RNS Number:0837M
BFS Managed Properties Ltd
09 June 2003
BFS MANAGED PROPERTIES LIMITED
PRELIMINARY ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS
The Directors announce the unaudited consolidated results for the six months
ended 31 March 2003 as follows:
CHAIRMAN'S STATEMENT
This Interim Report covers the six-month period to 31 March 2003. Net investment
income for the period, available for distribution by way of dividend, was
#1,696,000 after costs associated with the unsuccessful approach to the Board of
Property Income and Growth plc ("PIG") of #413,000 and before dividends paid of
2.0p per Ordinary share.
At the end of the period, 92% of the Group's total assets less current
liabilities were invested in commercial property, 3% in listed investments and
5% in cash and other net assets. The Net Asset Value ("NAV"), according to the
Articles of Association, per Ordinary share was 13.07p whilst the NAV per Zero
Dividend Preference share, issued by BFS Managed Properties Securities Limited,
increased from 110.97p at 30 September 2002 to 115.84p at 31 March 2003.
The Group's portfolio of commercial property, with its associated rent roll of
#7.5 million per annum, is performing well. The Property Portfolio had a
carrying value of some #99.8 million (following revaluation in accordance with
International Accounting Standards) at 31 March 2003 representing an increase in
value before amortisation of leasehold properties of #875,000, net of the sale
of the Car Showroom at Derby Road, Widnes.
The Board believes that in the medium-term, there are good prospects for rental
growth. Of the annual rent roll, 16% is either under review or falls due for
renewal in the next financial year. The void element of the portfolio remained
at less than 2% by value.
During the period, the Property Portfolio has been relatively static although
negotiations on a number of sales had commenced during the period. The Manager's
policy to improve the quality of the Portfolio led to the sale of the Car
Showroom property at Widnes in January 2003, where the lease term would have
reduced to 11 years at the end of the period.
In addition, discussions are well advanced for the sale of Friargate in Preston,
Shawlands Road in Glasgow and Oldham Road in Manchester. The net proceeds of
these sales are to be reinvested in a property that has been identified and
which will improve the overall profile of the Property Portfolio.
The period has seen the continuation in the reduction in interest rates both at
the short end of the maturity spectrum and also in the medium-term market which
have led to continued investor demand for the type of property purchased. The
Board continues to keep rates under review in conjunction with the Manager, and
the target of keeping only a small proportion of the debt fixed has been
beneficial to the Group to date.
The Company announced on 29 May 2003, that the Board has reviewed the Group's
capital structure and has concluded that the most effective use of its cash and
near cash holdings was to buy-back Zero Dividend Preference ("ZDP") shares.
In order to achieve this, the Board of the Subsidiary will be seeking authority
from the ZDP shareholders to re-purchase all of the ZDP shares and to eliminate
the Subsidiary's Share Premium account in order to create a new Special Reserve
out of which re-purchases of ZDP shares may be made. In addition, the approval
of the Royal Court of Guernsey is required.
The Company's Articles of Association currently provide that Group borrowings
must not exceed 65% of the Group's total assets. By re-purchasing and then
cancelling ZDP shares the Company's total assets will fall and therefore, in
order to provide the Subsidiary with flexibility to continue re-purchasing ZDP
shares, it is proposed that the restriction on borrowings in the Company's
Articles of Association is increased from 65% to 85% of total assets.
Accordingly, the Board will be seeking the approval of the Company's Ordinary
shareholders and ZDP shareholders for a change in the Company's Articles of
Association.
The Board expects to post a Circular to all shareholders very shortly seeking
the approvals set out above.
The announcement also indicated that it was intended, with immediate effect, to
commence making market purchases of ZDP shares. These purchases are to be made
at a discount to net asset value. Pending approval of the matters set out above,
the Company will hold any ZDP shares purchased. If the authorities requested are
not approved, any ZDP shares purchased by the Company will be held until
maturity. The Company will not exercise the voting rights attaching to the ZDP
shares it holds on any matter.
As a whole, the Property Portfolio provided an attractive and well-secured
income stream at the end of the period with a weighted average unexpired lease
length of some 16.7 years. A rental income yield on value of 7.54% per annum
backed by 87% of the Portfolio being let to Central Government Departments, high
street banks, FTSE 100 Companies or Dunn & Bradstreet 5A Listed Companies.
The Board considers that the performance of the Property Portfolio for the
period from 1 October 2002 to 31 March 2003 has been satisfactory with a total
return of 4.3%. Although not a direct comparison, the published IPD UK Monthly
Index was 4.5% for the same period.
