RNS Number:1275T
NHP PLC
11 December 2003
NHP Plc
11 December 2003
Preliminary Unaudited Results for the Year to 30 September 2003
Summary
- Profit before tax #24.8 million (2002: #16.4 million), an increase of 51 per
cent.
- Net asset value per Ordinary Share increased by 52 per cent to 157.6p (2002:
103.4p) after accruing for the proposed final dividend.
- Basic earnings per Ordinary Share up 25 per cent to 12.6p (2002: 10.1p).
- Proposed final dividend of 2.25p, payable on 3 March 2004 to shareholders on
the register on 6 February 2004. Together with the interim dividend of
0.75p, this makes a total for the year of 3p (2002: nil). Shareholder
approval sought for share repurchases.
- Highfield Care made significant progress, achieving profitability in the
second half and producing a much reduced operating loss for the year as a
whole of #2.0 million (2002: #3.2 million).
- Over half of third party leases now converted to annual RPI based review -
leading to an uplift in the valuations of the homes concerned and increased
certainty of future rental growth.
- New #60 million five year bank facility signed which will provide substantial
annual cost savings.
Bill Colvin, Chief Executive of NHP, said, "Our results have improved each year
since the change in strategy implemented almost three years ago. The growth and
success of Highfield Care has contributed greatly to our improved financial
performance, which has been achieved in a challenging business environment. We
expect to continue to deliver value to our shareholders through growing
dividends and asset values."
Enquiries:
Bill Colvin, Chief Executive Simon Hudson/Molly Dover
Richard Midmer, Finance Director Tavistock Communications
NHP Plc 020 7920 3150
01483 754760 07966 477256
Statement by the Chairman, Sir Martin Laing
I am pleased to report that we have made good progress once more this year
across all areas of our business. The operating subsidiary, Highfield Care,
made significant headway - achieving profitability in the second half and
restructuring under its new management team to enhance profitability further in
the current year.
Our property business, where we lease homes to a number of third party care home
operators, is nearing the end of the process of tenant consolidation that has
been a feature of the past three years. Agreements have now been signed
converting over half of all third party tenant leases to annual inflation linked
rent review. In return, NHP has removed the obligation to pay turnover rents.
The agreements will provide much greater rental visibility and additionally have
removed all discretionary buy-back options on the associated leases.
Many local authorities still do not pay fees that adequately cover the full cost
of providing care for residents. The position for private care providers (such
as Highfield Care) is made worse by significant staff cost pressures caused by
Minimum Wage increases and often severe, local shortages of nursing staff.
Because of the nature of the care industry - looking after the welfare and well
being of those who cannot care for themselves, in a highly regulated environment
- staff shortages must be filled. In many cases this requires the use of
expensive agency personnel. Highfield Care has made it a priority to find ways
to minimise such agency usage.
Financial results
Turnover for the year to 30 September 2003 was #171.9 million, an increase of 36
per cent over last year's #126.0 million. This primarily reflected a further
increase in the number of homes operated by Highfield Care plus organic revenue
growth in fees (from increased fee levels and rising occupancy). Profit before
taxation was #24.8 million (2002: #16.4 million).
The annual valuation of investment and operated properties produced an increase
of #93.2 million to #736.5 million. This increase, together with retained
profits, fed through directly to the net asset value per Ordinary Share, which
rose by a leveraged 52 per cent to 157.6p (2002: 103.4p). Basic earnings per
Ordinary Share increased by 25 per cent to 12.6p (2002: 10.1p) after a net tax
credit of #0.6 million (2001: credit of #0.5 million). Net recourse borrowings
were again reduced - to #34.4 million (2001: #51.5 million), representing
recourse gearing of only 12 per cent (2002: 30 per cent) - and were successfully
refinanced during the year under a facility whose much improved terms will
generate substantial annual savings and release NHP from restrictive terms
contained within the old facility.
Dividend
In July this year, NHP resumed dividend payments with an interim dividend of
0.75p per Ordinary Share. The Directors propose a final dividend of 2.25p per
Ordinary Share payable, if approved, on 3 March 2004 to shareholders on the
register on 6 February 2004. Together with the interim dividend, this makes a
total for the year of 3p. In future years, if the investment opportunities open
to us remain limited, we intend to adopt a policy of returning to shareholders
all surplus cash generated by our businesses after capital expenditure.
A growing dividend payment is just one of the mechanisms to provide returns to
shareholders. We are seeking authorisation to repurchase NHP Ordinary Shares
(effectively reducing the issued share capital) at the Annual General Meeting.
