co-investors in joint projects.
KEY EVENTS IN 1999
Formation of Moorfield Capital Partners (MCP) to acquire
#392 million of property.
Since formation, MCP generates over #210 million of sales,
enables repayment of original equity and produces profit of
#41.93 million. Over #230 million of MCP property still
owned at year-end.
#16.6 million sold from wholly owned portfolio at a profit
of #1.52 million, with further disposals since the year-end.
Acquisition of a property investment company owning a 3,066
sq. m. (33,000 sq. ft.) office building in Edinburgh.
Completion of five new 20 year full repairing and insuring
institutional leases, with an additional Agreement to Lease
on a 'courtyard building', to Arthur Andersen at Arundel
Great Court.
Terms agreed to form a #50 million joint venture with Bank
of Scotland to grow a branded accommodation business,
'Dom@in', focused principally on students, nurses and
similar key workers.
Acquisition for Dom@in of 2 freehold sites in Liverpool, one
currently under development for 962 students and the other
intended for some 736 nurses.
Establishment of a company to explore the potential for an
internet infrastructure business together with a funded
incubator for property and property related e-commerce
opportunities.
CHAIRMAN'S STATEMENT
The results for the year to 31 December 1999 conclusively
present the benefits of Moorfield's strategy, stated as
combining the advantages of being a listed public company
with some of the key structural advantages available to
private equity funds. Equity returns are derived from a
combination of returns on assets under management, income
from management fees and income from profit sharing
arrangements negotiated with co-investors in joint projects.
Pre-tax profits for the year were #14.89 million, prior to
#1.83 million of provisions against trading properties. The
resultant pre-tax profit, after provisions, of #13.06
million is 491% up from the previous year figure of #2.21
million. Earnings per share were 385% higher at 5.24p
compared to 1.08p last year.
The Board is recommending an increased final dividend per
share of 0.363p, up 10%, taking the full year figure to
0.6655p (1998:0.605p).
In April 1999, Moorfield issued approximately 44 million
shares at 28p per share to fund its #11.4 million investment
in the Moorfield Capital Partners Limited Partnerships
(MCP). MCP was set up to acquire from Royal & Sun Alliance
three companies which together owned a portfolio of 75
properties valued at approximately #392 million. The stated
net asset value per share as at 31 December 1998 was 39p but
was diluted to 36p as a result of the share issue at 28p per
share. Net asset value per share at the 1999 year-end,
stated after provisions of #1.06 million in respect of
deferred taxation, was 42p, which is 16.7% higher than the
net asset value per share for last year once the impact of
the dilutive equity issue is taken into account.
During the year, over #400 million of property was
purchased, the majority of which was acquired through MCP.
Over #200 million of property was sold both from Moorfield's
wholly owned portfolio and, principally, that of MCP. The
MCP disposals resulted in a profit of #31.56 million, of
which Moorfield's share was #9.78 million, and the disposals
of the Group's wholly owned property generated a profit of
#1.52 million.
In addition to the property disposals, MCP made a profit
after financing costs of #10.37 million, arising from rental
income, of which Moorfield's share was #3.22 million. The
Group also earned some #852,000 in management fees from its
partnerships over the year and has benefited in all of its
partnerships to date from enhanced profit share arrangements
due to the performance of the underlying assets.
In March 1999 Moorfield completed the acquisition of the
entire issued share capital of Firmwalk Limited. This
special purpose property investment company owns Wallace
House, a 3,088 sq. m. (33,241 sq. ft.) office building in
Edinburgh.
In April 1999 the acquisition by MCP of the property
portfolio from Royal & Sun Alliance became unconditional.
The portfolio comprised well-let properties with strong
covenants and properties where active asset management could
lead to an increase in value.
The MCP business plan for the portfolio was to dispose of
the properties when the value to the partnerships had been
maximised. This was to be achieved through active asset
management and taking advantage of property market
conditions to sell individual assets or portfolios thereof.
In August 1999, MCP sold 9 Central London properties for #70
million and in December it sold a further #69 million of
industrial property, simultaneous with #4 million of
industrial property wholly owned by Moorfield.
Other individual asset sales from MCP over the year amounted
to #71.49 million by value and, in addition, Moorfield sold
#12.56 million by value of its wholly owned property.
In April 1999, Moorstone Arundel Partners L.P., the
partnership between Moorfield and Blackstone Real Estate
Advisers completed the legal formalities with Arthur
Andersen (UK) for their long-term occupation of Arundel
Great Court. Arthur Andersen now occupy the 29,357 sq. m.
(316,000 sq. ft.) complex under new 20 year full repairing
and insuring institutional leases together with an
additional Agreement to Lease 3,344 sq. m. (36,000 sq. ft.)
of net lettable accommodation to be developed in the central
courtyard. The development has planning approval and is
underway with an anticipated completion in 2001.