At the period end, the Group's investments in income shares were valued at #2.71
million and represented approximately 3% of the total fund. Liquidity in the
split sector improved significantly during the period providing an opportunity
to reduce exposure to income shares. Sales from the portfolio raised #3.23
million.
During the period, the Board approached the Board of PIG with a proposal that
would have created a property company with a sizeable increase in its portfolio.
This approach was rebuffed out of hand by the Board of PIG, which has
subsequently been taken private by its managers.
The Interim Report has been prepared using International Accounting Standards
("IAS"). As mentioned in the Annual Report, IAS 40 - "Investment Property", in
its current form, prevents revaluation increases from applying to leasehold
property, irrespective of the length of the underlying lease and makes
amortisation of the leasehold acquisition cost mandatory. This differs
significantly from accounting practice using UK Generally Accepted Accounting
Principles, which allows both long leaseholds and freeholds to qualify as
"Investment Properties". Your Board will keep the implications of IAS 40 under
review.
Looking ahead, the Managers expect that the recent change to Stamp Duty,
announced in the Budget, affecting properties located within designated
disadvantaged urban areas, will have a positive effect on some 25% of the
Property Portfolio, since purchasers will incur reduced acquisition costs.
FUTURE STRATEGY
Given the resources available to the Company and the requirements of both
classes of shareholder, the Board has decided to focus on the Property Portfolio
which is very well let, and which produces secure long-term income and the
prospects of both rental and capital value growth.
The surplus resources available to the Group are best used, in the opinion of
the Board, in repurchasing ZDP shares issued by the subsidiary, thereby
eliminating a liability, accruing at 9% per annum, and improving both cover and
NAV for remaining shareholders.
Christopher Lovell
Chairman
9 June 2003
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited) for the six months ended 31 March 2003
Six months 3 July 2001
ended to 31 March
31 March 2003 2002
#000 #000
INCOME
Dividends 573 4,640
Loan stock interest - 119
Rent and service charges receivable 3,930 2,525
Bank interest 93 577
TOTAL INCOME 4,596 7,861
EXPENSES
Management fee 651 1,065
Administration fee 90 114
Custodian fee 3 16
Audit fee 14 16
Directors' remuneration 78 68
Leasehold property amortisation 59 54
Interest payable and non-utilisation fees 1,887 1,491
Amounts from Subsidiary companies written off 208 -
Other expenses 288 138
Finance costs on Zero Dividend Preference shares 1,314 1,699
Failed takeover costs 413 -
TOTAL EXPENSES 5,005 4,661
NET (LOSS)/PROFIT BEFORE INVESTMENT
RESULT (409) 3,200
Realised loss on sale of available for sale investments (29,034) (378)
Realised loss on sale of property (118) -
Movement in unrealised loss on revaluation of available for
sale investments 27,768 (43,486)
Movement in unrealised loss on revaluation of property 1,084 (2,411)
NET INVESTMENT RESULT (300) (46,275)
NET LOSS FOR THE PERIOD (709) (43,075)
pence pence
BASIC AND DILUTED LOSS PER ORDINARY SHARE (0.81) (48.95)
This financial information has been prepared using the accounting standards and
policies adopted in the Annual Report for the period ending 30 September 2002.
All items in the above statement derive from continuing operations.
