Final Results
Land Securities Group Plc
18 May 2004
18 May 2004
LAND SECURITIES GROUP PLC ('Land Securities' / 'Group')
Preliminary results for the year ended 31 March 2004 (Part 2)
Consolidated profit and loss account for the year ended 31 March 2004
Notes 2004 2003
£m £m
Gross property income - group 1 1,285.8 1,071.3
Plus share of joint ventures 1 195.3 168.2
---------- ----------.
Gross property income - total 1 1,481.1 1,239.5
---------- ----------.
Operating profit - group 1 464.7 462.4
Share of operating profits of joint ventures 1 101.1 87.8
Profit on sales of fixed asset properties (including share of 1 63.9 41.7
joint ventures)
---------- ----------.
Profit on ordinary activities before interest and taxation 1 629.7 591.9
Net interest payable by Group - ordinary 3 (174.4) (144.9)
Net interest payable by Group - exceptional 3 - (51.7)
Net interest payable by joint ventures - ordinary 3 (82.2) (75.4)
Net interest payable by joint ventures - exceptional 3 - (0.3)
---------- ----------.
Profit on ordinary activities before taxation 373.1 319.6
Taxation 4 (84.8) (89.7)
---------- ----------.
Profit on ordinary activities after taxation 288.3 229.9
Dividends 5 (173.2) (167.4)
---------- ----------.
Retained profit for the financial year 13 115.1 62.5
---------- ----------.
Earnings per share
Basic earnings per share 6 61.84p 46.46p
Diluted earnings per share 6 61.76p 46.44p
Adjusted earnings per share* 6 47.86p 50.89p
Adjusted diluted earnings per share* 6 47.80p 50.88p
Dividends per share 5 37.10p 35.50p
All income was derived from within the United Kingdom from continuing
operations. No operations were discontinued during the year.
* the comparatives in respect of the above have been restated as set out in Note
6
Statement of total recognised gains and losses for the year ended 31 March 2004
2004 2003
£m £m
Profit on ordinary activities after taxation 288.3 229.9
Unrealised surplus / (deficit) on revaluation of investment 400.7 (56.8)
properties
Unrealised surplus on revaluation of Joint Venture's investment 6.2 -
properties
Taxation on revaluation surpluses realised on sales of investment (27.3) (25.4)
properties
---------- ----------.
Total gains and losses recognised since the last financial 667.9 147.7
statements
---------- ----------.
Note of historical cost profits and losses
2004 2003
£m £m
Profit on ordinary activities before taxation 373.1 319.6
Revaluation surplus arising in previous years now realised on 333.0 281.2
sales of investment properties
---------- ----------.
Historical cost profit on ordinary activities before taxation 706.1 600.8
Taxation (84.8) (89.7)
Taxation on revaluation surpluses realised on sales of investment (27.3) (25.4)
properties
---------- ----------.
Historical cost profit on ordinary activities after taxation 594.0 485.7
Dividends (173.2) (167.4)
---------- ----------.
Retained historical cost profit for the financial year 420.8 318.3
---------- ----------.
Balance sheet at 31 March 2004
Notes 2004 2003
£m £m
Fixed assets
Intangible asset
Goodwill 8 34.3 36.7
---------- ----------.
Tangible assets
Investment properties 9 7,880.9 7,823.9
Operating properties 9 769.2 557.4
---------- ----------.
Total properties 9 8,650.1 8,381.3
Other tangible fixed assets 9 51.0 41.5
---------- ----------.
9 8,701.1 8,422.8
Investment in joint ventures
---------- ----------.
Share of gross assets of joint ventures 10 257.2 1,170.2
Share of gross liabilities of joint ventures 10 (5.1) (1,063.4)
---------- ----------.
252.1 106.8
---------- ----------.
8,987.5 8,566.3
---------- ----------.
Current assets
Trading properties 85.0 52.6
Debtors falling due within one year 339.7 273.5
Debtors falling due after one year 20.4 15.9
Investments: short term deposits 219.0 3.4
Cash at bank and in hand 22.8 96.0
---------- ----------.
686.9 441.4
Creditors falling due within one year (1,371.2) (594.9)
---------- ----------.
Net current liabilities (684.3) (153.5)
---------- ----------.
Total assets less current liabilities 8,303.2 8,412.8
Creditors falling due after one year
Debentures, bonds and loans 11 (1,995.9) (2,648.4)
Other creditors (35.9) (22.3)
Provision for liabilities and charges 12 (185.0) (179.0)
---------- ----------.
Investment in joint ventures (Telereal)
Share of gross assets of joint ventures 10 1,108.0 -
Share of gross liabilities of joint ventures 10 (1,155.9) -
---------- ----------.
(47.9) -
---------- ----------.
6,038.5 5,563.1
---------- ----------.
Capital and reserves
Called up share capital 13 55.0 76.9
Share premium account 13 15.9 13.3
Capital redemption reserve 13 22.1 0.1
Revaluation reserve 13 3,112.8 3,038.9
Profit and loss account 13 2,832.7 2,433.9
---------- ----------.
Shareholders' funds (including non-equity interests) 13 6,038.5 5,563.1
---------- ----------.
Net assets per share (basic) 7 1294p 1188p
Adjusted net assets per share (diluted)* 7 1331p 1219p
I J Henderson A E Macfarlane
Directors
* the comparative in respect of the above has been restated as set out in Note 7
Consolidated cash flow statement for the year ended 31 March 2004
2004 2003
£m £m
Net cash inflow from operating activities 456.4 484.4
Distributions received from joint venture* 51.0 55.3
Interest received from joint venture 7.6 7.7
---------- ----------.
Returns on investments and servicing of finance
Interest received 16.1 4.3
Interest paid (221.1) (292.0)
Costs of re-profiling an interest rate swap (21.1) -
---------- ----------.
Net cash outflow from investments and servicing of finance (226.1) (287.7)
Taxation (Corporation tax paid) (37.1) (95.8)
---------- ----------.
