RNS No 7376u
BIRKBY PLC
1st July 1997
FULL DETAILS
Preliminary results for the year to 31 March 1997
Proforma results include a full year's contribution from
British Coal Enterprise
KEY POINTS
* Proforma profit before tax up 20% to # 10.1m (1996: #8.4m)
including exceptional net profit of # 0.7m on sale of Hill Hire
plc stake & Milbank Foods (Statutory profit before tax: # 9.1m)
* Proforma earnings per share of 15.4p (1996: 13.8p) (Statutory
earnings per share: 14.0p)
* Proposed net final dividend of 6.2p, making a total for the year of
8.5p
* Successful acquisition of British Coal Enterprise ("BCE") in
January 1997, almost doubling the number of sites in the workspace
portfolio
* Significant growth of managed workspace division - IMEX:
- BCE swiftly integrated, adding 1.5m sq ft of lettable space
- 6 further sites acquired in Yorkshire
- 102 workspace centres with annual licence income of #13.4m
(1996: # 8.8m)
- IMEX Enterprise (BCE) current cash equivalent occupancy
rate of 76.4%
- cash equivalent occupancy rate of established IMEX
centres increased to 83.4%
- proforma pre-tax profit # 5.5m, representing 59% of Group
proforma profit (1996: 38%)
* Improvements in quality of managed retailspace portfolio, In Shops:
- new centres opened in Cannock and Blackpool
- refurbishment programme to enhance occupancy and licence
income
- disposal of four unprofitable centres
- tough trading conditions prevail but signs of improvement
now showing
- physical occupancy rate up 2%, achieved through increased
marketing efforts
- two indoor markets in Glasgow acquired after the year end
- pre-tax profit of # 2.9m (1996: # 3.1m)
* Disposal of loss-making discount food retailer, Milbank Foods,
completed in June 1997
- long-term licence arrangement agreed in 15 In Shops
centres
- repayment to Birkby of # 3.2m inter-company loan
* Increased activity across all divisions in new financial year.
Confident of further steady progress
Press enquiries:
Birkby plc:
Bill Cran, chief executive
Kim Taylor Smith, deputy chief executive
0171 377 6677
Biddick Associates:
Emma Cameron
0171 377 6677
Announcing Birkby PLC's preliminary results, Bill Cran, chief
executive, said;
"The most significant event for Birkby in the year ended 31
March 1997 was the successful acquisition of British Coal
Enterprise Ltd ("BCE"). In one move, Birkby almost doubled
the number of workspace centres managed by the Group,
underlining our position as the UK's leading provider of
managed commercial property to small and medium sized
businesses. The acquisition of BCE also marked the completion
of our programme to reinvest the proceeds of the sale of our
remaining stake in Hill Hire plc.
"It has also been a year of growth within our existing network
of centres and we have achieved increases in both income and
occupancy levels. Birkby now operates from 161 locations,
providing 5.4 million square feet of space to over 4,000
licensees on 'easy-in easy-out' terms. Annual licence fee
income totals over # 32.4 million.
Results
"The results outlined today are evidence that our strategy to
concentrate on the core activity of space management continues
to bear fruit, leading to increases in pre-tax profit,
earnings per share and dividends.
"In the presentation of our results for the year, we have
included a proforma profit and loss account, incorporating the
results of BCE for the period commencing 1 April 1996 to 7
January 1997, the date of the completion of the acquisition.
We hope that this will facilitate a better understanding of
the performance of BCE under Birkby's management.
"I am delighted to announce that, in the year under review,
the Group achieved a proforma profit on ordinary activities
before taxation of #10.1m (statutory profit #9.1 million).
This figure includes an exceptional net profit of #0.7
million on the disposal of the remaining stake in Hill Hire
plc together with an exceptional loss on the sale of Milbank
Foods, the discount food retailing subsidiary. Excluding
exceptional items, the proforma profit before tax was #9.4
million (statutory profit #8.4 million), representing a 15%
increase on the previous year (1996: #8.2 million).