In December 1998, Moorfield conditionally exchanged
contracts to purchase a 2.63 hectare (6.5 acre) site in
Leeds Street, Liverpool for #1.65 million. The site
required planning consent to be developed for student
accommodation and retail use, and this was obtained in April
1999. As a result, the site was purchased and development
is currently underway to provide a 962 bed student village,
with 65 parking spaces and a complementary commercial
element on a 0.81 hectare (2 acre) site. Completion of the
student village is expected in August 2000.
Moorfield has also agreed terms for the conditional
acquisition of both the freehold and leasehold interests in
a site on Prescott Street, Liverpool for some #3.26 million,
where it is intended to provide approximately 736
residential units, principally for nurses, together with 850
car parking spaces. Liverpool's largest teaching hospital
is directly opposite the site.
Moorfield has agreed to form a joint venture, called Dom@in,
with Bank of Scotland for all of its activities based on
accommodation for students, nurses and other similar key
workers. Both of the Liverpool projects are likely to be
taken into Dom@in, within which Moorfield will be an equity
provider as well as site finder and developer/manager and
Bank of Scotland will provide both debt and equity finance.
The intention of both partners is to grow the business
around a quality branded product that can be replicated
across the country.
In September 1999 Moorfield announced that it had received
outline planning consent for the 167,224 sq. m. (1.8 million
sq. ft.) first phase of the development opportunity at
Teesside International Airport. The project is designed to
provide a total of 327,158 sq. m. (3.5 million sq. ft.) of
airport related development over 101 hectares (250 acres) of
land within the boundary of the airport. Interest from both
potential investors and occupiers remains strong but as with
all sensitive developments progress will be governed by
factors beyond the basic property issues.
Moorfield is currently exploring a number of investment
opportunities based on an internet infrastructure business
to be created within one of its existing assets. It is also
considering the creation of a property and related business
incubator fund to complement this infrastructure business.
Despite current valuations, we believe that analysis based
on sound business principles will enable investments to be
made that remain underpinned by fundamentals. This new
business area for the Group will be pursued in partnership
with management expertise in the various fields of interest
to us.
Moorfield is in a strong financial position with significant
cash resources and almost #450 million of assets under
management. The property cycle for traditional assets is
maturing and the opportunities for investment, where there
are high returns on equity invested, are becoming more
scarce. However, with its venture capital approach,
Moorfield believes in investing in property and related
opportunities and, as such, will continue to refocus its
activities as directed by the returns it can achieve.
REVIEW OF OPERATIONS
Business Overview
At the year-end, the property portfolio under management
totalled some #450 million, excluding any value from the
development opportunities, and produced an annualised rental
income of #31.40 million p.a. Of the total portfolio, #85
million represented the wholly owned portfolio and the
balance represented properties owned in partnerships,
including Arundel Great Court, held jointly with Blackstone
Real Estate Advisors, and the MCP portfolio held jointly
with Ellerman Investments Limited.
Investment and Trading Portfolio
Over the most active year in Moorfield's history, the only
investment acquisition made within the wholly owned
portfolio was announced in March, when a property investment
company was acquired. This company owns a 3,066 sq. m.
(33,000 sq. ft.) office building in Edinburgh, for an
effective cost of #11 million, which generates a gross
rental income of #793,000 p.a. and is subject to fixed
rental uplifts. The secure nature of the asset income has
enabled the Group to take full advantage of asset gearing,
and as the property has increased in value over the year the
return on equity has proven to be significantly above
target. The investment has also produced a high income
return that will increase from February 2001, after first
review.
Despite the environment of rising short and long-term
interest rates, finance costs have remained relatively low
on a historic basis, and the market for smaller well let
investments has been reasonably buoyant through the year.
As such, Moorfield has taken advantage of this to dispose of
a number of holdings in the value band below #2m. The bulk
of assets sold have been secondary retail stock and included
properties at Atherstone, Epsom, Erdington, Haywards Heath,
Hove, Loughton, Swindon, Wilmslow and Worthing. These 9
properties realised a total of #7.4 million. One office
building in London SE1 was sold in 1999 for #1.4 million
and, since the year-end, another office building in Romford
has been sold for #1.3 million.
Three industrial holdings in Leeds, Bognor Regis and Windsor
were sold for #4 million simultaneous with a larger
portfolio sold from MCP, and an industrial unit in Merton
was sold earlier in the year for #3.85 million.
Overall, these sales of wholly owned commercial properties
showed a surplus over book value of #1.589 million. Since
the year-end a number of further disposals have had
contracts exchanged, or are anticipated, as the active
trading programme is progressed.