Net cash inflow from operating activities and investments after finance 251.8 163.9
charges
Capital expenditure
---------- ----------.
Development programme expenditure (190.2) (301.4)
Acquisition of investment properties (205.1) (139.1)
Other investment property related expenditure (111.0) (52.5)
Capital expenditure associated with property outsourcing (234.5) (120.2)
---------- ----------.
Capital expenditure on properties (740.8) (613.2)
Sale of fixed asset investment properties 698.2 425.5
Sale of fixed asset operating properties 2.0 10.8
---------- ----------.
Net expenditure on properties (40.6) (176.9)
Net expenditure on non-property related fixed assets (8.2) (12.9)
---------- ----------.
Net cash outflow from capital expenditure (48.8) (189.8)
Acquisitions
Repayment of loan capital by joint venture* 121.0 25.3
Equity dividends paid (167.5) (176.6)
---------- ----------.
Cash inflow / (outflow) before use of liquid resources 156.5 (177.2)
Management of liquid resources (Investments: short term deposits) (215.6) 57.5
Financing
---------- ----------.
Issue of shares 2.7 1.2
Purchase of own share capital (22.0) (516.2)
Increase in debt 22.0 728.2
---------- ----------.
Net cash inflow from financing 2.7 213.2
---------- ----------.
(Decrease) / increase in cash in year (56.4) 93.5
---------- ----------.
Reconciliation of net cash flow to movements in net debt 2004 2003
£m £m
(Decrease) / increase in cash in year (56.4) 93.5
Cash outflow / (inflow) from increase / (decrease) in liquid resources 215.6 (57.5)
Cash inflow from increase in debt (22.0) (728.2)
---------- ----------.
Change in net debt resulting from cash flow 137.2 (692.2)
Non-cash changes in debt 16.3 45.0
---------- ----------.
Movement in net debt in year 153.5 (647.2)
Net debt at 1 April (2,589.3) (1,942.1)
---------- ----------.
Net debt at 31 March (2,435.8) (2,589.3)
---------- ----------.
Reconciliation of Group operating profit to net cash inflow from 2004 2003
operating activities
£m £m
Operating profit - group 464.7 462.4
Depreciation and amortisation 31.5 28.6
Increase in trading properties (3.6) (15.7)
Increase in debtors (91.9) (16.1)
Increase in creditors 55.7 25.2
---------- ----------.
Net cash inflow from operating activities 456.4 484.4
---------- ----------.
Notes to the financial statements
for the year ended 31 March 2004
The financial information is abridged and does not constitute the Group's full
Financial Statements for the years ended 31 March 2003 and 31 March 2004.
Full Financial Statements for the year ended 31 March 2003 (which received an
unqualified audit report) have been filed with the Registrar of Companies.
Financial Statements for the year ended 31 March 2004 will be presented to the
Members at the forthcoming Annual General Meeting; the auditors have indicated
that their report on these Financial Statements will be unqualified.
1. Segmental information
An analysis of turnover, profit before interest and taxation, and net assets by
business sector is set out below. The business sectors consist of property
investment (which comprises the investment portfolio and development activities)
and property outsourcing.
Business Business Business Analysis Analysis Business Business Business Analysis Analysis
sectors sectors sectors of total of sectors sectors sectors of total of total
including including including results total including including including results results
the the the between results the the the between between
results results results Group and between results results results Group Group
of of of joint Group of joint of joint of joint and joint and
joint joint joint ventures and joint ventures ventures ventures venture joint
ventures ventures ventures ventures venture
(i) Property Property Total Group Share Property Property Total Group Share of
Profit invest out 2004 2004 of invest out 2003 2003 joint
and ment sourcing £m £m joint ment sourcing £m £m ventures
loss 2004 2004 ventures 2003 2003 2003
account £m £m 2004 £m £m £m
£m
Rental 515.1 - 515.1 514.5 0.6 519.7 - 519.7 519.7 -
income
(Note a))
Service 65.6 - 65.6 65.6 - 55.9 - 55.9 55.9 -
charges
and
other
recove
ries
Property - 802.0 802.0 636.2 165.8 - 658.3 658.3 492.0 166.3
services
income
(Note (b))
Long 49.6 - 49.6 49.6 - - - - - -
term
contract
income
Proceeds 19.9 28.9 48.8 19.9 28.9 3.7 1.9 5.6 3.7 1.9
of sales
of
trading
proper
ties
-------- -------- ---------- ---------- -------- -------- --------- ---------- ---------- ---------
Gross 650.2 830.9 1,481.1 1,285.8 195.3 579.3 660.2 1,239.5 1,071.3 168.2
property
income
Rents (14.9) (164.7) (179.6) (139.7) (39.9) (17.0) (145.5) (162.5) (114.5) 48.0
payable
Other (87.1) (433.7) (520.8) (520.8) - (71.1) (328.3) (399.4) (399.4) -
direct
property
or
contract
expend
iture
(Note
(c))
Indirect (44.5) (19.4) (63.9) (45.8) (18.1) (35.3) (23.7) (59.0) (43.0) (16.0)
property
or
contract
expend
iture
Long (49.6) - (49.6) (49.6) - - - - - -
term
contract
expend
iture
Bid - (6.2) (6.2) (6.2) - - (4.7) (4.7) (4.7) -
costs
Costs (18.2) (23.3) (41.5) (18.2) (23.3) (2.4) (1.4) (3.8) (2.4) (1.4)
of
sales
of
trading
proper
ties
-------- -------- ---------- ---------- -------- -------- --------- ---------- ---------- ---------
Operat 435.9 183.6 619.5 505.5 114.0 453.5 156.6 610.1 507.3 102.8
ing
profit
before
deprec
iation
and
amorti
sation
Deprec (4.1) (36.4) (40.5) (27.6) (12.9) (9.8) (29.9) (39.7) (24.7) (15.0)
iation
Amorti - (2.4) (2.4) (2.4) - - (2.2) (2.2) (2.2) -
sation
of
goodwill
-------- -------- ---------- ---------- -------- -------- --------- ---------- ---------- ---------
431.8 144.8 576.6 475.5 101.1 443.7 124.5 568.2 480.4 87.8
Profit 52.1 11.8 63.9 52.0 11.9 26.6 15.1 41.7 26.6 15.1
on
sale
of
fixed
assets
proper
ties
-------- -------- ---------- ---------- -------- -------- --------- ---------- ---------- ---------
Segment 483.9 156.6 640.5 527.5 113.0 470.3 139.6 609.9 507.0 102.9
profit
-------- -------- ---------- -------- -------- --------- ---------- ---------
Common (10.8) (11.7)
costs
(Note
(d))
Group - (6.3)
reorga
nisati
on
costs
---------- ----------
Profit 629.7 591.9
on
ordinary
activi
ties
before
interest
and
taxation
---------- ----------
Notes
(a) Rental income includes £9.3m (2003 £7.3m) of rent receivable allocated to
rent free periods.
