Final Results - Part 2

Land Securities PLC 22 May 2002 PART 2 LAND SECURITIES CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 March 2002 Interest in Total 2001 Group joint venture 2002 (restated) Notes £m £m £m £m ---------- ---------- ---------- ---------- GROSS PROPERTY INCOME 3 977.1 48.5 1,025.6 650.4 ======= ======= ======= ======= OPERATING PROFIT 497.5 19.3 516.8 450.6 Profit on sales of properties 13.4 - 13.4 6.3 ---------- ---------- ---------- ---------- PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND TAXATION 510.9 19.3 530.2 456.9 Interest receivable and similar income 4 4.2 0.8 5.0 7.6 _______ _______ _______ _______ Interest payable and similar charges - gross 4 (168.2) (24.6) (192.8) (151.1) -interest capitalised 4 21.1 - 21.1 11.3 _______ _______ _______ _______ (147.1) (24.6) (171.7) (139.8) ---------- ---------- ---------- ---------- _______ _______ _______ _______ Revenue profit 361.3 3.5 364.8 323.4 Profit/(loss) on sales of properties and bid costs 6.7 (8.0) (1.3) 1.3 _______ _______ _______ _______ Share of loss before taxation of joint venture 20 (4.5) - ---------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 368.0 (4.5) 363.5 324.7 ======= ======= Taxation on: _______ _______ Revenue profit (100.0) (91.0) Property sales and bid costs 0.1 0.9 _______ _______ Taxation 5 (99.9) (90.1) ---------- ---------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 263.6 234.6 Dividends 6 (178.4) (170.1) ---------- ---------- RETAINED PROFIT FOR THE FINANCIAL YEAR 85.2 64.5 ====== ====== 2002 2002 2001 2001 (restated) (restated) Basic Diluted Basic Diluted ---------- ---------- ---------- ---------- EARNINGS PER SHARE 7 50.27p 49.54p 44.87p 44.41p ADJUSTED EARNINGS PER SHARE 7 51.61p 50.81p 45.38p 44.89p ======= ======= ======= ======= 2002 2001 ---------- ---------- DIVIDENDS PER SHARE 6 34.0p 32.5p ======= ======= All income was derived from within the United Kingdom from continuing operations. No operation was discontinued during the year. The comparative figures for the year ended 31 March 2001 have been restated to reflect the changes in accounting policies described in Note 1. Trillium was acquired in November 2000. Results for the year ended 31 March 2001 therefore include four months' trading for that business. The joint venture was acquired on 13 December 2001. Results for the year ended 31 March 2002 therefore include just over three months' of the group's share of the trading results of that business. LAND SECURITIES CONSOLIDATED BALANCE SHEET 2001 31 March 2002 2002 (restated) Notes £m £m ---------- ---------- FIXED ASSETS Intangible assets Goodwill 9 38.9 41.2 Tangible assets Investment properties 10 7,800.0 7,899.1 Operating properties 11 428.9 323.1 ---------- ---------- Properties 12 8,228.9 8,222.2 Other tangible assets 14 45.3 34.1 Investment in joint venture Share of gross assets of joint venture 20 1,297.8 Share of gross liabilities of joint venture 20 (1,109.0) 188.8 - ---------- ---------- ---------- 8,501.9 8,297.5 ---------- ---------- CURRENT ASSETS Trading properties 36.9 - Debtors falling due within one year 254.8 176.0 Debtors falling due after more than one year 5.5 1.3 Investments: short term deposits 60.9 22.0 Cash at bank and in hand 7.5 7.3 ---------- ---------- 365.6 206.6 CREDITORS falling due within one year (690.9) (594.6) ---------- ---------- NET CURRENT LIABILITIES (325.3) (388.0) ---------- ---------- TOTAL ASSETS LESS CURRENT LIABILITIES 8,176.6 7,909.5 CREDITORS falling due after more than one year Debentures, bonds and loans (1,744.0) (1,480.4) Convertible bonds (243.3) (246.1) Other creditors (22.8) (31.8) PROVISION FOR LIABILITIES AND CHARGES (129.9) (133.4) ---------- ---------- 6,036.6 6,017.8 ====== ====== CAPITAL AND RESERVES Called up share capital 524.3 523.6 Share premium account 15 314.9 312.0 Capital redemption reserve 15 36.0 36.0 Revaluation reserve 15 3,376.9 3,673.4 Other reserves 15 550.4 324.6 Profit and loss account 15 1,234.1 1,148.2 ---------- ---------- EQUITY SHAREHOLDERS' FUNDS 6,036.6 6,017.8 ====== ====== NET ASSETS PER SHARE 8 1151p 1149p DILUTED NET ASSETS PER SHARE 8 1132p 1130p ADJUSTED NET ASSETS PER SHARE 8 1176p 1172p ADJUSTED DILUTED NET ASSETS PER SHARE 8 1155p 1152p LAND SECURITIES CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 March 2002 2001 2002 (restated) Notes £m £m £m £m ---------- ---------- ---------- ---------- NET CASHFLOW FROM OPERATING ACTIVITIES 16 406.2 462.0 RETURNS ON INVESTMENT AND SERVICING OF FINANCE Interest received 4.2 9.8 Interest paid (166.5) (103.8) -------- -------- NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (162.3) (94.0) TAXATION - Corporation tax paid (111.3) (87.5) -------- -------- NET CASH INFLOW FROM OPERATING ACTIVITIES AND INVESTMENTS AFTER FINANCE CHARGES AND TAXATION 132.6 280.5 CAPITAL EXPENDITURE Development expenditure (256.4) (161.9) Acquisitions and other capital expenditure (306.1) (419.5) ---------- ---------- Additions to properties (562.5) (581.4) Sales of properties 549.2 491.3 ---------- ---------- Investing in properties (13.3) (90.1) Increase in other tangible assets (19.6) (7.5) ---------- ---------- NET CASH OUTFLOW ON CAPITAL EXPENDITURE (32.9) (97.6) ACQUISITIONS Acquisition of group undertaking - (114.2) Investment in joint venture (146.4) - ---------- (146.4) ---------- (114.2) EQUITY DIVIDENDS PAID (172.5) (164.1) ---------- ---------- CASH OUTFLOW BEFORE USE OF LIQUID RESOURCES AND FINANCING (219.2) (95.4) MANAGEMENT OF LIQUID RESOURCES 17 (a) (38.9) 118.1 FINANCING Issues of shares 1.1 1.2 Purchase and cancellation of own shares - (6.0) Increase/(decrease) in debt 17 (b) 239.6 (14.1) ---------- ---------- NET CASH INFLOW/(OUTFLOW) FROM FINANCING 240.7 (18.9) ---------- ---------- (DECREASE)/INCREASE IN CASH IN YEAR (17.4) 3.8 ====== ====== RECONCILIATION OF NET CASH FLOW TO MOVEMENTS IN NET DEBT -------------------------------------------------------------------------------------- (Decrease)/increase in cash in year (17.4) 3.8 Cash (inflow)/outflow from (increase)/decrease in debt (239.6) 14.1 Cash inflow from increase/(decrease) in liquid resources 38.9 (118.1) ---------- ---------- Change in net debt resulting from cash flow 18 (218.1) (100.2) Non-cash changes in debt 18 3.8 1.4 Loans acquired with new group undertaking - (212.8) ---------- ---------- Movement in net debt in year (214.3) (311.6) Net debt at 1 April (1,727.8) (1,416.2) ---------- ---------- Net debt at 31 March 18 (1,942.1) (1,727.8) ====== ====== LAND SECURITIES OTHER PRIMARY STATEMENTS for the year ended 31 March 2002 2001 STATEMENT OF TOTAL RECOGNISED 2002 (restated) GAINS AND LOSSES Notes £m £m ---------- ---------- Profit on ordinary activities after taxation 263.6 234.6 Unrealised (deficit)/surplus on revaluation of investment 15 (105.5) 276.3 properties Share of unrealised surplus on revaluation of properties held in 15 46.8 - joint venture Taxation on revaluation surpluses realised on sale of investment 15 (12.0) (1.8) properties ---------- ---------- Total gains and losses relating to the financial year 192.9 509.1 Prior year adjustment 2 (133.1) - ---------- ---------- Total gains and losses recognised since last financial 59.8 509.1 statements ====== ====== 2001 2002 (restated) NOTES OF HISTORICAL COST PROFITS Notes £m £m AND LOSSES ---------- ---------- Profit on ordinary activities before taxation 363.5 324.7 Revaluation surplus arising in previous years, now realised on sales of investment properties 15 237.8 185.3 Taxation on revaluation surpluses realised on sales of 15 (12.0) (1.8) investment properties ---------- ---------- Historical cost profit on ordinary activities before taxation 589.3 508.2 Taxation 5 (99.9) (90.1) ---------- ---------- Historical cost profit on ordinary activities after taxation 489.4 418.1 Dividends 6 (178.4) (170.1) ---------- ---------- Retained historical cost profit for the year 311.0 248.0 ====== ====== 2001 RECONCILIATION OF MOVEMENTS IN 2002 (restated) EQUITY SHAREHOLDERS' FUNDS Notes £m £m ---------- ---------- Profit on ordinary activities after taxation 263.6 234.6 Dividends 6 (178.4) (170.1) ---------- ---------- Retained profit for the financial year 85.2 64.5 Unrealised (deficit)/surplus on revaluation of investment 15 (105.5) 276.3 properties Share of unrealised surplus on revaluation of properties held in 20 46.8 - joint venture Taxation on revaluation surpluses realised on sales of 15 (12.0) (1.8) investment properties Issues of shares 0.7 1.2 Premium arising on issues of shares 15 3.6 7.5 Purchase and cancellation of own shares - (0.1) ---------- ---------- Net change in shareholders' funds 18.8 347.6 Opening equity shareholders' funds As previously reported 6,150.9 5,781.8 Prior year adjustment (133.1) (111.6) ---------- ---------- As restated 6,017.8 5,670.2 ---------- ---------- Closing equity shareholders' funds 6,036.6 6,017.8 ====== ====== LAND SECURITIES SUPPLEMENTARY NOTES The financial information is abridged and does not constitute the group's full Financial Statements for the years ended 31 March 2001 or 31 March 2002. Full Financial Statements for the year ended 31 March 2001 (which received an unqualified audit report) have been filed with the Registrar of Companies. Financial Statements for the year ended 31 March 2002 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. Changes in accounting policies The results have been prepared on the basis of the accounting policies set out in the group's audited financial statements for the year ended 31 March 2001 except that in these results the group has adopted the Accounting Standards Board's (ASB) Urgent Issues Task Force Abstract 28 'Operating Lease Incentives' (UITF28), Financial Reporting Standard 19 'Deferred Tax' (FRS19) and UITF 34 'Pre-contract Costs'. In addition the group has also changed its policy and now capitalises interest on directly attributable expenditure on properties under development. These changes have required that comparative figures are restated accordingly. UITF28 requires property companies to treat any incentive for lessees to enter into lease agreements as a revenue cost and also to account for rental income from the commencement and not, as was the group's prior practice, the expiry date of any rent-free period. The group has, therefore, changed its accounting policy for leases commencing on or after 1 April 2000. The cost of all lease incentives (such as rent-free periods or contributions to fitting out costs) is now offset against the total rent due and the net rental income is then spread evenly over the shorter of the period from the rent-free or rent commencement date, as appropriate, to the date of the next rent review or the lease end date. FRS19 requires that deferred tax is recognised in full in respect of transactions or events that have taken place by the balance sheet date and which could give the group an obligation to pay more or less tax in the future. However, the FRS requires that deferred tax is not recognised on revaluation gains and losses where these are not taken to the profit and loss account. The group's accounting policy had been to account for deferred tax to the extent that liabilities or assets were expected to be payable or receivable in the foreseeable future. In accordance with FRS19, the group has now changed its policy to make full provision for timing differences which, in the group's case, arise primarily from capital allowances and industrial building allowances. Following the sale or demolition of a property, any deferred tax provisions not required will be released to the profit and loss account. The Accounting Standards Board's Urgent Issues Task Force Abstract 34 'Pre-contract Costs' (UITF34) requires bid costs which do not comprise incidental costs associated with the acquisition of fixed assets or finance costs to be expensed until such time as the group is virtually certain of entering into a contract. The group has, therefore, changed its accounting policy for these bid costs and will now expense costs incurred prior to exchange of contract. Previously the group capitalised bid costs if preferred bidder status had been achieved at the end of a reporting period. Interest associated with direct expenditure on properties under development is capitalised. The rate used is the group's pre-tax weighted average cost of borrowings or, if appropriate, the rate on specific borrowings. Interest is capitalised as from the commencement of the development work until the date of practical completion. The capitalisation of finance costs is suspended, however, if there are prolonged periods when development activity is interrupted. Interest is also capitalised on the purchase cost of a site or property if it was acquired specifically for redevelopment in the short term. Interest is not capitalised on the acquisition cost of properties previously held as investments, or on refurbishment projects. This represents a change in accounting policy from previous years when all interest costs incurred were expensed as incurred. Financing costs are potentially a material element of the total costs of development projects. As the group's development programme gathers momentum, the inclusion of interest in development costs will give a better view of the expenditure on developments and the surpluses created by this activity. 