RNS Number:9868Q
Moorfield Group PLC
15 September 2000
Moorfield Group PLC
Interim Results for the six months to 30 June 2000
Highlights
* Pre-tax profit of #2.135m
* Earnings per share 0.83p
* Interim Dividend of 0.3328p
* #43m of disposals from Moorfield Capital Partners
* Dom@in's first 962 bed development in Liverpool has been
completed
* Appointment of Graham Sidwell as an Executive Director and Group
Finance Director
Sir Brian Corby, Chairman of Moorfield Group, commented:
"The results for the six months to 30 June 2000 reflect the
ongoing disposals both from the limited partnerships and the
wholly owned portfolio. The Group's strategy clearly remains one
of active asset management followed by disposal once the internal
rate of equity return to the Group has been maximised. With the
majority of the Group's business now comprising of trading
activities, the flow of profits will be volatile and continue to
be dominated by the timing of the asset disposals.
"I would like to welcome Graham Sidwell, as our Group Finance
Director, who will also have responsibility for originating and
managing asset and property related investment opportunities. We
look forward to the year end with confidence."
Marc Gilbard, Managing Director, said:
"We have made excellent progress so far this year and have
achieved consistently high returns on equity invested. The
Company continues to monitor market conditions for new investment
opportunities and we are actively pursuing a number of exciting
projects within the traditional and e-commerce sectors of the
market.
"To date, the share rating reflects little, if any, of our
strategy or its results. Consequently because of the significant
discount of the share price to stated net asset value, we are
currently exploring ways, with our advisors, to enhance value to
our shareholders."
Press Enquiries:
Marc Gilbard Moorfield Group PLC
Graham Stanley
Tel: 020 7399 1900
Jonathon Brill Bell Pottinger Financial
Charlotte Lambkin
Tel: 020 7353 9203
Results Summary
The results for the six months to 30 June 2000 reflect the ongoing
disposals both from the limited partnerships and the wholly owned
portfolio. Net rental income fell by 11% as disposals during the
last year took effect, whilst the reduction in Group net interest
payable of 33% highlights the reduced balance sheet gearing. The
Group's strategy clearly remains one of active asset management
followed by disposal once the internal rate of equity return to
the Group has been maximised.
The profits from the disposals helped generate Group pre tax
profits of #2.135m. With the majority of the Group's business now
made up of trading activities, the flow of profits will be
volatile and continue to be dominated by the timing of asset
disposals. The current period has seen the focus more on
disposals than acquisitions in order to take advantage of
valuation uplifts, reduce the overall level of debt and provide
resources to enable the Company to pursue new opportunities that
are continually under consideration.
The Board is recommending that an interim dividend of 0.3328p per
share be paid, an increase of 10% on last year. The dividend will
be paid on 10 November 2000.
Arundel Great Court
The disposal of this property, held in limited partnership with
funds managed by Blackstone Real Estate Advisors, has been
progressing throughout the year. The potential purchaser
highlighted at the time of the 1999 Final Results failed to
complete the transaction but the property was placed 'under offer'
at #138.5m to another overseas purchaser during the summer. This
is a complicated disposal because of to the courtyard development
that is taking place during the marketing period. We would,
however, expect the disposal to be completed before the year end.
The successful sale of this property will trigger both a 25%
profit share to Moorfield and an enhanced profit share payment by
the partnership to Moorfield as asset manager. The quantum of this
enhanced profit share payment will depend on both the timing of
the sale and the final cash flows to the partnership. The property
was valued at the last year end at #135m.
Moorfield Capital Partners
The planned disposals have continued during the year, with a
further #43m of sales completed by the end of July, most notably
those in Staines and Peterborough. These transactions were at an
average of 5% above the year end valuations and some 15% above the
original purchase prices. This takes the value of the properties
from #392.35m on acquisition in April 1999 to below #200m within
15 months of acquisition.
Further disposals are planned for the remaining assets, with the
bulk of the portfolio being liquidated within the next twelve
months.