Under the new rules in force from December 2003, Ordinary Shares repurchased can
be held in 'Treasury' for re-issue at a future date, subject to the amounts set
out in the Companies Act and the ABI guidelines. The authorisation will give us
another option for returning value to shareholders and we will continue to
evaluate other options.
Board
The chief executive of Highfield Care, John Murphy, joined the Board in January
2003. John's brief is to develop Highfield Care into a profitable business and
make it one of the UK's premier care home operators. In February, Mrs Nancy
Hollendoner joined the Board as a Non-Executive Director. Nancy is a leading UK
health care consultant and was for six years the health care sector equity
analyst with UBS. She brings extensive healthcare industry knowledge plus long
experience of investment and capital markets. John and Nancy are both making
significant contributions to the Board and the Group.
In September, Daniel Francis, our longest serving executive director, retired
from the Board. On behalf of all the Directors, I would like to thank Danny for
his hard work and contributions to NHP since its inception in 1995.
Outlook
The current year should see further benefits from the actions taken by our
management team to create two strong business units. The property business is
currently completing what we believe will be the last phase of tenant
consolidation as the final homes are taken out of receivership and re-registered
to Highfield Care. In addition, the conversion of third party leases to rental
levels escalated by RPI has increased both the certainty of rental income growth
and the values of the assets concerned.
Our improving financial performance should be viewed against the background of
continued uncertainty and margin pressure within the substantially state funded
UK care home industry. Care homes across the country are continuing to close
with over a thousand beds per month currently being lost. New build activity is
minimal and is focused in regions where long term contracts are offered by local
authorities or where the majority of residents will pay for their own care.
We believe that the private residential care home sector, with appropriately
high standards and well-trained staff, has an important part to play in the
future healthcare needs of an increasingly ageing UK population. NHP intends to
maintain its leading position within the industry by continuing to invest in
Highfield Care's homes and people to provide the best possible standard of
accommodation and care for our residents.
Review of Operations by the Chief Executive, Bill Colvin
In the year under review, we continued to improve the financial performance of
the NHP group. Profits and cash flows maintained the upward trend of recent
years while debt continues to fall. Our continuing progress led directly to a
further significant uplift in net asset value and earnings per Ordinary Share
and enabled the Board to resume dividend payments to shareholders.
A major contributing factor to the improvement in financial performance was the
progress made by our care home operating subsidiary, Highfield Care. Since his
appointment 12 months ago, the Highfield Care Chief Executive, John Murphy, and
his new management team have substantially upgraded the physical condition of a
large number of Highfield Care's homes and improved all aspects of care in them
by providing strong management and clear direction. The new management team
continues to work hard to grow profitability by investing in care staff,
systems, equipment and buildings. We believe that there still exists plenty of
scope to improve overall financial performance over the next two years.
The transfer of six under-performing frail elderly homes to our newly created
psychiatric care business, NHP Healthcare Partnerships, will further enhance the
performance of Highfield Care. Two units are already trading very successfully
as specialist homes and one has seen a substantial valuation increase as a
consequence of conversion. The four others are in the process of being
converted and will be trading by the end of the current financial year. We
believe NHP Healthcare Partnerships can be built into a profitable business.
However, its potential size is constrained by the specialist market it serves
and it is not expected to become material to NHP as a whole.
The UK care home industry
The total capacity for nursing and residential care for the elderly in the UK is
currently some 500,000 beds, of which the private sector contributes
approximately 70 per cent. This has steadily increased from 60 per cent over
the last ten years as many local authorities, and the NHS, have withdrawn beds
from the long term care market because they were unable to provide residential
care services as cost-efficiently as private operators.
Local authorities currently fund from their own resources over 60 per cent of
all residents - a figure that will continue to decline as more and more people
are able to self-fund (particularly in the South East with its higher property
values) or own houses local authorities can sell to fund care.
The past year has brought even more challenges to the publicly funded, private
sector care home industry. Margins have fallen as increases in National
Insurance contributions, Minimum Wage levels and nursing salaries raised care
home wage costs by more than inflation. Staff costs look set to rise further
over the next year with further Minimum Wage increases planned and as
regulations are implemented requiring a minimum ratio of 50 per cent of care
staff to be trained to NVQ (National Vocational Qualification) Level 2 by 2005.
In addition, all staff are to receive three days training per year on full pay.