The past year has also been a successful one for active
asset management progress on a number of wholly owned
properties. At New St, Birmingham there has proven to be
strong occupier demand for the building from recruitment
consultants and A2 occupiers where Zone A retail rents have
risen from #8,611 per sq. m. (#80 per sq. ft.) to #1,667 per
sq. m. (#155 per sq. ft.) since purchasing the property.
Extensive refurbishment of the common parts has been
undertaken on the office space to assist lettings where
quoting rents have increased from #75 per sq. m. (#7 per sq.
ft.) to #135 per sq. m. (#12.50 per sq. ft.). At Eastgate
House, Leeds 33% of the income has been secured through a
lease re-gear for a 10 year term with the Secretary of State
for Environment, resulting in the property being fully let.
Chapel Market, Islington had proved to be a difficult
property up to and following the liquidation of the previous
tenant. However, Moorfield has successfully secured a new
letting for a 15 year term at #120,000 p.a., thereby
improving certainty of income and value. At Atlas House,
Sutton Coldfield, our exposure to lease expiries on the
retail element was mitigated with the letting of all 5 units
to Bass for a 25 year term. The vacant offices and common
parts are being upgraded and actively marketed.
At 11/15 Victoria Street, Wolverhampton, Moorfield is
developing a 297 sq. m. (3,200 sq. ft.) 2nd floor roof
extension to the property. After a series of complex
negotiations Moorfield has successfully secured a pre-let to
HMV for a 15 year term at #35,000 p.a., thereby enabling HMV
to expand and link through from an adjoining property.
Building works have commenced with HMV taking occupation by
April 2000.
Since the new management team joined Moorfield, the assets
acquired, both directly and in partnership, have performed
well in excess of the stated equity return hurdle of 20%
p.a., enabling the management to progress the business.
However, many of the assets that were within the Group at
the beginning of 1996, continue to underperform and, as
such, these properties are being actively disposed of as
asset management and market conditions allow. The total
write down in the value of the wholly owned portfolio was
#3.13 million. This comprised a current year charge against
profit of #1.83 million in respect of the trading and
development portfolio, as well as a #1.3 million provision
through reserves made in respect of prior year revaluation
deficits of certain investment properties.
Overall, the portfolio of wholly owned investment and
trading properties increased in capital value by only 1%
adding approximately #430,000 to the net asset value of
Moorfield. The annualised rent roll of the wholly owned
portfolio was #5.39 million which represented a gross
initial income yield of 7.50%, with a reversionary gross
yield of approximately 8.45%.
Development Activities
Lowestoft
Further development is taking place at North Quay Retail
Park Lowestoft where #372 sq. m. (4,000 sq. ft.) of retail
space has been pre-let to Choices Video at #135 per sq. m.
(#12.50 per sq. ft.), with completion due in summer 2000.
The rent to be paid by Choices Video sets an increased
rental tone for the park. In addition, there has been
development of a further 2,787 sq. m. (30,000 sq. ft.) of
industrial units as part of an existing planning condition.
These units are being actively marketed.
Since the year-end Moorfield has conditionally agreed terms
for the disposal of the retail element of North Quay Retail
Park in Lowestoft, to a listed property company for #17
million. An exchange of contracts is expected imminently.
South Side Development - Teesside International Airport
Moorfield has been successful in obtaining outline planning
consent for the first phase of its development proposals for
Teesside International Airport (TIA). The Secretary of
State for the Department of Environment, Transport and
Regions issued the consent, following a protracted Public
Inquiry, on 27 September 1999. The consent authorised the
construction of up to 167,286 sq. m. (1.8 million sq. ft.)
of airport related development on the first phase of a 101
hectare (250 acre) site intended to eventually accommodate
325,158 sq. m. (3.5 million sq. ft.) of airport related
development. The land is currently held under option by the
Group and is abutting the main runway.
On 9 February 2000 Moorfield completed the acquisition of
the land which will provide road access to the South Side
development, for #436,000, which is fundamental to the
opening-up of the South Side area of the airport.
Marketing of the development will commence in earnest now
planning consent has been obtained, with Moorfield
continuing to work closely with local, regional and national
bodies to ensure that the airport receives international
exposure. A virtual reality model of the development has
recently been completed and will form an integral part of
this marketing process.
Darlington and Drighlington
Moorfield established strong tenant interest and thus agreed
to acquire the retail warehouse development site in
Darlington. However, the British Rail Property Board was
unable to complete the transaction as a result of the
Department of the Environment, Transport and the Regions
implementing an embargo that prevented them from disposing
of land assets with a potentially strategic transport use.
Moorfield continues to receive occupational interest in the
site and hopes to be able to resurrect a viable opportunity
before expiry of the existing planning consent.
