Interim Results
Great Portland Estates PLC
14 November 2006
14 November 2006
Interim Results
The Directors of Great Portland Estates plc announce the results for the six
months ended 30 September 2006.
Highlights:
• Adjusted net assets per share* up 17.4% to 513p
• Portfolio value** of £1,306.4 million, up 10.7% on a like-for-like basis
• Total property return** of 15.0%, outperforming the IPD Central London Index
of 12.2%
• Profit before taxation up 235.8% to £148.1 million
• Adjusted earnings per share* up 2.0% to 5.0p
• Dividend per share up 2.2% to 3.75p
• Recycling capital - £141.5 million of sales and £154.1 million of
acquisitions**
• 5 new near-term development projects***, taking the total programme to 14 or
1.1 million sq ft, an 80.0% increase in existing area
• 3 major planning applications submitted for a total area of more than 1
million sq ft
• Group intends to convert to REIT status on 1 January 2007
* EPRA adjustments on a diluted basis - see note 7
** Includes Group's share of joint venture
*** Includes joint ventures
Toby Courtauld, Chief Executive, said:
'The first half of the year has been encouraging. For the second half, we expect
a combination of steady occupational demand and restricted supply of high
quality space to support underlying rental growth. The Group's development
programme, with its West End focus, is ideally placed to capture both new
letting interest and valuation gains.
The proposed conversion to a UK-REIT will allow the Group to operate in a more
tax efficient manner and should enhance post-tax performance.
We remain confident that we will continue to generate attractive returns for our
shareholders.'
Enquiries etc:
Great Portland Estates plc 020 7647 3000
Toby Courtauld, Chief Executive
Timon Drakesmith, Finance Director
Finsbury Group 020 7251 3801
James Murgatroyd
Gordon Simpson
The results presentation will be broadcast live at 9.30am today on www.gpe.co.uk
STRATEGY AND OPERATIONAL HIGHLIGHTS
During the first six months of the year we have continued to deliver against our
three strategic objectives:
Development activity - we completed our 21,000 sq ft refurbishment at Sackville
Street, W1 in May and let all the office space within five months at rents ahead
of our forecasts. The near-term development programme has evolved to include new
schemes at Wigmore Street, W1, Bermondsey Street and Blackfriars Road, SE1 and
is scheduled to deliver 1.1 million sq ft, with an end value approaching £600 million.
Including the medium and longer term prospects the development programme totals
some 2.5 million sq ft of new space, up from those assets' existing area of
1.3 million sq ft.
Recycling capital - we have sold £141.5 million of properties, generating a
profit of £17.1 million over March 2006 book values. A highlight of the first
six months of the year was the sale of our Tooley Street scheme in Southwark
which generated a return on our investment of nearly 80%. In the six months to
30 September, we bought £154.1 million of properties because we believe that
there are opportunities for future redevelopment or other value creating angles
based on low current rents. A good example is the assembly of a substantial 1.2
acre holding in Hanover Square and New Bond Street, W1, part of which has been
acquired since 30 September 2006.
Active asset management - we have maintained a low void rate by letting or
pre-letting 99,000 sq ft of space, generating £4.7 million of new rent roll,
some 5% ahead of March 2006 rental values.
The result of this activity has been a strong increase in our adjusted NAV per
share of 76 pence or 17.4% to 513 pence and a total shareholder return for the
period of 26% compared to the FTSE 350 real estate index of 7%. The portfolio
generated a total property return of 15.0% vs the benchmark IPD Central London
Index of 12.2%, partly explained by the Group's decision to allocate resources
and capital in order to grow the development programme.
MARKET AND INVESTMENT ENVIRONMENT
Market and Investment Environment is accompanied by graphics (See Appendix 1)
(Please copy and paste the link below to see the graphics)
http://www.rns-pdf.londonstockexchange.com/rns/0241m_1-2006-11-14.pdf
Our market
Central London is increasingly characterised by a shortage of good quality
office space to let. Vacancy rates have continued to fall in office markets
across the Capital and now stand at 8% compared to 9% six months ago, of which
less than a third is Grade A accommodation.
In the West End the amount of space under construction, although up on 12 months
ago, has fallen in the last six months to 2.5 million sq ft, or 3% of current
office stock. Demand levels are running higher, and vacancy rates lower, than
the long-term average. With developers unable to react quickly to the demand/
supply imbalance, we remain optimistic as to the prospects for this market where
81% of our portfolio by value (including our share of joint venture properties)
is located. Rental growth in the West End office market was estimated to be 5.2%
in the six months to 30 September 2006.
In the City and Southwark markets, where the remainder of our portfolio is
located, due to a noticeable increase in take up in the last three months, the
office vacancy rate has fallen by almost the same proportion as the West End and
currently stands at 9%. Around 5.0 million sq ft or 5% of stock is under
construction and, unlike in the West End, developers are able to react
relatively swiftly in these markets, with the result that we expect the supply
of new office space to pick up strongly within the next four years. We,
therefore, remain more cautious about the City market than that in the West End.
As expected, rental values are growing in all central London markets and our
development pipeline is well set to benefit as tenants compete for space.
In the investment markets, £8 billion has been traded over the last six months
in central London, ahead of last year's record levels on an annualised basis,
with properties purchased by a wide spectrum of domestic and international
buyers. Yields, which have fallen significantly over the last few years,
continue to see downward pressure exerted by the weight of money chasing
investment assets. However, the rate of compression is slowing and we expect a
combination of asset management initiatives and rental growth to become the main
driver of valuation progression.
BUSINESS ACTIVITIES AND RESOURCES
Business activities and resources is accompanied by graphics (See Appendix 2)
(Please copy and paste the link below to see the graphics)
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Our business
Valuation
The valuation of the Group's properties as at 30 September 2006, including
acquisitions made during the year and our share of gross assets in joint
ventures, was £1,306.4 million (up 10.7% on a like-for-like basis or £125.8
million, net of capital expenditure and acquisition costs, since 31 March 2006).
The valuation of the portfolio held throughout the first half, excluding joint
ventures, was £1,011.9 million which, net of capital expenditure, increased in
value by 11.0% or £100.6 million.
Growth in rental values was the single largest contributor to the valuation
uplift as the ERV of the portfolio increased by 6.3% in the first six months of
the financial year. We estimate that two thirds of the valuation increase came
from rental value growth with the remainder arising from yield compression,
driven by a combination of strong investment demand and the improvement we made
to our assets, rendering them more attractive to investors.
Valuations were up across the portfolio, although the best performance came from
properties under development; which were up 16.9% or £22.2 million, as good
progress was made across the development programme and expected letting rents
increased.
In the investment portfolio, values were up 10.1% or £78.5 million over the six
months. The equivalent yield of the portfolio fell by 16 basis points to 5.1%
and most of the valuation progression has been created by asset management
activity and the proving of rental growth.
