Interim Results
Great Portland Estates PLC
19 November 2002
19 November 2002
INTERIM RESULTS
The Directors of Great Portland Estates P.L.C. announce the results of the Group
for the six months ended 30 September 2002.
Highlights:
• New management team in place
• Strategic Review completed
• The disposal of £37 million of non-core properties in the first half, and a
further £85 million since the half year
• £130 million 103/4% First Mortgage Debenture Stock 2021 purchased
• Weighted average cost of borrowing down to 6.6% (31 March 2002: 7.8%)
• Adjusted earnings up 6.5% to 6.6p per share (2001: 6.2p)
• Interim dividend up 2.7% to 3.42p per share (2001: 3.33p)
• Adjusted diluted net assets per share down 12.0% to 307p
(31 March 2002: 349p)
• Portfolio valuation down 4.8% on a like-for-like basis
Toby Courtauld, Chief Executive, said:
'Since the full year announcement in June, we have begun to address some of the
Company's recent under-performance at the property level. We have completed a
strategic review, strengthened our team and sold a substantial part of our
non-core holding.'
'Looking forward, we expect rental values in the capital to continue their
downward trend during the second half of the financial year, particularly in the
City market. We also believe the investment markets are beginning to price risk
more realistically than has been the case over the last twelve months, and we
are in the enviable position of having significant capacity in the balance sheet
to take on new opportunities as we uncover them.'
Enquiries etc:
Great Portland Estates P.L.C. 020 7580 3040
Toby Courtauld, Chief Executive
John Whiteley, Finance Director
Finsbury Group 020 7251 3801
Edward Orlebar
CHAIRMAN'S STATEMENT
Since I last wrote to shareholders in June, the pace of change at Great Portland
has been maintained under our new Chief Executive, Toby Courtauld, and his team.
The well-timed purchase of our £130 million 103/4% Debenture 2021 in April has
enabled us to continue with the sale of non-core properties, amounting to £122
million, and at figures marginally ahead of March 2002 values. This has been a
notable achievement in difficult conditions and more disposals are anticipated
in the near future.
The activity during this period has, once again, produced a distorting effect on
the face of the revenue account, and a full explanation of the results is given
later. However, underlying earnings per share are ahead, as is the interim
dividend at 3.42p per share. Your Directors continue to attach great importance
to the level of dividend as an integral part of shareholder return.
There is no doubt that the coming months will prove to be equally challenging.
Our new executives are concentrating on the basics and have already begun to
show their mettle. We are confident that, with the firepower which they are
amassing, they will prove themselves to be ready and able to take advantage of
opportunities in central London which the current markets will inevitably
provide.
CHIEF EXECUTIVE'S REVIEW
This is my first report to you on a period during which the new management has
played a part. Direct comparison with the interims last year is confused by the
purchase in April of a high-coupon debenture and £36.9 million of property
sales, distorting the face of the profit and loss account. Excluding these,
adjusted earnings are up 6.5% to 6.6p per share (2001: 6.2p) and the directors
have declared an interim dividend of 3.42p per share (2001: 3.33p), an increase
of 2.7%.
The investment portfolio was valued at 30th September 2002 at £993 million,
representing a reduction of 4.8% on a like-for-like basis over the last six
months. This, together with the 21p per share negative impact of the debenture
purchase, resulted in diluted net assets per share (adjusted to exclude deferred
tax on accelerated capital allowances) at 30th September of 307p per share (31st
March 2002: 349p).
In our announcement of the full year results in June, I referred to the need for
change at Great Portland to continue, indeed accelerate, in some areas of the
business. This has been the theme for the half year just gone as we have begun
to address some of the Company's recent under-performance at the property level.
We have focused much of our efforts on the key areas of asset strategy and our
people and processes. We have made good progress on both these important fronts,
completing a detailed strategic review of the portfolio and further
strengthening the senior management team with the appointment of investment,
development and corporate finance specialists.
Disposals
In the six months to 30th September, we took the opportunity to capitalise on
the strength in the investment market and dispose of properties identified in
the strategic review as non-core totalling some £36.9 million (at a 3.7% loss,
including costs, against their March 2002 book values). The most significant of
these was at 13/15 Moorgate, EC2 which we sold to a private investor for £24
million (equating to a capital value of almost £750 per sq. ft.). The Grade II
listed property, built in 1985, was almost 100% over-rented with nine years of
income remaining and, with the site fully developed, it offered limited
redevelopment opportunity.