Moorfield had been negotiating over the last year to extend
the terms of the various options under which it holds an
interest in the approximately 20 hectare (50 acre) site in
Drighlington. It was felt necessary to seek a timetable
that would span the next two Unitary Development Plan
reviews for both Leeds and Kirklees Councils, to bring the
site forward from a greenbelt allocation to a developable
status. However, after protracted discussion, Moorfield has
been unable to agree acceptable terms with the land-owners
and has, therefore, withdrawn from an active position and
written off the carrying costs of the project.
Dom@in
Moorfield has agreed to form a joint venture, branded as
Dom@in Limited, with Bank of Scotland for all of its
activities based on accommodation for students, nurses and
similar key workers. Moorfield will be an equity provider
as well as site finder and developer/manager and Bank of
Scotland will provide both debt and equity finance. The
intention of both partners in Dom@in is to grow the business
around a quality branded product that can be replicated
across the country.
In January 2000, Matthew McAdden was recruited as a director
of Dom@in, to work exclusively within this sector of the
business. He has a background in public sector finance, and
has extensive contacts throughout the Higher and Further
Education sectors. These links are already generating
prospective opportunities.
In December 1998, Moorfield conditionally exchanged
contracts to purchase a 3 hectare (6.5 acre) site in Leeds
Street, Liverpool for #1.65 million. The site was zoned for
industrial use and required planning consent to be developed
for student accommodation and retail use. In April 1999
Liverpool City Council issued a 'minded to approve' planning
decision that subsequently went unchallenged. As a result,
the site was purchased and development is currently underway
to provide a 962 bed student village, with 65 parking spaces
and a complementary 1,858 sq. m. (20,000 sq. ft.) commercial
element on a 0.81 hectare (2 acre) site. Completion of the
student village is expected in August 2000.
Moorfield has also agreed terms for the conditional
acquisition of both the freehold and leasehold interests in
a site on Prescott Street, Liverpool for some #3.26 million,
where it is intended to provide approximately 736
residential units, principally for nurses, together with
some 850 car parking spaces. Liverpool's largest teaching
hospital is directly opposite the site.
There are many direct and related business opportunities
currently being explored with regard to growing this
business.
Joint Projects
The most significant event of the year for Moorfield was the
establishment of MCP to acquire from Royal & Sun Alliance
three companies which together owned a portfolio of 75
properties, independently valued on an open market basis as
at 31 March 1999, at #392.35 million. Moorfield identified
and negotiated the acquisition and arranged the formation
and financing of MCP.
MCP comprises two limited partnerships, established in
England. Each Partnership comprises three limited partners,
being the investors, and a general partner. The investors
are Moorfield, Ellerman (whose main activities are the
operation of hotels in the UK and Europe and property
investment) and Dover Trading Limited/Weir Limited (two
companies owned by a Moorfield Employee Benefit Trust which
hold these interests in MCP on trust). The general partners
are MCP Trading and MCP Investment, each of which is owned
as to 50% each by Moorfield and Ellerman.
On 9 March 1999, Moorfield announced a 1 for 3 Open Offer of
New Ordinary Shares at 28p per share, the net proceeds of
which were applied towards financing Moorfield's investment
in MCP. The issue was fully underwritten by Royal & Sun
Alliance and resulted in them owning just over 10% of
Moorfield.
Moorfield invested #11.4 million for a 24% interest in MCP,
Ellerman invested #32.4 million for a 72% interest and
Dover/Weir invested #1.8 million for a 4% interest. Net
proceeds from realisations of properties from MCP (after
debt repayment) together with surplus income is distributed
to investors pro rata to their respective interests until
each has received distributions equal to its investment.
Thereafter, distributions are amended to generate a carried
interest return to Moorfield whereby Moorfield receive 31%,
Ellerman 65% and Dover/Weir 4%.
As part of the acquisition funding, Depfa Bank loaned MCP
#295 million of non-recourse bank debt and Royal & Sun
Alliance subscribed for #60 million of MCP subordinated
bonds.
Moorfield is property manager of the MCP portfolio and is
paid a management fee equal to the greater of 3% of gross
rental income from the portfolio or the costs incurred in
managing the business of MCP. Ellerman also paid a
founder's fee of #1.5 million to Moorfield.
The properties within the MCP portfolio have been actively
managed around a business plan established at the time of
acquisition and continually reviewed in the light of market
circumstances and opportunities arising. Some specific
management highlights and a sales summary are set out below.
MCP Asset Management Summary
The quality refurbishment carried out of the 7th floor of
Holland House, Bournemouth was justified with the letting of
all 743 sq. m. (8,000 sq. ft.) to Abbey Life for a 10 year
term at #113 per sq. m. (#10.50 per sq. ft.), the best rent
achieved in Bournemouth for over 5 years. Similar success
was achieved at 172/176 High Road, Streatham where
Sainsburys was secured by way of a pre-let for a 20 year
term at a rent of #125,000 p.a. (#50 Zone A). This is in
excess of our ERV and provides favourable evidence for
adjoining rent reviews and lease renewals on property owned
by MCP.