Upward pressure on costs is not restricted to staffing. The cost of insuring a
care home business has risen significantly during the year, as was the case last
year. In addition, the four newly established inspection bodies across the UK
are demanding improved physical standards in care homes. Many local authority
funders, who set their fixed fees at the beginning of each financial year, will
not meet increased costs from higher staffing costs and improved quality.
Consequently, the predictable result of the current system is continuing home
closures, particularly in areas where fee levels do not meet the cost of
providing care.
Despite an ageing population, current Government policy and lack of action
appear to support a reduction in the number of available residential care beds
across the UK. Their stated preference is for more people to be given care in
their own homes, so keeping to a minimum the time publicly funded residents
spend in a care home setting. This will result in the number of self-funded
residents, both in NHP homes and across the industry, continuing to grow but it
will be several years before such residents replace publicly funded individuals
as a majority.
NHP wholeheartedly supported the creation of English Care and Scottish Care, the
industry bodies set up to lobby Government on linking fees from local
authorities to the local cost of providing residential care. The Scottish
Executive has accepted this principle and is working in partnership with the
industry in Scotland. John Murphy and I are actively involved in these bodies.
I am delighted that one of our non-executive directors, Lord Sutherland, has
agreed to become Chairman of both bodies. His experience as a past Chairman of
the Royal Commission on Long Term Care will be invaluable in making
representations to national and local government.
Property business
In response to the trend outlined above, NHP is being very selective where we
build or acquire new homes and, at the time of writing, there are only three in
the pipeline - one in York and two in Scotland - in areas where the local
supply/demand balance will ensure that we secure an adequate return on our
investment. Elsewhere, Highfield Care has in place 10 planning consents to
build extensions and annexes at existing homes. Our growth plans are focused on
adding to the Highfield Care portfolio, where we obtain the highest returns.
The process of tenant consolidation continued during the year under review with
three further receiverships taking place during the year or just after the year
end. These resulted in 18 additional homes for Highfield Care, including 14 in
South Wales that have now formed the basis of a new Welsh division, Highfield
Cymru. After the year end, nine further properties were assigned from
receivership to Southern Cross.
All leases on our homes held by Southern Cross and Ashbourne, accounting for 118
homes or 57 per cent of third party operated NHP homes, have now been converted
to an inflation-linked rent review process, effective from April 2003. The new
agreements consolidated the existing pavement and turnover rents to a single
higher level of base rent to be reviewed upwards annually by the level of
inflation, subject to cap and collars. At the same time all discretionary
buy-back options held under the leases were removed.
The valuations of the 79 homes whose leases were converted during the period
under review increased by over 17 per cent as a result of the change, together
with their improved trading performance and enhanced financial covenants. The
improved tenant covenants resulted from the acquisition of Ashbourne (and Care
Management Group) by venture capital funded vehicles during the year.
As part of the drive to more actively manage the property portfolio, six homes
were closed during the year after they had been reviewed as either sub-economic
or more suitable for alternative use. One home was sold during the year for
#0.3 million, another is in the process of being sold and four will be
refurbished and transferred to NHP Healthcare Partnerships for use as
psychiatric rehabilitation facilities.
Highfield Care
Highfield Care under its new management team has made excellent progress. The
business achieved profitability during the second half of the year with an
operating profit of #0.7 million, coupled with the loss in the first half of
#2.7 million meant that the business recorded a loss of #2.0 million (2002: #3.2
million loss) for the year as a whole. These better than expected results are
direct consequences of substantial operational improvements and a disciplined
strategy to increase fees where possible and to attack controllable costs
throughout the business. The improved financial performance is reflected in
increased profitability per bed when compared with the equivalent periods in the
prior year.
A considerable effort has been made to improve and upgrade all Highfield Care's
homes and to deliver additional equipment such as specially adapted minibuses
and provide a much-expanded training programme for staff, in association with
the Learning and Skills Council. The upgrading of a large number of our
Highfield Care homes accounted for a large proportion of the Group's #11.3
million capital expenditure. This level of investment is required whilst we
complete the major 'catch-up' investment in homes starved of capital expenditure
by previous operators. With the operational improvement and the major capital
investment, we have substantially enhanced the quality of care for residents,
enabling us to secure higher occupancy and to charge increased numbers and
levels of top-up fees.