(b) Property services income for Property Outsourcing comprises £449.4m (2003
£342.4m) in respect of unitary charge and £186.8m (2003 £149.6m) in respect of
capital projects and other reimbursable costs.
(c) Other direct property or contract expenditure includes pre-commitment costs
written off of £2.4m (2003 £3.1m).
(d) Common costs are costs associated with central Group Management.
1. Segmental information (continued)
(ii) Net assets Property Property Total Property Property Total
investment outsourcing 2004 investment outsourcing 2003
£m £m £m £m £m £m
Properties in development
programme 732.2 - 732.2 963.3 - 963.3
(Note 9)
Other investment properties 7,148.7 - 7,148.7 6,860.6 - 6,860.6
Operating properties -
relating to - 380.7 380.7 - 372.7 372.7
the PRIME contract
Operating properties -
relating to - 99.7 99.7 - - -
the Employment Services contract
Operating properties -
relating to - 288.8 288.8 - 184.7 184.7
the BBC contract
Goodwill and other tangible fixed 9.1 76.2 85.3 12.0 66.2 78.2
assets
Fixed assets 7,890.0 845.4 8,735.4 7,835.9 623.6 8,459.5
Investment in Joint Ventures 252.1 (47.9) 204.2 - 106.8 106.8
Net current assets /
(liabilities) (139.0) 44.2 (94.8) (50.2) 37.9 (12.3)
(excluding financing
and dividends)
8,003.1 841.7 8,844.8 7,785.7 768.3 8,554.0
Financing and dividends payable (2,585.4) (2,789.6)
Long term liabilities and provisions (220.9) (201.3)
---------------
Net assets 6,038.5 5,563.1
---------------
2. Revenue Profit
Notes Group Share of joint Total 2004 Group Share of joint Total 2003
£m ventures £m £m ventures £m
Profit on ordinary activities 342.3 30.8 373.1 292.4 27.2 319.6
before taxation
Profit on sale of fixed asset (52.0) (11.9) (63.9) (26.6) (15.1) (41.7)
properties
Exceptional items
Deficit on purchase and 3 - - - 28.2 - 28.2
redemption of convertible bonds
Cost of cancellation/novation 3 - - - 23.5 0.3 23.8
of interest rate swaps
Group reorganisation costs - - - 6.3 - 6.3
Revenue profit before taxation 290.3 18.9 309.2 323.8 12.4 336.2
Previously, revenue profits were calculated by eliminating the effect of
exceptional items, profit on fixed asset disposals and bid costs from the profit
before tax. Bid costs have become a normal part of Trillium's business and it
is now considered inappropriate to continue to adjust revenue profits for these
costs. Revenue profits are now defined as profits before tax, adjusted to
eliminate only profits on disposal of fixed asset properties and the effect of
exceptional items. The basis of the calculation of revenue profit has therefore
been revised, and the comparatives have been restated in accordance with this
new definition of revenue profit.
3. Net interest payable
Group Share of Total Group Share of Total
£m joint 2004 £m joint 2003
ventures £m ventures £m
£m £m
Interest payable:
Borrowings not wholly repayable (154.7) (76.9) (231.6) (117.2) (70.1) (187.3)
within five years
Borrowings wholly repayable (70.4) - (70.4) (76.2) - (76.2)
within five years
Other interest payable (1.0) - (1.0) (2.5) - (2.5)
Loans from joint venture partners - (7.6) (7.6) - (7.7) (7.7)
(226.1) (84.5) (310.6) (195.9) (77.8) (273.7)
Interest capitalised in relation to 35.6 - 35.6 39.0 - 39.0
properties under development
(190.5) (84.5) (275.0) (156.9) (77.8) (234.7)
Interest receivable:
Short term deposits 5.7 2.3 8.0 0.9 - 0.9
Other interest receivable 2.8 - 2.8 3.4 2.4 5.8
Loan to joint venture 7.6 - 7.6 7.7 - 7.7
Net interest payable - ordinary (174.4) (82.2) (256.6) (144.9) (75.4) (220.3)
Deficit on purchase and redemption - - - (28.2) - (28.2)
of convertible bonds
Cost of cancellation/novation of - - - (23.5) (0.3) (23.8)
interest rate swaps
Net interest payable - exceptional - - - (51.7) (0.3) (52.0)
Interest has been capitalised at the Group's pre-tax weighted average borrowing
rate for non-specific borrowings for the year of 7.7% (2003 8.3%). Non-specific
borrowings exclude certain bank debt which is specific to the PRIME contract.
Group interest payable on borrowings includes £4.8m (2003 £0.7m) in respect of
the amortisation of bond discounts and issue expenses.