A further £85.3 million has been contracted for sale since the end of the half
year in six separate transactions. Of these, the two most significant are the
sales of our business park at Weybridge for a figure of £34.3 million and 21
Bloomsbury Street, WC1 for £41.2 million. The latter represents a good example
of our management strategy. We restructured the government's occupational lease
and simultaneously contracted to sell the property, crystallising a valuation
uplift of some £2.9 million. Taken together, the £122.2 million of sales were
contracted at a blended net initial yield of 6.9% and will generate receipts,
net of selling costs, at a figure marginally ahead of the March 2002 valuation.
Interim Valuation
CB Hillier Parker valued the portfolio at £993 million as at 30th September
2002. Like-for-like, it dropped in value by 4.8% since March 2002 despite a 3.3%
increase in the rent roll. The majority of the decrease was in the North of
Oxford Street portfolio where rental values declined by 6.6% during the period
and capital values by 7.1%. Half of this capital fall came from our development
prospects which account for one-third of this sub-portfolio, and which, by
design, have relatively shorter leases. Similarly, in the rest of the West End,
rental values fell by 6.0%; however, new income from rent reviews and a slight
hardening of the investment yield limited the valuation decline. In the City and
Holborn - 22% of the portfolio at September - values declined by 2.7% whilst
rental values fell by 7.5%. Our South East offices portfolio - 9% of the total -
suffered a reduction in value of 8.7% with a corresponding fall in rental values
of 8.5%. Within it, the largest percentage decline was at 661 London Road,
Hounslow where we are refurbishing the office premises.
The valuation of £993 million reflected a net initial yield of 6.6% and a five
year reversionary yield of 7.5%. The total reversionary potential of the
portfolio over the next five years has fallen from £13.2 million as at March
2002 to £7.3 million, or 10.3% of the rent roll at the interim stage. This fall
is in part due to declining rental values (£3.0 million) and in part the effect
of successfully completing rent reviews (£2.4 million) and reletting expiries
(£0.5 million).
As was the case in March, the valuation is being undermined by three main
factors: first, in a weak occupational market, the letting risk associated with
short leases reduces values; second, reversions across the portfolio have fallen
by 6.7% since March; and third, investors are discounting future reversions due
to the greater risk that exists today of them being further eroded.
Developments
During the six months, we have begun our detailed review of development
prospects at our holdings in Bishopsgate, EC2, 190 Great Portland Street, W1,
Knighton House in Mortimer Street, W1 and our Titchmor block on the junction of
Mortimer Street, Great Titchfield Street and Wells Street, W1. Whilst we are
some way from definitive solutions for each of these properties, we remain
excited about their prospects.
The above four potential developments form the core of the Company's programme
for the next market cycle. With the recent senior development appointment, I am
confident that we will now be able to make real progress in creating value from
these excellent opportunities. This objective remains a management challenge of
central importance to the Group.
Satisfactory progress has been made during the half year at our recently
completed leisure development, Sol Central, in Northampton. During the period,
contracts were exchanged to lease 27,800 sq. ft. with a further 1,100 sq. ft.
under offer. If exchanged, this will take occupancy to in excess of 90% by
rental value (up from 75% at March). The value for the six months to September
increased by 11.2%, largely reflecting this activity.
Asset Management
Despite the challenging central London occupier markets, between March and
November we have added £3.8 million of net new rents to the Group's income
through rent reviews, lettings and lease renewals.
With a relatively short weighted average lease length (7.5 years), we expect a
significant number of lease expiries in any one year. Between March and
November, we saw 29 lease expiries and, of these, 18 tenants decided to vacate.
During the same period, we let a total of 26 units across the Group - much of it
in the North of Oxford Street portfolio - to 23 new tenants, generating £1.1
million of rent. A further £0.3 million is currently under offer. In total, the
rents achieved were some 8.6% above the March 2002 rental values for these
units.
Much of this letting activity is a direct result of our pragmatic approach to
securing new tenants - our Group voids as at September stood at 2.1% by rent,
with the London portfolio at 1.4% (virtually no movement from 1.3% and 0.7% at
March 2002 respectively) and currently both stand at 1.5%. Our North of Oxford
Street portfolio has 15,800 sq.ft. vacant, of which some 7,600 sq.ft. is under
offer to let. In uncertain markets such as exist in London today, it has never
been more important to explore with occupiers opportunities to restructure
leases in order to strengthen our rental cash flow.
68,000 sq. ft. of unlet space is currently being refurbished with a rental value
of some £1.5 million. Of this, the majority is at two buildings - 41,000 sq. ft.
at 661 London Road, Hounslow (scheduled for completion during December 2002) and
15,100 sq. ft. at 33 Chancery Lane, WC2 (completion in November 2002).