At 30 September the Group had three 50:50 joint ventures, two with Liverpool
Victoria Friendly Society and one created during the second quarter with
Scottish Widows Investment Partnership. These joint ventures owned properties
worth £402.2 million, up 10.9% or £39.6 million on the aggregate of the 31 March
valuation and subsequent purchase prices, net of all capital expenditure and
acquisition costs. On a like-for-like basis properties held throughout the
period rose in value by 8.0%.
Development
The six months under review have seen significant activity across the Group's
development programme with two completions, some strong letting activity and
three major planning applications.
The Group's programme is divided into near-term, medium and longer term schemes.
The near-term programme, defined by a project start date expected within three
years, has continued to evolve since the year end with the completion and
letting of Sackville Street, W1, the completion of Bond Street House, W1 (100%
under offer), and the sale of both Tooley Street, SE1 and 180 Great Portland
Street, W1. Additionally, the programme has been enlarged by the inclusion of
240 Blackfriars Road, SE1 where a planning application for a 188,000 sq ft
scheme (up from 131,000 sq ft) has been submitted.
In July, we created the Great Wigmore Partnership, a new 50:50 joint venture
with Scottish Widows, to own and develop a 0.8 acre island site on 79/97 Wigmore
Street, W1 and to own 180 Great Portland Street, W1 a Group near-term
development due for completion in December this year.
As well as Wigmore Street, W1 which has exciting redevelopment potential when
the existing leases expire in 2008/9 and good income in the meantime, we also
expanded the near-term programme through the acquisition of 46/58 Bermondsey
Street, SE1. The 0.6 acre site currently comprises 38,000 sq ft of studio and
warehouse space and we expect to submit a planning application for 50,000 sq ft
of office and retail space shortly.
Turning to the projects completed during the first half, at 21 Sackville Street,
W1 all of the office space has been let at £80 per sq ft, within four months of
practical completion, generating £1.2 million in new rent, and we have strong
tenant interest in Bond Street House, W1 (completed during August) where all of
the space is under offer at similar rental levels.
At Tooley Street, SE1 we are in the early construction phase, working under a
development management agreement, having sold our development site in June.
In the summer, as part of our medium-term programme, we submitted a planning
application for 100 Bishopsgate, EC3 to develop a three building complex
providing 815,000 sq ft of accommodation, up from the existing 252,000 sq ft.
The main building, a 40 storey tower, with floor plates ranging from 18,500 sq
ft up to 43,000 sq ft, is planned on a site which is currently leased until
2011.
Investment management
We have continued our strategy of recycling capital from mature properties into
projects to which we can apply our asset management and development skills.
In addition to the island site bounded by Wigmore Street, Duke Street, James
Street and Picton Place, W1 acquired within the Great Wigmore Partnership, we
spent a further £91.6 million on purchasing properties in Bermondsey Street,
SE1, Shand Street, SE1, Carteret Street, SW1 and Hanover Square, W1. Taken with
50% of 180 Great Portland Street, W1, the total value of acquisitions was £154.1
million in the six months to 30 September 2006.
Two sales were made at the beginning of the financial year at Gillingham Street,
SW1 and New Cavendish Street, W1 at an aggregate price of £47.0 million
generating a 2.4% premium to the 31 March 2006 valuation.
In June we sold our development site at 154/172 Tooley Street, SE1. An initial
payment of £33.9 million was received for the land, a 19% premium to the 31
March 2006 valuation, and two further payments will be received totalling £2.5
million over the next two years. The Group will complete the development for the
purchaser and will receive a profit estimated to be £10.0 million, payable on
practical completion, bringing total net proceeds to £46.4 million and
generating a return on capital employed of almost 80%.
Since 30 September, we acquired retail and office properties in New Bond Street,
W1 and Oxford Street, W1, which adjoin existing Group holdings, for £51.6
million. As part of the same transaction we sold 14 Hanover Square, W1 and 293/
295 Oxford Street, W1 for £35.3 million, in line with the September valuation,
using a mature asset to gain access to interesting opportunities which might not
otherwise have been available in the open market.
Asset management
The Group's asset management remained focused on the execution of each
property's clearly defined asset strategy.
We have continued to make strong progress on all fronts with a good amount of
leasing activity providing both new rental levels and keeping voids to a
minimum. Voids in the investment portfolio remain low at 3.0%.
Lease renewals, new leases and pre-lets, including joint ventures, signed
between 1 April and 30 September will add £6.3 million to the rent roll. These
include all four floors of our development at 21 Sackville Street, W1, completed
in May, and all three flagship retail units at 208/222 Regent Street, W1,
acquired from retailer Liberty in April last year in a 50:50 joint venture with
Liverpool Victoria, and currently under construction.
FINANCIAL REVIEW
The Financial Review is accompanied by graphics (see Appendix 3)
(Please copy and paste the link below to see the graphics)
http://www.rns-pdf.londonstockexchange.com/rns/0241m_3-2006-11-14.pdf
Financial results
This section describes the Group's strong financial performance during the
period.
Valuation growth
Adjusted net assets per share at 513 pence grew 17.4% from 31 March 2006.
The main factors behind this 76 pence per share increase, as illustrated in the
chart in the appendix, were:
• significant valuation rises of 46 pence per share from the investment
portfolio and 12 pence from properties under development;
• increases in valuation in the Liverpool Victoria and Scottish Widows
joint ventures of 13 pence;
• profits on sale of properties including Tooley Street, SE1 of 7 pence; and
• adjusted earnings for the period of 5 pence which, together with the
payment of the final dividend, reduced adjusted net assets per share by a
net 2 pence.
The valuation of the development schemes incorporated in the net asset value per
share at 30 September includes around one-third of the expected surplus on the
schemes when complete.
Triple net asset value (NNNAV) grew to 441 pence per share up 14.8% from 31
March 2006, principally due to the movements set out in the appendix.
The biggest difference between NNNAV per share and adjusted net assets per share
was the provision for deferred tax on revaluation gains of 60 pence per share at
30 September 2006. This provision is considerably higher than the equivalent
figure of 42 pence per share at 31 March 2006, reflecting significant
revaluation gains in the Group's portfolio. Assuming the Group converts to a UK
Real Estate Investment Trust (UK-REIT) this provision for deferred tax will be
eliminated. For further information on the potential effects of UK-REIT
conversion, please refer to the section on page 5.
Shareholder return KPIs
In addition to the traditional net assets per share measure, the Group uses
various other key performance indicators (KPIs).
The total shareholder return was 25.8% for the period to 30 September 2006, an
increase of 4.1 percentage points over the comparable period last year and
exceeded that of the FTSE 350 real estate sector index and the FTSE 250 index.
Return on shareholders' equity for the year to 30 September was 44.3% versus
22.1% for the same period last year. The Group's return on capital employed for
the year to 30 September was 41.3%, significantly greater than the cost of
capital and considerably higher than the comparative value of 17.2% for 2005.