4. Taxation
2004 2003
£m £m
Analysis of tax charge for the year
Corporation tax on Group profit for the period at 30% (2003 30%) 73.3 32.0
Adjustments to current taxation in respect of prior periods (1.5) (7.8)
Share of joint venture's taxation 14.7 14.5
. --------------- . ---------------
Total current tax 86.5 38.7
. --------------- . ---------------
Deferred tax on Group timing differences arising in the year 31.5 59.2
Deferred tax released in respect of property disposals in the year (31.6) (8.2)
Share of joint venture's deferred tax (1.6) -
. --------------- . ---------------
Total deferred tax (1.7) 51.0
. --------------- . ---------------
Tax charge for the period 84.8 89.7
. --------------- . ---------------
Factors affecting the tax charge for the year
The tax assessed for the year is lower than the standard rate
of corporation tax in the UK of 30% (2003 30%).
The differences are explained below:
Profit on ordinary activities before taxation 373.1 319.6
. --------------- . ---------------
Tax at 30% 111.9 95.9
Effects of:
Capital allowances (26.8) (29.1)
Depreciation of fixed assets qualifying for capital allowances 5.9 7.9
. --------------- . ---------------
91.0 74.7
Tax relief on capitalised interest and other timing differences (8.4) (32.0)
Reduced rate of tax on profit on disposal of assets (5.9) (3.4)
Telereal depreciation and goodwill amortisation 4.7 5.3
Non-allowable expenses and non-taxable items 6.6 1.9
Prior year corporation tax adjustments (1.5) (7.8)
. --------------- . ---------------
Current tax 86.5 38.7
. --------------- . ---------------
The Group's share of Telereal's tax charge is stated after disallowing
depreciation charges but without the availability of capital allowances which
were retained by British Telecom plc.
Included in the total tax charge is a net credit of £18.3m (2003 charge of
£0.6m) attributable to property sales, including the release of deferred
taxation. In 2003 a tax credit of £15.7m was attributable to exceptional items.
5. Dividends
2004 2003 2004 2003
pence pence £m £m
Ordinary shares - interim 9.90 9.50 46.1 44.1
Ordinary shares - final 27.20 26.00 126.8 121.1
B shares 0.3 0.5
Additional prior year dividends -ordinary - 1.7
shares
. --------------- . --------------- . --------------- . ---------------
37.10 35.50 173.2 167.4
. --------------- . --------------- . --------------- . ---------------
B shares carry the right to a dividend of 70% of six month LIBOR paid twice
yearly. The annualised dividend rates for the periods to 17 April 2003, 17
October 2003 and 17 April 2004 were 2.8%, 2.5% and 2.8% respectively of the
nominal value of the shares.
Additional prior year dividends relate to increases in share capital arising
after the respective prior period ends but before their corresponding dividend
record dates.
6. Earnings per share
2004 2003 2004 2003 2004 2003
£m £m No. m No. m pence pence
Earnings per share 288.0 229.4 465.7 493.8 61.84 46.46
Effect of dilutive share options - - 0.6 0.1 (0.08) (0.02)
. . . . . .
--------------- --------------- --------------- --------------- --------------- ---------------
Diluted earnings per share 288.0 229.4 466.3 493.9 61.76 46.44
. . . . . .
--------------- --------------- --------------- --------------- --------------- ---------------
Earnings per share 288.0 229.4 465.7 493.8 61.84 46.46
Fixed asset property disposals (82.2) (41.1) (17.65) (8.32)
after current and deferred tax
Effect of exceptional items after - 42.6 - 8.62
taxation
Deferred tax arising from capital 8.3 11.1 1.78 2.25
allowances on investment properties
Deferred tax arising from 8.8 9.3 1.89 1.88
capitalised interest on investment
properties
. . . . . .
--------------- --------------- --------------- --------------- --------------- ---------------
Adjusted earnings per share 222.9 251.3 465.7 493.8 47.86 50.89
. . . . . .
--------------- --------------- --------------- --------------- --------------- ---------------
Diluted earnings per share 288.0 229.4 466.3 493.9 61.76 46.44
Fixed asset property disposals (82.2) (41.1) (17.63) (8.32)
after current and deferred tax
Effect of exceptional items after - 42.6 - 8.63
taxation
Deferred tax arising from capital 8.3 11.1 1.78 2.25
allowances on investment properties
Deferred tax arising from 8.8 9.3 1.89 1.88
capitalised interest on investment
properties
. . . . . .
--------------- --------------- --------------- --------------- --------------- ---------------
Adjusted diluted earnings 222.9 251.3 466.3 493.9 47.80 50.88
per share . . . . . .
--------------- --------------- --------------- --------------- --------------- ---------------
Six months ended 30 September 2003
Reported Revised
pence pence
Adjusted earnings per share 26.66 24.74
Adjusted diluted earnings per share 26.65 24.73
. --------------- . ---------------
7. Net assets per share
2004 2003 2004 2003 2004 2003
£m £m No. m No. m pence pence
Net assets per share 6,030.1 5,532.7 465.9 465.6 1294 1188
Deferred tax arising from capital 101.4 124.7 23 27
allowances on investment properties
Deferred tax arising from 30.0 21.2 6 5
capitalised interest on investment
properties
Joint venture's negative investment 47.9 - 10 -
. . . . . .
--------------- --------------- --------------- --------------- --------------- ---------------
Adjusted net assets per share 6,209.4 5,678.6 465.9 465.6 1333 1220
. . . . . .
--------------- --------------- --------------- --------------- --------------- ---------------
Net assets per share 6,030.1 5,532.7 465.9 465.6 1294 1188
Exercise of outstanding share - - 0.6 0.1 (1) -
options
. . . . . .
--------------- --------------- --------------- --------------- --------------- ---------------
Diluted net assets per share 6,030.1 5,532.7 466.5 465.7 1293 1188
. . . . . .