Refurbishment activity in the North of Oxford Street portfolio totalled 16,000
sq. ft. at September. If all this space was completed and held vacant today, the
Group's voids would only increase to 3.4% from 1.5%.
Since June, we have successfully completed some important rent reviews,
producing good results in a market short on positive comparable evidence. In
total, these reviews have converted approximately £3.7 million of reversions
into new rent during the six months.
Outlook
I said in June that we were not experiencing the extent of oversupply in central
London witnessed in the early 1990's. Six months on, I believe this statement
still stands. However, with the London vacancy rate up to almost 10%, and
occupiers remaining cautious about their space requirements, we can expect
rental values in the capital to continue their downward trend during the second
half of the financial year, particularly in the City market. With no speculative
development activity in the portfolio, our void risk is confined to lease
expiries and a limited number of refurbishments. The last six months has
demonstrated that, with a pragmatic and commercial lettings policy, we are able
to maintain vacancies at negligible levels.
We believe the investment markets are beginning to price risk - particularly
short income and development risk - more realistically than has been the case
over the last twelve months. Having completed our strategic review, strengthened
our team and sold a substantial part of our non-core holding, we are in the
enviable position of having significant capacity in the balance sheet to take on
new opportunities as we uncover them.
FINANCIAL REVIEW
There have been no new financial reporting standards which have applied for the
first time in the six months ended 30th September 2002.
The profit and loss account for the period comprises three distinct elements:
the underlying core business, which generated profits before tax of £18.9
million and earnings of 6.6p per share (2001: 6.2p), before deferred tax arising
on accelerated capital allowances; the disposal of properties, at a loss of 0.8p
per share; and the purchase of a high-coupon, long-term debenture at a cost of
23.0p per share.
The fall in rent receivable to £37.7 million from £45.1 million in the
corresponding six months last year was largely due to the loss of income of
£10.5 million from property sales; lease expiries also accounted for a £0.5
million fall in rent, but new lettings added £1.5 million, and rent reviews a
further £2.1 million. The early repayment of high-coupon debt in 2002 and the
use of disposal proceeds to pay off short-term debt has led to the fall in net
interest, before exceptional items, of £9.4 million to £13.3 million.
Investment property disposals in the six months to 30th September 2002 generated
proceeds of £36.9 million against a valuation of £37.8 million in March, and the
loss on sale was £1.7 million after selling costs and sundry retentions. Since
the end of September, a further £85.3 million of investment properties have been
sold, bringing the total since 1st April 2002 to £122.2 million, representing a
marginal profit after costs on the March 2002 valuation.
In April 2002, we took advantage of relatively high gilt yields and a favourable
debenture market to purchase our entire £130 million 103/4% First Mortgage
Debenture Stock 2021, at a cost of £196.6 million. This generated an exceptional
loss of £66.6 million (and associated exceptional administration costs of £0.3
million) but released 20% of the investment property portfolio from charge,
facilitating the disposal of properties which were designated non-core under the
detailed strategic property review referred to earlier. It also reduced our
weighted average cost of borrowing from 7.8% to 6.6%, and reduced our annual
interest bill by over £5 million. The fall in long-term interest rates since
April 2002 has meant that, had we bought in the debenture on 30th September
2002, it would have cost an extra £26.2 million, and marking it to market under
FRS13 at 30th September 2002 would have produced a potential liability of £198.9
million, £2.3 million in excess of the amount we paid.
The underlying tax charge for the six months ended 30th September 2002,
excluding the effects of deferred tax on accelerated capital allowances, capital
profits and the debenture purchase, was 28.3%, which was less than 30%, due
primarily to the benefit of capital allowances.
Diluted net assets per share, excluding deferred tax on accelerated capital
allowances, fell from 349p to 307p in the six months to 30th September 2002. The
fall of 42p per share comprised a number of items: the exceptional cost of
purchasing the debenture reduced diluted net assets per share by 21p and the
revaluation deficit did so by a further 23p; the interim dividend cost 3p and
the capital loss on disposal of investment properties was 1p. Underlying
earnings, however, added 6p.
Gearing, excluding deferred tax on accelerated capital allowances, rose from 47%
to 62%, net of cash balances of £4.5 million, and the Group had in place undrawn
bank facilities of £130 million. Property disposals since 30th September 2002
have reduced gearing to 45%, and increased cash balances and undrawn facilities
to £240 million. Under FRS13, the market value of the Group's financial
instruments at 30th September 2002 exceeded the amount at which they were shown
in the consolidated balance sheet by £26.0 million, representing a potential
reduction in diluted net assets per share of 8p after tax, and there was a
contingent liability to taxation on capital gains of 6p per share.