Considerable proactive asset management is being undertaken
at Kembrey Park, Swindon (the largest asset in the
portfolio) which is a 22 hectare (55 acre) mixed use
business park, totalling 66,890 sq. m. (720,000 sq. ft.),
with a total rent of approximately #4 million p.a. MCP has
rebranded the park and renewed the marketing to increase the
occupancy rate from its current 83%. We are actively
seeking pre-lets for the vacant buildings and development
sites, having taken lease surrenders and carried out
refurbishment on vacant space.
Increased office occupier demand around the M25 has
considerably assisted the rent review negotiations for the
two office buildings at Thames Street, Staines, totalling
3,252 sq. m. (35,000 sq. ft.) where the rents agreed at
approximately #236 per sq. m. (#22 per sq. ft.) show a 20%
increase in the passing rental level, against expectations
of nil increase when the property was purchased.
At 50/52 Regent Street, London a sublease was sold to a
serviced office operator, for the remainder of the MCP head
lease term, for a capital sum of #2.1 million together with
a base annual income of #50,000 (plus a potential profit
share). Whilst this removes the intensive financial
management liabilities of the serviced offices, MCP has
retained an interest in the event that the head lease is
renewed upon expiry.
Tenant negotiations were successfully concluded with British
Gas at Heron House, Holborn, London where MCP secured a
substantial reverse premium for a surrender of the head
lease and simultaneously inherited various sub tenants.
This property has subsequently been sold.
The lack of development sites generally available enabled
MCP to negotiate a sale option with Asda at 134 Bridge Road,
Maidenhead. Asda have paid a non-refundable deposit and are
attempting to secure a supermarket planning consent on the
site.
Considerable asset enhancement opportunities exist at Cavern
Walks Shopping Centre, Liverpool where MCP is actively
negotiating flexibility within the tenants leases to enable
a reconfiguration of the centre at a later date to refocus
the scheme for top quality fashion retailers. The vacant
offices are being refurbished to take advantage of the
strong occupier demand and over 1,858 sq. m. (20,000 sq.
ft.) is currently under offer.
MCP Sales Summary
Since acquiring the MCP Portfolio, Moorfield, as property
manager, has been responsible for sales in 1999 totalling
#210.49 million, which consisted of a total of 35
properties. A further 4 properties have been sold in the
first two months of 2000.
The properties sold produced a total rental income of #11.19
million which yielded approximately 6.45% and were sold for
an increase in capital value over cost of 21.3%.
Notable disposals included a portfolio of 9 central London
properties for #70 million. These properties produced an
annual rental income in the order of #4.62 million and were
sold on a net initial yield of approximately 6.3%. Terms
were agreed directly with the purchaser and Moorfield
progressed the transaction to an exchange of contracts
within 3 weeks.
A further portfolio of properties were sold from both MCP
and those wholly owned by Moorfield Group. The portfolio
comprised 15 properties from MCP, sold for #69 million, and
a further 3 properties from the wholly owned portfolio sold
for #4 million. The gross rental income on this portfolio
was in the order of #5.34 million and sold on a net initial
yield of approximately 6.9%.
Other notable disposals included the sale of Bevis Marks
House in the City for #28 million. The building produced a
rental income of #2.37 million and was sold on a net initial
yield of 8%. Cory House and Ocean House in Bracknell, was
sold for #14.7 million and 137 St Vincent Street, Glasgow, a
building let to the Prudential, was sold for #10.35 million,
based on a net initial yield of 6.4%.
Retail properties in Rushden, Wallingford, Chesham, Wickford
and Truro were sold for a total consideration of #11.265
million.
Since acquisition, the cash generated from net rental income
and sales has enabled the repayment of all the original
equity and has generated a profit of over #41.93 million.
At the year-end, property valued at over #230million was
still owned by MCP.
Arundel Great Court
The Moorfield Group acting for Moorstone Arundel Partners LP
(MAP), the joint venture partnership between Moorfield and
Blackstone Real Estate Advisors, the property fund of The
Blackstone Group, completed the legal formalities with
Arthur Andersen for their long-term occupation of Arundel
Great Court in April 1999.
Arundel Great Court comprises a complex of five inter-linked
office buildings totalling 29,357 sq. m. (316,000 sq. ft.)
with a central courtyard located just off the Strand in
Central London. Agreements were exchanged with Arthur
Andersen to surrender their existing relatively short-term
occupational leases and they will now occupy under new 20
year full repairing and insuring institutional leases with 5
yearly upward only rent reviews.