--------------- --------------- --------------- --------------- --------------- ---------------
Diluted net assets per share 6,030.1 5,532.7 466.5 465.7 1293 1188
Deferred tax arising from capital 101.4 124.7 22 26
allowances on investment properties
Deferred tax arising from 30.0 21.2 6 5
capitalised interest on investment
properties
Negative investment in joint 47.9 - 10 -
venture
--------------- --------------- --------------- --------------- --------------- ---------------
Adjusted diluted net assets per 6,209.4 5,678.6 466.5 465.7 1331 1219
share
--------------- --------------- --------------- --------------- --------------- ---------------
The additional deferred tax liability arising from capital allowances on
investment properties is excluded from the calculation of the adjusted net
assets as the Group's experience is that deferred tax on capital allowances in
relation to such properties is unlikely to crystallise in practice. In
addition, the deferred tax on capitalised interest on these properties is added
back as this is a permanent timing difference. This is a change to the basis of
calculation and the prior year figures have been restated accordingly.
8. Goodwill
Cost Amortisation Net
£m £m £m
At 1 April 2003 42.0 (5.3) 36.7
Amortisation for the year - (2.4) (2.4)
--------------- --------------- ---------------
At 31 March 2004 42.0 (7.7) 34.3
--------------- --------------- ---------------
9. Fixed assets
Leasehold Leasehold
Freehold Over 50 Under 50 Total Other tangible Total
£m years to years to properties fixed assets £m
run run £m £m
£m £m
Cost/valuation
At 1 April 2003 6,222.5 2,057.1 120.4 8,400.0 83.7 8,483.7
Additions 564.8 217.5 10.2 792.5 17.2 809.7
Reclassifications 25.2 (40.0) 8.4 (6.4) 6.4 -
Sales (585.4) (47.3) - (632.7) (8.9) (641.6)
Investment properties sold to (105.1) (134.9) - (240.0) - (240.0)
joint venture
Investment properties transferred(28.5) - - (28.5) - (28.5)
to trading properties
--------------- --------------- --------------- --------------- --------------- ---------------
6,093.5 2,052.4 139.0 8,284.9 98.4 8,383.3
Unrealised surplus on revaluation 305.6 97.2 (2.1) 400.7 - 400.7
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 March 2004 6,399.1 2,149.6 136.9 8,685.6 98.4 8,784.0
--------------- --------------- --------------- --------------- --------------- ---------------
Accumulated depreciation
At 1 April 2003 (10.2) (2.0) (6.5) (18.7) (42.2) (60.9)
Depreciation for the year (9.7) (0.2) (7.5) (17.4) (11.7) (29.1)
Reclassifications 1.8 1.8 (3.2) 0.4 (0.4) -
Sales 0.2 - - 0.2 6.9 7.1
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 March 2004 (17.9) (0.4) (17.2) (35.5) (47.4) (82.9)
--------------- --------------- --------------- --------------- --------------- ---------------
Net book value
At 31 March 2004 6,381.2 2,149.2 119.7 8,650.1 51.0 8,701.1
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 March 2003 6,212.3 2,055.1 113.9 8,381.3 41.5 8,422.8
--------------- --------------- --------------- --------------- --------------- ---------------
Freeholds include £442.9m (2003 £408.9m) of leaseholds with unexpired terms
exceeding 900 years; leaseholds under 50 years include £11.4m (2003 £12.1m) with
unexpired terms of 20 years or less. Other tangible assets include computers,
motor vehicles, furniture, fixtures and fittings, and improvements to Group
offices.
9. Fixed assets (continued)
Additional analysis in respect of the movements in investment and operating
properties is set out below:
Investment Investment Investment
properties properties properties
Portfolio Development Total Operating Total
management programme £m £m properties £m
£m £m
Market value at 1 April 2003 6,876.6 967.4 7,844.0
Less amount included in prepayments in respect (16.0) (4.1) (20.1)
of UITF 28 adjustments
Net book value at 1 April 2003 6,860.6 963.3 7,823.9 557.4 8,381.3
Properties transferred from portfolio
management into the development programme (18.1) 18.1 - - -
during the year (at 1 April 2003 valuation)
Developments completed, let and transferred
from the development programme into 451.0 (451.0) - - -
portfolio management during the year
Transfer of investment properties to trading (28.5) - (28.5) - (28.5)
properties
Reclassification of certain costs as other - 1.0 1.0 (7.0) (6.0)
tangible fixed assets
Property acquisitions 205.1 - 205.1 109.8 314.9
Capital expenditure 111.0 213.6 324.6 117.7 442.3
Capitalised interest 0.8 25.4 26.2 9.1 35.3
Sales (590.1) (40.4) (630.5) (2.0) (632.5)
Properties sold to joint venture (240.0) - (240.0) - (240.0)
--------------- --------------- --------------- --------------- ---------------
6,751.8 730.0 7,481.8 785.0 8,266.8
Depreciation (1.6) - (1.6) (15.8) (17.4)
Unrealised surplus on revaluation 398.5 2.2 400.7 - 400.7
--------------- --------------- --------------- --------------- ---------------
Net book value at 31 March 2004 7,148.7 732.2 7,880.9 769.2 8,650.1
. .
--------------- ---------------
Plus amount included in prepayments in respect 23.9 1.9 25.8
of UITF 28 adjustments
--------------- --------------- ---------------
Market value at 31 March 2004 (Group) 7,172.6 734.1 7,906.7
--------------- --------------- ---------------
Market value at 31 March 2004 (Group and share 7,416.1 734.1 8,150.2
of joint venture)
--------------- --------------- ---------------
Fixed asset properties include capitalised interest of £111.0m (2003 £79.5m)
The classification of properties between portfolio management and the
development programme is defined in the Glossary. Operating properties are
carried at depreciated cost and are not revalued.
The historical cost of investment properties is £4,589.5m (2003 £4,577.9m).
Proposed developments are excluded from the development programme as experience
has shown that these schemes can be subject to substantial revision. In
addition to the development programme, investment properties include properties
to the value of £179.3m (2003 £180.5m) in respect of proposed developments.