Dom@in
The joint venture with the Bank of Scotland, set up to develop
purpose built accommodation for students and key workers was
formally established in March this year. The joint venture's first
project, a 962 bed development in Liverpool was completed in July
2000. This project has opened for occupation and is currently
being marketed to new and existing students in Liverpool, with the
new academic year beginning this month. A successful launch is
expected and this project will be a significant influence in the
establishment of the brand in other cities.
The acquisition for some #3.26m of a site at Prescott Street in
Liverpool, opposite the Liverpool Teaching Hospital, has been
completed by Moorfield for possible inclusion in the joint
venture. A scheme to include homes for nurses and hospital workers
is currently being designed.
A number of additional sites across the UK have been identified
for potential acquisition and discussions are ongoing with
landowners, universities, hospitals and local authorities to
unlock further development opportunities.
Investment and Trading Portfolio
From the wholly owned portfolio, further disposals have taken
place at Romford, Haywards Heath (in part), West Drayton and
Maidstone this year at an average of 4% above the year end
valuations. The portfolio has now been reduced to 24 properties
and further sales are likely during the second half of the year.
With the vast majority of the Group's properties in the
strengthening office market, letting activity and rental growth
are proving robust.
South Side Development - Teesside International Airport
There has been significant progress following the 'in principal
approval' of a Heads of Terms for the new Development Agreement
between Moorfield and Teesside International Airport. The
Development Agreement is expected to have been completed by the
year end. Discussions continue with potential occupiers and
investors and further details will be forthcoming in due course.
Internet and e-Commerce Related Opportunities
For over 2 years we have studied the likely impact of the internet
and e-commerce on the property market and as a result we have put
in place a number of initiatives. The majority of both the Group's
and limited partnership's retail property has been sold due to our
concerns over the actual and perceived impact of e-tailing on
retail property valuations. Similarly, the majority of the
industrial property, owned and managed, has been sold due to the
significant uplift in values resulting from both a strong economic
environment and the anticipated demand for distribution and
storage space from internet and related activities.
As reported at our year end, we have studied one of our wholly
owned buildings, a vacant 55,000 sq ft property on the edge of the
M25, to ascertain its suitability for co-location usage. The
conclusion of this study has left us with a clear understanding of
the costs, risks and rewards involved in this area of the market.
As a result we are currently pursuing the possibility of leasing
the building to an operator rather than funding the setup of a
competing business in this sector of the market.
We have made a small number of property related software, internet
and related investments that will ensure we retain an
understanding of the changes in the IT sector, and their likely
impact on the property market. We remain potential investors for
the right opportunities in the future.
Moorfield has decided to enter the market for the provision of
start-up and incubator office space. Allied closely with our
Dom@in joint venture, this activity is likely to be established in
partnership with a financial organisation, allowing for asset
acquisition and business growth as appropriate. We expect to
report on the strategy and activity in more detail at the year-
end.
Financial
The receipt of the Group's share of the disposal proceeds from the
MCP partnerships, and the ongoing net sales programme, has left
the Group with a modest level of balance sheet gearing of 37%.
This is the lowest level of gearing for the past four years,
despite buying back in over 20% of the Company's share capital in
the past two years, and leaves property gearing (net of cash) at
only 38%. This provides a strong position from which to take
advantage of any market opportunities and to consider, if
appropriate, corporate restructuring or additional share buybacks.
The strong cash position enabled the Group to repurchase for
cancellation at the end of June some 17 million shares at a price
of 30p per share. This has had a positive effect on the net asset
value per share at the half year, increasing it from a year end
level of 42p to a current figure of 44p without the benefit of an
interim property revaluation.
Appointment
The Board is pleased to announce the appointment of Graham Sidwell
as an Executive Director of the Group. Graham will be the Group
Finance Director and will also have responsibility for originating
and managing 'asset and property related' investment
opportunities. Graham has been a partner with RSM Robson Rhodes
for the past 15 years. He has had a variety of senior management
roles and has been Head of Corporate Finance for a number of
years, specialising in acquisitions, capital raising and
structuring transactions primarily for UK listed companies and
those with overseas operations.
Strategy
When Moorfield adopted its current strategy of working principally
through partnerships and joint ventures, the intention was to
generate an earnings capability underpinned by secure assets,
without requiring a return to the equity capital markets for
acquisition finance. This has been achieved and its success proven
by the consistently high returns on equity that have been achieved
from property acquisitions.