2. Restatement of Comparatives The effects of adopting UITF 28, FRS19, UITF 34 and capitalisation of interest for the current and comparative prior years are as follows: Without changes in Capitalisation Adoption Adoption Adoption accounting of of of of As policies interest UITF28 FRS19 UITF34 reported YEAR ENDED 31 MARCH 2002 £m £m £m £m £m £m ---------- ---------- ---------- ---------- ---------- ---------- (i) PROFIT AND LOSS ACCOUNT Gross property income 1,022.1 3.5 1,025.6 Operating profit 528.0 3.5 (14.7) 516.8 Profit before interest and taxation 541.4 3.5 (14.7) 530.2 Interest payable and similar charges (192.8) 21.1 (171.7) Revenue profit before taxation 340.2 21.1 3.5 364.8 Profit before taxation 353.6 21.1 3.5 (14.7) 363.5 Taxation (88.2) (6.3) (1.3) (5.9) 1.8 (99.9) Profit after taxation 265.4 14.8 2.2 (5.9) (12.9) 263.6 EARNINGS PER SHARE - basic (pence) 50.59 2.82 0.42 (1.1) (2.46) 50.27 - diluted (pence) 49.89 2.67 0.40 (1.1) (2.32) 49.54 (ii) BALANCE SHEET Goodwill 39.6 (0.7) 38.9 Investment properties 7,810.9 (10.9) 7,800.0 Trading properties 36.5 0.4 36.9 Debtors falling due within one year 258.6 10.9 (14.7) 254.8 Creditors falling due within one year (690.3) (2.4) 1.8 (690.9) Provisions for liabilities and charges 9.9 (12.2) (127.6) (129.9) Revaluation reserve 3,424.1 (40.5) (6.7) 3,376.9 Profit and loss account 1,348.1 28.7 2.2 (128.3) (16.6) 1,234.1 Equity shareholders' funds 6,196.1 (12.2) (2.4) (128.3) (16.6) 6,036.6 NET ASSETS PER SHARE - basic (pence) 1178 (1) 1 (24) (3) 1151 - diluted (pence) 1158 (1) 1 (23) (3) 1132 As Capital- Adoption Adoption Adoption previously sation of of of of As reported interest UITF28 FRS19 UITF34 restated YEAR ENDED 31 MARCH 2001 £m £m £m £m £m £m ---------- ---------- ---------- ---------- ---------- ---------- (i) PROFIT AND LOSS ACCOUNT Gross property income 647.2 3.2 650.4 Operating profit 451.8 3.2 (4.4) 450.6 Profit before interest and taxation 458.1 3.2 (4.4) 456.9 Interest payable and similar charges (151.1) 11.3 (139.8) Revenue profit before taxation 308.9 11.3 3.2 323.4 Profit before taxation 314.6 11.3 3.2 (4.4) 324.7 Taxation (81.5) (3.4) (1.1) (4.8) 0.7 (90.1) Profit after taxation 233.1 7.9 2.1 (4.8) (3.7) 234.6 EARNINGS PER SHARE - basic (pence) 44.57 1.51 0.41 (0.92) (0.70) 44.87 - diluted (pence) 44.14 1.43 0.38 (0.87) (0.67) 44.41 (ii) BALANCE SHEET Goodwill 41.9 (0.7) 41.2 Investment properties 7,905.9 (6.8) 7,899.1 Debtors falling due within one year 173.6 6.8 (4.4) 176.0 Creditors falling due within one year (594.2) (1.1) 0.7 (594.6) Provisions for liabilities and charges (5.8) (5.9) (121.7) (133.4) Revaluation reserve 3,696.4 (19.8) (3.2) 3,673.4 Profit and loss account 1,258.3 13.9 2.1 (122.4) (3.7) 1,148.2 Equity shareholders' funds 6,150.9 (5.9) (1.1) (122.4) (3.7) 6,017.8 NET ASSETS PER SHARE - basic (pence) 1175 (1) (24) (1) 1149 - diluted (pence) 1154 (1) (23) 1130 Property Total Total Property Property Property Investment Outsourcing Outsourcing Trading (Note (a)) Trillium Joint Venture (Note (b)) Group Total 3. Segmental Information £m £m £m £m £m £m ---------- ---------- ---------- ---------- ---------- ---------- (i) PROFIT AND LOSS ACCOUNT Rental income (c) 525.9 525.9 525.9 Service charges and other recoveries 53.1 53.1 53.1 Property services income 357.7 48.5 357.7 406.2 Proceeds of sales of trading properties 40.4 40.4 40.4 ---------- ---------- ---------- ---------- ---------- ---------- GROSS PROPERTY INCOME 579.0 357.7 48.5 40.4 977.1 1,025.6 Rents payable (17.4) (92.7) - - (110.1) (110.1) _______ _______ _______ _______ _______ _______ Other direct property or contract expenditure (62.0) (187.9) (14.4) - (249.9) (264.3) (d) Indirect property or contract expenditure (e) (33.2) (16.7) (3.0) (1.5) (51.4) (54.4) Bid costs - (6.7) (8.0) - (6.7) (14.7) _______ _______ _______ _______ _______ _______ (95.2) (211.3) (25.4) (1.5) (308.0) (333.4) Costs of sales of trading properties (34.6) (34.6) (34.6) ---------- ---------- ---------- ---------- ---------- ---------- 466.4 53.7 23.1 4.3 524.4 547.5 Depreciation (0.2) (10.9) (3.8) - (11.1) (14.9) Amortisation of goodwill - (2.3) - - (2.3) (2.3) ---------- ---------- ---------- ---------- ---------- ---------- 466.2 40.5 19.3 4.3 511.0 530.3 Profit on sales of properties 10.1 3.3 - - 13.4 13.4 ---------- ---------- ---------- ---------- ---------- ---------- SEGMENT PROFIT 476.3 43.8 19.3 4.3 524.4 543.7 ====== ====== ====== ====== ====== Less: Common costs (f) (13.5) ---------- OPERATING PROFIT 516.8 Profit on sales of properties 13.4 ---------- PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND TAXATION 530.2 ====== 2001 2001 2001 (restated) (restated) (restated) Property Total (Note (b)) Property Investment Outsourcing Total 3. Segmental Information (continued) £m £m £m ---------- ---------- ---------- (i) PROFIT AND LOSS ACCOUNT Rental income (c) 501.6 501.6 Service charges and other recoveries 51.5 51.5 Property services income 97.3 97.3 Proceeds of sales of trading properties - ---------- ---------- ---------- GROSS PROPERTY INCOME 553.1 97.3 650.4 Rents payable (17.5) (30.2) (47.7) _______ _______ _______ Other direct property or contract expenditure (57.4) (41.5) (98.9) (d) Indirect property or contract expenditure (e) (25.3) (8.7) (34.0) Bid costs - (5.0) (5.0) _______ _______ _______ (82.7) (55.2) (137.9) Costs of sales of trading properties - ---------- ---------- ---------- 452.9 11.9 464.8 Depreciation (0.2) (3.9) (4.1) Amortisation of goodwill (0.8) (0.8) ---------- ---------- ---------- 452.7 7.2 459.9 Profit on sales of properties 6.3 - 6.3 ---------- ---------- ---------- SEGMENT PROFIT 459.0 7.2 466.2 ====== ====== Less: Common costs (f) (9.3) ---------- _______ OPERATING PROFIT 450.6 Profit on sales of properties 6.3 _______ PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND TAXATION 456.9 ====== 2002 2002 2002 2002 Property Total Property Property Investment Outsourcing Trading Total £m £m £m £m (ii) NET ASSETS ---------- ---------- ---------- ---------- Properties in development programme 1,050.1 - - 1,050.1 Other investment properties 6,749.9 - - 6,749.9 Operating properties - 428.9 - 428.9 Other fixed assets 17.7 66.5 - 84.2 ---------- ---------- ---------- ---------- FIXED ASSETS 7,817.7 495.4 - 8,313.1 INVESTMENT IN JOINT VENTURE - 188.8 - 188.8 NET CURRENT (LIABILITIES)/ASSETS (346.8) (22.2) 43.7 (325.3) ---------- ---------- ---------- ---------- 7,470.9 662.0 43.7 8,176.6 ====== ====== ====== LONG TERM LIABILITIES AND PROVISIONS (2,140.0) ---------- NET ASSETS 6,036.6 ====== 2001 2001 2001 (restated) (restated) (restated) Property Total Property (Note (b)) Investment Outsourcing Total £m £m £m (ii) NET ASSETS (continued) ---------- ---------- ---------- Properties in development programme 904.5 - 904.5 Other investment properties 6,994.6 - 6,994.6 Operating properties 323.1 323.1 Other fixed assets 15.7 59.6 75.3 ---------- ---------- ---------- FIXED ASSETS 7,914.8 382.7 8,297.5 INVESTMENT IN JOINT VENTURE - - - NET CURRENT (LIABILITIES)/ASSETS (382.9) (5.1) (388.0) ---------- ---------- ---------- 7,531.9 377.6 7,909.5 ====== ====== LONG TERM LIABILITIES AND PROVISIONS (1,891.7) ---------- NET ASSETS 6,017.8 ====== NOTES: (a) Includes the results of investment properties under development and the group's share of the results of its development partnerships (Note 22). (b) No comparatives exist for the services joint venture and property trading segments, as these activities commenced in the year ended 31 March 2002. Also, as Trillium was acquired in November 2000, the results for the year ended 31 March 2001 