Final Results - Part 4
Land Securities PLC
23 May 2001
PART 4
LAND SECURITIES - SUPPLEMENTARY INFORMATION
The financial information in this report is abridged and does not constitute
the group's full Financial Statements for the years ended 31 March 2000 or 31
March 2001.
Full Financial Statements for the year ended 31 March 2000 (which received an
unqualified audit report) have been filed with the Registrar of Companies.
Financial Statements for the year ended 31 March 2001 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.
NOTE 1 NET PROPERTY INCOME
Acquisition Acquisition 2001 2000
£m £m £m £m
Rental income 498.4 - 498.4 479.9
Property services
income - 97.3 97.3 -
Service charges and
other recoveries 51.5 - 51.5 48.3
----- ----- ----- -----
Gross property income 549.9 97.3 647.2 528.2
Rents payable (17.5) (30.2) (47.7) (16.4)
Other property (57.6) (44.4) (102.0) (54.6)
outgoings
(75.1) (74.6) (149.7) (71.0)
----- ----- ----- -----
474.8 22.7 497.5 457.2
===== ===== ===== =====
All income was derived from within the United Kingdom from continuing
operations. No operations were discontinued during the year.
Other property outgoings are costs incurred in providing services in
compliance with the outsourcing contract and in the direct maintenance and
upkeep of investment properties. Void costs, which include those relating to
empty properties pending redevelopment and refurbishment, and costs of
investigating potential development schemes which are not proceeded with, are
also included. In addition, depreciation of £3.1m (2000 £0.2m),which includes
£1.3m relating to Trillium, in respect of other tangible assets (Note 13),
together with £1.6m in respect of properties held by Land Securities Trillium
(Note 10), are treated as other property outgoings.
NOTE 2 PROPERTY MANAGEMENT AND ADMINISTRATION EXPENSES
2001 2000
-------- --------
£m £m
These include
Auditors' remuneration .3 .2
Staff costs 20.8 13.9
Directors'
remuneration 2.8 1.7
Amortisation of
goodwill .8 -
Depreciation of other
tangible assets
(including Trillium
£1.0m) 4.7 2.6
The Group's property management and administration expenses consist of all
costs of managing the portfolio, including the costs of staff involved in
development projects, together with costs of rent reviews and renewals,
relettings of properties and all office administration and operating costs of
the group. No staff costs or overheads are capitalised.
NOTE 3 INTEREST
Acquisition Acquisition 2001 2000
£m £m £m £m
----------- -------- -------- -----------
RECEIVABLE:
Short term deposits 5.9 1.0 6.9 18.7
and corporate bonds
Other interest
receivable .7 - .7 .8
----- ----- ----- -----
6.6 1.0 7.6 19.5
===== ===== ===== =====
PAYABLE:
Borrowings not wholly
repayable within five
years 135.5 5.0 140.5 139.9
Borrowings wholly
repayable within five
years 8.2 - 8.2 1.1
Other interest payable 2.0 .4 2.4 1.9
----- ----- ----- -----
145.7 5.4 151.1 142.9
===== ===== ===== =====
Interest payable includes £4.5m (2000 £0.2m) in respect of bank borrowings.
NOTE 4 TAXATION
2001 2000
-------- --------
£m £m
On revenue profit for
the year 82.2 79.1
Adjustments relating
to previous years (.5) (4.0)
----- -----
On revenue profit 81.7 75.1
On property sales and
bid costs (.2) .6
----- -----
81.5 75.7
===== =====
The amount of tax on capital gains which would become payable in the event of
sales of the properties at the amounts at which they are stated in the balance
sheet is in the region of £540m (2000 £490m).