As a result of the assignment of leases from receiverships, Highfield Care has
now acquired the operation or management of an additional 18 care homes,
including 14 from one operator in South Wales allowing us to create Highfield
Cymru - under a new Managing Director, Kamma Foulkes - as a new division. In
total, Highfield Care now operates or manages 196 care homes with some 9,300
beds, of which 174 (with some 8,200 beds) are owned by NHP, representing some 46
per cent of NHP's care home portfolio. In the absence of a significant
acquisition, we do not expect to add materially to the number of homes operated
by Highfield Care in the short term.
The divisional structure instituted at the beginning of the year has injected a
much sharper focus on day to day operational issues in the business - ranging
from the provision of a greatly enhanced level of activities for residents to
the costs of consumables and the accurate analysis of local and regional supply/
demand balances. The four divisions have been supported by a series of central
marketing initiatives aimed at enhancing the Highfield Care brand among
residents, potential residents, funders, referrers and staff.
The retention and motivation of staff is key to our business and we expect to
see continuing improvements in this area resulting from the upgraded physical
work environment and from incentive schemes and training initiatives which are
now in place throughout Highfield Care. A particular focus has been on reducing
the expensive use of agency staff to cover absent staff and unfilled vacancies.
For example, we have recently introduced a lottery, with attractive high value
prizes, and for which entry is limited to those staff with high attendance
records over a specified period.
The revenues generated by Highfield Care have risen as a result of occupancy
increases as refurbishment programmes at individual properties are completed.
Highfield Care's occupancy, at 30 September 2003, stood at 91 per cent. This
figure should increase further in the current year as we finish renovating more
of our homes. For publicly funded residents, the fee increases received from
their local authority funders varied enormously across the country but produced
an average fee increase for all such residents of 5.5 per cent.
Highfield Care's progress in raising its standards of care was recognised at the
recent Caring Times' UK Care Awards, at which two of our team members won awards
- for Marketing and Lifetime Achievement - and a third was a finalist.
Recognition by our peers provides a valuable boost to morale as well as helping
to make Highfield Care an operator people want to work for.
We have made a good start on building Highfield Care into one of the UK's
premier care home operators. Subject, as always, to the level of fee
settlements from local authorities, our current strategy and management team
should be able to achieve further increases in operating profit over the next
couple of years, producing a valuable and cash generative business for NHP's
shareholders.
Outlook
The property business now derives around 90 per cent of its rental income from
four tenants, one of which is Highfield Care. Together with the re-negotiated
leases, the consolidation that this represents will produce increased earnings
visibility and quality. In addition, the last stage in NHP's refinancing was
completed in September with the signing of a new five year bank facility on much
improved terms. We begin the current financial year in robust financial health.
We expect further progress from Highfield Care, supported by our core high
quality property business, giving us the profitability to examine ways in which
to begin to return further value to shareholders.
Review by the Finance Director, Richard Midmer
This review provides a commentary on the principal movements in the Group
accounts for the year to 30 September 2003 and an analysis of the Group's
businesses.
Profit and loss account
Rent receivable from third party operators of NHP homes totalled #49.0 million
for the year (2002: #56.6 million), which included #4.3 million (2002: #3.4
million) of turnover rent. Income from pavement rents reduced as a consequence
of lease transfers during the period to Highfield Care. The increase in
turnover rents arises from a one-off payment of #1.0 million associated with the
conversion of leases held by the two largest tenants into annually reviewed
inflation linked leases with no turnover rent, with effect from 1 April 2003.
Rent charged to Highfield Care was #25.7 million (2002: #15.6 million). Total
rents receivable during the year from both third parties and Highfield Care
increased from #72.3 million to #74.7 million.
Turnover generated by Highfield Care increased significantly to #122.9 million
(2002: #69.3 million), reflecting the much larger number of NHP homes operated
by the company and its inclusion for a full year as a wholly owned subsidiary.
Combined total Group turnover was #171.9 million (2002: #126.0 million), again
reflecting the growth of the Highfield Care operating business and average fee
increases of 5.5 per cent secured during the year. This average figure conceals
wide regional variations in fee increases with the lowest increases coming from
local authorities in the North West of England and the East Midlands.
Profit before tax was #24.8 million (2002: #16.4 million). This figure is after
the write back of #0.8 million of bad debt provisions (2002: charge of #4.8m)
which included #1.2 million in respect of Eastwood Care Homes (Northampton)
Limited, made possible by the receivership sale of the ex-Eastwood leases to
Southern Cross for a premium of #1.4 million. In addition there was a net
exceptional credit of #0.3 million (2002: exceptional credit of #0.3 million)
and profit on disposal of tangible fixed assets of #0.3 million (2002: #0.4
million). Net exceptional income for the period of #0.3 million comprises a net
write back of permanent diminution in value on fixed asset properties of #1.7
million (2002: #1.5 million), tenant receivership costs of #1.3 million (2002:
#1.4 million) and a charge in respect of Ultima Group closure support costs of
#0.1 million (2002: credit of #0.2 million). Included in administrative
expenses are restructuring (principally redundancy) costs of #1.1 million.