include only four months' trading for that business. (c) As a consequence of adopting UITF28, rental income includes £3.5m (2001 £3.2m) of rent receivable allocated to rent free periods falling in the respective financial years. (d) Other direct property or contract expenditure, previously described as other property outgoings, are costs incurred in the direct maintenance and upkeep of properties and in providing services in compliance with outsourcing contracts. Void costs, which include those relating to empty properties pending redevelopment and refurbishment costs, and costs of investigating potential development schemes which are not proceeded with are also included. (e) Indirect property or contract expenditure consists of all bid costs and the costs of managing the portfolio. It includes the costs of staff involved in development projects, together with the costs of rent reviews and renewals, relettings of properties and all office administration and operating costs other than common costs. (f) Common costs comprise all costs, including premises costs, associated with the Senior Executive Team, company secretarial and non-executive directors and non-segment related depreciation charges. The group total of indirect property or contract expenditure, depreciation and common costs includes: 2002 2001 £m £m Auditors remuneration: ---------- ---------- Audit fees 0.3 0.3 Non-audit fees for: Bids - Trillium 0.2 0.7 Acquisitions 0.1 0.6 Taxation and other advice 1.0 1.0 ---------- ---------- 1.3 2.3 Directors' remuneration 4.5 2.8 Depreciation of other tangible assets and operating properties 14.9 7.8 ---------- ---------- In addition, the auditors also received non-audit fees of £2.6m (2001 £Nil) charged to Telereal as part of Telereal's bid costs. Total 2001 Group Telereal 2002 (restated) 4. Interest £m £m £m £m ---------- ---------- ---------- ---------- RECEIVABLE Short term deposits and corporate bonds 3.3 0.8 4.1 6.9 Other interest receivable 0.9 - 0.9 0.7 ---------- ---------- ---------- ---------- 4.2 0.8 5.0 7.6 ====== ====== ====== ====== PAYABLE Borrowings not wholly repayable within five years 132.6 20.0 152.6 140.5 Borrowings wholly repayable within five years 32.6 3.7 36.3 8.2 Other interest payable 3.0 0.9 3.9 2.4 ---------- ---------- ---------- ---------- 168.2 24.6 192.8 151.1 Less: Capitalised as costs of properties under development (21.1) - (21.1) (11.3) ---------- ---------- ---------- ---------- 147.1 24.6 171.7 139.8 ====== ====== ====== ====== Interest payable includes £16.0m (2001 £4.5m) in respect of bank borrowings. Interest has been capitalised at the group's pre-tax weighted average borrowing rate for the year of 8.5% (2001 9%), as explained in Note 1. 2001 2002 (restated) 5. Taxation £m £m ---------- ---------- Current tax Corporation tax on revenue profit for the year at 30% (2001 30%) 91.6 86.8 Adjustments in respect of previous years 0.2 (0.6) ---------- ---------- 91.8 86.2 Deferred taxation on revenue profit 17.6 12.2 Release of deferred taxation (10.7) (7.4) On joint ventures' revenue profit 1.3 - ---------- ---------- 100.0 91.0 On property sales and bid costs Current taxation 1.2 (0.9) Joint venture (1.3) - ---------- ---------- 99.9 90.1 ====== ====== 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% (2001 30%).The differences are explained below: Profit on ordinary activities before taxation 363.5 324.7 ====== ====== Profit on ordinary activities multiplied by the standard rate of corporation tax at 30% 109.1 97.4 Expenses disallowed 2.9 2.4 Reduced tax on property sales (2.3) (2.1) Deferred tax - principally capital allowances (17.6) (12.2) Other items 0.9 (0.2) ---------- ---------- Current tax including current tax on property sales and bid costs 93.0 85.3 (Less)/add: Current taxation (charge)/credit on property sales and bid costs (1.2) 0.9 ---------- ---------- Current taxation on revenue profit 91.8 86.2 ====== ====== The amount of tax on capital gains which would become payable in the event of sales of the investment properties at the amounts at which they are stated in Note 10 is in the region of £535m (2001 £540m). The deferred taxation which would be released in such circumstances, on the assumption that no balancing charge would be incurred, is £130.6m (2001 £122.3m). 2002 2001 2002 2001 pence pence 6. Equity Dividends per share per share £m £m ---------- ---------- ---------- ---------- Interim paid 9.05 8.65 47.5 45.2 Proposed final 24.95 23.85 130.9 124.9 ---------- ---------- ---------- ---------- 34.00 32.50 178.4 170.1 ====== ====== ====== ====== Profit Profit after Weighted Weighted after taxation taxation average average 7. Earnings per share 2002 2001 no. of shares no. of shares (restated) 2002 2001 £m £m m m EARNINGS PER SHARE ---------- ---------- ---------- ---------- Earnings per share 263.6 234.6 524.2 523.0 Effect of dilutive securities: Convertible bonds 10.9 11.1 29.7 30.2 Share options 0.2 0.2 ---------- ---------- ---------- ---------- Diluted earnings per share 274.5 245.7 554.1 553.4 ====== ====== ====== ====== ADJUSTED EARNINGS PER SHARE Earnings per share 263.6 234.6 524.2 523.0 Effect of results of property sales and bid costs after 1.2 (2.2) taxation Effects of additional deferred tax arising on the adoption of FRS19 5.8 4.8 ---------- ---------- ---------- ---------- Adjusted earnings per share 270.6 237.2 524.2 523.0 ====== ====== ====== ====== Diluted earnings per share 274.5 245.7 554.1 553.4 Effect of results of property sales and bid costs after 1.2 (2.2) taxation Effects of additional deferred tax arising on the adoption of FRS19 5.8 4.8 ---------- ---------- ---------- ---------- Adjusted diluted earnings per share 281.5 248.3 554.1 553.4 ====== ====== ====== ====== Earnings Earnings 7. Earnings per share (continued) per share per share 2002 2001 (restated) EARNINGS PER SHARE pence pence ---------- ---------- Earnings per share 50.27 44.87 Effect of dilutive securities: Convertible bonds Share options ---------- ---------- Diluted earnings per share 49.54 44.41 ====== ====== ADJUSTED EARNINGS PER SHARE Earnings per share 50.27 44.87 Effect of results of property sales and bid costs after 0.24 (0.41) taxation Effects of additional deferred tax arising on the adoption of FRS19 1.10 0.92 ---------- ---------- Adjusted earnings per share 51.61 45.38 ====== ====== Diluted earnings per share 49.54 44.41 Effect of results of property sales and bid costs after 1.04 (0.39) taxation Effects of additional deferred tax arising on the adoption of FRS19 0.23 0.87 ---------- ---------- Adjusted diluted earnings per share 50.81 44.89 ====== ====== Profits on the sales of properties and bid costs are excluded from adjusted earnings as these are potentially non-recurring items. The additional deferred tax arising from the adoption of FRS19 is also excluded as the group's experience is that it is very unusual for plant allowances to be claimed back through balancing charges on the disposal of a property. Adjusted