However, to date, the share rating reflects little, if any, of
this strategy or its results. Consequently, because of the
significant discount of the share price to the stated net asset
value, Moorfield, in common with many quoted property companies,
is currently exploring ways, with it's advisors, to enhance value
to shareholders, and as part of this consideration process
intends to renew the share buyback authority in respect of up to
15% of the shares. This will necessitate a reduction of share
capital and share premium account, in order to create reserves
which will enable the Company's cash resources to be used for
further share purchases, and we will be writing to shareholders
shortly to seek approval for these proposals at an EGM next
month.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months to 30 June 2000
Six Six Year
months months ended
to 30 to 30 31
June June December
2000 1999 1999
(unaudited) (unaudited) (audited)
Note #'000 #'000 #'000
Turnover - group and share of
associates 13,001 13,903 76,947
Less - share of associates
turnover (8,773) (3,101) 55,939)
-------- -------- --------
Group turnover - continuing
operations 2 4,228 10,802 21,008
===== ===== =====
Gross rental income 2,943 3,262 6,603
Rents payable and other
outgoings 3 (406) (399) (595)
-------- -------- --------
Net rental income 2,537 2,863 6,008
Administration expenses 4 (948) (1,237) (4,353)
Profit/(loss) on sale of
trading properties 250 688 (429)
Profit on sale of investment
properties 77 4 122
Other operating income 5 1,070 1,500 1,524
Other operating expenses (277) - -
-------- -------- --------
Operating profit - continuing
operations 2,709 3,818 2,872
Group share of operating
profit of associated
undertakings 3,960 2,496 19,687
-------- -------- --------
Profit on ordinary activities
before interest and
taxation 6,669 6,314 22,559
Net interest payable - Group (943) (1,401) (2,925)
Net interest payable - Share
of associated undertakings (3,591) (1,994) (6,578)
-------- -------- --------
Profit on ordinary activities
before taxation 2,135 2,919 13,056
Taxation on profit on
ordinary activities (679) (737) (4,569)
-------- -------- --------
Profit on ordinary activities
after taxation 1,456 2,182 8,487
Equity dividends (530) (533) (1,173)
-------- -------- --------
Retained profit for the
period 926 1,649 7,314
===== ===== =====
Basic and diluted earnings
per ordinary share 6 0.83p 1.48p 5.24p
===== ===== =====
CONSOLIDATED BALANCE SHEET
for the six months at 30 June 2000
30 30 31
June June December
2000 1999 1999
(unaudited) (unaudited) (audited)
Note #'000 #'000 #'000
Fixed assets
Investment and development
properties 50,015 58,918 64,060
Other tangible assets 222 303 260
------- -------- --------
50,237 59,221 64,320
===== ===== =====
Investments
Investments in joint venture 7
Share of gross assets 9,399 - -
Share of gross liabilities (7,342) - -
-------- -------- --------
2,057 - -
Investment in associated 8
undertakings 17,622 17,245 29,541
Other fixed asset investment 9 500 - -
-------- -------- ---------
Total fixed assets 20,179 17,245 29,541
-------- -------- --------
70,416 76,466 93,861
-------- -------- --------
Current assets
Trading properties 17,575 24,779 17,258
Debtors 13,130 3,315 6,766
Other investments 62 62 62
Cash at bank and in hand 18,728 8,097 11,750
-------- -------- --------
49,495 36,253 35,836
Creditors
Amounts falling due within
one year (16,103) (6,343) (17,751)
-------- -------- --------
Net current assets 33,392 29,910 18,085
-------- -------- --------
Total assets less current
liabilities 103,808 106,376 111,946
Creditors
Amounts falling due after
more than one year (35,619) (44,923) (39,830)
Provisions for liabilities
and charges
Deferred taxation provision (643) - (643)
-------- -------- --------
Net assets 67,546 61,453 71,473
===== ===== =====
Capital and reserves
Called up share capital 15,922 17,623 17,623
Share premium account 36,744 36,778 36,744
Investment revaluation
reserve 11,402 6,606 11,318
Capital reserve 648 648 648
Capital redemption reserve 2,848 1,148 1,148
Profit and loss account (18) (1,350) 3,992
-------- -------- --------
Shareholders' funds - equity
interests 67,546 61,453 71,473
===== ===== =====
CONSOLIDATED CASH FLOW STATEMENT
for the six months to 30 June 2000
Six Six Year
months months ended
to 30 June to 30 June 31
December