Both these measures have been boosted by a strong market for Central London
offices and the decision to allocate resources and capital to the Group's
development programme.
Income statement and earnings per share
Gross rental income for the period was £21.4 million, a modest fall of £0.8
million or 3.6% compared to the first half of last year. The main drivers of
this reduction (as illustrated in the chart in the appendix) were disposals,
including Gillingham Street, SW1 and lower comparative rent at the Group's
development properties as we obtained vacant possession to allow redevelopment.
Rental income from recent acquisitions at New City Court, SE1 and 18/19 Hanover
Square, W1 partly compensated for this reduction. In addition, rent reviews,
lease renewals and new lettings added £4.1 million to rental income during the
period.
Overall, the estimated rental value of the wholly-owned portfolio grew by some
6.3% illustrating a combination of positive market factors and the upgrading of
many of the Group's assets.
Reported profit before tax of £148.1 million was 235.8% higher than the first
half of last year. The Group benefited from substantially greater revaluation
gains and profit on sale of assets partly off-set by higher finance costs. Basic
EPS for the period was 70.2 pence, up 226.5% on 2005.
Adjusted profit before tax at £6.7 million was £2.2 million lower when compared
to the same period last year and the key factors are set out in the chart in the
appendix. A fall in net rental income and higher administrative costs were
offset by profits from development management activities. The latter boosted
profits by £1.5 million year on year due to income from the Tooley Street, SE1
and Margaret Street, W1 schemes. Administration costs rose by £0.6 million
primarily due to an accounting charge in respect of our LTIP schemes and
depreciation associated with our new headquarters. Interest costs increased by
£0.8 million as the result of greater net debt due to capital spend on our
development schemes and acquisitions made during the period.
The Group's share of the joint ventures' net profit was £0.9 million (2005: £1.3
million) and management fees of £0.5 million (2005: £0.7 million) were received.
The share of profits from the Great Victoria joint ventures was impacted by
lower rental income from 222 Regent Street, W1 as it is being refurbished ahead
of occupancy by H&M, Desigual and GAP next year.
Adjusted earnings per share were 5.0 pence, slightly up on last year. Although
the lower adjusted profit before tax described above had a negative impact of
1.2 pence per share, this was wholly mitigated by a lower tax charge.
Financial effects of near-term development schemes
The composition and nature of the Group's near-term development and
refurbishment schemes have changed during the first half of the year. The sale
of Tooley Street, SE1, the injection of 180 Great Portland Street, W1 into the
Great Wigmore joint venture and the enhancement of the Blackfriars Road, SE1
proposals have had a significant effect on the financial characteristics of the
near-term programme. Since March 2006, the forecast project surplus from the
near-term schemes has increased due to growth in estimated rental values,
greater net new areas and tightening of yields. The returns from the development
schemes will be recognised in higher rental income (when let), income from
development management activities and higher joint venture profits. During the
period the Group spent £15.0 million on project costs on the near-term schemes.
By 2011 the near-term schemes are forecast to generate incremental rental income
for the Group of £19.0 million. This growth in rental income from the near-term
schemes taken with potential rental increases from voids and reversions is the
equivalent of over 56% of the Group's current rent roll.
Financial resources and dividend
Cash utilised by operations was £30.3 million, largely due to acquisitions and
the Group investing in the near-term development schemes. Net debt increased to
£378.8 million, up from £325.4 million at 31 March 2006, partly due to the
acquisitions of 18/19 and 20 Hanover Square, W1. The sales of Tooley Street,
SE1, New Cavendish Street, W1 and Gillingham Street, SW1 generated £83.4
million. Gearing fell to around 43.2% at 30 September 2006, from 44.1% at last
year end, and interest cover remained comfortable at 1.7 times.
The Board has declared an interim dividend of 3.75 pence which will be paid on 3
January 2007.
Taxation and possible UK-REIT conversion
The current corporation tax in the income statement for the half year to
September 2006 is a credit of £0.1 million due to a variety of available
reliefs. The Group's future tax paying position will be subject to potential
conversion into a UK-REIT.
In recent months we have undertaken a substantial amount of due diligence,
analysis and forecasting to assess whether the Group would benefit from UK-REIT
conversion. We have appointed specialists from PricewaterhouseCoopers and
Nabarro Nathanson to assist in our evaluation of the potential conversion.
The Board believes it is in the shareholders' interest for the Group to convert
to a UK-REIT. The key benefits from UK-REIT election are set out below:
• exemption from UK tax on both rental profits and chargeable gains
relating to our property investment business, removing the effective double
tax charge currently suffered by many investors in UK companies;
• the latent CGT (estimated at £108.1 million as at 30 September 2006) will
be eliminated;
• NNNAV, dividend cover and adjusted EPS will be enhanced;
• interest in GPE from new investors could increase; and
• we will maintain our competitiveness in both the investment and capital
markets.
The illustrative UK-REIT analysis table in the appendix illustrates the pro
forma effects of a UK-REIT conversion on the Group's NNNAV per share.
In order to support the conversion the Group will need to pay a conversion
charge of 2% of property assets. Based on the 30 September 2006 valuation this
is estimated at £26.0 million. For technical reasons, the Company will need to
change its Articles of Association and a circular to shareholders will be sent
out explaining the basis for this change.
Merger discussions
On 3 October the Board announced that it was engaged in preliminary discussions
with London Merchant Securities plc concerning a potential merger and that any
merger transaction would involve a share for share offer by Great Portland
Estates plc for London Merchant Securities plc. However, there can be no
certainty that any transaction will be forthcoming. A further announcement will
be made as appropriate.
Outlook
The first half of the year has been encouraging for the Group, best illustrated
by the portfolio Total Property Return of 15.0%, beating the IPD Central London
return of 12.2%.
For the second half, we expect a combination of steady occupational demand and
restricted supply of high quality space to support underlying rental growth. The
Group's development programme, with its West End focus, is ideally placed to
capture both new letting interest and valuation gains.
We believe that the proposed conversion to a UK-REIT will allow the Group to
operate in a more tax efficient manner and should enhance post-tax performance.
We remain confident that we will continue to generate attractive returns for our
shareholders.