In addition, MAP have agreed to undertake a comprehensive
refurbishment of the Strand entrance providing an imposing
new entrance lobby which will provide a strong corporate
identity for Arthur Andersen. Agreements were also
exchanged with Arthur Andersen for the pre-let of a new high
quality 3 storey office building in the central courtyard
which will provide a further 3,344 sq. m. (36,000 sq. ft.)
of net lettable accommodation, with a new conference centre
and meeting rooms as well as grade A office accommodation.
Moorfield obtained planning permission for this new building
in August 1999 subject to the resolution of a Section 106
Agreement for a contribution to environmental improvements
in the Strand area. Construction for the new courtyard
building is due to commence in late February 2000 and in
addition Arthur Andersen have requested the developer to
undertake all of their fitting out works and produce a turn-
key building for them to occupy.
With the new building completed, the entire complex will
produce a rental income of #11.2 million p.a. with rent
reviews due in February 2003.
Since the year-end, discussions have commenced with a Middle
Eastern buyer for MAP to dispose of their interest in
Arundel Great Court. However, the transaction is only in
the early stages of legal due diligence.
Internet and e-Commerce Related Activities
Moorfield has been researching the internet market and the
property related opportunities therein for some 2 years. It
has been a very difficult market to analyse based upon
business fundamentals, particularly the establishment of
corporate value. However, the time spent on research has
developed some very interesting contacts and opportunities
for Moorfield and has given it the confidence to begin to
invest time and capital into specific internet and related
business areas.
Moorfield considers it has identified a building within its
own portfolio that may prove to be suitable for conversion
into a web hosting facility. Further property due diligence
will be undertaken but the most important aspects in
determining the building's suitability have already been
established. Not only would this building become income
producing as a result of its new occupation, but it could
also be the foundation for an internet infrastructure
business. There will be substantial capital costs involved
in making this property fully compatible with its user
requirements if it proves suitable.
As a result of the possible creation of this internet
infrastructure business, Moorfield has also been exploring
various internet opportunities that either separately or
together may be of significant value. The Group intends to
act as an initial financial supporter and catalyst to
various property and related internet and e-commerce
businesses.
It is not Moorfield's intention to become an internet
investor for the sake of inclusion in the current e-commerce
euphoria. If the identified building proves unsuitable or
no business opportunities of value or interest arise, the
Group will not play a part in this activity until it is able
to justify doing so based on sound fundamental criteria.
Financial Position
Moorfield is in a strong financial position with almost #450
million of assets under management, significant cash
resources and balance sheet gearing of 47%. On Balance
Sheet property gearing, net of cash, was 41%, although the
average level of property gearing in the MCP and Moorstone
partnership vehicles was 82%. The strategy of a lowly
geared core business with higher gearing in non-recourse,
off-balance sheet vehicles, is one that the Group intends to
continue to employ.
Interest cover from the wholly owned portfolio currently
runs at approximately 1.8 times and produces a surplus of
almost #2.4 million p.a. This provides a significant
contribution to Group profit with additional income coming
from the partnership investments.
The property cycle for traditional assets is maturing and
the opportunities for investment, where there are high
returns on equity invested, are becoming more scarce.
However, with its venture capital approach, Moorfield
believes in investing in property and related opportunities
and, as such, will continue to refocus its activities as
directed by the returns it can achieve
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 1999
1999 1998
Notes #'000 #'000
Turnover - group and share of associates 76,947 12,957
Less - share of associates turnover (55,939) (2,407)
====== =====
Group turnover - continuing operations 1 21,008 10,550
====== =====
Gross rental income 6,603 6,742
Rents payable and other outgoings (595) (650)
-------- -------
Net rental income 6,008 6,092
Administration expenses (4,353) (2,213)
(Loss)/profit on trading properties (429) 181
Profit on investment properties 122 226
Other operating income 1,524 553
-------- -------
Operating profit - continuing operations 2,872 4,839
Group share of operating profit of
associated undertakings 2 19,687 2,460
------- -------
Profit on ordinary activities before
interest and taxation 22,559 7,299
Net interest payable - group (2,925) (3,106)
Net interest payable
- share of associated undertakings 2 (6,578) (1,984)
-------- -------
Profit on ordinary activities before