Total Group depreciation was #6.2 million (2002: #3.4 million) including
depreciation of the operated properties of #5.4 million (2002: #2.9 million).
This charge will continue to increase in the current year as a result of the
greater number of NHP homes operated by Highfield Care and the increased opening
valuations on which depreciation is based.
Highfield Care's financial performance improved significantly during the year.
After a first half operating loss of #2.7 million (2002: #1.5 million), an
operating profit of #0.7 million (2002: loss of #1.7 million) was recorded in
the second half producing a reduced operating loss for the year of #2.0 million
(2002: loss of #3.2 million).
At the beginning of the year, 50 homes were in receivership and four more,
previously operated by Healthcare Investments (No.2) Limited, were added in the
first quarter of the year. All of these homes, with the exception of two that
were assigned to a new tenant, Methodist Homes for the Aged, were reregistered
to Highfield Care during the year.
In April, Eastwood Care Homes (Northampton) Limited, which operated nine
specialist NHP homes across England, went into receivership. Since 30 September
2003, all nine homes have been assigned to Southern Cross. Also after the year
end, Puretruce Care Limited, an operator of 14 NHP homes in South Wales, was
placed in receivership. Highfield Care is currently managing or operating the
homes in its newly created Welsh division.
Net interest payable and similar charges reduced from #38.1 million in 2002 to
#34.8 million this year and includes a #0.4 million accelerated write-off of
unamortised bank arrangement charges relating to the replaced bank facility. In
the last four years the Group has charged annual amortisation in respect of bank
arrangement fees averaging #1.4 million. Under the new facility such charges
will be below #0.1 million per year. Average cost of bank borrowing during the
year was 5.6 per cent (2002: 6.0 per cent). The blended fixed rate of the #559
million (2002: same) secured notes outstanding was an unchanged 6.7 per cent.
These non-recourse secured notes represented 94 per cent (2002: 91 per cent) of
the Group's total debt.
Basic earnings per Ordinary Share were 12.6 p (2002: 10.1p) and fully diluted
earnings per Ordinary Share were 12.2p (2002: 9.9p). There was a tax credit for
the year of #0.6 million (2002: #0.5 million) comprising a credit of #1.0
million relating to an increase in the estimate of recoverable deferred tax
(2002: nil) and an income tax charge of #0.4 million (2002: credit of #0.5
million).
Balance Sheet
At 30 September 2003, there were 367 care homes in the Group's property
portfolio (2002: 373 homes) with a total of 17,754 beds (2002: 18,395 beds).
Bed numbers have been reduced as a result of six disposals (225 beds), a review
of the available beds in Highfield Care in the light of rising standards and the
elimination of the majority of double rooms (369 beds) and adjustments elsewhere
in the third party tenanted portfolio (47 beds).
The annual year end independent valuation of the 207 investment properties,
including those still in receivership, (2002: 261 homes) produced a value of
#464.6 million (2002: #483.3 million). The 158 operated properties (2002: 108
homes) were valued, on an existing use basis as operating assets requiring
depreciation, at #271.8 million (2002: #159.9 million). Taking the two asset
classes together, the value has increased by 14 per cent to #736.5 million
(2002: #643.3 million). In addition, two homes are held for resale, as current
assets, one of which has been sold since the year end.
A significant factor behind the increase was the uplift in value of the 79
investment properties whose leases were converted during the year to an annual
RPI increase in place of turnover rent. This is a reflection of certainty of
future rental growth and the increased pavement rent levels from which rent will
grow. Several of the leases converted contained discretionary buy-back options
and these have now been removed, reducing to 41 (including 11 in receivership)
the number of homes subject to such buy-backs (which are at purchase prices
equivalent to the higher of a formulated figure or the market value).
In arriving at the Group property portfolio valuation, GVA Grimley International
Property Advisers have separately assessed the market values of the individual
properties and made an adjustment by way of a portfolio premium of around five
per cent, an approach consistent with that applied in previous years. The
overall yield on the investment property portfolio, based on annualised
receivable rents of #44.8 million (2002: #52.4 million), was 9.6 per cent (2002:
10.8 per cent). Using full annual pavement rents only, the yield reduces to 9.3
per cent (2002: 10.2 per cent).