The Company was incorporated on 3 July 2001 and commenced operations on 16 July
2001.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited) for the six months ended 31 March 2003
Six months 3 July 2001
ended to 31 March
31 March 2003 2002
#000 #000
NET LOSS FOR THE PERIOD (709) (43,075)
Issue of Ordinary share capital, net of issue costs - 84,722
Dividends paid (1,760) (3,080)
(1,760) 81,642
MOVEMENT IN UNREALISED LOSS ON
REVALUATION OF CASH FLOW HEDGE (159) (111)
NET ASSETS BROUGHT FORWARD 13,920 -
NET ASSETS AT 31 MARCH 11,292 38,456
CONSOLIDATED BALANCE SHEET
(unaudited) as at 31 March 2003
31 March 30 September 31 March
2003 2002 2002
(Unaudited) (Audited) (Unaudited)
#'000 #'000 #'000
NON-CURRENT ASSETS
Available for sale investments 2,710 7,035 30,635
Property - freehold 78,185 77,310 76,095
Property - long leasehold 21,616 23,114 23,175
102,511 107,459 129,905
CURRENT ASSETS
Debtors 117 672 914
Cash and cash equivalents 9,149 5,460 7,435
9,266 6,132 8,349
TOTAL ASSETS 111,777 113,591 138,254
CURRENT LIABILITIES
Creditors 3,501 3,980 5,221
TOTAL ASSETS LESS CURRENT
LIABILITIES 108,276 109,611 133,033
NON-CURRENT LIABILITIES
Bank loans 67,112 67,292 67,747
Zero Dividend Preference shares 29,299 27,985 26,719
Interest rate swap liability 573 414 111
96,984 95,691 94,577
NET ASSETS 11,292 13,920 38,456
Represented by:
Share capital 22,000 22,000 22,000
Share premium account 62,722 62,722 62,722
Reserves (73,430) (70,802) (46,266)
ISSUED CAPITAL AND RESERVES 11,292 13,920 38,456
pence pence pence
NET ASSET VALUE PER ORDINARY SHARE 12.83 15.82 43.70
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited) for the six months ended 31 March 2003
Six months 3 July 2001
ended to 31 March
31 March 2003 2002
#'000 #'000
OPERATING ACTIVITIES
Dividends received 685 4,286
Loan stock interest received - 105
Rent and service charges received 4,056 4,436
Bank interest received 93 577
Bank loan interest and non-utilisation fees paid (2,707) (551)
Investment Managers fees paid (548) (785)
Operating expense payments (460) (317)
NET CASH INFLOW FROM OPERATING ACTIVITIES 1,119 7,751
INVESTING ACTIVITIES
Purchases of listed investments (167) (79,870)
Purchases of property (14) (99,737)
Sales of listed investments 3,429 5,371
Sales of properties 1,296 -
NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES 4,544 (174,236)
FINANCING ACTIVITIES
Proceeds of issue of Ordinary shares - 88,000
Issue costs paid on issue of Ordinary shares - (3,278)
Proceeds of issue of Zero Dividend Preference shares - 26,000
Issue costs paid on issue of Zero Dividend Preference shares - (980)
Draw down of bank loan - 67,500
Bank loan issue costs paid (214) (242)
Dividends paid (1,760) (3,080)
NET CASH (OUTFLOW)/INFLOW FROM FINANCING ACTIVITIES (1,974) 173,920
INCREASE IN CASH AT 31 MARCH 3,689 7,435
CASH AND CASH EQUIVALENTS AT START OF PERIOD 5,460 -
CASH AND CASH EQUIVALENTS AT 31 MARCH 9,149 7,435
NOTES TO THE RESULTS
1. Investment income distribution
The gross revenue of the Group is applied first to meet the investment
management and administration fees, finance costs and all other expenses
save that the Group effectively treats the interest on #16,000,000 of the
Bank facility and the finance costs on the ZDP shares as a charge to
capital. The effect of this accounting treatment is equivalent to charging
all such costs and expenses (other than "capitalised" finance costs) against
revenue. Net investment gains, realised or unrealised, will not be
distributed by way of dividend.
Therefore, for the period to 31 March 2003, the net profit before investment
result available for distribution by way of dividend was:
Six months 3 July 2001
ended to 31 March
31 March 2003 2002
#'000 #'000
Net (loss)/profit before investment result (409) 3,200
Add back:
Bank loan interest payable and non-utilisation fees on
#16 million bank loan treated as capital 524 495
Finance costs on Zero Dividend Preference shares 1,314 1,699
Leasehold property amortisation 59 54
Amounts from Subsidiary companies written off 208 -
1,696 5,448
Pence Pence
Distributable return per Ordinary share 1.93 6.19
2. Dividends on Ordinary shares
Six months 3 July 2001
ended to 31 March
31 March 2003 2002
Rate #'000 Rate #'000
pence pence
Final dividend from 30 September 2002 period 1.0 880 - -
paid 29 November 2002
First interim dividend paid 28 February 2003 1.0 880 1.5 1,320
Second interim dividend - - 2.0 1,760
2.0 1,760 3.5 3,080
A second interim dividend of #880,000, equivalent to 1.0p per share, was
declared on 2 May 2003. The dividend was paid on 27 May 2003 to shareholders
on the register at close of business on 16 May 2003, with an ex-dividend
date of 14 May 2003.
3. The basic and diluted loss per Ordinary share is based on the net loss for
the period of #709,000 (31 March 2002: #43,075,000) and on 88,000,000 (31
March 2002: 88,000,000) Ordinary shares, being the number of Ordinary shares
in issue throughout the period.