"Proforma earnings per share, excluding exceptional items,
have increased by 7.5% from 13.3p to 14.3p, despite an
increase in the rate of taxation to 25% from 20% in the
previous period (statutory earnings per share: 12.9p).
"In accordance with best practice, we commissioned an external
valuation of the property portfolio this year, which has led
to a #3.0 million net increase in the revaluation reserve.
As at 31 March 1997, consolidated net assets have increased by
18.6% to #64.3 million (1996: #54.2 million), while net
borrowings total #29.0 million (1996: #22.9 million)
including borrowings associated with Manor Credit of #8.1
million. Net gearing (including cash) remains a modest 45%
(1996: 42%). We are currently reviewing our banking
arrangements with the intention of securing additional lines
of credit to enable gearing to increase to 70% in the future.
The Board considers that a gearing limit of 70% provides
sufficient resources for further complementary acquisitions.
Dividend
"The Board is proposing the payment of an increased final
dividend of 6.2p net (1996: 5.8p), up 6.9% on last year,
giving a total net dividend for the year under review of 8.5p
(1996: 8.0p). The total dividend is covered more than 1.8
times by proforma earnings per share (1.6 times statutory
earnings per share). It is intended that the final dividend
will be paid on 10 October 1997 to shareholders on the
register on 5 September 1997.
Board Change
"Over the past year, we have developed separate Boards for the
operating subsidiaries, each with their own managing director.
Following the successful sale of Milbank Foods, Mr Derek Hine
has resigned as managing director - Operations of Birkby. I
would like to pay tribute to Derek Hine for his contribution
to the Group and wish him well in the future. The managing
directors of the two principal operating subsidiaries, IMEX
and In Shops, will now report directly to the Board.
OPERATING REVIEW
"The most visible step in the development of our business was
the acquisition of British Coal Enterprise Ltd in January
1997. However, we have also been busy buying other new sites,
developing existing ones and disposing of under-performing
centres. There have also been internal changes aimed at making
us more efficient and better able to compete in a demanding
market place.
Managed workspace - IMEX, IMEX Enterprise and Bridge House
"In aggregate, the division achieved a proforma profit before
tax of # 5.5 million for the year (statutory profit: #4.5
million) (1996: #3.2 million), based on an annual income of
#16.9 million (1996: #8.7 million). IMEX and IMEX Enterprise
(formerly BCE) contributed #4.0 million and #1.5 million
respectively and the enlarged workspace division now accounts
for more than 58.8% of Group proforma profits. The workspace
division now manages 102 centres in total, providing over 4.4
million square feet of licence space across 3,200 units. We
have in excess of 2,200 licensees, producing an annual licence
income, excluding services, of over #13.4 million. Each
percentage point increase in the cash equivalent occupancy
rate leads to an extra # 165,000 of Group profit.
"On a like for like basis, the cash equivalent occupancy rate
for the established IMEX operation, excluding BCE, was 83.4%
at 31 March 1997 (1996: 82.9%).
"The most significant acquisition during the period was that
of BCE. This added 1.5 million square feet of high quality
workspace across 50 centres, expanding our coverage in England
and extending our network into Scotland and Wales. The
portfolio will operate as a separate company under the new
name of IMEX Enterprise, in the short to medium term.
Operationally, the portfolio has been swiftly integrated within
the existing IMEX division through a new, shared management
structure. This will enable us to take advantage of increased
operating efficiencies and consequently better margins.
Intensive marketing and letting activity has been our priority
and has led to a significant increase in the current cash
equivalent occupancy rate to 76.4%. Continued improvements in
occupancy have resulted in an uplift in the property valuation
to #26.4 million, which compares with the valuation of #24.0
million at the date of the acquisition and the net purchase
consideration of #16.7 million, including costs.
"Notable successes in raising occupancy levels include IMEX
Business Centre in Durham, where we started with one tenant
and which is now fully let. The Seaham Grange centre in Co.