At 30th September 2002, our rent roll stood at £70.6 million per annum, and was
estimated to be reversionary to the tune of £7.3 million within the next five
years, and voids comprised 2.1% of lettable space. The effect of property
disposals since 30th September 2002 has been to reduce the rent roll to £64.2
million per annum and voids to 1.5%.
Portfolio Statistics
Rental Income At 30th September 2002
Five Year Five Year
Rent Reversionary Rental
Roll Potential Values
£m £m £m
London West End and Covent Garden
North of Oxford Street Offices 18.4 3.2 21.6
Other Offices 13.0 0.8 13.8
Retail 12.8 0.9 13.7
Total West End and Covent Garden 44.2 4.9 49.1
City and Holborn Offices 16.2 2.6 18.8
Total London 60.4 7.5 67.9
South East Offices 8.4 (0.3) 8.1
Other 1.8 0.1 1.9
Total Let Portfolio 70.6 7.3 77.9
Voids 1.5
Premises under refurbishment 1.6
Total Let 81.0
Portfolio
Rent Roll Weighted
Secure Average
For Five Length
Years Lease Voids
% % %
London West End and Covent Garden
North of Oxford Street Offices 60.2 5.6 2.4
Other Offices 71.8 7.5 1.7
Retail 67.0 8.8 1.3
Total West End and Covent Garden 65.5 7.1 1.8
City and Holborn Offices 63.0 7.4 -
Total London 64.9 7.2 1.4
South East Offices 56.1 5.9 5.3
Other 100.0 25.0 9.3
Total Let Portfolio 64.7 7.5 2.1
Average Average Initial Equivalent
Rent ERV Yield Yield
£psf £psf % %
London West End and Covent Garden
North of Oxford Street Offices 27 31 6.0 7.2
Other Offices 36 39 6.3 6.8
Retail 39 41 6.3 6.5
Total West End and Covent Garden 32 35 6.2 7.0
City and Holborn Offices 34 39 7.0 7.8
Total London 32 36 6.4 7.2
South East Offices 17 16 8.6 8.8
Other 11 11 6.4 7.9
Total Let Portfolio 28 31 6.6 7.3
Valuation Valuation
Investment Property Portfolio £m Movement
London West End and Covent Garden
North of Oxford Street Offices 309.3 -7.1%
Other Offices 189.9 -4.4%
Retail 164.9 -3.7%
Total West End and Covent Garden 664.1 -5.5%
City and Holborn 218.4 -2.7%
Total London 882.5 -4.8%
South East Offices 85.4 -8.7%
Other 24.9 11.2%
992.8 -4.8%
Analysis of Rental Values Lease Expiries
£m %
Rent roll 70.6 Less than 5 years 35
Rent reviews 5.0 5 to 10 years 36
Lease renewals 2.3 10 to 15 years 24
Under refurbishment 1.6 Over 15 years 5
Voids 1.5
81.0 100
Occupier Portfolio by Location
% %
Banking & Finance 17 West and Covent Garden 67
Media & Marketing 16 City and Holborn 22
Professional 21 South East Offices 9
IT & Telecoms 6 Other 2
Corporates 6
Government 10
Retailers 24
100 100
Unaudited Group Profit and Loss Account
For the six months ended 30th September 2002
Year to Six months to Six months to
31st March 30th September 30th September
2002 2002 2001
£m Notes £m £m
85.3 Rent receivable 2 37.7 45.1
(1.7) Ground rents (1.0) (0.9)
83.6 Net rental income 36.7 44.2
(2.1) Property and refurbishment costs (1.4) (1.3)
(5.7) Administration expenses 3 (3.2) (2.7)
75.8 32.1 40.2
0.4 Trading (losses)/profits (0.2) 0.4
76.2 Operating profit 31.9 40.6
(3.2) (Loss)/profit on sale of investment properties (1.7) 1.7
73.0 Profit on ordinary activities before interest 30.2 42.3
1.8 Interest receivable 4 0.3 0.5
(42.1) Interest payable 5 (13.6) (23.2)
(30.3) Exceptional interest costs 6 (66.6) (28.2)
2.4 (Loss)/profit on ordinary activities before taxation (49.7) (8.6)
2.1 Tax on (loss)/profit on ordinary activities 7 14.7 3.2
4.5 (Loss)/profit on ordinary activities after taxation (35.0) (5.4)
(20.3) Dividends 8 (6.9) (6.8)
(15.8) Retained loss for the period 19 (41.9) (12.2)
2.1p (Loss)/earnings per share - basic 9 (17.2)p (2.6)p
12.7p Earnings per share - adjusted 9 6.6p 6.2p
10.0p Dividend per share 8 3.42p 3.33p
Unaudited Group Balance Sheet
As at 30th September 2002
31st March 30th September 30th September
2002 2002 2001