NOTE 5 EQUITY DIVIDENDS
2001 2000
pence pence 2001 2000
per share per share £m £m
--------- --------- --------- ---------
Interim paid 8.65 8.25 45.2 46.8
Proposed final 23.85 22.75 124.9 118.9
----- ----- ----- -----
32.50 31.00 170.1 165.7
===== ===== ===== =====
NOTE 6 EARNINGS PER SHARE
Part A - 2001 figures
Weighted Earnings
Profit after taxation average no. per
of shares share
--------- --------- ---------
EARNINGS 2001 2001 2001
PER SHARE £m m pence
--------- --------- ---------
Earnings per share 233.1 523.0 44.57
Effect of dilutive
securities:
Convertible bonds 11.2 30.2
Share options .2
----- ----- -----
Diluted earnings
per share 244.3 553.4 44.14
----- ----- -----
ADJUSTED EARNINGS
PER SHARE
Earnings per share 233.1 523.0 44.57
Effect of results
of property sales
and bid costs after
taxation (5.9) (1.13)
----- ----- -----
Adjusted earnings
per share 227.2 523.0 43.44
----- ----- -----
Diluted earnings
per share 244.3 553.4 44.14
Effect of results
of property sales
and bid costs after
taxation (5.9) (1.06)
----- ----- -----
Adjusted diluted
earnings per share 238.4 553.4 43.08
----- ----- -----
NOTE 6 EARNINGS PER SHARE
Part B - 2000 figures
Profit Weighted Earnings
after average no. per
taxation of shares share
--------- --------- ---------
EARNINGS 2000 2000 2000
PER SHARE £m m pence
--------- --------- ---------
Earnings per share 252.0 554.4 45.44
Effect of dilutive
securities:
Convertible bonds 11.3 30.8
Share options .2
----- ----- -----
Diluted earnings
per share 263.3 585.4 44.97
----- ----- -----
ADJUSTED EARNINGS
PER SHARE
Earnings per share 252.0 554.4 45.44
Effect of results
of property sales
and bid costs after
taxation (25.4) (4.58)
----- ----- -----
Adjusted earnings
per share 226.6 554.4 40.86
----- ----- -----
Diluted earnings
per share 263.3 585.4 44.97
Effect of results
of property sales
and bid costs after
taxation (25.4) (4.34)
----- ----- -----
Adjusted diluted
earnings per share 237.9 585.4 40.63
----- ----- -----
NOTE 7 NET ASSETS PER SHARE
Net assets per share are calculated on net assets of £6,150.9m (2000 £
5,781.8m) and on 523.6m shares (2000 522.4m shares).
The diluted net assets per share are calculated on adjusted net assets of £
6,411.0m (2000 £6,034.5m) and on 555.7m shares (2000 553.8m shares) after
adjusting for the effects of the exercise of share options and of conversion
rights relating to the convertible bonds on net assets and the number of
shares in issue.
NOTE 8 ACQUISITION AND GOODWILL
ACQUISITION
The group acquired the entire issued share capital of Trillium Investments GP
Limited ('Trillium') on 29 November 2000 for a consideration of £169.5m,
including costs. This has been accounted for by the acquisition method of
accounting. Goodwill arising as a result of the acquisition was £42.7m.
The results of Trillium were as follows:
Profit after taxation prior to acquisition £m
1 January 2000 to the date of acquisition 8.1
Preceding financial year ended 31 December 1999 4.4
The following table shows the fair value of the major categories of assets and
liabilities of Trillium acquired at the date of acquisition. The cash flow
effects of the acquisition are given in the Cash Flow Statement.
At 29 November 2000
-------------------
Fair At
Value 31 March
to the group 2001
£m £m
--------- ---------
Tangible fixed
assets 331.8 341.5
Cash at bank and
in hand 41.9 7.2
Other current assets 70.0 90.3
Loans (212.8) (208.9)
Creditors (99.5) (92.4)
Provisions (4.6) (4.7)
--------- ---------
Net assets 126.8 133.0
=========
Goodwill 42.7
---------
169.5
=========
Consideration £m
Cash 152.2
Expenses of acquisition 3.9
---------
156.1
Deferred consideration 7.8
Shares allotted 5.6
---------
169.5
=========
In accordance with the Group's accounting policy, the goodwill arising on the
acquisition has been capitalised in the current financial year and is being
amortised over the remaining life of the PRIME Agreement.