earnings and adjusted diluted earnings per share have been disclosed, therefore, to show measures of earnings that better reflect the principal operating activities of the group. Net assets Net assets 8. Net assets per share Net assets Net assets Number of Number of per share per share 2002 2001 shares shares 2002 2001 (restated) 2002 2001 (restated) £m £m m m pence pence ---------- ---------- ---------- ---------- ---------- ---------- Net assets per share 6,036.6 6,017.8 524.3 523.6 1151 1149 Effect of additional deferred tax arising on the adoption of FRS19 128.3 122.4 25 23 ---------- ---------- ---------- ---------- ---------- ---------- Adjusted Net assets per share 6,164.9 6,140.2 524.3 523.6 1176 1172 ====== ====== ====== ====== ====== ====== Net assets per share 6,036.6 6,017.8 524.3 523.6 1151 1149 Adjustments for: Convertible bonds 243.3 246.1 29.7 30.2 Exercise of outstanding share options 27.6 14.0 3.4 1.9 ---------- ---------- ---------- ---------- ---------- ---------- Diluted net assets per share 6,307.5 6,277.9 557.4 555.7 1132 1130 ====== ====== ====== ====== ====== ====== Diluted net assets per share 6,307.5 6,277.9 557.4 555.7 1132 1130 Effect of additional deferred tax arising on the adoption of FRS19 128.3 122.4 - - 23 22 ---------- ---------- ---------- ---------- ---------- ---------- Adjusted diluted net assets per share 6,435.8 6,400.3 557.4 555.7 1155 1152 ====== ====== ====== ====== ====== ====== The additional deferred tax liability arising on the adoption of FRS19 has been excluded from the calculations of the adjusted values as the group's experience is that deferred tax on capital allowances in relation to properties is unlikely to crystallise in practice. Cost Amortisation Net 9. Goodwill £m £m £m ---------- ---------- ---------- At April 1 2001 42.7 (0.8) 41.9 Prior year adjustment (0.7) (0.7) ---------- ---------- ---------- At 1 April 2001 as restated 42.0 (0.8) 41.2 Amortisation for the year (2.3) (2.3) ---------- ---------- ---------- At 31 March 2002 42.0 (3.1) 38.9 ====== ====== ====== Goodwill, which arose on the group's acquisition of Trillium Investments GP Limited ('Trillium') in November 2000, has been restated for the effects of pre-acquisition deferred tax resulting from the adoption of FRS19 by Trillium. The prior year adjustment has no material affect on amortisation. Leasehold Leasehold ---------- ---------- Over 50 Under 50 Freehold years to run years to run Total 10. Investment properties £m £m £m £m ---------- ---------- ---------- ---------- At 1 April 2001: at valuation 5,842.5 1,993.4 70.0 7,905.9 Prior year UITF28 adjustment (3.1) (3.6) (0.1) (6.8) ---------- ---------- ---------- ---------- At 1 April 2001 as restated: net book amount 5,839.4 1,989.8 69.9 7,899.1 Additions 345.0 160.3 0.3 505.6 Sales (395.1) (99.3) (3.7) (498.1) ---------- ---------- ---------- ---------- 5,789.3 2,050.8 66.5 7,906.6 Depreciation - - (1.1) (1.1) Unrealised deficit on valuation (Note 15) (74.0) (29.9) (1.6) (105.5) ---------- ---------- ---------- ---------- At 31 March 2002: net book amount 5,715.3 2,020.9 63.8 7,800.0 Amount included in prepayments under UITF28 5.4 5.4 0.1 10.9 ---------- ---------- ---------- ---------- Open market value 5,720.7 2,026.3 63.9 7,810.9 ====== ====== ====== ====== The movement on investment properties that comprise the group's development programme included above are as follows. These figures exclude the BBC development and trading properties. £m ---------- At 1 April 2001: at open market value 904.5 Properties transferred into the development pipeline during the year (at cost or at 1 April 2001 valuation) 29.2 Expenditure during the year, including development property acquisitions 325.4 Capitalised interest 19.9 Defecit on valuation (70.3) ---------- 1,208.7 Developments completed, let and transferred out of development pipeline during the year (137.6) Developments removed from the development programme (21.0) ---------- At 31 March 2002: at open market value 1,050.1 ====== At 31 March 2002, the cumulative interest capitalised in investment properties under development amounts to £39.7 (2001 - restated £19.8m). Freeholds include £366.1m (2001 £376.7m) of leaseholds with unexpired terms exceeding 900 years; leaseholds under 50 years to run include £10.3m (2001 £10.9m) with unexpired terms of 20 years or less. The historical cost of investment properties to the group is £4,260.3m (2001- restated £4,016.1m). The current schemes in the development programme are set out in the Development Review. The new schemes added during the year are 7 Soho Square, W1, 190 High Holborn, WC1, 40/50 Eastbourne Terrace, W2, Commerce Way, Croydon and St. David's Centre, Cardiff. Developments are taken out of the development programme when physically completed and 95% let. Schemes completed during the year comprise Martineau Place, Birmingham, 6/16 Market Square, Sunderland, Racecourse Retail Park, Liverpool and industrial units at Juniper Phase I, Basildon and Horizon Point Phase I, Hemel Hempstead. Leasehold Leasehold Freehold buildings buildings land and over 50 under 50 buildings years to run years to run Total 11. Operating Properties £m £m £m £m ---------- ---------- ---------- ---------- COST At 1 April 2001 257.6 34.2 32.9 324.7 Additions 96.3 11.1 17.1 124.5 Sales (12.3) - - (12.3) ---------- ---------- ---------- ---------- At 31 March 2002 341.6 45.3 50.0 436.9 ====== ====== ====== ====== ACCUMULATED DEPRECIATION At 1 April 2001 (1.3) (0.2) (0.1) (1.6) Depreciation for the year (4.7) (0.9) (0.9) (6.5) Sales 0.1 - - 0.1 ---------- ---------- ---------- ---------- At 31 March 2002 (5.9) (1.1) (1.0) (8.0) ====== ====== ====== ====== NET BOOK AMOUNT At 31 March 2002 335.7 44.2 49.0 428.9 ====== ====== ====== ====== At 31 March 2001 256.3 34.0 32.8 323.1 ====== ====== ====== ====== Certain of the assets acquired under the PRIME Agreement are subject to a first charge granted to the DWP (formerly known as the DSS). The amount of this charge at 31 March 2002 is £13m (2001 £26m) which reduces to nil on a straight line basis after a further year. The charge secures amounts which would become payable to the DWP on early termination of the PRIME agreement in the relevant year. At 31 March 2002, the cumulative interest capitalised in operating properties under development amounts to £0.7m (2001 £Nil). Leasehold Leasehold over 50 under 50 Freehold years to run years to run Total 12. Properties £m £m £m £m ---------- ---------- ---------- ---------- BOOK AMOUNT/COST At 1 April 2001 6,100.1 2,027.6 102.9 8,230.6 Prior year UITF28 adjustment (3.1) (3.6) (0.1) (6.8) ---------- ---------- ---------- ---------- At 1 April 2001 as restated 6,097.0 2,024.0 102.8 8,223.8 Additions 441.3 171.4 17.4 630.1 Sales (407.4) (99.3) (3.7) (510.4) ---------- ---------- ---------- ---------- 6,130.9 2,096.1 116.5 8,343.5 Unrealised deficit on valuation (74.0) (29.9) (1.6) (105.5) ---------- ---------- ---------- ---------- At 31 March 2002 6,056.9 