Developments are transferred out of the development programme when physically
complete and 95% let. Schemes completed during the year include The Bullring
(Birmingham), Kingsway West (Phase 1) (Dundee), Portman House (London W1), 7
Soho Square (London W1) and 25/31 Sidwell Street (Exeter). The total
development profit earned on schemes completed in the period was £82.7m (2003
£24.3m). This comprises development profits on those properties completed
during the first half of £78.8m plus a further uplift in the second half on
those properties of £22.4m, offset by losses on projects completed in the second
half of £18.5m.
10. Investment in joint ventures
Summary financial information of 2004 2004 2004 2003 2003 2003
Group's share of joint ventures
Telereal Scottish Total Telereal Scottish Total
£m Retail £m £m Retail £m
Property Property
Partnership Partnership
£m £m
Profit and loss account
Property services and
rental income 165.8 0.6 166.4 166.3 - 166.3
Proceeds of sales of trading 28.9 - 28.9 1.9 - 1.9
properties
--------------- --------------- --------------- --------------- --------------- ---------------
Gross property income 194.7 0.6 195.3 168.2 - 168.2
Rents payable (39.9) - (39.9) (48.0) - (48.0)
Indirect property or contract (18.0) (0.1) (18.1) (16.0) - (16.0)
expenditure
Costs of sales of trading (23.3) - (23.3) (1.4) - (1.4)
properties
Depreciation (12.9) - (12.9) (15.0) - (15.0)
--------------- --------------- --------------- --------------- --------------- ---------------
Operating profit 100.6 0.5 101.1 87.8 - 87.8
Profit on sale of fixed asset 11.9 - 11.9 15.1 - 15.1
properties
--------------- --------------- --------------- --------------- --------------- ---------------
Profit before interest and tax 112.5 0.5 113.0 102.9 - 102.9
Net interest payable (82.2) - (82.2) (75.7) - (75.7)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit before tax 30.3 0.5 30.8 27.2 - 27.2
Taxation (13.0) (0.1) (13.1) (14.5) - (14.5)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit after tax 17.3 0.4 17.7 12.7 - 12.7
--------------- --------------- --------------- --------------- --------------- ---------------
Balance sheet
---------- ----------. ---------- ----------.
Fixed assets - Investment - 243.5 - -
properties
Fixed assets - Operating
properties 1,033.5 - 1,056.9 -
---------- ----------. ---------- ----------.
1,033.5 243.5 1,056.9 -
Current assets 74.5 13.7 113.3 -
---------- ----------. ---------- ----------.
1,108.0 257.2 1,170.2 -
---------- ----------. ---------- ----------.
Liabilities due within one year (56.1) (5.1) (75.3) -
Liabilities due after one year (1,099.8) - (988.1) -
---------- ----------. ---------- ----------.
(1,155.9) (5.1) (1,063.4) -
--------------- --------------- --------------- ---------------
Net investment in joint ventures (47.9) 252.1 106.8 -
--------------- --------------- --------------- ---------------
Net debt (1,073.0) - (949.6) -
--------------- --------------- --------------- ---------------
Net investment in joint ventures Telereal Scottish Total
£m Retail £m
Property
Partnership
£m
At 1 April 2003 106.8 - 106.8
Properties contributed - 245.5 245.5
Share of post tax profits 17.3 0.4 17.7
Distributions (51.0) - (51.0)
Loan repayments (121.0) - (121.0)
Unrealised surplus on revaluation - 6.2 6.2
--------------- --------------- ---------------
At 31 March 2004 (47.9) 252.1 204.2
. . .
--------------- --------------- ---------------
The Group has two joint ventures, both of which are 50% owned and draw up
accounts to 31 March, as follows:
• The Telereal group of companies ('Telereal') is a 50:50 joint venture
between Land Securities Trillium and the Pears Group, which acquired the
majority of the properties of British Telecommunications ('BT') on 13 December
2001. Telereal is responsible for providing accommodation and estate management
services to BT in return for a total availability and service charge under a
30-year contract.
The Scottish Retail Property Partnership is a joint venture between Land
Securities Properties Limited and British Land Property Management Limited,
which manages four shopping centres in Aberdeen and East Kilbride. The
partnership was created on the 16 March 2004.
11. Debentures, bonds and loans
Nominal Nominal Unamortised Unamortised Book Book
value value discount and discount and value value
issue costs issue costs
2004 2003 2004 2003 2004 2003
£m £m £m £m £m £m
Unsecured
--------------- --------------- --------------- --------------- --------------- ---------------
10 3/4 per cent Exchange Bonds due 21.2 21.2 - - 21.2 21.2
2004
9 1/2 per cent Bonds due 2007 200.0 200.0 - - 200.0 200.0
5 7/8 per cent Bonds due 2013 400.0 400.0 (5.4) (6.0) 394.6 394.0
9 per cent Bonds due 2020 200.0 200.0 (3.0) (3.2) 197.0 196.8
6 3/8 per cent Bonds due 2024 200.0 200.0 (2.0) (2.1) 198.0 197.9
Syndicated bank debt 289.0 603.0 (1.4) (2.5) 287.6 600.5
Commercial paper 358.1 - - - 358.1 -
--------------- --------------- --------------- --------------- --------------- ---------------
1,668.3 1,624.2 (11.8) (13.8) 1,656.5 1,610.4
Secured
--------------- --------------- --------------- --------------- --------------- ---------------
6 1/4 per cent Mortgage Debenture - 8.4 - - - 8.4
2000/05
6 1/2 per cent Mortgages 2000/05 - 8.4 - - - 8.4
7 3/4 per cent Mortgage 2008 5.4 5.5 - - 5.4 5.5
6 3/8 per cent First Mortgage 32.3 32.3 - - 32.3 32.3
Debenture Stock 2008/13
10 per cent First Mortgage 400.0 400.0 - - 400.0 400.0
Debenture Stock 2025
10 per cent First Mortgage 200.0 200.0 - - 200.0 200.0
Debenture Stock 2027
10 per cent First Mortgage 200.0 200.0 - - 200.0 200.0
Debenture Stock 2030
Bank loan 193.1 198.4 (9.7) 8.5 183.4 206.9
--------------- --------------- --------------- --------------- --------------- ---------------
1,030.8 1,053.0 (9.7) 8.5 1,021.1 1,061.5
--------------- --------------- --------------- --------------- --------------- ---------------
2,699.1 2,677.2 (21.5) (5.3) 2,677.6 2,671.9
Falling due within one year (691.4) (23.5) 9.7 - (681.7) (23.5)
--------------- --------------- --------------- --------------- --------------- ---------------
Falling due after one year 2,007.7 2,653.7 (11.8) (5.3) 1,995.9 2,648.4
--------------- --------------- --------------- --------------- --------------- ---------------
In accordance with FRS4 'Capital Instruments' where bonds are issued at a
discount or incur issue expenses they are stated net of those costs.