PORTFOLIO STATISTICS
Rental income - wholly-owned portfolio At 30 September 2006
-------------------------------------------------------------------------------------------
Reversionary
Five year Five year potential Total
Rent reversionary rental beyond five rental
roll potential values years values
£m £m £m £m £m
-------------------------------------------------------------------------------------------
London North of Oxford Street Office 16.7 2.6 19.3 0.4 19.7
Retail 3.2 0.3 3.5 - 3.5
Rest of West End Office 10.3 1.8 12.1 0.1 12.2
Retail 6.0 0.6 6.6 (0.1) 6.5
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Total West End 36.2 5.3 41.5 0.4 41.9
-------------------------------------------------------------------------------------------
City and Southwark Office 13.0 0.9 13.9 (0.4) 13.5
Retail 0.4 - 0.4 0.6 1.0
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Total City and Southwark 13.4 0.9 14.3 0.2 14.5
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Total let portfolio 49.6 6.2 55.8 0.6 56.4
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Voids 1.7
Premises under refurbishment 7.8
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Total portfolio 65.9
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Rental income - joint venture portfolio At 30 September 2006
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Let portfolio Office 6.3 0.4 6.7 (0.3) 6.4
Retail 6.7 0.6 7.3 1.5 8.8
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Total portfolio 13.0 1.0 14.0 1.2 15.2
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GPE's share 6.5 0.5 7.0 0.6 7.6
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Rent roll security, lease length and voids At 30 September 2006
Rent roll Weighted
secure average
for lease
five years length Voids
% years %
--------------------------------------------------------------------------------------
London North of Oxford Street Office 32.2 3.9 2.8
Retail 72.3 9.5 0.1
Rest of West End Office 51.1 6.0 8.5
Retail 73.4 11.1 -
Total West End 47.9 6.2 3.6
City and Southwark Office 14.0 4.2 1.5
Retail 25.0 10.3 -
Total City and Southwark 14.3 4.3 0.9
Total let wholly-owned portfolio 38.8 5.7 3.0
Joint venture 57.2 8.1 11.8
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Analysis of total rental values Lease expiries
£m %
Rent roll, rent reviews and lease renewals 56.4 Less than 5 years 61
Under refurbishment 7.8 5 to 10 years 28
Voids 1.7 10 to 15 years 4
Over 15 years 7
------ ------
65.9 100.0
------ ------
GROUP INCOME STATEMENT
For the six months ended 30 September 2006
Year to Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
Audited Unaudited Unaudited
£m Notes £m £m
----------------------------------------------------------------------------------------
44.5 Rental income 2 21.1 22.8
5.0 Service charge income 3.2 3.1
(6.3) Service charge expenses (4.2) (3.8)
(1.3) (1.0) (0.7)
(2.2) Other property expenses (0.4) (0.5)
-----------------------------------------------------------------------------------------
41.0 Net rental and related income 19.7 21.6
14.8 Profit on disposal of investment property 11.9 4.7
171.3 Net valuation gain on property portfolio 105.9 28.5
- Profit from development management agreements 3 1.5 -
16.4 Share of profit on joint ventures 10 25.1 3.3
(10.6) Administration expenses (5.6) (5.0)
-----------------------------------------------------------------------------------------
232.9 Operating profit before financing costs 158.5 53.1
0.8 Finance income 4 0.1 0.3
(18.2) Finance costs 5 (10.3) (9.3)
(27.5) Premium on redemption of interest-bearing (0.2) -
loans and borrowings
-----------------------------------------------------------------------------------------
188.0 Profit before tax 148.1 44.1
(39.7) Tax 6 (34.4) (9.4)
-----------------------------------------------------------------------------------------
148.3 Profit for the period 113.7 34.7
-----------------------------------------------------------------------------------------
91.7p Basic earnings per share 7 70.2p 21.5p
-----------------------------------------------------------------------------------------
84.1p Diluted earnings per share 7 64.1p 20.2p
-----------------------------------------------------------------------------------------
10.2p Adjusted earnings per share 7 5.0p 4.9p
-----------------------------------------------------------------------------------------
All results are derived from continuing operations.
GROUP BALANCE SHEET
At 30 September 2006
31 March 30 September 30 September
2006 2006 2005
Audited Unaudited Unaudited
£m Notes £m £m
---------------------------------------------------------------------------------------
Non-current assets
965.1 Investment property 8 1,098.8 699.7
61.0 Property, plant and equipment 9 18.7 114.7
72.4 Investment in joint ventures 10 156.2 59.8
---------------------------------------------------------------------------------------
1,098.5 1,273.7 874.2
---------------------------------------------------------------------------------------
Current assets
4.5 Trade and other receivables 11 18.3 5.6
10.3 Cash and cash equivalents 6.9 24.9
---------------------------------------------------------------------------------------
14.8 25.2 30.5
---------------------------------------------------------------------------------------
1,113.3 Total assets 1,298.9 904.7
---------------------------------------------------------------------------------------
Current liabilities
29.6 Trade and other payables 12 27.1 23.0
0.4 Income tax payable - 4.0
110.0 Interest-bearing loans and borrowings 13 3.0 1.0
---------------------------------------------------------------------------------------
140.0 30.1 28.0
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Non-current liabilities
225.7 Interest-bearing loans and borrowings 13 382.7 262.2
8.5 Obligations under finance leases 10.0 9.1
83.7 Deferred tax 14 116.9 53.3
0.7 Pension liability 0.6 1.8
---------------------------------------------------------------------------------------
318.6 510.2 326.4
458.6 Total liabilities 540.3 354.4
---------------------------------------------------------------------------------------
654.7 Net assets 758.6 550.3
---------------------------------------------------------------------------------------
Equity
20.4 Share capital 15 20.4 20.3
15.1 Share premium account 16 15.9 13.0
9.2 Equity reserve 17 8.8 9.5
- Hedging reserve 17 (0.1) -
16.4 Capital redemption reserve 17 16.4 16.4
8.1 Revaluation reserve 17 0.2 23.5
587.3 Retained earnings 17 698.4 469.6
(1.8) Investment in own shares 18 (1.4) (2.0)
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654.7 Equity shareholders' funds 758.6 550.3
---------------------------------------------------------------------------------------
401p Net assets per share 7 464p 339p
---------------------------------------------------------------------------------------
437p Adjusted net assets per share 7 513p 363p
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GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 September 2006
Year to Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
Audited Unaudited Unaudited
£m Notes £m £m
-----------------------------------------------------------------------------------------
Operating activities
232.9 Operating profit before financing costs 158.5 53.1
(202.5) Adjustments for non-cash items 19 (140.4) (35.8)
(0.2) Increase in receivables (11.5) (0.3)
3.2 (Decrease)/increase in payables (1.5) (3.8)
(131.4) Purchase and development of property (108.5) (11.9)
(1.8) Purchase of fixed assets - -
121.2 Sale of properties 80.0 63.0
(15.6) Purchase of interests in joint ventures (6.9) (15.6)
-----------------------------------------------------------------------------------------
5.8 Cash generated from operations (30.3) 48.7
0.8 Interest received 0.1 0.3
(21.1) Interest paid (10.4) (9.4)
(1.5) Tax paid (0.2) -
-----------------------------------------------------------------------------------------
(16.0) Cash flows from operating activities (40.8) 39.6
-----------------------------------------------------------------------------------------
Financing activities
(89.1) Redemption of loans (1.4) -
156.0 Borrowings drawn 51.0 -
(55.0) Borrowings repaid - (35.0)
- Purchase of derivatives (0.3) -
(17.5) Equity dividends paid (11.9) (11.6)
----------------------------------------------------------------------------------------
(5.6) Cash flows from financing activities 37.4 (46.6)
----------------------------------------------------------------------------------------
(21.6) Net decrease in cash and cash equivalents (3.4) (7.0)
31.9 Cash and cash equivalents at 1 April 10.3 31.9
----------------------------------------------------------------------------------------
10.3 Cash and cash equivalents at balance sheet date 6.9 24.9
----------------------------------------------------------------------------------------
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the six months ended 30 September 2006
Year ended Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
Audited Unaudited Unaudited
£m £m £m
----------------------------------------------------------------------------------------------
7.0 Revaluation of development properties 0.2 15.5
(2.1) Deferred tax on development properties recognised directly - (4.6)
in equity
- Reversal of deferred tax provision on disposal of development 1.4 -
property
- Fair value movement on derivatives (0.1) -
0.8 Actuarial (losses)/gains on defined benefit schemes net of (0.2) 0.2
deferred tax
----------------------------------------------------------------------------------------------
5.7 Net gain recognised directly in equity 1.3 11.1
148.3 Profit for the period 113.7 34.7
----------------------------------------------------------------------------------------------
154.0 Total recognised income and expense for the period 115.0 45.8
----------------------------------------------------------------------------------------------
GROUP RECONCILIATION OF OTHER MOVEMENTS IN EQUITY
For the six months ended 30 September 2006
Year ended Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
Audited Unaudited Unaudited
£m £m £m
-------------------------------------------------------------------------------------------
516.0 Opening equity shareholders' funds 654.7 516.0
154.0 Total recognised income and expense for the period 115.0 45.8
2.1 Conversion of convertible bonds 0.6 -
(0.3) Deferred tax on convertible bonds (0.2) (0.1)
0.4 Employee long-term incentive plan 0.4 0.2
(17.5) Dividends (11.9) (11.6)
-------------------------------------------------------------------------------------------
654.7 Closing equity shareholders' funds 758.6 550.3
-------------------------------------------------------------------------------------------
NOTES FORMING PART OF THE INTERIM STATEMENT
1 Basis of Preparation
The unaudited financial information contained in this report does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985.