taxation 13,056 2,209
Taxation on profit on ordinary activities 3 (4,569) (663)
-------- -------
Profit on ordinary activities after
taxation 8,487 1,546
Equity dividends 4 (1,173) (831)
-------- -------
Retained profit for the year 7,314 715
===== =====
Basic earnings per ordinary share 5 5.24p 1.08p
===== =====
Diluted earnings per ordinary share 5 5.24p 1.08p
===== =====
CONSOLIDATED BALANCE SHEET
for the year ended 31 December 1999
1999 1998
Notes #'000 #'000 #'000 #'000
Fixed assets
Investment and
development properties 6 64,060 45,540
Other tangible assets 260 302
Investment in associated
undertakings 29,543 6,093
------- 93,863 ------ 51,935
Current assets
Trading properties 7 17,258 31,498
Debtors 6,764 1,896
Other investments 62 62
Cash at bank and in hand 11,750 8,273
------- ------
35,834 41,729
Creditors
Amounts falling due
within one year (17,751) (5,662)
-------- ------- ------ -------
Net current assets 18,083 36,067
------- -------
Total assets less
current liabilities 111,946 88,002
Creditors
Amounts falling due
after more than
one year (39,830) (39,589)
Provisions for
liabilities and charges (643) -
-------- --------
Net assets 71,473 48,413
===== =====
Capital and reserves
Called up share capital 17,623 13,217
Share premium account 36,744 29,793
Investment revaluation
reserve 11,318 6,606
Capital reserve 648 648
Capital redemption
reserve 1,148 1,148
Profit and loss account 3,992 (2,999)
-------- --------
Shareholders' funds -
equity interests 71,473 48,413
===== =====
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 1999
1999 1998
Notes #'000 #'000 #'000 #'000
Net cash inflow from
operating activities 9 15,518 1,819
Dividends from Associated
undertakings
Dividend received from
Moorstone associates - 544
Returns on investment and
servicing of finance
Interest received 492 363
Interest and finance fees
paid (3,248) (3,461)
------- -------
Net cash outflow from
returns on investment (2,756)
and servicing of finance (3,098)
Taxation - UK Corporation
tax paid (1,171) (334)
Capital expenditure and
financial investment
Purchase of investment
properties (9,707) (723)
Additions to tangible fixed
assets (109) (109)
Sale of investment
properties 2,074 7,141
Sale of tangible fixed
assets 41 24
------- -------
(7,701) 6,333
Acquisitions and disposals
Original investment in MCP
associated undertakings (11,400) -
Repayment of investment in
MCP associated
undertakings 6,120 -
Investments in Moorstone
associated undertakings (355) 2,222
Acquisition of subsidiary
(Firmwalk Ltd) (633) -
-------- -------
(6,268) 2,222
Equity dividends paid (969) (826)
------- -------
Cash (outflow)/inflow
before use of liquid
resources and financing (3,347) 6,660
Financing
Share issue proceeds 12,336 -
Share issue expenses (979) -
Consideration for
acquisition of own shares - (1,750)
Increase/(decrease) in
debt:
Capital element of finance
lease payments (7) (7)
Loans advanced in the year - 20,685
Loan repayments in the year (4,598) (21,983)
-------- --------
Net cash inflow/(outflow) 6,752 (3,055)
from financing
------- ------
Increase in cash in the
period 3,405 3,605
===== =====
NOTES TO THE ACCOUNTS
for the year ended 31 December 1999
1. Group Turnover
1999 1998
Turnover Cost of Property Turnover Cost of Property
sales income sales income
#'000 #'000 #'000 #'000 #'000 #'000
Rental
income 6,603 - 6,603 6,742 - 6,742
Trading
income
(commercial
property) 13,046 (11,579) 1,467 - - -
Trading
income
(residential
property) 1,359 (1,426) (67) 3,808 (3,627) 181
-------- -------- -------- -------- ------- --------
21,008 (13,005) 8,003 10,550 (3,627) 6,923
======== ===== ===== ===== ===== =====
2. Results from Associated Undertakings
MCP Moorstone Total Moorstone
Associates Associates Associates Associates
1999 1999 1999 1998
#'000 #'000 #'000 #'000
(i) Operating profit
for the year
Gross rental income 26,035 9,173 35,208 9,629
Property outgoings/
administration (2,505) (85) (2,590) (161)
Profit on property
sales 30,668 - 30,668 370
Other income 1,982 - 1,982 -
------ ------ ------- ------
56,180 9,088 65,268 9,838
====== ====== ====== =====
Group share 17,415 2,272 19,687 2,460
====== ====== ====== =====
(ii) Net interest
payable 14,250 8,644 22,894 7,935
------ ------ ------ ------
Group share 4,417 2,161 6,578 1,984
====== ====== ====== =====
3. Taxation on Profit on Ordinary Activities
1999 1998
#'000 #'000
Current year charge:
UK corporation tax on profit on ordinary
activities - group - 937
UK corporation tax on profit on ordinary
activities - share of associated undertakings 3,927 54
Deferred tax 642 -
Advance corporate tax written back - (262)
Prior year adjustments - (66)
----- -------
4,569 663
===== =======
Deferred tax has been provided in respect of Accelerated
Capital Allowances.
4. Dividends
1999 1998
#'000 #'000
Interim dividend of 0.3025p per share
(1998 - 0.275p) paid 533 395
Proposed final dividend of 0.363p per share
(1998 - 0.33p) payable 640 436
------ ------
Total dividends on equity shares 1,173 831
===== =====
5. Earnings per Ordinary Share
The calculation of basic earnings per share is calculated
using profit after tax of #8,487,000 (1998 - #1,546,000) and
the weighted average number of shares in issue during the
year of 161,861,794 (1998 - 143,367,699).