£m Notes £m £m
Tangible fixed assets
1,076.1 Investment properties 10 992.8 1,403.4
Current assets
1.9 Stock of trading properties 0.8 3.5
24.5 Debtors 11 64.5 33.6
83.4 Cash at bank and short-term deposits 4.5 5.4
109.8 69.8 42.5
(51.5) Creditors: amounts falling due within one year 12 (46.2) (53.9)
58.3 Net current assets/(liabilities) 23.6 (11.4)
1,134.4 Total assets less current liabilities 1,016.4 1,392.0
Creditors: amounts falling due after more than one year
(353.8) Debenture loans 13 (223.7) (353.9)
(56.9) Convertible loans 14 (57.0) (56.8)
(6.7) Bank and other loans 15 (110.9) (181.7)
(15.2) Provisions for liabilities and charges 17 (15.2) (18.1)
701.8 609.6 781.5
Capital and reserves
101.5 Called up share capital 18 101.5 102.7
24.8 Share premium account 24.8 24.8
445.9 Revaluation reserve 19 372.4 538.6
25.0 Other reserves 19 25.0 23.8
104.6 Profit and loss account 19 85.9 91.6
701.8 Equity shareholders' funds 609.6 781.5
Unaudited Group Statement of Cash Flows
For the six months ended 30th September 2002
Year to Six months to Six months to
31st March 30th September 30th September
2002 2002 2001
£m Notes £m £m
72.5 Net cash inflow from operating activities 21 31.4 33.7
(55.2) Returns on investments and servicing of finance 22 (13.1) (28.2)
(5.2) Tax paid 22 - (3.1)
330.5 Net cash inflow from capital expenditure 22 7.9 73.7
(20.7) Equity dividends paid (13.5) (13.9)
321.9 Net cash inflow before management of liquid resources and 12.7 62.2
financing
11.8 Management of liquid resources 22 80.0 95.2
(334.5) Net cash outflow from financing 22 (91.6) (152.8)
(0.8) Increase/(decrease) in cash 24 1.1 4.6
Unaudited Group Statement of Total Recognised Gains and Losses
For the six months ended 30th September 2002
Year to Six months to Six months to
31st March 30th September 30th September
2002 2002 2001
£m £m £m
4.5 (Loss)/profit for the period (35.0) (5.4)
(99.5) Unrealised deficit on revaluation of fixed assets (50.3) (29.5)
(95.0) Total recognised gains and losses for the period (85.3) (34.9)
Unaudited Note of Historical Cost Profits and Losses
For the six months ended 30th September 2002
Year to Six months to Six months to
31st March 30th September 30th September
2002 2002 2001
£m £m £m
2.4 Reported (loss)/profit on ordinary activities before taxation (49.7) (8.6)
40.5 Realisation of revaluation surpluses of previous years 23.2 2.8
42.9 Historical cost (loss)/profit on ordinary activities before taxation (26.5) (5.8)
Historical cost (loss)/profit for the period
24.7 retained after taxation and dividends (18.7) (9.4)
Notes forming part of the Interim Statement
1 Basis of Preparation of Interim Financial Information
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's 2002 statutory accounts. The
financial information contained in this report does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985. The
abridged accounts for the year ended 31st March 2002 are an extract from the
accounts for that year which, together with an unqualified audit report, have
been delivered to the Registrar of Companies.
2 Turnover and Segmental Analysis
Rent receivable by location:
Year to Six months to Six months to
31st 30th September 30th September
March
2002 2002 2001
£m £m £m
17.8 West End - North of Oxford Street Offices 9.2 8.9
13.9 Other West End and Covent Garden Offices 6.8 6.7
12.3 West End and Covent Garden Retail 6.7 5.7
17.9 City and Holborn 9.3 8.5
9.6 South East Offices 5.1 4.3
12.4 Shopping Centres - 9.8
1.4 Rest of United Kingdom 0.6 1.2
85.3 37.7 45.1
Rent receivable is stated exclusive of value added tax, and arose wholly
from continuing operations in the United Kingdom. No operations were
discontinued during the period.