The carrying value of the secured bank loan comprises the loan amount (currently
£193.1m (2003 £198.4m)), the fair value of the linked interest rate swap
outstanding at the time of the acquisition of Trillium and the upfront
arrangement fees relating to this funding. Both the swap and the upfront fees
are being written off over the life of the borrowings. Either party to the swap
can terminate the agreement on 15 April 2005 and every second anniversary
thereafter. The loan and swap were restructured after the year end to reflect
the Employment Services addition to the PRIME contract.
The interest rate on the secured bank loan, which is variable, includes a margin
which varies according to the Group's credit rating. This has been swapped into
a current fixed rate of 5.09%.
Secured loans are charged on properties of group undertakings. From time to
time, short term deposits are charged as temporary security until substitutes
have been agreed for properties taken out of charge. At 31 March 2004 short
term deposits of £154.0m (2003 £nil) were charged as temporary security for
borrowings until substitutions have been agreed for properties taken out of
charge. The bank loan is secured on the unitary charge receivable from the DWP
under the PRIME Agreement and also on most properties held by Land Securities
Trillium.
12. Provision for liabilities and charges
Dilapidations Deferred Total
taxation
£m £m £m
At 1 April 2003 5.9 173.1 179.0
Net charge for the year 5.8 31.5 37.3
Released in respect of property disposals during the year - (31.6) (31.6)
Other movements - 0.3 0.3
--------------- --------------- ---------------
At 31 March 2004 11.7 173.3 185.0
--------------- --------------- ---------------
Deferred tax is provided as follows: 2004 2003
£m £m
Excess of capital allowances over depreciation - investment properties 101.4 124.7
Excess of capital allowances over depreciation - operating properties 34.8 21.7
Capitalised interest - investment properties 30.0 21.2
Capitalised interest - operating properties 4.4 3.0
Other timing differences 2.7 2.5
--------------- ---------------
173.3 173.1
--------------- ---------------
Estimated tax on contingent capital gains are as follows: 2004 2003
£m £m
Tax on capital gains that would become payable by the Group, if it
were to dispose of all of its investment properties at the
490.0 435.0
amount stated in the balance sheet
Potential reduction in tax on contingent capital gains if properties (75.0) (110.0)
were sold within their owning companies
. .
--------------- ---------------
Tax on contingent capital gains assuming no further mitigation 415.0 325.0
. .
--------------- ---------------
The deferred taxation provision that would be released in the event of sales of
investment properties, on the assumption that the proceeds of qualifying assets
equate for tax purposes to the tax written down value, would be £101.4m (2003
£124.7m), and a further £30.0m (2003 £21.2m) would be released in respect of
capitalised interest.
13. Shareholders' funds
Ordinary Non-equity B Redeemable Share premium Capital Revaluation Profit and loss Total
shares shares preference account redemption reserve account
£m shares reserve
£m £m £m £m £m £m £m £m
At 1
April 2003 46.5 30.3 0.1 13.3 0.1 3,038.9 2,433.9 5,563.1
Repayment
of B - (21.9) - - 21.9 - (21.9) (21.9)
shares
Redemption
of - - (0.1) - 0.1 - (0.1) (0.1)
redeemable
preference shares
Exercise
of options 0.1 - - 2.6 - - - 2.7
Unrealised
surplus - - - - - 400.7 - 400.7
on revaluation of
investment
properties
Unrealised
surplus - - - - - 6.2 - 6.2
on revaluation of
investment
properties within
Joint Ventures
Realised on - - - - - (333.0) 333.0 -
disposals of
investment
properties
Taxation on - - - - - - (27.3) (27.3)
revaluation
surpluses realised
on disposals of
investment
properties
Retained
profit for - - - - - - 115.1 115.1
the financial year
At 31
March 2004 46.6 8.4 - 15.9 22.1 3,112.8 2,832.7 6,038.5
Comprising
Equity 46.6 - - 15.9 22.1 3,112.8 2,832.7 6,030.1
shareholders'
funds
Non-equity - 8.4 - - - - - 8.4
shareholders'
funds
46.6 8.4 - 15.9 22.1 3,112.8 2,832.7 6,038.5
14. Analysis of net debt
Movements Movements Movements Movements
during year during year during year during year
At 1 April 2003 Transfers Cash Flow Amortisation of Cost of At 31 March
discount and reprofiling 2004
issue an interest
costs rate swap
£m £m £m £m £m £m
Net bank balance/
(overdraft) 79.2 - (56.4) - - 22.8
Liquid resources 3.4 - 215.6 - - 219.0
Debt due within
one year (23.5) (221.8) (454.7) (2.8) 21.1 (681.7)
Debt due after
one year (2,648.4) 221.8 432.7 (2.0) - (1,995.9)
Net debt (2,589.3) - 137.2 (4.8) 21.1 (2,435.8)
15. Financial assets and liabilities
The Group has defined financial assets and liabilities as those assets and
liabilities of a financial nature, namely cash, investments, borrowings and
interest rate swaps.