NOTE 9..INVESTMENT BUSINESS PROPERTIES
Leasehold Leasehold
Over Under
50 years 50 years
Freehold to run to run Total
-------- -------- -------- -------
£m £m £m £m
At 1 April 2000: at
valuation 5,711.9 1,686.8 55.0 7,453.7
Additions 274.1 301.0 2.7 577.8
Reclassifications - (4.7) 4.7
Sales (349.6) (75.3) - (424.9)
------- ------- ------- -------
5,636.4 1,907.8 62.4 7,606.6
Unrealised surplus on
valuation (Note 14) 206.1 85.6 7.6 299.3
------- ------- ------- -------
At 31 March 2001: at
valuation 5,842.5 1,993.4 70.0 7,905.9
======= ======= ======= =======
Freeholds include £376.7m (2000 £394.0m) of leaseholds with unexpired terms
exceeding 900 years; leaseholds under 50 years to run include £10.9m (2000 £
10.3m) with unexpired terms of 20 years or less.
The historical cost of investment properties to the group is £4,019.7 (2000 £
3,681.5m).
NOTE 10 PROPERTIES HELD BY LAND SECURITIES TRILLIUM
Leasehold
Buildings Leasehold
Over Buildings
Freehold 50 years Under
land and to run 50 years
buildings to run Total
--------- -------- -------- -------
£m £m £m £m
COST
Fair values at date
of acquisition of
Trillium 252.4 31.0 30.3 313.7
Additions 5.2 3.2 2.6 11.0
------- ------- ------- -------
At 31 March 2001 257.6 34.2 32.9 324.7
======= ======= ======= =======
ACCUMULATED
DEPRECIATION
Depreciation for
the period (1.3) (.2) (.1) (1.6)
------- ------- ------- -------
At 31 March 2001 (1.3) (.2) (.1) (1.6)
======= ======= ======= =======
NET BOOK AMOUNT
At 31 March 2001 256.3 34.0 32.8 323.1
======= ======= ======= =======
At date of acquisition
of Trillium 252.4 31.0 30.3 313.7
======= ======= =======
Freehold and leasehold properties, originally acquired by Trillium under the
PRIME Agreement, are stated at the fair values attributed to them at 29
November 2000, the date of acquisition of Trillium by the group. The
directors are satisfied that there is nothing to indicate any diminution to
the value of the properties.
Certain of the assets acquired under the PRIME Agreement are subject to a
first charge granted to the DSS. The amount of this charge at 31 March 2001
is £26m which reduces to nil on a straight line basis after a further two
years. The charge secures amounts which would become payable to the DSS on
early termination of the PRIME Agreement in the relevant year.
NOTE 11 PROPERTIES - Part A
Leasehold Leasehold
Over Under
50 years 50 years
Freehold to run to run Total
-------- -------- -------- --------
£m £m £m £m
VALUATION/COST
At 1 April 2000: 5,711.9 1,686.8 55.0 7,453.7
Additions
-on acquisition of
Trillium 252.4 31.0 30.3 313.7
- during the year 279.3 304.2 5.3 588.8
Reclassifications - (4.7) 4.7
Sales (349.6) (75.3) - (424.9)
------- ------- ------- -------
5,894.0 1,942.0 95.3 7,931.3
Unrealised surplus
on valuation
(Note 14) 206.1 85.6 7.6 299.3
------- ------- ------- -------
At 31 March 2001 6,100.1 2,027.6 102.9 8,230.6
======= ======= ======= =======
ACCUMULATED
DEPRECIATION
Depreciation for
the year (1.3) (.2) (.1) (1.6)
------- ------- ------- -------
At 31 March 2001 (1.3) (.2) (.1) (1.6)
======= ======= ======= =======
VALUATION/NET
BOOK AMOUNT
At 31 March 2001 6,098.8 2,027.4 102.8 8,229.0
======= ======= ======= =======
At 31 March 2000 5,711.9 1,686.8 55.0 7,453.7
======= ======= ======= =======
NOTE 11 PROPERTIES - Part B
Land
Investment Securities
Business Trillium
(Note 9) (Note 10)
---------- --------
£m £m
VALUATION/COST
At 1 April 2000: 7,453.7 -
Additions
- on acquisition of
Trillium - 313.7
- during the year 577.8 11.0
Reclassifications
Sales (424.9) -
------- -------