3 Administration Expenses
Year to Six months to Six months to
31st 30th September 30th September
March
2002 2002 2001
£m £m £m
Administration expenses
5.4 Other 2.9 2.4
Exceptional items
0.3 Costs of early repayment of debenture 0.3 0.3
5.7 3.2 2.7
4 Interest Receivable
Year to Six months to Six months to
31st 30thSeptember 30th September
March
2002 2002 2001
£m £m £m
1.5 Short-term deposits 0.2 0.4
0.3 Other 0.1 0.1
1.8 0.3 0.5
5 Interest Payable
Year to Six months to Six months to
31st 30th September 30th September
March
2002 2002 2001
£m £m £m
Interest payable
8.0 Bank loans and overdrafts 3.7 5.5
34.1 Other 9.9 17.7
42.1 13.6 23.2
6 Exceptional Interest Costs
Year to Six months to Six months to
31st 30th September 30th September
March
2002 2002 2001
£m £m £m
28.2 Premium on purchase of debenture 66.6 28.2
2.1 Cost of swap cancellation - -
30.3 66.6 28.2
7 Tax on (Loss)/Profit on Ordinary Activities
Year to Six months to Six months to
31st 30th September 30th September
March
2002 2002 2001
£m £m £m
0.4 UK corporation tax (credit) / charge for the period (14.7) (3.6)
1.0 Deferred tax - current period 0.4 0.7
(3.5) - relating to prior periods (0.4) (0.3)
(2.1) Tax on (loss)/profit on ordinary activities (14.7) (3.2)
Taxation has been calculated using the estimated effective tax rate for the
full year. The difference between the standard rate of tax and the effective
rate arises from the items set out below:
Year to Six months to Six months to
31st 30th September 30th September
March
2002 2002 2001
£m £m £m
2.4 (Loss)/profit on ordinary activities before tax (49.7) (8.6)
0.7 Tax on (loss)/profit on ordinary activities at standard rate (14.9) (2.6)
0.2 Expenses not deductible for tax purposes 0.1 0.2
(1.2) Capital allowances (0.4) (0.7)
1.0 Sale of investment properties covered by capital losses 0.5 (0.5)
(0.3) Other timing differences - -
0.4 UK corporation tax (credit)/charge for the period (14.7) (3.6)
Taxation on capital gains of approximately £14.5 million would have arisen
if the Group's investment properties had been sold for their book value at the
balance sheet date.
8 Dividends
An interim dividend of 3.42p per share (2001: 3.33p) will be paid on 6th
January 2003 to shareholders on the register at 29th November 2002.
9 Earnings per Share
Earnings per share for the six months are based on the loss attributable to
ordinary shareholders of £35,000,000 (2001: £5,400,000) and on the weighted
average of 203,091,544 shares in issue (2001: 212,907,037 shares). There is no
impact on earnings per share of conversion of the convertible bonds.
The directors believe that earnings per share before deferred tax arising
on capital allowances exceeding depreciation, exceptional items and profits or
losses on sales of investment properties provide a more meaningful measure of
the Group's performance. Accordingly, earnings per share on that adjusted basis
have been disclosed on the face of the profit and loss account, and calculated
as follows:
Year to Six months to Six months to Six months to Six months to
31st March 30th September 30th September 30th September 30th September
2002 2002 2002 2001 2001
Earnings Profit Earnings Profit Earnings
per share after tax per share after tax per share
pence £m pence £m pence
2.1 Basic (35.0) (17.2) (5.4) (2.6)
(1.3) Deferred tax - - 0.4 0.2
10.3 Exceptional items 46.8 23.0 20.0 9.4
Loss/(profit) on sale of
1.6 investment properties 1.7 0.8 (1.7) (0.8)
12.7 Adjusted 13.5 6.6 13.3 6.2
10 Investment Properties
Leasehold
over Leasehold
Freehold 900 years 50-250 years Total
£m £m £m £m
At 1st April 2002 813.9 114.8 147.4 1,076.1
Additions at cost 4.8 - - 4.8
Disposals (37.8) - - (37.8)
780.9 114.8 147.4 1,043.1
Deficit on revaluation (41.3) (4.6) (4.4) (50.3)
At 30th September 2002 739.6 110.2 143.0 992.8
The freehold and leasehold investment properties were valued on the basis
of Open Market Value by CB Hillier Parker as at 30th September 2002 in
accordance with the Appraisal and Valuation Manual of the Royal Institution of
Chartered Surveyors.