2,066.2 114.9 8,238.0 ====== ====== ====== ====== ACCUMULATED DEPRECIATION At 1 April 2001 (1.3) (0.2) (0.1) (1.6) Depreciation for the year (4.7) (0.9) (2.0) (7.6) Sales 0.1 - - 0.1 ---------- ---------- ---------- ---------- At 31 March 2002 (5.9) (1.1) (2.1) (9.1) ====== ====== ====== ====== NET BOOK AMOUNT At 31 March 2002 6,051.0 2,065.1 112.8 8,228.9 ====== ====== ====== ====== At 31 March 2001 6,095.7 2,023.8 102.7 8,222.2 ====== ====== ====== ====== Investment Operating properties properties (Note 10) (Note 11) £m £m ---------- ---------- BOOK AMOUNT/COST At 1 April 2001 7,905.9 324.7 Prior year UITF28 adjustment (6.8) - ---------- ---------- At 1 April 2001 as restated 7,899.1 324.7 Additions 505.6 124.5 Sales (498.1) (12.3) ---------- ---------- 7,906.6 436.9 Unrealised deficit on valuation (105.5) - ---------- ---------- At 31 March 2002 7,801.1 436.9 ====== ====== ACCUMULATED DEPRECIATION At 1 April 2001 - (1.6) Depreciation for the year (1.1) (6.5) Sales - 0.1 ---------- ---------- At 31 March 2002 (1.1) (8.0) ====== ====== NET BOOK AMOUNT At 31 March 2002 7,800.0 428.9 ====== ====== At 31 March 2001 7,899.1 323.1 ====== ====== At 31 March 2002, the cumulative capitalised interest in properties under development amounts to £40.5m (2001 - restated £19.8m). 2002 2001 13. Commitments for future expenditure on properties £m £m ---------- ---------- Under contract 574.1 254.8 Board authorisations not contracted 312.1 293.2 ---------- ---------- Contracted and authorised commitments 886.2 548.0 Less: Commitments outside the development programme (70.3) (135.4) Estimated additional expenditure on the development programme (excluding future interest) 918.2 1,141.3 ---------- ---------- Total development programme (including the BBC development) 1,734.1 1,553.9 ====== ====== Cost Depreciation Net 14. Other tangible assets £m £m £m ---------- ---------- ---------- At 1 April 2001 54.0 (19.9) 34.1 Additions during the year 19.8 19.8 Disposals (1.8) 1.6 (0.2) Depreciation for the year (8.4) (8.4) ---------- ---------- ---------- At 31 March 2002 72.0 (26.7) 45.3 ====== ====== ====== Other tangible assets include computers, motor vehicles, furniture, fixtures and fittings and improvements to group offices. Share Capital premium redemption Revaluation account reserve reserve 15. Reserves £m £m £m ---------- ---------- ---------- At 1 April 2001 312.0 36.0 3,696.4 Prior year adjustment (Note 2) - - (23.0) ---------- ---------- ---------- At 1 April 2001 as restated 312.0 36.0 3,673.4 Premium arising on issues of shares 3.6 Unrealised deficit on revaluation of investment properties (Note 10) (105.5) Share of unrealised surplus on revaluation of properties held in joint venture 46.8 Realised on sales of investment properties (237.8) Taxation on revaluation surpluses realised on sales of properties Retained profit for the year Amortised discount and issue expenses of bonds (0.7) ---------- ---------- ---------- At 31 March 2002 314.9 36.0 3,376.9 ====== ====== ====== Other Profit and reserves loss account Total 15. Reserves (continued) £m £m £m ---------- ---------- ---------- At 1 April 2001 324.6 1,258.3 5,627.3 Prior year adjustment (Note 2) - (110.1) (133.1) ---------- ---------- ---------- At 1 April 2001 as restated 324.6 1,148.2 5,494.2 Premium arising on issue of shares 3.6 Unrealised deficit on revaluation of investment properties (Note 10) (105.5) Share of unrealised surplus on revaluation of properties held in joint venture 46.8 Realised on sales of investment properties 237.8 Taxation on revaluation surpluses realised on sales of properties (12.0) (12.0) Retained profit for the year 85.2 85.2 Amortised discount and issue expenses of bonds 0.7 ---------- ---------- ---------- At 31 March 2002 550.4 1,234.1 5,512.3 ====== ====== ====== 2002 2001 16. Reconciliation of Operating Profit to Net (restated) Cash Inflow from Operating Activities £m £m ---------- ---------- Operating profit (group) 497.5 450.6 Depreciation and amortisation 18.2 8.6 Increase in trading properties (36.9) - (Increase)/decrease in debtors (107.9) 14.1 Increase/(decrease) in creditors 35.3 (11.3) ---------- ---------- Net cash inflow from operating activities 406.2 462.0 ====== ====== 2002 2001 17. Analysis of Net Cash Flows £m £m ---------- ---------- (a) MANAGEMENT OF LIQUID RESOURCES Net (increase)/decrease in short term deposits (38.9) 118.1 ---------- ---------- Net cash (outflow)/inflow from management of liquid resources (38.9) 118.1 ====== ====== Liquid resources comprise short term deposits which are readily realisable within one year. 17. Analysis of Net Cash Flows (continued) 2002 2001 (b) CASH MOVEMENT IN DEBT £m £m ---------- ---------- Debt due within one year - Repayment of secured debt (0.4) (0.4) - Repayment of unsecured debt - (28.7) - Unsecured bank loan (25.0) 25.0 ---------- ---------- (25.4) (4.1) Debt due after one year - Unsecured bank loan 265.0 - - Repayment of secured debt - 265.0 (10.0) (10.0) ---------- ---------- ---------- ---------- 239.6 (14.1) ====== ====== Movements Movements 1 April during year during year 31 March 2001 Cash Flow Non-Cash 2002 18. Analysis of Net Debt £m £m £m £m ---------- ---------- ---------- ---------- Net bank balance/overdraft 3.1 (17.4) (14.3) Liquid resources 22.0 38.9 60.9 Debt due within one year (26.4) 25.4 (0.4) (1.4) Debt due after one year (1,726.5) (265.0) 4.2 (1,987.3) ---------- ---------- ---------- ---------- Net debt (1,727.8) (218.1) 3.8 (1,942.1) ====== ====== ====== ====== 19. 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. Short term debtors/creditors, capital debtors/creditors, taxation and prepayments and accruals have been excluded. All of the group's financial assets and liabilities are sterling based and, with the exception of the committed bank facility, at fixed rates. The group's financial assets and liabilities Excess Excess and their fair values are: of fair of fair Book Book Fair Fair value over value over value value value value book value book value 2002 2001 2002 2001 2002 2001 £m £m £m £m £m £m ---------- ---------- ---------- ---------- ---------- ---------- FINANCIAL ASSETS Short term investments and cash 72.3 31.8 72.3 31.8 - - FINANCIAL LIABILITIES Debentures, bonds, other loans and overdraft (1,767.2) (1,511.0) (2,205.6) (1,964.5) (438.4) (453.5) Convertible bonds (243.3) (246.1) (274.9) (287.7) (31.6) (41.6) FINANCIAL INSTRUMENTS Interest rate swaps - - (4.9) (12.2) (4.9) (12.2) ====== ====== ====== ====== ---------- ---------- (474.9) (507.3) ====== ====== Fair value has been calculated by taking the mid market value, where one is available, or using a discounted cash flow approach for those financial assets and liabilities that do not have a published market value. The difference between book value and fair value will not result in any change to the cash outflows of the group unless, at some stage in the future, borrowings are purchased in the market or repaid at a price different to the nominal value. The group has entered into the following interest rate swaps: Each for Duration £m Start date Receives Pay (years) 100 29 September 2000 6-month LIBOR 5.59% 30* 100 29 September 2000 6-month LIBOR 5.58% 30* 100 28 June 2002 6-month LIBOR 5.00% 20* 100 30 June 2002 6-month LIBOR 5.00% 20* 100 31 March 2002 6-month LIBOR 5.46% 10 100 31 March 2002 6-month LIBOR 5.45% 10 100 31 March 2002 6-month LIBOR 5.28% 18 * The counterparties have the right to terminate the swaps mid-way through the life of the swaps. As the intention of these swaps is to fix the interest rate on existing and new borrowings, the value of the swaps have not been incorporated into the financial statements. Once they commence operating, interest receipts and payments on swaps are dealt with on an accruals basis. 