7,606.6 324.7
Unrealised surplus
on valuation
(Note 14) 299.3 -
------- -------
At 31 March 2001 7,905.9 324.7
======= =======
ACCUMULATED
DEPRECIATION
Depreciation for
the year - (1.6)
------- -------
At 31 March 2001 - (1.6)
======= =======
VALUATION/NET
BOOK AMOUNT
At 31 March 2001 7,905.9 323.1
======= =======
At 31 March 2000 7,453.7 -
======= =======
NOTE 12 COMMITMENTS FOR FUTURE EXPENDITURE ON INVESTMENT BUSINESS PROPERTIES
2001 2000
-------- --------
£m £m
Under contract 254.8 92.6
Board authorisations 293.2 262.0
not contracted
----- -----
548.0 354.6
===== =====
NOTE 13 OTHER TANGIBLE ASSETS
Cost Depreciation Net
-------- -------- --------
£m £m £m
At 1 April 2000 28.6 (13.9) 14.7
Additions
- on acquisition of
Trillium 18.1 18.1
- during the year 7.6 7.6
Disposals (.3) .2 (.1)
Depreciation for
the year (6.2) (6.2)
----- ----- -----
At 31 March 2001 54.0 (19.9) 34.1
===== ===== =====
NOTE 14 RESERVES- PART A
Capital
Share redempt- Revalu-
premium ion ation
account reserve reserve Subtotal
£m £m £m £m
--------- --------- --------- ---------
At 1 April 2000 305.2 36.0 3,582.4 3,923.6
Premium arising on issues of shares 7.5 7.5
Purchase and
cancellation of own
shares
Unrealised surplus
on valuation of
properties 299.3 299.3
Realised on sales
of properties (185.3) (185.3)
Taxation on valuation
surpluses realised on
sales of properties
Retained profit for
the year
Amortised discount
and issue expenses
of bonds (.7) (.7)
----- ----- ------- -------
At 31 March 2001 312.0 36.0 3,696.4 4,044.4
----- ----- ------- -------
NOTE 14 RESERVES- PART B
Profit
Other and loss
reserve account Total
£m £m £m
--------- --------- ---------
At 1 April 2000 141.2 1,194.6 5,259.4
Premium arising on
issues of shares 7.5
Purchase and
cancellation of own
shares (.1) (.1)
Unrealised surplus
on valuation of
properties 299.3
Realised on sales of
properties 185.3
Taxation on valuation
surpluses realised on
sales of properties (1.8) (1.8)
Retained profit
for the year 63.0 63.0
Amortised discount
and issue expenses of
bonds .7
----- ------- -------
At 31 March 2001 324.6 1,258.3 5,627.3
----- ------- -------
NOTE 15 FINANCIAL ASSETS AND LIABILITIES
The Group's assets and liabilities and their fair values are:
Book Value Book Value Fair Value Fair Value
2001 2000 2001 2000
-------- --------- -------- ---------
£m £m £m £m
Financial assets
Short term investments
and cash 31.8 140.1 31.8 140.1
Financial liabilities
Debentures, bonds,
other loans and
overdraft (1,511.0) (1,308.8) (1,964.5) (1,827.9)
Convertible bonds (246.1) (247.5) (287.7) (260.5)
Financial instruments
Interest rate swaps - - (12.2) 2.7
======= ======= ======= =======
Fair value has been calculated by taking the market value, where available,
and 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 other than at nominal value.
The group has entered into five interest rate swaps. Two swaps, each for £
100m, had a start date of 30 September 2000 for 15 years. Two further swaps,
each for £100m, have a start date of 30 June 2002 for 10 years. The
counterparties can extend the durations of each of these swaps on similar
terms. As the intention is to link these swaps to new borrowings, the value
of the swaps has not been incorporated in the financial statements, instead
once they commence operating they are dealt with on an accruals basis. The
remaining swap was taken out by Trillium to hedge a secured bank loan. This
swap has a maximum life of 17 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 £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.