11 Debtors
31st March 30th September 30th September
2002 2002 2001
£m £m £m
5.6 Rental debtors 7.4 14.0
13.4 Corporation tax 13.4 11.1
3.9 Other debtors 26.7 8.0
1.6 Prepayments 2.3 0.5
- Deferred taxation 14.7 -
24.5 64.5 33.6
The deferred taxation asset arises from the loss in the current period and
has been recognised on the basis of future estimated taxable profits against
which it will be offset.
12 Creditors: Amounts Falling Due Within One Year
31st March 30th September 30th September
2002 2002 2001
£m £m £m
- Unsecured loan notes 2007 0.8 0.6
26.4 Accruals and rents in advance 27.2 38.3
6.7 Corporation tax 6.7 2.5
1.9 Other taxes and social security costs 1.1 2.3
3.0 Other creditors 3.5 3.4
13.5 Proposed dividend 6.9 6.8
51.5 46.2 53.9
13 Debenture Loans
31st March 30th September 30th September
2002 2002 2001
£m £m £m
First mortgage debenture stock
27.2 £24 million 11 3/16 per cent. debenture stock 2009/14 27.1 27.3
130.0 £130 million 10 3/4 per cent. debenture stock 2021 - 130.0
97.7 £100 million 7 1/4 per cent. debenture stock 2027 97.7 97.7
98.9 £100 million 5 5/8 per cent. debenture stock 2029 98.9 98.9
353.8 223.7 353.9
Certain of the freehold and leasehold properties are charged to secure the
first mortgage debenture stock.
14 Convertible Loans
31st March 30th September 30th September
2002 2002 2001
£m £m £m
58.0 5 1/4 per cent. convertible bonds 2008 58.0 58.0
(1.1) Costs of issue (1.0) (1.2)
56.9 57.0 56.8
The bonds, which are unsecured, are convertible by the bondholder at any
time until 2008 at a price of £3.10 per share, and redeemable by the Company
in 2008 at par.
15 Bank and Other Loans
31st March 30th September 30th September
2002 2002 2001
£m £m £m
- Bank loans 105.0 175.0
6.7 Unsecured loan notes 2007 6.7 7.3
6.7 111.7 182.3
- Falling due within one year (0.8) (0.6)
6.7 Falling due after one year 110.9 181.7
The bank loans are unsecured and expire between 2002 and 2005. The Company
has entered into swap arrangements to fix the rate of interest on the bank
loans, which has resulted in a weighted average rate of 6.7 per cent. The
unsecured loan notes, which together with an associated guarantee attract a
floating rate of interest of 0.275 per cent. in aggregate above LIBOR, are
redeemable at the option of the noteholder until 2007, and by the Company in
2007.
16 Borrowings
Maturity of financial liabilities
The maturity profile of the financial liabilities of the Group at 30th
September 2002 was as follows:
31st March 30th September 30th September
2002 2002 2001
£m £m £m
- In one year or less, or on demand 0.8 0.6
- In more than two years but not more than five years 110.9 175.0
417.4 In more than five years 280.7 417.4
417.4 392.4 593.0
Borrowing facilities
Undrawn committed borrowing facilities available to the Group at 30th
September 2002 were as follows:
31st March 30th September 30th September
2002 2002 2001
£m £m £m
40.0 Expiring in one year or less 40.0 15.0
- Expiring in more than one year but not more than two years - 25.0
195.0 Expiring in more than two years 90.0 20.0
235.0 130.0 60.0
Fair values of financial assets and financial liabilities
31st March 31st March 30th September 30th September 30th September 30th September
2002 2002 2002 2002 2001 2001
Book Fair Value Book Value Fair Value Book Value Fair Value
Value
£m £m £m £m £m £m
Short-term
- - borrowings 0.8 0.8 0.6 0.6
Long-term
417.4 485.8 borrowings 391.6 412.5 592.4 648.0
Interest rate
- 2.5 swaps - 5.1 - 6.2
417.4 488.3 392.4 418.4 593.0 654.8
The fair values of the Group's cash and short-term deposits are not
materially different from those at which they are carried in the accounts.
Market values have been used to determine the fair value of listed long-term
borrowings, and interest rate swaps have been valued by reference to market
rates of interest. The market values of all other items have been calculated by
discounting the expected future cash flows at prevailing interest rates.