Durham is now also 100% occupied and the Fountain Business
Centre in Scotland has doubled in occupancy from 44% to 88%.
As a specialist provider of small unit space, we have
sub-divided larger units at centres such Wansbeck. Here, 50%
of the smaller sized units have already been let.
"In addition to IMEX Enterprise, a number of other centres
were added during the year. In June 1996, we acquired Black
Rock Mills in Huddersfield, comprising 220,000 square feet of
vacant industrial buildings in 15 acres of land. We have
successfully completed the conversion of Black Rock into
multiple small units and have attracted significant interest
in the site. To date, over 45% of available space has been let,
providing an annualised income in excess of # 100,000.
"In March 1997, we acquired five workspace centres comprising
over 90,000 square feet of licence space, for #1.7 million
from Sheffield City Council. The Sheffield centres fill a gap
in our Yorkshire portfolio and use the existing management
structure.
"Opportunities for growth within the existing portfolio arise
from the development of surplus land and the conversion of
derelict buildings. Two examples this year are the four new
units at Brighouse, Yorkshire and the development of unutilized
space at Atlas Business Centre in London, which will provide
a further 12,000 square feet of licence space.
"Included within the workspace division results is a small
serviced office network, which trades as Bridge House.
Operating from six locations and providing 331 units, Bridge House
had a record year. It has a current cash equivalent
occupancy rate of 84.0%.
"The management structure of the workspace division has
been reorganised to take account of the enlarged portfolio.
Mr Bob Chapman has been appointed managing director, having
worked at senior management level within both the retail
and workspace divisions. Furthermore, we have divided the
network of centres into three regions - Scotland & the
North East, Yorkshire & the North West, and the Midlands,
Wales & the South - with a designated Director and central
office for each region.
Managed Retailspace - In Shops
"Demand for retail units remains geographically patchy, with
improvements in certain areas, notably West Scotland, the
North East and North West. Whilst there are signs of recovery
within the general retail economy. In Shops continues to be
affected by a slow spending recovery in the lower income
sector, from which our retailers' customer base is typically
drawn. Through increased marketing efforts, we have been able
to increase physical occupancy by 2% over the year. However,
this has been achieved through discounting licence rates with
the consequence that the cash equivalent occupancy rate was
76.4% (1996: 77%).
"For the year under review, the division returned a profit
before tax of #2.9 million (1996: #3.1 million) representing
31.8% of Group proforma profits. Operational gearing within
the retailspace division remains high as each percentage point
increase in the cash equivalent occupancy rate generates an
additional #225,000 profit before tax for the Group.
"We are committed to improving further the quality of the
retail portfolio through the refurbishment of existing centres,
the opening of new centres in locations that offer a return that
meets our investment criteria and the disposal of unprofitable
centres. In April 1996, we acquired an established indoor market
in Blackpool, comprising 10,000 square feet of net licence space,
across 89 units. Since its acquisition, we have completed a limited
refurbishment, including the establishment of a cafe - a major
contributor to increasing football. In August 1996, we opened a
centre within the new Cannock shopping development, where we are
anchor tenants trading alongside Argos. The 55 unit retail centre
has remained 100% occupied since the date of opening. During the
year, we have disposed of four unprofitable centres in Carlisle,
Kirkcaldy, Redcar and Southend.
"The upgrading of existing centres is selectively undertaken,
where we can see the potential of generating our minimum
return on the capital cost of the project. In March 1997, we
completed the refurbishment of Northfield, Birmingham which has
previously suffered from a poor occupancy level. It re-opened
fully occupied and customer count has increased. The current
refurbishment programme has targeted a further eight retail
centres for upgrade.
"We are still actively seeking new centres where they meet our
minimum target return. Since the year end, we have exchanged
contracts for the acquisition of a leasehold interest on two
established indoor markets within the Clyde Regional Shopping
Centre, Glasgow. Together they add a further 47,500 square
feet of licence space across 130 units. The location of the
markets means that they can easily be incorporated within the
existing management sructure, offering savings on operating
efficiencies.