At 31 March 2001, £9.1m of short term deposits were charged as temporary
security for borrowings until substitutions have been agreed for properties
taken out of charge.
NOTE 15 FINANCIAL ASSETS AND LIABILITIES (Continued)
The maturity and repayment profiles of the group's financial assets and
liabilities and the expiry periods of its undrawn committed borrowing
facilities are:
Financial Financial Financial Financial
Assets 2001 Assets 2000 Liabilities Liabilities
2001 2000
-------- --------- -------- ---------
£m £m £m £m
One year or less,
or on demand 29.8 140.1 30.6 26.1
More than one year
but no more than
two years 2.0 - 1.4 .4
More than two
years
but no more than
five years - - 62.3 48.6
More than five - - 1,662.8 1,481.2
years
-------- --------- -------- ---------
31.8 140.1 1,757.1 1,556,3
======== ======== ======== ========
Weighted average
period of fixed 35 45 17.1 18.8
interest rates days days years years
Weighted average
interest rate 5.3% 5.8% 8.8% 9.0%
NOTE 15 FINANCIAL ASSETS AND LIABILITIES (Continued)
Borrowing Borrowing
Facilities Facilities
2001 2000
-------- ---------
£m £m
One year or less,
or on demand 50.0 50.0
More than one year
but no more than
two years - 100.0
More than two years
but no more than
five years - 25.0
More than five years 600.0 -
-------- ---------
650.0 175.0
======== ========
Weighted average
period of fixed
interest rates
Weighted average
interest rate
The amount of debt that is repayable by instalments, where any of the
instalments fall due after more than five years, is not material.
Since 31 March 2001, the group has cancelled committed bank facilities of £
50m.
NOTE 16 MANAGEMENT OF LIQUID RESOURCES
2001 2000
-------- --------
£m £m
Net decrease in short
term deposits 118.1 346.5
----- -----
Net cash inflow from
management of liquid
resources 118.1 346.5
===== =====
Liquid resources comprise short term deposits and corporate bonds which are
readily realisable within one year.
NOTE 17 CASH MOVEMENT IN DEBT
2001 2000
-------- --------
£m £m
Due within one year
- Repayment of secured
debt (.4) (.6)
- Repayment of
unsecured debt (28.7) (1.0)
- Unsecured bank loan 25.0 25.0
----- -----
(4.1) 23.4
Debt due after one year
- Repayment of secured
debt (10.0) (12.1)
----- -----
(Decrease)/increase
in debt (14.1) 11.3
===== =====
NOTE 18 ANALYSIS OF NET CASH FLOW - ACQUISITION
2001
--------
£m
Purchase of group
Undertaking (Note 8) (156.1)
Net cash acquired with
group undertaking
(Note 8) 41.9
-----
Net cash outflow on
acquisition of group
undertaking (114.2)
=====
NOTE 19 ANALYSIS OF NET DEBT
Movements
during
year
Acquisit-
ion
(exclud-
Movements ing cash Movements
during and
1 April 2000 year during 31 March 2001
over-
Cash year
drafts)
Flow Non-Cash
£m £m £m £m £m
------- --------- --------- -------- --------
Net bank balance
/(overdraft) (.7) 3.8 3.1
Liquid resources 140.1 (118.1) 22.0
Debt due within
one year (25.4) 4.1 (4.9) (.2) (26.4)
Debt due after
one year (1,530.2) 10.0 (207.9) 1.6 (1,726.5)
------- ----- ----- ----- -------
Net debt (1,416.2) (100.2) (212.8) 1.4 (1,727.8)
======= ===== ===== ===== =======
LAND SECURITIES
GLOSSARY OF TERMS
Adjusted figures
Reported amount adjusted to exclude the results of property sales and bid
costs
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 surplus
Excess of latest valuation over the total development cost excluding finance
costs
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 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 less short term deposits, corporate bonds and cash, as a
percentage of equity shareholders' funds
Interest cover
Number of times interest payable is covered by operating profit and interest
receivable
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
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 3 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 together with dividends 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 expressed as
a percentage of opening book value of 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 0.48%) applied to fair value of debt and
equity market capitalisation and then suitably weighted
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