The full financial statements for the year ended 31 March 2006 were prepared
under IFRS and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985 and, together with an unqualified audit report, have been
delivered to the Registrar of Companies. The interim financial report has been
prepared using accounting policies set out in the full financial statements for
the year ended 31 March 2006, which are consistent with IFRS.
2 Rental Income
Year to Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
£m £m £m
--------------------------------------------------------------------------------------
42.2 Gross rental income 21.4 22.2
2.6 Amortisation of capitalised lease incentives (0.2) 0.7
(0.3) Ground rents payable (0.1) (0.1)
--------------------------------------------------------------------------------------
44.5 21.1 22.8
--------------------------------------------------------------------------------------
3 Profit from development management agreements
Year to Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
£m £m £m
--------------------------------------------------------------------------------------
0.3 Development management revenue 9.7 -
(0.3) Development management costs (8.2) -
- 1.5 -
--------------------------------------------------------------------------------------
4 Finance Income
Year to Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
£m £m £m
--------------------------------------------------------------------------------------
0.5 Interest on short-term deposits 0.1 0.3
0.3 Other - -
--------------------------------------------------------------------------------------
0.8 0.1 0.3
--------------------------------------------------------------------------------------
5 Finance Costs
Year to Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
£m £m £m
--------------------------------------------------------------------------------------
3.1 Interest on bank overdrafts and loans 4.4 1.4
11.8 Interest on debentures 3.8 6.2
4.1 Interest on convertible bonds 2.0 2.1
0.2 Interest on loan notes 0.1 0.1
0.7 Interest on obligations under finance leases 0.3 0.4
0.7 Other interest 0.2 -
-------------------------------------------------------------------------------------
20.6 Total borrowing costs 10.8 10.2
(2.4) Less: capitalised interest (0.9) (0.9)
-------------------------------------------------------------------------------------
18.2 9.9 9.3
- Fair value movement on derivatives 0.4 -
-------------------------------------------------------------------------------------
18.2 10.3 9.3
-------------------------------------------------------------------------------------
6 Tax
Year to Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
£m £m £m
--------------------------------------------------------------------------------------
Current tax
- UK corporation tax - 2.4
0.3 Tax (over)/under provided in previous years (0.1) -
-------------------------------------------------------------------------------------
0.3 Total current tax (0.1) 2.4
39.4 Deferred tax 34.5 7.0
-------------------------------------------------------------------------------------
39.7 Tax charge for the period 34.4 9.4
-------------------------------------------------------------------------------------
The difference between the standard rate of tax and the effective rate of tax
arises from the items set out below:
Year to Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
£m £m £m
--------------------------------------------------------------------------------------
188.0 Profit before tax 148.1 44.1
--------------------------------------------------------------------------------------
56.4 Tax on profit at standard rate of 30% 44.4 13.2
0.7 Expenses not deductible for tax purposes 0.2 0.2
2.5 Capital allowances (1.3) (0.1)
(0.9) Receipts taxable as chargeable gains partially - (0.3)
covered by capital losses
1.5 Sale of investment properties covered by (3.6) -
capital losses
0.3 Previous years' corporation tax (0.1) -
- Employee long-term incentive plan - (0.1)
- Capitalised receipts taxable as income - 0.3
- Chargeable gains on sales of investment - (0.7)
properties
- Pension liabilities - 0.1
(20.4) Property revaluations (4.7) (3.2)
(0.1) Accounting profits arising in the period not (0.1) -
taxable
(0.3) Other (0.4) -
--------------------------------------------------------------------------------------
39.7 Tax charge for the period 34.4 9.4
--------------------------------------------------------------------------------------
During the period £1.5 million (2005: £4.6 million) of tax was charged directly
to equity. This charge related to deferred tax in respect of revaluations of
property, plant and equipment and pension liabilities.
7 Earnings and Net Assets per Share
Earnings and net assets per share are calculated in accordance with the guidance
issued in January 2006 by the European Real Estate Association (EPRA).