The Group's financial assets and liabilities and their fair values are:
Book value Book value Fair value Fair value Excess of fair Excess of fair
value value
over book value over book value
2004 2003 2004 2003 2004 2003
£m £m £m £m £m £m
Financial assets
Short term investments
and cash * 241.8 102.1 241.8 102.1 - -
Financial liabilities
Debentures, bonds,
other loans and (2,677.6) (2,688.7) (3,249.1) (3,204.9) (571.5) (516.2)
overdrafts
Non-equity B shares (8.4) (30.3) (8.4) (30.3) - -
Redeemable preference shares - (0.1) - (0.1) - -
Financial instruments
Interest rate swaps - - (44.5) (82.3) (44.5) (82.3)
(2,444.2) (2,617.0) (3,060.2) (3,215.5) (616.0) (598.5)
* Short term investments and cash include £154.0m of short term deposits charged
as temporary security for borrowings as disclosed in Note 11.
Financial liabilities Financial liabilities
2004 2003
Weighted average period of fixed interest rate debt 12.4 years 13.3 years
Weighted average fixed interest rate 7.3% 7.9%
Fair value has been calculated by taking the market value, for those instruments
which have a listing, or where one is not available, the fair value is
calculated using a discounted cash flow approach. The difference between book
value and fair value will not result in any change to the cash flows of the
Group unless, at some stage in the future, fixed rate borrowings are purchased
in the market, or repaid, at a price different to the nominal value.
The Group has entered into a number of interest rate swaps in the name of Land
Securities PLC. Land Securities PLC has interest rate swaps with a nominal
value of £800.0m upon which it pays a fixed rate of interest and receives six
month LIBOR, all of which are operational. The interest rate swaps terminate
between April 2007 and September 2030, and have fixed interest rates of between
4.999% and 5.585%. Land Securities PLC has a further interest rate swap with a
nominal value of £200.0m upon which it receives a fixed rate of interest of
4.895% and pays six month LIBOR. This interest rate swap was entered into in
March 2004 with a commencement date of 25 March 2004 and a termination date of
April 2007. In the case of four £100m fixed rate payer swaps, the
counterparties have a right to terminate the swaps mid-life.
In December 2003, Land Securities PLC novated a swap with a nominal value of
£100.0m to Trillium (Prime) Property GP Limited, a related group company. The
swap was repriced and reprofiled to match the expected amortisation of the
project finance debt, which it is hedging. The current nominal value of the
swap is £78.7m and the Group is paying interest at 4.975%.
As the intention of the above interest rate swaps is to fix the interest rates
on existing and new borrowings, their mark to market value has not been
recognised in the financial statements and instead net interest is accrued
through the profit and loss account.
In addition, there is a further interest rate swap with a notional value of
£191m, which was taken out by Trillium (Prime) Property Ltd Partnership to hedge
the secured bank loan, which funds the PRIME contract. This swap mirrors the
repayment schedule of the associated bank loan. As part of the fair value
accounting exercise on the acquisition of Trillium, this swap was marked to
market at a cost of £14.9m in November 2000. The cost is being amortised over
the life of the interest rate swap as a credit to interest payable. The
interest rate swap was repriced and reprofiled in December 2003 at a cost of
£21.1m. The cost of repricing and reprofiling is being amortised over the life
of the interest rate swap.
15. Financial assets and liabilities (continued)
Financial Financial Financial Financial Undrawn Undrawn
assets assets liabilities liabilities committed committed
borrowing borrowing
facilities facilities
2004 2003 2004 2003 2004 2003
£m £m £m £m £m £m
The maturity and repayment profiles
of the group's financial assets and
liabilities, excluding the non-
equity B Shares and redeemable
preference shares, and the
expiry periods of its
undrawn committed borrowing
facilities are:
One year or less, or on demand 241.8 102.1 681.7 40.1 - -
More than one year but no
more than two - - - 29.8 800.0 -
years
More than two years but no
more than five - - 374.0 829.8 580.0 899.5
years
More than five years - - 1,621.9 1,789.0 - -
241.8 102.1 2,677.6 2,688.7 1,380.0 899.5
16. Membership of certain undertakings
During the period, the Group has been a member of the following limited
partnerships, all of which are registered in England. The accounts of the
partnerships, drawn up to the 31 March (with the exception of the partnerships
forming the Birmingham Alliance, which are prepared to 31 December), are dealt
with in the Group's financial statements as 'joint arrangements' on the basis
explained in Note 2(a). The 100% results of the partnerships are set out below:
Partnership Group Gross assets Gross assets Gross Gross Profit/ Profit/
liabilities liabilities (loss) (loss)
before tax before tax
share % 2004 2003 2004 2003 2004 2003
£m £m £m £m £m £m
Martineau
Limited
Partnership * 33 1/3 116.8 132.0 (4.5) (3.5) 5.0 5.4
Martineau
Galleries
limited
Partnership * 33 1/3 112.4 112.2 (1.3) (2.1) 3.5 4.0
Bullring
Limited
Partnership * 33 1/3 747.9 362.9 (316.1) (213.5) 18.4 (0.7)
Gunwharf
Quays
Limited
Partnership** 50 - 147.9 - (3.3) - 7.7
Ebbsfleet
Limited
Partnership 50 39.1 35.3 (0.1) (0.4) - -
* forming the Birmingham Alliance
** On 30 November 2003 Land Securities Group PLC acquired the 50% interest in
the Gunwharf Quays Limited Partnership it did not already own.
Advantage has been taken of the exemption conferred by Regulation 7 of The
Partnership and Unlimited Companies (Accounts) Regulations 1993 in not
delivering the financial statements of the partnerships to the Registrar of
Companies.
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