19. Financial Assets and Liabilities In addition there is a further swap which was taken out by Trillium to hedge the secured bank loan. This swap has a maximum life of 16 years and mirrors the repayment schedule for that bank loan. As part of the fair value accounting for the acquisition of Trillium, this swap was marked to market at a cost of £15.7m (2001 £14.9m). The cost, which is included in the bank loan, is being amortised over the life of the swap as a credit to interest payable. The maturity and repayment profiles Financial Financial Financial Financial of the group's financial assets and assets assets liabilities liabilities liabilities and the expiry periods of its 2002 2001 2002 2001 undrawn committed borrowing facilities are: £m £m £m £m ---------- ---------- ---------- ---------- One year or less, or on demand 72.3 29.8 23.2 30.6 More than one year but no more than two years - 2.0 6.7 1.4 More than two years but no more than five years - - 537.6 62.3 More than five years - - 1,443.0 1,662.8 ---------- ---------- ---------- ---------- 72.3 31.8 2,010.5 1,757.1 ====== ====== ====== ====== Weighted average period of fixed interest rates 3 days 35 days 14.1 years 17.1 years Weighted average interest rates 3.0% 5.3% 8.3% 8.8% The maturity and repayment profiles Borrowing Borrowing of the group's financial assets and facilities facilities liabilities and the expiry periods of its 2002 2001 undrawn committed borrowing facilities are: £m £m ---------- ---------- One year or less, or on demand 250 50 More than one year but no more than two years - - More than two years but no more than five years 335 - More than five years - 600 ---------- ---------- 585 650 ====== ====== The amount of debt that is repayable by instalments, where any of the instalments fall due after more than five years, is not material. 20. Joint Venture The group has a 50% interest in the Telereal group of companies ('Telereal'), which draws up accounts to 31 March. Telereal, a 50:50 joint venture between Land Securities Trillium and The William Pears Group, 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. Telereal was funded with £2.5bn to meet the consideration of £2.4bn due to BT and the other costs of £112m associated with bidding for and mobilising the contract. The funding was provided externally by way of securitisation of £1.8bn and bank debt of £400m, both secured on Telereal's properties without any recourse to the shareholders of Telereal, and equity investment by the shareholders of £292m shared equally. The property portfolio has been financed according to the different occupational needs within the BT portfolio. The 'specialised estate' consists primarily of telephone exchanges and associated property and are characterised by a long term commitment for occupation by BT. The purchase of these assets was funded through a securitisation. The 'general purpose estate' consists of properties where the occupational requirements are more normal, comprising offices, vehicle depots, etc. The purchase of this part of the estate was primarily funded through bank debt to reflect the need for greater flexibility in the management of these assets. SUMMARY FINANCIAL INFORMATION OF TELEREAL 13 Dec 2001 to 13 Dec 2001 to 31 March 2002 31 March 2002 Telereal Group's share 100% 50% £m £m ---------- ---------- Turnover 97.0 48.5 Operating profit 38.6 19.3 Depreciation (8.2) (4.1) Bid costs written off (16.0) (8.0) Finance costs (net) (47.6) (23.8) Loss before tax (9.0) (4.5) Loss after tax (9.0) (4.5) Distributions to shareholders - - ====== ====== At At 31 March 2002 31 March 2002 Telereal Group's share 100% 50% £m £m ---------- ---------- Fixed assets - properties 2,386.8 1,193.4 Current assets 208.8 104.4 ---------- ---------- 2,595.6 1,297.8 Securitisation (1,760.0) (880.0) Bank debt (391.2) (195.6) Other liabilities (66.8) (33.4) ---------- ---------- (2,218.0) (1,109.0) ---------- ---------- Net assets 377.6 188.8 ====== ====== Financed by: Shareholders' equity 292.8 146.4 Reserves 84.8 42.4 ---------- ---------- 377.6 188.8 ====== ====== The majority of properties held by Telereal are part of a 30-year contract with BT and will be held at cost to the group. The accounting policy adopted for dealing with the properties in Telereal's financial statement is: Freehold land is stated at historical cost and is not depreciated. Freehold buildings are depreciated in equal annual instalments over 50 years. Expenditure which enhances the value of a building is capitalised and depreciated over the remaining life of the building up to a maximum of 50 years or, if appropriate, its expected life. Repair and maintenance expenditure is written off to the profit and loss account as incurred. Six properties are held outside the 30-year contract and are treated as investment properties. These properties are included in the financial statements at open market values based on the latest professional valuation. At 31 March 2002 valuations were carried out by GVA Grimley and The Wheelan Partnership. The group's 50% share of reserves include £46.8m of valuation surplus arising from the revaluation of Telereal's investment properties. The group's 50% share of the fair value of Telereal's financial liabilities as at 31 March 2002 is £1,042.8m The Telereal entities include two partnerships, Telereal Securitised Property Limited Partnership and Telereal General Property Limited Partnership, which are registered in England and whose accounts, drawn up to 31 March 2002, are dealt with in the group financial statements by way of gross equity accounting and are consolidated in the group's financial information set out above. 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. 