2000 1999 1999
(unaudited) (unaudited) (audited)
Note #'000 #'000 #'000
Net cash inflow from operating
activities 10 879 8,456 15,518
-------- --------- --------
Dividends from associated
undertakings
Dividend received from MCP
associates 12,762 - -
-------- --------- --------
Returns on investment and
servicing of finance
Interest received 640 305 492
Interest and finance fees paid (1,595) (1,625) (3,248)
-------- -------- --------
Net cash outflow from returns
on investment and servicing
of finance (955) (1,320) (2,756)
-------- -------- --------
Taxation - UK corporation tax
received/(paid) (1,270) 6 (1,171)
-------- -------- --------
Capital expenditure and
financial investment
Additions/purchase to
investment properties (3,359) (2,478) (9,707)
Additions to tangible fixed
assets (15) (97) (109)
Fixed asset investment (500) - -
Sale of investment
properties 2,752 104 (2,074)
Sale of tangible fixed
assets - 40 41
-------- -------- --------
(1,122) (2,431) (7,701)
-------- -------- --------
Acquisition and disposals
Original investment in MCP
associated undertakings - (9,720) (11,400)
Repayment of investment in
MCP associated undertakings - - 6,120
Loan to MCP associated
undertaking (5,500) - -
Investments in Moorstone
associated undertakings (700) (930) (355)
Repayment of loan to Moorfield
(Atlantic Point) Ltd 11,622 - -
Investment in Moorfield
(Atlantic Point) joint
venture (1,871) - -
Acquisition of subsidiary
(Firmwalk Ltd) - (633) (633)
-------- -------- --------
3,551 (11,283) (6,268)
-------- -------- --------
Equity dividends paid (640) (436) (969)
-------- -------- --------
Cash inflow/(outflow) before
use of liquid resources and
Financing 13,205 (7,008) (3,347)
Financing
Share issue proceeds - 12,336 12,336
Share issue expenses - (945) (979)
Increase/(decrease) in debt:
Capital element of finance
lease payments - (4) (7)
Loan repayments in the year (6,277) (4,555) (4,598)
-------- -------- --------
Net cash (outflow)/inflow from
financing (6,277) 6,832 6,752
-------- -------- --------
Increase/(decrease) in cash in
the period 6,928 (176) 3,405
===== ===== =====
NOTES TO THE ACCOUNTS
for the six months to 30 June 2000
1. Interim Report
This interim report was approved by the Board on 14 September
2000. It has been prepared using accounting policies that are
consistent with those adopted in the statutory accounts for the
year ended 31 December 1999. FRS 15 has no material effect on
this interim report and valuations have been brought forward
without amendment from the previous annual accounts.
The figures for the year ended 31 December 1999 have been derived
from the statutory accounts for that year. The statutory accounts
have been delivered to the Registrar of Companies and received an
audit report which was unqualified and did not contain statements
under s237(2) or (3) of the Companies Act 1985.
2. Group Turnover
Six months Six months Year ended
to 30 June to 30 June 31 December
2000 1999 1999
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Rental income 2,943 3,262 6,603
Trading income (commercial
property) 1,225 6,535 13,046
Trading income (residential
property) 60 1,005 1,359
-------- -------- --------
4,228 10,802 21,008
===== ===== =====
3. Rents Payable and Other Property Outgoings
Ground rent payable 10 10 21
Rates 46 27 122
Other non-recoverable
outgoings 350 362 452
------- -------- --------
406 399 595
===== ===== =====
4. Administration Expenses
Administration expenses are stated after charging:
Six Six Year
months months ended
to 30 to 30 31
June June December
2000 1999 1999
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Expenses for share buy back 16 - -
Compensation to former
director for loss of office - 147 147
Management fee receivable
from associated
undertakings (354) (196) (852)
5. Other operating income
Six months Six months Year ended
to 30 to 30 31
June June December
2000 1999 1999
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
MCP finance fees 1,070 - -
Founders fee receivable - 1,500 1,500
Sundry income - - 24
-------- -------- -------
1,070 1,500 1,524
===== ===== ====
6. Basic and diluted earnings per ordinary share
The earnings per share are calculated using profit after tax of
#1,456,000 (1999 - #2,182,000) and the weighted average number of
shares in issue during the period of 175,765,968 (1999 -
147,260,149).