17 Provisions for Liabilities and Charges
31st March 30th September 30th September
2002 2002 2001
£m £m £m
Deferred taxation
17.7 At the beginning of the period 15.2 17.7
(2.5) Profit and loss account charge/(credit) - 0.4
15.2 At the end of the period 15.2 18.1
The provision for deferred taxation arises from:
31st March 30th September 30th September
2002 2002 2001
£m £m £m
14.9 Capital allowances exceeding depreciation 14.9 18.1
0.3 Sundry timing differences 0.3 -
15.2 15.2 18.1
18 Share Capital
Year to Year to Six months to Six months to Six months to Six months to
31st 31st 30th 30th 30th 30th
March March September September September September
2002 2002 2002 2002 2001 2001
Number £m Number £m Number £m
Ordinary shares
of 50p each
Allotted, called up
and fully paid
At the beginning
214,249,114 107.1 of the period 203,041,984 101.5 214,249,114 107.1
Exercise of
- - share options 51,531 - - -
(11,207,130) (5.6) Purchased - - (8,860,000) (4.4)
At the end
203,041,984 101.5 of the period 203,093,515 101.5 205,389,114 102.7
19 Reserves
Other Reserves
---------------------------------------
Capital Profit and
Redemption Acquisition Revaluation Loss
Reserve Reserve Total Reserve Account
£m £m £m £m £m
At 1st April 2002 16.4 8.6 25.0 445.9 104.6
Realised on disposal of properties - - - (23.2) 23.2
Deficit on revaluation - - - (50.3) -
Retained loss for the period - - - - (41.9)
At 30th September 2002 16.4 8.6 25.0 372.4 85.9
20 Reconciliation of Movements in Shareholders' Funds
Year to Six months to Six months to
31st March 30th September 30th September
2002 2002 2001
£m £m £m
4.5 (Loss)/profit for the period (35.0) (5.4)
(20.3) Dividends (6.9) (6.8)
(15.8) (41.9) (12.2)
(30.3) Purchase of shares - (24.2)
(99.5) Other recognised gains and losses relating to the period (50.3) (29.5)
(145.6) Net decrease in shareholders' funds (92.2) (65.9)
847.4 Opening shareholders' funds 701.8 847.4
701.8 Closing shareholders' funds 609.6 781.5
21 Reconciliation of Operating Profit to Net Cash Inflow from Operating
Activities
Year to Six months to Six months to
31st March 30th September 30th September
2002 2002 2001
£m £m £m
76.2 Operating profit 31.9 40.6
5.0 Decrease in stock of trading properties 1.1 3.4
(2.2) Increase in debtors (1.4) (8.7)
(6.5) Decrease in creditors (0.2) (1.6)
72.5 Net cash inflow from operating activities 31.4 33.7
22 Analysis of Cash Flows
Year to Six months to Six months to
31st March 30th September 30th September
2002 2002 2001
£m £m £m
Returns on investments and servicing of finance
1.8 Interest received 0.4 0.6
(57.0) Interest paid (13.5) (28.8)
(55.2) (13.1) (28.2)
Taxation
(5.7) Corporation tax paid - (3.1)
0.5 Corporation tax refunded - -
(5.2) - (3.1)
Net cash inflow from capital expenditure
(27.8) Payments to acquire investment properties (4.6) (16.7)
358.3 Receipts from sale of investment properties 12.5 90.4
330.5 7.9 73.7
Management of liquid reserves
11.8 Cash withdrawn from short-term deposit 80.0 95.2
11.8 80.0 95.2
Net cash outflow from financing
(129.2) Redemption of loans (196.6) (128.6)
(175.0) Drawdown/(repayment) of bank loans 105.0 -
(30.3) Purchase of shares - (24.2)
(334.5) (91.6) (152.8)
23 Reconciliation of Net Cash Flow to Movement in Net Debt
Year to Six months to Six months to
31st March 30th September 30th September
2002 2002 2001
£m £m £m
(0.8) Increase / (decrease) in cash in the period 1.1 4.6
(11.8) Cash withdrawn from short-term deposit (80.0) (95.2)
276.0 Cash outflow from redemption of loans 25.0 128.6
263.4 Change in net debt arising from cash flows (53.9) 38.0
0.1 Other non-cash movements - (28.1)
263.5 Movement in net debt in the period (53.9) 9.9
(597.5) Net debt at the beginning of the period (334.0) (597.5)
(334.0) Net debt at the end of the period (387.9) (587.6)
24 Analysis of Net Debt
At At
1st April Cash Flow Non-cash 30th September
2002 Changes 2002
£m £m £m £m
Cash - 1.1
Short-term deposits 83.4 (80.0) - 3.4
Debt due within one year - - (0.8) (0.8)
Debt due after one year (417.4) 25.0 0.8 (391.6)
(334.0) (53.9) - (387.9)
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