Net debt, excluding the deposit swaps and zero coupon notes of the three
securitisation vehicles reduced to #548.6 million from #563.7 million in the
prior year. Recourse borrowings of #34.4 million (2002: #51.5 million) were
refinanced in September with a new five year #60 million facility with
significantly reduced coupon and fees. Consolidated gearing - including the
non-recourse securitised debt - was 136 per cent at 30 September 2003
(2002: 222 per cent). Gearing calculated using recourse only borrowings
declined to 12 per cent from 30 per cent, reflecting the increased value of the
asset base and the growing level of retained profits.
Cash flow
Net cash inflow from operating activities improved to #64.3 million (2002: #57.9
million). Net cash interest and finance costs reduced by #3.5 million to #39.6
million (2002: #43.1 million) principally as a result of lower bank borrowings
at reduced cost.
Capital expenditure exceeded cash inflows from asset disposals by #5.9 million
(2002: net cash inflow of #0.2 million) with disposals during the year totalling
#5.4 million (2002: #5.5 million). Capital expenditure more than doubled to
#11.3 million (2002: #5.3 million) as Highfield Care carried out substantial '
catch-up' investment on its increased portfolio of operated homes
Financial derivatives and other instruments
The deposit swap agreements and zero coupon notes associated with the redemption
of the Care Homes 1, 2 and 3 securitised notes remained in place during the
period. These investments mature between 2021 and 2028 and provide for the
repayment of #408 million of the non-recourse #559 million notes. In NHP's
consolidated accounts, interest on these investments accrues on a monthly basis
until their maturity dates. At 30 September 2003 the investments were held at a
book value in the consolidated balance sheet of #139.5 million (2002: #132.4
million).
Short term cash deposits held in the three securitisation vehicles average #18
million at any one time, thereby providing a natural hedge against sterling
interest rate movements. Together with the purchase of a #10 million interest
rate cap at 6 per cent in November 2003, this has reduced the Group's future
interest rate exposure to almost nil.
NHP Plc
Unaudited consolidated profit and loss account
For the year ended 30 September 2003
2003 2002
Note #'000 #'000
Turnover 2 171,892 125,964
Cost of sales (87,321) (47,836)
Gross profit 84,571 78,128
Provision for doubtful debts and related costs 774 (4,838)
Other administrative expenses (26,381) (19,750)
Exceptional income 3 250 248
Administrative expenses (25,357) (24,340)
Group operating profit 59,214 53,788
Share of associated undertakings' operating 32 283
profits
Total operating profit 2 59,246 54,071
Profit on disposal of tangible fixed assets 337 371
Net interest payable and similar charges (34,827) (38,072)
Profit on ordinary activities before taxation 24,756 16,370
Tax credit on profit on ordinary activities 556 509
Profit on ordinary activities after taxation 25,312 16,879
Profit for the year 25,312 16,879
Dividends paid and proposed 4 (6,088) -
Retained profit transferred to reserves 19,224 16,879
Earnings per Ordinary Share 5
Basic 12.6p 10.1p
Diluted 12.2p 9.9p
Turnover and operating profit is wholly derived from continuing operations
carried out in the UK.