As required by Financial Reporting Standard 14 "Earnings per
Share", the component figures used in calculating the fully
diluted earnings per share are disclosed below.
The weighted average number of dilutive shares is arrived at
by comparing the difference between the weighted exercise
price of the share options with the daily average mid-market
share price over the period.
1999 1998
Weighted average exercise price of
share options in the period 28.97p 29.00p
Average daily share price in the
period 27.33p 27.67p
----------- -----------
Weighted average number of shares in
issue in the period 161,861,794 143,367,699
Weighted average number of dilutive
share options 19,618 12,026
Total number of shares used in
calculation of diluted earnings per
share 161,881,412 143,379,725
=========== ===========
6. Investment and Development Properties
Investment Development
Long
Freehold leasehold Freehold Total
#'000 #'000 #'000 #'000
Cost or valuation
At 1 January 1999 41,840 3,700 - 45,540
Additions 12,462 - 9,720 22,182
Disposals (3,347) - - (3,347)
Revaluation (deficit)/
surplus 360 (675) - (315)
------- ------ ------- -------
At 31 December 1999 51,315 3,025 9,720 64,060
===== ===== ======= =====
The year end book
values are analysed
as follows:
Historical cost 48,125 3046 9,720 60,891
Revaluation surplus/
(deficit) 3,190 (21) - 3,169
===== ===== ======= =====
Freehold and leasehold investment properties held by the
subsidiaries were valued at #54,340,000 by DTZ Debenham Tie
Leung Limited, acting as external valuers. The properties
were valued as at 31 December 1999 on the basis of Open
Market Value, in accordance with the Appraisal and Valuation
Manual of the Royal Institution of Chartered Surveyors.
7. Trading Properties
Freehold Freehold
commercial Development residential
properties expenditure properties Total
#'000 #'000 #'000 #'000
At 1 January
1999 29,125 1,158 1,215 31,498
Development
expenditure - 123 - 123
Additions 53 - 262 315
Disposals (11,423) - (1,426) (12,849)
Write down
provisions (1,264) (565) - (1,829)
--------- --------- --------- --------
At 31 December
1999 16,491 716 51 17,258
===== ===== ===== =====
The freehold commercial trading properties held by the
subsidiaries were valued at #17,950,000 by DTZ Debenham Tie
Leung Limited, acting as external valuers. The properties
were valued as at 31 December 1999 on the basis of Open
Market Value, in accordance with the Appraisal and Valuation
Manual of the Royal Institution of Chartered Surveyors. The
development expenditure comprises costs incurred in relation
to the projects at Darlington and Teesside. The residential
properties are held by Upwood LP.
8. Borrowings
1999 1998
#'000 #'000
The aggregate amount repayable falls
due over the following time periods:
Within one year 5,537 426
Between one and two years 4,832 434
Between two and five years 30,998 5,729
Over five years 4,000 33,404
-------- --------
45,367 39,993
======== ========
1999 1998
#'000 #'000
Comprising:
Variable rate bank loans and
overdrafts 31,983 28,993
Fixed rate bank loans
(8.65 per cent until February 2004) 11,000 11,000
Fixed rate bank loans
(6.54 per cent until February 2004) 2,384 -
-------- --------
45,367 39,993
======== =====
9. Reconciliation of Operating Profit to Cash Inflow from
Operating Activities
1999 1998
#'000 #'000 #'000 #'000
Operating profit 2,872 4,839
Depreciation of tangible
assets 103 100
Profit on sale of
investment properties (123) (226)
Profit on sale of other
fixed assets 7 (8)
------- -------
(13) (134)
Working capital movements
Stocks 14,240 (2,998)
Debtors (3,062) (154)
Creditors (1,481) 266
------- -------
12,659 (2,886)
------ ---------
Net cash inflow from
operating activities 15,518 1,819
====== =====
The preliminary statement, which has been agreed with the
auditors, was approved by the Board on 2 March 2000. It is
not the Company's statutory accounts. The statutory
accounts for the year ended 31 December 1998 have been
delivered to the Registrar of Companies and received an
audit report which was unqualified and did not contain a
statement under Section 237 (2) or (3) of the Companies Act
1985. The statutory accounts for the year ended 31 December
1999 have not yet been approved, audited or filed.
The Directors recommend the payment of a final dividend of
0.363p per ordinary share for the year ended 31 December
1999 making a total of 0.6655p per ordinary share for the
year. Subject to approval at the Annual General Meeting on
22 May 2000, the dividend will be paid on 26 May 2000 to
shareholders on the Register of members at the close of
business on 17 March 2000.
END
FR KKBKKDBKKONK
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