4. Reconciliation of the published net asset value to net asset value per
accounts
31 March 2003 30 September 2002
ORDINARY SHARES #'000 Per share #'000 Per share
(pence) (pence)
Published net asset value + 11,503 13.07 12,400 14.09
Gain on revaluation of freehold properties - - 1,125 1.28
Gain on revaluation of leasehold properties - - 484 0.55
Distributable profit ++ - - 8,439 9.59
Dividends paid and proposed ++ - - (7,040) (8.00)
NET ASSET VALUE PER ARTICLES OF ASSOCIATION 11,503 13.07 15,408 17.51
Valuation of available for sale investments (828) (0.94) (2,734) (3.10)
at bid prices
Provision for diminution in value of (54) (0.06) - -
available for sale investments
Accounting for derivatives on balance sheet (573) (0.65) (414) (0.47)
Distributable profit ++ 1,696 1.93 - -
Amounts from Subsidiary companies written (208) (0.24) - -
off
Current period dividends paid ++ (880) (1.00) - -
Dividends proposed ++ - - 880 1.00
Issue costs allocated to Zero Dividend 980 1.11 980 1.11
Preference shares
Amortisation of issue costs allocated to (161) (0.18) (114) (0.13)
Zero Dividend Preference shares
Adjustment to increase leasehold properties (124) (0.14) 30 0.03
to cost
Leasehold property amortisation (59) (0.07) (116) (0.13)
NET ASSET VALUE PER ACCOUNTS 11,292 12.83 13,920 15.82
Based on 88,000,000 Ordinary shares at 31 March 2003 and 30 September 2002.
+ The published net asset value at 31 March 2003 includes the revaluation of property at that date.
++ Distributable profit is only recognised when it has been audited, therefore, it is treated differently
in the interim results net asset value calculation to that of the annual results.
ZERO DIVIDEND PREFERENCE SHARES #'000 Per share pence #'000 Per share
pence
Published net asset value 30,118 115.84 28,851 110.97
Allocation of issue costs (980) (3.77) (980) (3.77)
Amortisation of issue costs 161 0.62 114 0.43
NET ASSET VALUE PER ACCOUNTS 29,299 112.69 27,985 107.63
Based on 26,000,000 Zero Dividend Preference shares at 31 March 2003 and 30 September 2002.
Zero Dividend Preference Shares
An appropriation is made to increase the amounts attributable to the Zero
Dividend Preference shares from the net proceeds of their issue, including any
premium and net of any issue costs, to the expected redemption price on 30
September 2011 of 241.02 pence at a constant daily compound rate. The total net
assets attributable to the Zero Dividend Preference shares at 31 March 2003
calculated in accordance with the accounting standard and shown in the Group's
balance sheet amounted to #29,299,000 (31 March 2002: #26,719,000). This differs
with the figure shown in the balance sheet of BFS Managed Properties Securities
Limited, which is calculated in accordance with the Articles of Association of
that company.
5. Bank Loans
Facility Drawn down Issue costs Amortisation of Total due at 31
issue costs March 2003
#'000 #'000 #'000 #'000 #'000
Lloyds TSB plc 43,000 33,750 (270) 36 33,516
Bank of Scotland plc 43,000 33,750 (186) 32 33,596
Total 86,000 67,500 (456) 68 67,112
The Company has loan facilities totalling #86,000,000 (30 September 2002:
#86,000,000) and, as at 31 March 2003, the Company had drawn down #67,500,000
(30 September 2002: #67,500,000). As described in the Annual Report, the Company
re-arranged its loan facility on 4 October 2002. The interest on #16,000,000 of
the total facilities previously arranged to be rolled up, has now been paid with
future interest to be paid quarterly. The interest calculated on the #16,000,000
will remain a capital expense in line with the Group's investment income
distribution policy. The cost of the renegotiation of the bank loans amounted to
#214,000. Due to the renegotiation of the bank loan, the loan balances at 31
March 2003 and 30 September 2002 are not directly comparable with the loan
balance at 31 March 2002, which included loan interest rolled up of #473,000.
Loan issue costs are amortised over the term of the loan.
The Company has entered into an interest rate swap with the Bank of Scotland plc
on loans to the value of #8,000,000, effectively fixing the rate of the loan to
6.495%. Interest has been calculated on the remaining loan facilities at:
#8,000,000 at a fixed rate of 6.486%; and #51,500,000 at LIBOR plus a margin and
associated costs amounting to 1.12%.
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