"Today, the retailspace portfolio encompasses 59 centres, providing
one million square feet of licence space across 3,300 units and
generating an annual licence income of #19 million.
Discount Retailing - Milbank Foods Limited ('Job Lot')
"In an extremely competitive trading environment, Milbank
reported an increased loss before tax in the year under review
of #211,000 (1996: #94,000 loss). In March, we sold part of
our investment in Milbank to Dawn Til Dusk Holdings plc, an
existing In Shops licensee. In June 1997, we announced the sale
of our remaining investment and therefore we have fully provided
for the estimated loss on disposal this year. The overall loss
has been reported as a discontinued business. Under the terms of
the sale agreement, the new owner has entered into long term
license arrangements to occupy each of the 15 outlets located
within the In Shops centres. The proceeds from the repayment of
the inter-company loan of #3.2 million will ultimately be
reinvested in the retail and workspace divisions.
Instalment Credit - Manor Credit
"Manor Credit has continued to make good progress and reported
a further year of record profit. At 31 March 1997, the loan
book had increased to #8.7 million, spread across 715
agreements. For the year under review, Manor Credit reported a
profit before tax of #434,000 (1996: #400,000) representing
4.6% of Group proforma profits. The acquisition of BCE has
provided the opportunity for Manor Credit to offer its services
to BCE tenants, particularly in the Yorkshire area.
Other Developments
"We have implemented a number of changes to the infrastructure
of the Group during the year. This will enable us to achieve
greater internal efficiencies and postion the Group for its
next stage of growth.
"In January 1997, national sales office was set up, providing
a central point for letting enquiries. A centralised system
for repairs and maintenance has also been set up within Property,
along with the recruitment of dedicated personnel, which is
expected to provide further cost efficiencies and improved
service levels.
Current Trading
"With the disposal of Milbank Foods, a loss making peripheral
business that took up considerable management time, we are
now tightly focused on our core business. The new financial
year has started well, with increased activity in all
divisions. The Management team has reported stronger
business confidence and we anticipate increased lettings and
fewer departures.
We have ambitious plans to grow the number of workspace and
retail centres throughout the UK and can assimilate extra
centres with little incremental cost, using the nationwide
management infrastructure that we have put in place. We
have a dedicated team actively seeking properties, focusing
in particular on Scotland and the North East for both
workspace and retailspace, and on London for workspace.
We are well resourced and have set ourselves the target of
adding a further one million square feet of space during
the current year. At the same time, we will also continue
to enhance the occupancy levels of our existing portfolios.
We believe that the business offers tremendous potential and
I look forward to the challenges of the current year with
optimism".