21. Membership of Certain Undertakings During the year, the group has been a member of the following limited partnerships, all of which are registered in England, and whose accounts, drawn up to 31 December, are dealt with in the group's financial statements as joint arrangements. Year ended Year ended At 31 March At 31 March 31 March 31 March 2002 2002 2002 2002 Group Gross Gross Gross property Profit/(loss) share assets liabilities Income before tax % £m £m £m £m ---------- ---------- ---------- ---------- ---------- Martineau Limited Partnership 33 1/3 125.0 (4.8) 4.4 3.9 Martineau Galleries Limited Partnership 33 1/3 114.8 (1.7) 6.5 5.1 Bull Ring Limited Partnership 33 1/3 235.9 (85.9) 0.2 (0.3) Gunwharf Limited Partnership 50 117.0 (2.5) 5.6 5.2 Ebbsfleet Limited Partnership 50 26.5 (13.4) - - ---------- ---------- ---------- ---------- 619.2 (108.3) 16.7 13.9 ====== ====== ====== ====== Advantage has been taken of the exemption conferred by Regulation 7 of The Partnerships and Unlimited Companies (Accounts) Regulations 1993 in not delivering the financial statements of the partnerships to the Registrar of Companies. 22. Related Party Transactions The group has a 50% interest in the Telereal group of companies ('Telereal'). The group, principally through Land Securities Trillium Telecom Services Limited, provides staff to Telereal to deliver services to BT, for which it received £2.5m in the year ended 31 March 2002. As at 31 March 2002, the group was owed £151.7m by Telereal. This comprised a subordinated loan from the group of £149.4m. including accrued interest, and an amount rechargeable to Telereal of £2.3m in respect of services provided by the group. 23. Contingent Liabilities The group has a contingent liability arising from a performance guarantee that Land Securities PLC, as the parent company of LSTrillium Limited, has given, severally with its Telereal joint venture partner, for the performance by Telereal Services Limited of its service obligations to BT together with a guarantee related to transaction issues associated with the BT outsourcing contract. The group's maximum liability under the guarantee is £50m plus a further amount which is capped by reference to amounts either distributed or available for distribution to each shareholder by certain of the Telereal companies up to a further £50.7m. The transaction element of the guarantee is capped at £10m. The maximum potential liability which the company could be exposed to under such arrangements is capped at £110.7m. The total maximum liability of £110.7m will, however, amortise over time in accordance with a contractual formula included and defined in the agreement with BT. At 31 March 2002, the estimated amount of the company's exposure to the guarantee was approximately £52.6m. 24. Post Balance Sheet Events On 22 May 2002 Land Securities issued redemption notices in respect of its 6% 2007 and 7% 2008 convertible bonds. As an alternative to conversion, the company may purchase bonds in the market place, if these are offered at attractive prices. On the same date, the company announced its intention to return approximately £500m to shareholders. It is also intended that this sum will be increased, pound for pound, to the extent that the bonds convert into issued share capital. These transactions are being funded by additional bank facilities put in place for the purpose. GLOSSARY OF TERMS Adjusted figures Reported amount adjusted to exclude the results of property sales, bid costs and additional deferred tax arising from the adoption of FRS19 'Deferred Tax' Average unexpired lease term Excludes short term lettings such as car parks and advertising hoardings, residential leases and long ground leases CPO Compulsory Purchase Order Development Programme The group's pipeline of major developments comprising the investment properties held under development as scheduled in the 'Development Review' Development surplus Excess of latest valuation over the total development cost Diluted figures Reported amount adjusted to include the effects of potential shares issuable under convertible bonds or employee share schemes Earnings per share Profit after taxation divided by the weighted average number of shares in issue during the year ERV The estimated market rental value of lettable space as determined bi-annually by the Company's valuers Forward dated swap An agreement to pay a fixed rate of interest for a period beginning at a future date Gearing (net) Total borrowings, including bank overdraft, less short term deposits, corporate bonds and cash, at book value, as a percentage of equity shareholders' funds Interest cover Number of times gross interest payable is covered by operating profit and interest receivable but excluding the activities of Telereal. Joint venture An entity in which the group holds an interest on a long term basis and is jointly controlled by the group and one or more venturers under a contractual arrangement whereby decisions on financial and operating policies essential to the operation, performance and financial position of the venture require each venturer's consent Net assets per share Equity shareholders' funds divided by the number of shares in issue at the period end Open A1 planning permission Planning permission for the retail sale of any goods other than food Operating properties Properties acquired and managed by Land Securities Trillium as part of its total property outsourcing contracts with third parties Over-rented Space that is let at a rent above its ERV Passing rent The annual rental income receivable which may be more or less than the ERV (see over-rented and reversionary) PFI Private Finance Initiative under which a public sector (or in the case of Corporate PFI the private sector) passes the risks and responsibilities associated with the ownership or leasing of property to a third party Pre-let A lease signed with a tenant prior to completion of a development Rental value growth Increase in the current rental value, as determined by the Company's valuers, over the 12 month period on a like for like basis Retail park A scheme of three or more retail warehouse units aggregating over 4,650m(2) with shared parking Return on shareholders' equity Increase in diluted net asset value per share plus dividends per share for the year expressed as a percentage of diluted net asset value per share at the beginning of the year Reversionary or under-rented Space where the passing rent is below the ERV Total development cost All capital expenditure on a project including the opening book value of the property on commencement of development, together with all finance costs Total investment property return Valuation surplus, profit on property sales and net rental income in respect of investment properties expressed as a percentage of opening book value of the investment property portfolio Unitary charge A payment under a PFI or property partnership covering the costs of using a property or facility Weighted average cost of capital (WACC) Market cost of debt and cost of equity capital (equity capital cost calculated assuming equity risk premium of 4% and using London Business School beta factor, average for last year 0.43%) applied to fair value of debt and equity market capitalisation and then suitably weighted This information is provided by RNS The company news service from the London Stock Exchange

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