Weighted average number of ordinary shares
Year to Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
No. of shares No. of shares No. of shares
-----------------------------------------------------------------------------------------------
162,474,812 Issued ordinary share capital at 1 April 163,181,906 162,474,812
256,245 Conversion of convertible bonds 53,354 -
(1,115,628) Investment in own shares (1,115,628) (1,115,628)
----------------------------------------------------------------------------------------------
161,615,429 Weighted average number of ordinary shares 162,119,632 161,359,184
----------------------------------------------------------------------------------------------
18,453,432 Effect of conversion of convertible bonds 17,868,140 18,709,677
----------------------------------------------------------------------------------------------
180,068,861 Diluted weighted average number of ordinary shares 179,987,772 180,068,861
----------------------------------------------------------------------------------------------
Basic, diluted and adjusted earnings per share
Year to Six months to Six months to Six months to Six months to
31 March 30 September 30 September 30 September 30 September
2006 2006 2006 2005 2005
Earnings Profit Earnings Profit Earnings
per share after tax per share after tax per share
pence £m pence £m pence
-----------------------------------------------------------------------------------------------------
91.7 Basic 113.7 70.2 34.7 21.5
(7.6) Effect of convertible bonds 1.6 (6.1) 1.7 (1.3)
-----------------------------------------------------------------------------------------------------
84.1 Diluted 115.3 64.1 36.4 20.2
(77.4) Net valuation gain on property (80.0) (44.4) (22.7) (13.5)
portfolio net of deferred tax
(5.6) Net valuation gain on joint (15.8) (8.8) (1.9) (0.1)
ventures net of deferred tax
(4.1) Profit on sale of investment (11.9) (6.6) (4.0) (2.2)
properties
- Movement in fair value of 0.4 0.3 - -
derivatives
10.7 Non-recurring items 0.1 - - -
2.5 Deferred tax on accelerated 0.8 0.4 1.0 0.5
capital allowances
-----------------------------------------------------------------------------------------------------
10.2 Adjusted 8.9 5.0 8.8 4.9
-----------------------------------------------------------------------------------------------------
Non-recurring items in the period to 30 September 2006 comprise £0.2 million of
premiums on the redemption of debentures and the convertible bonds, less tax
relief of £0.1 million.
Net assets per share
31 March 30 September 30 September 30 September 30 September 30 September 30 September
2006 2006 2006 2006 2005 2005 2005
Net assets Net No. of Net assets Net No. of Net assets
per share assets shares per share assets shares per share
pence £m million pence £m million pence
---------------------------------------------------------------------------------------------------------------------
401 Basic 758.6 163.4 464 550.3 162.5 339
(10) Convertible bonds 52.7 17.6 (16) 54.9 18.7 (5)
---------------------------------------------------------------------------------------------------------------------
391 Diluted 811.3 181.0 448 605.2 181.2 334
(7) Fair value of (12.5) (7) (21.4) (12)
financial
liabilities net of
tax
---------------------------------------------------------------------------------------------------------------------
384 Diluted triple net 798.8 441 583.8 322
assets
---------------------------------------------------------------------------------------------------------------------
7 Fair value of 12.5 7 21.4 12
financial
liabilities net of
tax
- Fair value of 0.2 - - -
derivatives
4 Deferred tax on 8.5 5 4.3 2
capital allowances
42 Deferred tax on 108.1 60 48.8 27
revaluation gains
---------------------------------------------------------------------------------------------------------------------
437 Adjusted net assets 928.1 513 658.3 363
---------------------------------------------------------------------------------------------------------------------
The fair value of liabilities reflects a diluted number of shares and the high
likelihood of the convertible bonds converting to equity. Therefore the fair
values of financial liabilities in the calculation above include the Group's
debentures but exclude the convertible bonds.
8 Investment Property
Investment property
Freehold Leasehold Total
£m £m £m
----------------------------------------------------------------------------------------
Book value at 1 April 2006 697.9 146.8 844.7
Acquisitions 79.5 - 79.5
Costs capitalised 6.0 2.4 8.4
Disposals (21.4) (24.5) (45.9)
Transfers from development properties 23.0 - 23.0
Transfers to investment properties - development (45.9) - (45.9)
Net valuation gain on investment property 63.7 19.8 83.5
----------------------------------------------------------------------------------------
Book value at 30 September 2006 802.8 144.5 947.3
----------------------------------------------------------------------------------------
Investment property - development
Freehold Leasehold Total
£m £m £m
----------------------------------------------------------------------------------------
Book value at 1 April 2006 72.6 47.8 120.4
Acquisitions 3.2 - 3.2
Costs capitalised 7.3 0.8 8.1
Interest capitalised 0.5 0.1 0.6
Disposals (49.2) - (49.2)
Transfers from investment property 45.9 - 45.9
Net valuation gain on investment property 17.3 5.2 22.5
----------------------------------------------------------------------------------------
Book value at 30 September 2006 97.6 53.9 151.5
----------------------------------------------------------------------------------------
Total investment property 900.4 198.4 1,098.8
----------------------------------------------------------------------------------------
Net valuation gain on investment property 106.0
Add: net valuation deficit on development property (note 9) (0.1)
----------------------------------------------------------------------------------------
Net valuation gain on property portfolio 105.9
----------------------------------------------------------------------------------------
The investment and development properties (note 9) were valued on the basis of
Market Value by CB Richard Ellis, as at 30 September 2006 in accordance with the
Appraisal and Valuation Standards of the Royal Institution of Chartered
Surveyors. The book value of investment properties includes £10.0 million (2005:
£9.1 million) in respect of the present value of future ground rents.
At 30 September 2006, properties with a carrying value of £239.0 million (2005:
£382.7 million) were secured under first mortgage debenture stock (see note 13).
9 Property, plant and equipment
Leasehold Fixtures and Development
improvements fittings Property Total
£m £m £m £m
-----------------------------------------------------------------------------------------------
Cost or valuation
At 1 April 2006 1.9 0.6 58.6 61.1
Acquisitions - - 8.5 8.5
Costs capitalised - - 1.2 1.2
Interest capitalised - - 0.3 0.3
Disposals - - (29.2) (29.2)
Net valuation gain taken to equity - - 0.2 0.2
Net valuation deficit taken to the income - - (0.1) (0.1)
statement
Transfers to investment property - - (23.0) (23.0)
-----------------------------------------------------------------------------------------------
At 30 September 2006 1.9 0.6 16.5 19.0
-----------------------------------------------------------------------------------------------
Depreciation
At 1 April 2006 0.1 - - 0.1
Charge for the period 0.1 0.1 - 0.2
-----------------------------------------------------------------------------------------------
At 30 September 2006 0.2 0.1 - 0.3
-----------------------------------------------------------------------------------------------
Carrying amount at 31 March 2006 1.8 0.6 58.6 61.0
-----------------------------------------------------------------------------------------------
Carrying amount at 30 September 2006 1.7 0.5 16.5 18.7
-----------------------------------------------------------------------------------------------
The historical cost of development properties at 30 September 2006 was £16.3
million (2005: £81.0 million). The cumulative interest capitalised in
development properties was £0.2 million (2005: £3.4 million).
10 Investment in Joint Ventures
The Group has the following investments in joint ventures:
Equity Loans Total
£m £m £m
--------------------------------------------------------------------------------
At 1 April 2006 62.9 9.5 72.4
Acquisitions 60.6 - 60.6
Share of profits of joint venture 0.9 - 0.9
Revaluation of joint ventures 24.2 - 24.2
Distributions (1.9) - (1.9)
--------------------------------------------------------------------------------
At 30 September 2006 146.7 9.5 156.2
--------------------------------------------------------------------------------
The investments in joint ventures comprise the following:
31 March 30 September 30 September
2006 Country 2006 2005
----------------------------------------------------------------------------------------
50% The Great Victoria Partnership United Kingdom 50% 50%
50% The Great Victoria Partnership (No. 2) United Kingdom 50% 50%
- The Great Wigmore Partnership United Kingdom 50% -
----------------------------------------------------------------------------------------
Included in the financial statements are the following items that represent the
Group's share in the assets and liabilities, revenues and expenses for the joint
ventures.