7. Investment in joint venture
On 7 March 2000 the Company announced that it had completed the
agreement to form a branded accommodation joint venture with Bank
of Scotland.
Bank of Scotland subscribed for a 50% stake in Moorfield (Atlantic
Point) Ltd, previously a 100% subsidiary of Moorfield Group PLC,
which is in the process of constructing the Atlantic Point student
accommodation development in Liverpool.
Moorfield Group PLC also subscribed for further shares in the
company at a cost of #1,871,000.
Subsequent to the share subscription the funding of #11,622,000
from Moorfield Group PLC was repaid.
The joint venture has continued to construct the student
accommodation, which was not operational by 30 June 2000.
8. Investments in associated undertakings
30 30 31
June June December
2000 1999 1999
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Share of net assets brought 29,541 6,093 6,093
forward
Original investment in MCP - 9,720 11,400
associates
Repayment of investment in - - (6,120)
MCP associates
Investment in Moorstone 700 930 355
associates
Share of Moorstone retained 56 109 111
profit
Share of MCP retained profit 321 393 12,998
Dividend received from MCP (12,762) - -
associates
Share of MCP taxation (283) - -
Share of Moorstone
unrealised revaluation - - 4,138
surplus
Share of MCP unrealised (164) - 986
revaluation surplus
Share of MCP revaluation
surplus on property 213 - -
sales
Share of deferred tax on MCP
unrealised - - (420)
revaluation surplus
-------- -------- --------
Share of net assets carried 17,622 17,245 29,541
forward
===== ===== =====
9. Fixed asset investment
In March 2000, the Company made an investment of #500,000 to
acquire a 3.07% stake in educentre.com, an unlisted company.
This company was incorporated to develop the use of on-line
technology in education and began trading on 1 January 1999. It
trades as digitalbrain.co.uk and its website was launched on 21
September 1999.
The company raised an additional #4million of share capital in
March 2000 and intends to use these resources to further market
its products to Local Education Authorities and to enhance the
content and support of its website.
10. Reconciliation of Operating Profit to Cash Flow From
Operating Activities
Six months Six months Year ended
to 30 to 30 31
June June December
2000 1999 1999
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Operating profit 2,709 3,818 2,872
Depreciation of tangible 53 49 103
fixed assets
(Profit) on sale of (68) (4) (123)
investment properties
Loss on sale of other fixed - 7 7
assets
-------- -------- --------
2,694 3,870 2,859
===== ===== =====
Working capital movements
Stocks (317) 6,719 14,240
Debtors 877 (952) (3,062)
Creditors (2,375) (1,181) 1,481
-------- -------- --------
(1,815) 4,586 12,659
===== ===== =====
Net cash inflow from 879 8,456 15,518
operating activities
===== ===== =====
11. Share buy back
On 26 June 2000, the Company purchased 16,652,191 ordinary 10p
shares for #4,996,000, and on 30 June 2000, the Company purchased
a further 350,000 ordinary 10p shares for #101,500.
These amounts were settled on 3 July and 7 July respectively.
These shares represented 9.65% of the share capital in issue on 26
June and, following these transactions, the Company has
159,223,177 ordinary 10p shares in issue.
The comparative figures for the financial year ended 31 December
1999 are an extract from the Group's statutory accounts for that
financial year. Those accounts have been reported on by the
Group's auditors and delivered to the Registrar of Companies. The
report of the auditors was unqualified and did not contain a
statement under section 237 (2) or (3) of the Companies Act 1986.
A copy of this statement is being sent to all shareholders and
will be available for inspection at the Company's registered
office.
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