Unaudited balance sheets
As at 30 September 2003 Group Group Company Company
2003 2002 2003 2002
Note #'000 #'000 #'000 #'000
Intangible fixed assets
Goodwill 2,053 2,167 - -
Tangible fixed assets
Investment properties 6 464,640 483,330 - -
Operated properties 6 271,810 159,920 - -
Other fixed assets 3,540 1,782 - -
739,990 645,032 - -
Investments 139,880 132,817 191,589 199,521
Total fixed assets 881,923 780,016 191,589 199,521
Current assets
Properties held for resale 2,328 2,972 - -
Debtors 19,258 14,877 35,869 26,744
Short term investments 19,331 17,869 - -
Cash at bank and in hand 1,773 2,339 - -
42,690 38,057 35,869 26,744
Creditors
Amounts falling due within one (35,185) (25,558) (6,142) (1,798)
year
Net current assets 7,505 12,499 29,727 24,946
Total assets less current 889,428 792,515 221,316 224,467
liabilities
Creditors
Amounts falling due after more (567,626) (583,690) - -
than one year
Provisions for liabilities and 7 (1,261) (1,088) (274) -
charges
Net assets 2 320,541 207,737 221,042 224,467
Capital and reserves
Called up share capital 2,034 2,009 2,034 2,009
Share premium account 192,213 190,891 192,213 190,891
Revaluation reserve 86,306 (6,401) - -
Revenue reserve - - 914 914
Profit and loss account 39,988 21,238 25,881 30,653
Total equity Shareholders' 320,541 207,737 221,042 224,467
funds
Net assets per Ordinary Share
Basic 157.6p 103.4p
Unaudited consolidated cash flow statement
For the year ended 30 September 2003 2003 2002
Note #'000 #'000
Net cash inflow from operating activities 8 64,280 57,872
Returns on investments and servicing of finance
Interest paid (40,321) (43,746)
Other similar charges paid (net) (74) (223)
Interest received 787 837
Dividends received 32 33
Net cash outflow from returns on investment
and servicing of finance (39,576) (43,099)
Taxation
Corporation tax repaid 190 319
Capital expenditure and financial investment
Purchase of tangible fixed assets (11,326) (5,280)
Proceeds on disposal of fixed asset properties (net of disposal 3,128 4,291
costs)
Proceeds on disposal of other tangible fixed assets 1,124 631
Proceeds on disposal of properties held for resale 1,128 533
Net cash (outflow)/inflow from investing activities (5,946) 175
Acquisitions and disposals
Net bank overdraft acquired with subsidiaries - (73)
Investment in Highfield Holdings Limited - (73)
Net cash outflow from acquisitions - (146)
Equity dividends paid (1,512) -
Net cash inflow before use of liquid resources and financing 17,436 15,121
Management of liquid resources
Short term deposit investment (net) (1,462) (5,460)
Financing
Equity
Issue of Ordinary Shares 1,347 33,963
Less: Issue costs paid - (2,104)
Net cash inflow from equity financing 1,347 31,859
Bank loans
Bank loans drawn down 37,700 5,800
Bank loans repaid (55,915) (47,152)
Less: Financing costs paid (1,204) (2,336)
Net cash outflow from bank loan finance (19,419) (43,688)
Other loan repayments (298) (111)
Finance lease repayments (170) (18)
Net cash outflow from financing activities (18,540) (11,958)
Decrease in cash in the year (2,566) (2,297)
Analysed as follows:
Reduction in cash at bank and in hand (566) (2,297)
Increase in bank overdrafts, included in "Creditors: Amounts
falling due
within one year" (2,000) -
Decrease in cash in the year (2,566) (2,297)
Unaudited consolidated statement of total recognised gains and losses
For the year ended 30 September 2003
2003 2002
#'000 #'000
Profit for the year 25,312 16,879
Net surplus on revaluation of properties 92,233 56,607
Total recognised gains for the year 117,545 73,486
Unaudited consolidated reconciliation of movements in shareholders' funds
For the year ended 30 September 2003
2003 2002
#'000 #'000
Profit for the year 25,312 16,879
Dividends paid and proposed (6,088) -
Retained profit for the year 19,224 16,879
Net surplus on revaluation of properties 92,233 56,607
Issue of share capital net of costs 1,347 31,859
Net increase in shareholders' funds 112,804 105,345
Shareholders' funds at the beginning of the year 207,737 102,392
Shareholders' funds at the end of the year 320,541 207,737
Unaudited consolidated note of historical cost profits and losses
For the year ended 30 September 2003
2003 2002
#'000 #'000
Profit on ordinary activities before taxation 24,756 16,370
Realisation of net valuation losses on disposal
of fixed asset properties (1,597) (2,045)
Difference between an historical cost depreciation charge and the actual
depreciation charge for the year 1,123 -
Historical cost profit on ordinary activities before taxation 24,282 14,325
Historical cost profit retained for the year 18,750 14,834
Unaudited notes to the financial information
1 The financial information set out in the announcement does not constitute the
Company's statutory accounts for the years ended 30 September 2003 or 2002. The
financial information for the year ended 30 September 2002 is derived from the
statutory accounts for that year which have been delivered to the Registrar of
Companies. The auditor reported on those accounts; their report was unqualified
and did not contain a statement under Section 237(2) or (3) Companies Act 1985.
The statutory accounts for the year ended 30 September 2003 will be finalised on
the basis of the financial information presented by the Directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
2 Segmental analysis of turnover, operating profit and net assets
2003 2002
#'000 #'000
Turnover
Property business 48,985 56,631
Highfield Care 122,907 69,333
171,892 125,964
Operating profit
Property business 61,284 57,244
Highfield Care (2,038) (3,173)
59,246 54,071
The results of Highfield Care above include pavement and turnover rents payable
under leases to the property business of #25,712,000 (2002: #15,645,000).