31 March 30 September 30 September
2006 2006 2005
Total Great Wigmore Great Victoria Total Total
£m Partnership Partnerships £m £m
--------------------------------------------------------------------------------------------
113.1 Investment properties 74.4 126.7 201.1 101.8
15.6 Current assets 3.1 7.7 10.8 14.4
(53.4) Bank loans - (49.4) (49.4) (53.4)
(12.4) Current liabilities (1.5) (14.3) (15.8) (12.5)
--------------------------------------------------------------------------------------------
62.9 Net assets 76.0 70.7 146.7 50.3
--------------------------------------------------------------------------------------------
6.6 Income 0.3 2.5 2.8 3.1
12.9 Revaluation of properties 15.2 9.0 24.2 2.0
(3.1) Expenses (0.2) (1.7) (1.9) (1.8)
--------------------------------------------------------------------------------------------
16.4 Net profit 15.3 9.8 25.1 3.3
--------------------------------------------------------------------------------------------
During the period the Group received a management fee of £0.5 million (2005:
£0.7 million) from the joint ventures which has been recognised in
administration expenses.
11 Trade and Other Receivables
31 March 30 September 30 September
2006 2006 2005
£m £m £m
-----------------------------------------------------------------------------------------
0.8 Rent receivables 2.3 1.4
1.2 Prepayments and accrued income 1.1 1.6
0.3 Amounts receivable on development 10.0 -
management agreements
2.2 Other trade receivables 4.9 2.6
-----------------------------------------------------------------------------------------
4.5 18.3 5.6
-----------------------------------------------------------------------------------------
12 Trade and Other Payables
31 March 30 September 30 September
2006 2006 2005
£m £m £m
----------------------------------------------------------------------------------------
11.6 Trade payables 10.1 10.0
18.0 Non-trade payables and accrued expenses 17.0 13.0
----------------------------------------------------------------------------------------
29.6 27.1 23.0
----------------------------------------------------------------------------------------
13 Interest-bearing Loans and Borrowings
31 March 30 September 30 September
2006 2006 2005
£m £m £m
-----------------------------------------------------------------------------------------
Non-current liabilities
31.4 £31.6 million 71/4% debenture stock 2027 30.9 92.4
91.9 £92.9 million 55/8% debenture stock 2029 91.9 91.9
53.4 51/4% convertible bonds 2008 52.7 54.9
46.0 Bank loans 207.0 20.0
3.0 Unsecured loan notes 2007 - 3.0
- Fair value of derivatives 0.2 -
-----------------------------------------------------------------------------------------
225.7 382.7 262.2
-----------------------------------------------------------------------------------------
Current liabilities
110.0 Bank loans - -
- Current portion of unsecured loans 2007 3.0 1.0
-----------------------------------------------------------------------------------------
335.7 385.7 263.2
-----------------------------------------------------------------------------------------
Certain of the freehold and leasehold properties are charged to secure the first
mortgage debenture stock (see note 8). The bank loans are unsecured, attract a
floating rate of 0.525% above LIBOR and expire in 2011. The unsecured loan
notes, which together with an associated guarantee attract a floating rate of
interest of 0.275% in aggregate above LIBOR, are redeemable at the option of the
noteholder until 2007, and by the Company in 2007. The bonds, which are
unsecured, are convertible by the bondholder at a price of £3.10 per share, and
redeemable by the Company at par, at any time until 2008. The amount of the
convertible bonds classified as an equity reserve is net of attributable
transaction costs of £0.2 million.
At 30 September 2006 the Group had available £208 million (2005: £202 million)
of undrawn committed bank facilities.
Maturity of financial liabilities
The maturity profile of the financial liabilities of the Group at 30 September
2006 was as follows:
31 March 30 September 30 September
2006 2006 2005
£m £m £m
-----------------------------------------------------------------------------------
110.0 In one year or less, or on demand 3.0 1.0
56.4 In more than one year but not more than two years 52.7 3.0
- In more than two years but not more than three years - 54.9
- In more than three years but not more than four years - 20.0
46.0 In more than four years but not more than five years 207.2 -
123.3 In more than five years 122.8 184.3
-----------------------------------------------------------------------------------
335.7 385.7 263.2
-----------------------------------------------------------------------------------
Fair value of financial liabilities
31 March 31 March 30 September 30 September 30 September 30 September
2006 2006 2006 2006 2005 2005
Book Fair Book Fair Book Fair
value value value value value value
£m £m £m £m £m £m
-----------------------------------------------------------------------------------------------------------
110.0 110.0 Current liabilities 3.0 3.0 1.0 1.0
225.7 278.5 Non-current liabilities 382.5 454.0 262.2 310.2
- - Derivatives 0.2 0.2 - -
----------------------------------------------------------------------------------------------------------
335.7 388.5 385.7 457.2 263.2 311.2
----------------------------------------------------------------------------------------------------------
At 30 September 2006 the fair value of the convertible bonds was £106.3 million,
an excess of £53.6 million over its book value.
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 financial statements.
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.
14 Deferred tax
At Recognised At
1 April Recognised directly in 30 September
2006 in income equity 2006
£m £m £m £m
------------------------------------------------------------------------------------------------
Deferred tax liabilities
Accelerated capital allowances 7.7 0.8 - 8.5
Capitalised interest 1.4 (0.5) - 0.9
Property revaluations 75.2 34.3 (1.4) 108.1
Deferred tax assets
Long-term incentive plan (0.4) - - (0.4)
Pension liabilities (0.2) 0.1 (0.1) (0.2)
------------------------------------------------------------------------------------------------
Net deferred tax provision 83.7 34.7 (1.5) 116.9
------------------------------------------------------------------------------------------------
Included within the deferred tax liability relating to property revaluations of
£108.1 million is £14.1 million (2005: £2.9 million) in respect of the Group's
deferred tax liability on properties it holds in joint ventures. Deferred
taxation associated with development property revaluations in respect of
property, plant and equipment is reflected directly in reserves where the
underlying property revaluations are also recognised. The Group recognises
deferred tax assets based on forecast taxable profits.