Consolidated profit and loss account for the year ended
31 March 1997
Note *Proforma Statutory Statutory
1997 1997 1996
#000 #000 #000
Turnover
Existing Operations 36,540 36,540 35,566
Acquisitions 4,894 1,706 -
------ ------ ------
Continuing operations 41,434 38,246 35,566
Discontinued operations 19,687 19,687 20,663
------ ------ ------
61,121 57,933 56,229
Cost of sales (37,400) (36,640) (38,390)
------ ------ ------
Gross profit 23,721 21,293 17,839
Administration expenses (12,517) (11,760) (9,522)
Other operating income 210 210 52
Income from associated
undertakings 95 95 1,618
________ _______ ______
Operating profit
Existing operations 8,806 8,806 8,538
Acquisitions 2,795 1,124 -
Discontinued operations (92) (92) 1,449
________ ______ ______
11,509 9,838 9,987
Profit on part disposal of
Hill Hire plc 1,723 1,723 -
Loss on investment in
Milbank Foods Ltd (1,000) (1,000) -
_______ _______ _______
Profit on ordinary
activities before interest 12,232 10,561 9,987
Interest receivable and
similar income 395 395 315
Interest payable and
similar charges (2,545) (1,831) (1,866)
_______ _______ _______
Profit on ordinary
activities before 10,082 9,125 8,436
taxation
Tax on profit on
ordinary activities (2,519) (2,281) (1,683)
_______ _______ _______
Profit for the
financial year 7,563 6,844 6,753
Dividends 3 (4,187) (4,187) (3,919)
_______ _______ ________
Profit retained for
the year 3,376 2,657 2,834
Earnings per share: 4
Before exceptional
items 14.3p 12.9p 13.3p
FRS 3 basis 15.4p 14.0p 13.8p
* See note 1
Consolidated balance sheet as at 31 March 1997
1997 1996
#000 #000
Fixed assets
Tangible fixed assets 95,533 66,808
Investments 163 11,220
------ ------
95,696 78,028
Current assets
Stocks 5,893 5,909
Debtors: due after more than one
year 4,644 3,810
due within one year 9,201 6,324
Cash at bank and in hand 741 227
________ _______
20,479 16,270
Creditors: amounts falling due (31,694) (25,727)
within one year -------- -------
Net current liabilities (11,215) (9,457)
-------- -------
Total assets less current
liabilities 84,481 68,571
Creditors: amounts falling due
after more than one
year (17,429) (12,555)
Provisions for liabilities and
charges (497) (199)
Accruals and deferred income
Licensees' deposits (2,293) (1,651)
-------- -------
Net assets 64,262 54,166
------- -------
Capital and reserves
Called up share capital 2,457 2,447
Share premium account 21,943 21,770
Revaluation reserve 3,686 729
Special capital reserve 2,359 3,581
Merger reserve 15,333 15,333
Capital reserve 5,349 50
Profit and loss account 12,740 10,256
------ ------
Equity shareholders funds 63,867 54,l66
------- ------
Minority interests 395 -
------- ------
64,262 54,166
======= ======
Financial Notes
1. The proforma figures include the results of British Coal
Enterprise Ltd from 1 April 1996 rather than the actual
date of acquisition, 7 January 1997.
2. The operating profit from Hill Hire Plc has been shown
as discontinued following the sale of the Group's remaining
interest on 25 April 1996. The operating loss from Milbank
Foods Ltd has been shown as discontinued following the
completion of the sale on 4 June 1997.
3. The final dividend of 6.2p is payable on 10 October 1997 to
shareholders on the register on 5 September 1997.
4. The calculation of earnings per share under FRS 3 is based on
the proforma profit for the period, after taxation, of
#7.55m (statutory: #6.84m, 1996: #6.75m) and on the average
weighted number of ordinary shares in issue during the year
of 48,978,000 (1996: 48,812,000 ordinary shares). The
earnings per share excluding exceptional items is before the
net profit on the disposal of the remaining stake in Hill
Hire plc, together with the exceptional loss on the sale of
Milbank Foods Ltd.
Earnings Earnings
per share per share
before exceptional under
items FRS 3
Year ended 31 March 1997 - proforma 14.3p 15.4p
Year ended 31 March 1997 - statutory 12.9p 14.0p
Year ended 31 March 1996 13.3p 13.8p
5. The financial information set out above does not constitute
the Company's Statutory Accounts for the years ended 31
March 1996 or 31 March 1997 but is derived from those
accounts. Statutory accounts for 1996 have been delivered
to the Registrar of Companies and those for 1997 will be
delivered following the Company's Annual General Meeting.
The Auditors have reported on those accounts; their reports
were unqualified and did not contain statements under
Section 237 (2) of (3) of the Companies Act 1985.
6. Copies of the Annual Report and Accounts for the year
ended 31 March 1997 will be dispatched to shareholders in due
course. Copies will be available from the Company Secretary,
Birkby PLC, Warwick House, Spring Road, Hall Green, Birmingham
B11 3EA and the Company's Registered Office.
END
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