Included in the property business is #5,407,000 (2002: #2,879,000) depreciation
of the operated properties.
2003 2002
#'000 #'000
Net assets
Property business 325,248 210,206
Highfield Care (4,707) (2,469)
320,541 207,737
3 Exceptional income
The following exceptional income/(costs) have been incurred or provided for and
included in administrative expenses:
2003 2002
#'000 #'000
Net write back of permanent diminution in value
- fixed asset properties 1,686 1,525
Tenant receivership costs (1,289) (1,450)
Ultima Holdings Group closure support costs (147) 173
Total net exceptional income 250 248
4 Dividends paid and proposed
2003 2002
#'000 #'000
Interim dividend paid of 0.75p per Ordinary Share
on 201,600,395 shares (2002: nil) 1,512 -
Final dividend proposed of 2.25p per Ordinary Share
on 203,375,555 shares (2002: nil) 4,576 -
6,088 -
5 Earnings per share
The earnings per Ordinary Share of 12.6p for the year ended 30 September 2003 is
calculated on the profit after taxation of #25,312,000 divided by 201,589,427
Ordinary Shares of 1p each, being the weighted average number of Ordinary Shares
in issue during the year.
The diluted earnings per Ordinary Share of 12.2p for the year ended 30 September
2003 is based on the profit after taxation of #25,312,000 divided by 207,207,002
Ordinary Shares of 1p each, being the weighted average number of Ordinary Shares
in issue during the year and assuming the Directors' and employees' share
options are exercised.
The earnings per Ordinary Share of 10.1p for the year ended 30 September 2002 is
calculated on the profit after taxation of #16,879,000 divided by 166,801,087
Ordinary Shares of 1p each, being the weighted average number of Ordinary Shares
in issue during the year.
The diluted earnings per Ordinary Share of 9.9p for the year ended 30 September
2002 is based on the profit after taxation of #16,879,000 divided by 170,592,472
Ordinary Shares of 1p each, being the weighted average number of Ordinary Shares
in issue during the year and assuming the Directors' and employees' share
options were exercised.
6 Tangible fixed assets
Investment properties
Investment properties represent properties held for long term retention.
Investment properties have been valued by GVA Grimley, International Property
Advisers, at 30 September 2003, at Market Value on both portfolio and individual
property bases in accordance with the RICS Appraisal and Valuation Manual.
The Directors have reviewed GVA Grimley's valuation at 30 September 2003 and
have made a net write back to permanent diminution in value of #735,000 which
is credited to the profit and loss account. See note 3.
Operated properties
Operated properties represent properties held for long term retention. Operated
properties have been valued by GVA Grimley, International Property Advisers, at
30 September 2003 at existing use value on both portfolio and individual
property bases in accordance with the RICS Appraisal and Valuation Manual.
Operated properties, reclassified from investment properties at valuation, were
valued by GVA Grimley on an existing use basis at their respective dates of
transfer.
The Directors have reviewed GVA Grimley's valuation at 30 September 2003 and
have made a net write back to permanent diminution in value of #951,000 which
is credited to the profit and loss account. See note 3.
7 Provisions for liabilities and charges
At 1 Oct Costs Profit and At 30 Sep
2002 incurred loss 2003
in the year account
#'000 #'000 #'000 #'000
Ultima Holdings Group closure support costs 63 (100) 147 110
Receivership support costs 1,025 (1,560) 1,289 754
National Insurance Contributions payable
on exercise of share options - (185) 582 397
Total 1,088 (1,845) 2,018 1,261
8 Reconciliation of operating profit to operating cash flows
2003 2002
#'000 #'000
Operating profit 59,246 54,071
Depreciation of operated properties 5,407 2,879
Depreciation of other fixed assets 827 568
Amortisation of goodwill of subsidiary undertakings 114 104
Net write back of permanent diminution in value
- fixed asset properties (1,686) (1,525)
Loss on disposal of properties held for resale 27 -
Share of associated undertakings' operating profits (32) (283)
Write down in value of properties held for resale - 18
Increase in debtors (3,435) (1,985)
Increase in creditors 3,639 3,457
Increase in provisions 173 568
Net cash inflow from operating activities 64,280 57,872
This information is provided by RNS
The company news service from the London Stock Exchange
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