15 Share capital
Year to Year to Six months to Six months to Six months to Six months to
31 March 31 March 30 September 30 September 30 September 30 September
2006 2006 2006 2006 2005 2005
Number £m Number £m Number £m
------------------------------------------------------------------------------------------------------
Ordinary shares of
121/2 p each
550,100,752 68.8 Authorised 550,100,752 68.8 550,100,752 68.8
Allotted, called up
and fully paid
------------------------------------------------------------------------------------------------------
162,474,812 20.3 At the beginning of 163,181,906 20.4 162,474,812 20.3
the period
707,094 0.1 Conversion of 250,966 - - -
convertible bonds
------------------------------------------------------------------------------------------------------
163,181,906 20.4 At the end of the 163,432,872 20.4 162,474,812 20.3
period
------------------------------------------------------------------------------------------------------
16 Share Premium
Year to Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
£m £m £m
--------------------------------------------------------------------------------------------
13.0 At the beginning of the period 15.1 13.0
2.1 Conversion of convertible bonds 0.8 -
--------------------------------------------------------------------------------------------
15.1 At the end of the period 15.9 13.0
--------------------------------------------------------------------------------------------
17 Reserves
Capital
Equity Hedging redemption Revaluation Retained
reserve reserve reserve reserve earnings
£m £m £m £m £m
---------------------------------------------------------------------------------------------
At 1 April 2006 9.2 - 16.4 8.1 587.3
Profit for the period - - - - 113.7
Actuarial losses on defined benefit - - - - (0.3)
schemes
Deferred tax on actuarial losses on - - - - 0.1
defined benefit schemes
Net valuation gain taken to equity - - - 0.2 -
Transfer on completion of development - - - (5.9) 5.9
property
Realised on disposal of development - - - (3.6) 3.6
property
Reversal of deferred tax provision on - - - 1.4 -
disposal of development property
Fair value movement on derivatives - (0.1) - - -
Conversion of convertible bonds (0.2) - - - -
Deferred tax recognised on convertible (0.2) - - - -
bonds
Dividends to shareholders - - - - (11.9)
--------------------------------------------------------------------------------------------
At 30 September 2006 8.8 (0.1) 16.4 0.2 698.4
--------------------------------------------------------------------------------------------
18 Investment in Own Shares
Year to Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
£m £m £m
-----------------------------------------------------------------------------------------
2.2 At the beginning of the period 1.8 2.2
(0.4) Employee long-term incentive plan charge (0.4) (0.2)
-----------------------------------------------------------------------------------------
1.8 At the end of the period 1.4 2.0
-----------------------------------------------------------------------------------------
The investment in the Company's own shares is held at cost and comprises
1,115,628 shares held by the Great Portland Estates P.L.C. LTIP Employee Share
Trust which will vest in certain senior employees of the Group if performance
conditions are met.
19 Adjustment for non-cash movements in the Cash Flow Statement
Year to Six months to Six months to
31 March 30 September 30 September
2006 2006 2005
£m £m £m
-----------------------------------------------------------------------------------------
(171.3) Net valuation gain on property portfolio (105.9) (28.5)
(14.8) Profit on disposal of investment properties (11.9) (4.7)
0.4 Employee long-term incentive plan charge 0.4 0.2
(2.6) Capitalisation of lease incentives 0.2 (1.2)
(14.2) Share of profit on joint ventures (23.2) (1.6)
----------------------------------------------------------------------------------------
(202.5) Adjustment for non-cash items (140.4) (35.8)
----------------------------------------------------------------------------------------
20 Dividends
The proposed interim dividend of 3.75 pence per share (2005: 3.67 pence per
share) was approved by the Board on 13 November 2006 and is payable on 3 January
2007 to shareholders on the register on 24 November 2006. The dividend is not
recognised as a liability in the interim accounts. The 2006 final dividend of
£11.9 million was paid on 11 July 2006 and is included within the Group
Reconciliation of Other Movements in Equity.
Glossary
Adjusted earnings per share
Earnings per share adjusted to exclude non-recurring items, profits or losses on
sales of investment properties and deferred tax on capital allowances and
property revaluations on a diluted basis.
Adjusted net assets per share
NAV adjusted to exclude deferred tax on capital allowances and property
revaluations on a diluted basis.
Diluted figures
Reported amounts adjusted to include the effects of potential shares issuable
under the convertible bond.
Earnings per share (EPS)
Profit after tax divided by the weighted average number of ordinary shares in
issue.
EPRA adjustments
Standard calculation methods for adjusted EPS and adjusted NAV as set out by the
European Public Real Estate Association (EPRA) in their January 2006 Best
Practice and Policy Recommendations.
Estimated rental value (ERV)
The market rental value of lettable space as estimated by the Company's valuers
at each balance sheet date.
IPD
The Investment Property Databank Limited (IPD) is a company that produces an
independent benchmark of property returns.
Like-for-like portfolio
Properties that have been held for the whole of the period of account.
Market value
The amount as estimated by the Company's valuers for which a property should
exchange on the date of valuation between a willing buyer and a willing seller
in an arms-length transaction after proper marketing wherein the parties had
each acted knowledgeably, prudently and without compulsion. In line with market
practice, values are stated net of purchasers' costs.
Net assets per share or net asset value (NAV)
Equity shareholders' funds divided by the number of ordinary shares at the
balance sheet date.
Net gearing
Total borrowings less short-term deposits and cash as a percentage of equity
shareholders' funds.
Net initial yield
Annual net rents on investment properties as a percentage of the investment
property valuation.
Portfolio internal rate of return (IRR)
The rate of return that if used as a discount rate and applied to the projected
cash flows from the portfolio would result in a net present value of zero.
Rent roll
The annual contracted rental income.
Return on capital employed (ROCE)
Return on capital employed is measured as profit before financing costs plus
revaluation surplus on development property divided by the opening gross
capital.
Return on shareholders' equity
The growth in the adjusted diluted net assets per share plus dividends per share
for the period expressed as a percentage of the adjusted net assets per share at
the beginning of the period.
Reversionary or under-rented
The percentage by which ERV exceeds rents passing, together with the estimated
rental value of vacant space.
Reversionary yield
The anticipated yield, which the initial yield will rise to once the rent
reaches the ERV.
Total property return (TPR)
Capital growth in the like-for-like portfolio plus net rental income derived
from holding these properties plus profit on sale of disposals expressed as a
percentage return on the period's opening value.
Total shareholder return (TSR)
The growth in the ordinary share price as quoted on the London Stock Exchange
plus dividends per share received for the period expressed as a percentage of
the share price at the beginning of the period.
Triple net asset value (NNNAV)
NAV adjusted to include the fair value of the Group's financial liabilities on a
diluted basis.
True equivalent yield
The constant capitalisation rate which, if applied to all cash flows from an
investment property, including current rent, reversions to current market rent
and such items as voids and expenditures, equates to the market value. Assumes
rent is received quarterly in advance.
UK-REIT
UK Real Estate Investment Trust.
Voids
The element of a property which is unoccupied but available for letting, usually
expressed as the ERV of the void space divided by the existing rent roll plus
the ERV of the void space.
Weighted average cost of capital (WACC)
The weighted average pre-tax cost of the Group's debt and the notional cost of
the Group's equity used as a benchmark to assess investment returns.
Weighted average unexpired lease term (WAULT)
The weighted average unexpired lease term expressed in years.
This information is provided by RNS
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