Interim Results - Part 2

Land Securities Group Plc 19 November 2003 For immediate release 19 November 2003 LAND SECURITIES GROUP PLC ('Land Securities' / 'Group' / 'Company') Interim results for the period 30 September 2003 - PART 2 Unaudited consolidated profit and loss account for the six months ended 30 September 2003 Six Six Six Six Six Six months months months months months months Year Year ended ended ended ended ended ended ended ended 30.9.03 30.9.03 30.9.03 30.9.02 30.9.02 30.9.02 31.3.03 31.3.03 31.3.03 audited Interest Interest Interest in in in joint joint joint Group venture Total Group venture Total Group venture Total Notes Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m ------- ----------- ----------- ----------- ----------- ----------- -------- -------- ------- GROSS PROPERTY INCOME 2 561.0 85.8 646.8 492.1 89.7 581.8 1,071.3 168.2 1,239.5 ====== ====== ====== ====== ====== ====== ====== ====== ====== OPERATING PROFIT 2 231.0 48.8 279.8 230.4 47.0 277.4 462.4 87.8 550.2 Profit on sales of 2 11.8 2.9 14.7 10.7 8.9 19.6 26.6 15.1 41.7 fixed asset properties ------- ----------- ----------- ----------- ----------- ----------- -------- -------- ------- PROFIT ON ORDINARY 2 242.8 51.7 294.5 241.1 55.9 297.0 489.0 102.9 591.9 ACTIVITIES BEFORE INTEREST AND TAXATION Interest receivable and 3 7.4 0.9 8.3 7.7 1.3 9.0 12.0 2.4 14.4 similar income Interest payable and similar charges ------- ----------- ----------- ----------- ----------- ----------- -------- -------- ------- Gross 3 (111.0) (36.2) (147.2) (95.3) (42.3) (137.6) (195.9) (77.8) (273.7) Exceptional deficit on purchase and redemption of convertible bonds 3 - - - (28.2) - (28.2) (28.2) - (28.2) Exceptional cost of 3 - - - - - - (23.5) (0.3) (23.8) cancellation of interest rate swaps Interest capitalised 3 26.1 - 26.1 16.9 - 16.9 39.0 - 39.0 ------- ----------- ----------- ----------- ----------- ----------- -------- -------- ------- (84.9) (36.2) (121.1) (106.6) (42.3) (148.9) (208.6) (78.1) (286.7) ------- ----------- ----------- ----------- ----------- ----------- -------- -------- ------- PROFIT ON ORDINARY 165.3 16.4 181.7 142.2 14.9 157.1 292.4 27.2 319.6 ACTIVITIES BEFORE TAXATION ------- ----------- ---------- ----------- ------- -------- Taxation 4 (50.7) (44.0) (89.7) ----------- ----------- ----------- PROFIT ON ORDINARY 131.0 113.1 229.9 ACTIVITIES AFTER TAXATION Dividends 5 (46.3) (45.7) (167.4) ----------- ----------- ----------- RETAINED PROFIT FOR THE 84.7 67.4 62.5 PERIOD ====== ====== ====== ------- ----------- ----------- ----------- ----------- ----------- -------- -------- ------- PROFIT ON ORDINARY 165.3 16.4 181.7 142.2 14.9 157.1 292.4 27.2 319.6 ACTIVITIES BEFORE TAXATION Profit on sales of fixed (11.8) (2.9) (14.7) (10.7) (8.9) (19.6) (26.6) (15.1) (41.7) asset properties Bid costs 2 1.7 - 1.7 0.7 1.8 2.5 4.7 - 4.7 Exceptional items Deficit on purchase and - - - 28.2 - 28.2 28.2 - 28.2 redemption of convertible bonds Cost of cancellation of - - - - - - 23.5 0.3 23.8 interest rate swaps Group reorganisation 2 - - - 6.3 - 6.3 6.3 - 6.3 costs ------- ----------- ----------- ----------- ----------- ----------- -------- -------- ------- REVENUE PROFIT BEFORE 155.2 13.5 168.7 166.7 7.8 174.5 328.5 12.4 340.9 TAXATION ====== ====== ====== ====== ====== ====== ====== ====== ====== ------- ----------- ----------- ----------- ----------- ----------- -------- -------- ------- Six Six months months Year ended ended ended 30.9.03 30.9.02 31.3.03 Basic Diluted Basic Diluted Basic Diluted ----------- ----------- ----------- ----------- ----------- -------- EARNINGS PER SHARE 6 28.10 28.09p 21.69p 21.67p 46.46p 46.44p ADJUSTED EARNINGS PER SHARE 6 26.66p 26.65p 24.31p 24.29p 50.39p 50.36p ====== ====== ====== ====== ====== ====== All income was derived from within the United Kingdom from continuing operations. No operations were discontinued during the period. Unaudited consolidated balance sheet 30 September 2003 31.3.03 30.9.03 30.9.02 audited Notes Â£m Â£m Â£m ----------- ----------- ----------- FIXED ASSETS Intangible asset Goodwill 35.6 37.8 36.7 Tangible assets ----------- ----------- ----------- Investment properties 8 7,976.8 7,729.1 7,823.9 Operating properties 8 652.0 478.2 557.4 ----------- ----------- ----------- Properties 8 8,628.8 8,207.3 8,381.3 Other tangible assets 46.4 45.9 41.5 Investment in joint venture ----------- ----------- ----------- Share of gross assets of joint venture 17 1,136.0 1,169.3 1,170.2 Share of gross liabilities of joint 17 (1,047.0) (1,037.6) (1,063.4) venture ----------- ----------- ----------- 89.0 131.7 106.8 ----------- ----------- ----------- 8,799.8 8,422.7 8,566.3 ----------- ----------- ----------- CURRENT ASSETS Trading properties 52.7 41.3 53.3 Debtors 10 262.4 363.4 288.7 Investments: short term deposits 103.8 39.4 3.4 Cash at bank and in hand 65.9 29.8 96.0 ----------- ----------- ----------- 484.8 473.9 441.4 CREDITORS falling due within one year 11 (988.5) (512.2) (594.9) ----------- ----------- ----------- NET CURRENT LIABILITIES (503.7) (38.3) (153.5) ----------- ----------- ----------- TOTAL ASSETS LESS CURRENT LIABILITIES 8,296.1 8,384.4 8,412.8 CREDITORS falling due after more than one year Debentures, bonds and loans 12 (2,309.1) (2,580.5) (2,648.4) Other creditors (20.9) (23.0) (22.3) PROVISION FOR LIABILITIES AND CHARGES 13 (187.1) (134.7) (179.0) ----------- ----------- ----------- 5,779.0 5,646.2 5,563.1 ====== ====== ====== CAPITAL AND RESERVES Called up share capital 58.1 76.8 76.9 Share premium account 13.9 - 13.3 Capital redemption reserve 18.9 - 0.1 Revaluation reserve 3,097.1 3,155.3 3,038.9 Profit and loss account 2,591.0 2,414.1 2,433.9 ----------- ----------- ----------- SHAREHOLDERS' FUNDS 5,779.0 5,646.2 5,563.1 ====== ====== ====== EQUITY SHAREHOLDERS' FUNDS 5,767.4 5,615.8 5,532.7 NON-EQUITY SHAREHOLDERS' FUNDS 11.6 30.4 30.4 ----------- ----------- ----------- 5,779.0 5,646.2 5,563.1 ====== ====== ====== NET ASSETS PER SHARE 7 1239p 1209p 1188p DILUTED NET ASSETS PER SHARE 7 1238p 1209p 1188p ADJUSTED NET ASSETS PER SHARE 7 1265p 1235p 1215p ADJUSTED DILUTED NET ASSETS PER SHARE 7 1264p 1235p 1215p Unaudited consolidated cash flow statement for the six months ended 30 September 2003 Six Six Year months months to 31.3.03 to 30.9.03 to 30.9.02 audited Â£m Â£m Â£m ----------- ----------- ----------- NET CASH INFLOW FROM OPERATING ACTIVITIES (Note 14) 226.9 244.5 484.4 Distribution received from joint venture (Note) 25.5 19.7 55.3 Interest received on loan to joint venture 4.0 4.7 7.7 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE ----------- ----------- ----------- Interest received 3.5 2.8 4.3 Interest paid (103.1) (170.4) (292.0) ----------- ----------- ----------- NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (99.6) (167.6) (287.7) TAXATION - Corporation tax paid (28.5) (37.9) (95.8) ----------- ----------- ----------- NET CASH INFLOW FROM OPERATING ACTIVITIES AND INVESTMENTS AFTER FINANCE CHARGES AND TAXATION 128.3 63.4 163.9 CAPITAL EXPENDITURE ----------- ----------- ----------- Investment property development and refurbishment expenditure (141.5) (145.6) (301.4) Acquisitions and other capital expenditure * (174.7) (131.7) (311.8) ----------- ----------- ----------- Additions to properties (316.2) (277.3) (613.2) Sales of properties 279.9 221.0 436.3 ----------- ----------- ----------- Investing in properties (36.3) (56.3) (176.9) Investment in other tangible assets (10.4) (6.0) (12.9) ----------- ----------- ----------- NET CASH OUTFLOW ON CAPITAL EXPENDITURE (46.7) (62.3) (189.8) ACQUISITIONS Part repayment of loan capital by joint venture (Note) - 25.3 25.3 EQUITY DIVIDENDS PAID (121.7) (132.4) (176.6) ----------- ----------- ----------- CASH OUTFLOW BEFORE USE OF LIQUID RESOURCES AND FINANCING (40.1) (106.0) (177.2) MANAGEMENT OF LIQUID RESOURCES (Increase)/decrease in short term deposits (100.4) 21.5 57.5 FINANCING ----------- ----------- ----------- Issues of shares 0.6 0.8 1.2 Repayment of B shares (18.8) (511.1) (511.1) Purchase and cancellation of own ordinary shares - - (5.1) Increase in debt 145.4 638.9 728.2 ----------- ----------- ----------- NET CASH INFLOW FROM FINANCING 127.2 128.6 213.2 ----------- ----------- ----------- (DECREASE)/INCREASE IN CASH IN PERIOD (13.3) 44.1 93.5 ====== ====== ====== * includes Â£76.0m (2002 Â£37.6m) on the BBC developments and Â£5.9m (2002 Â£13.2m) on life cycle capital expenditure. Year Six months Six months to 31.3.03 to 30.9.03 to 30.9.02 audited RECONCILIATION OF NET CASH FLOW TO MOVEMENTS IN NET Â£m Â£m Â£m DEBT ----------- ----------- ----------- (Decrease)/increase in cash in period (13.3) 44.1 93.5 Increase/(decrease) in short term deposits 100.4 (21.5) (57.5) Cash inflow from increase in debt (145.4) (638.9) (728.2) ----------- ----------- ----------- Change in net debt resulting from cash flow (58.3) (616.3) (692.2) Non-cash changes in debt (including bond conversions) 0.2 45.8 45.0 ----------- ----------- ----------- Movement in net debt in period (58.1) (570.5) (647.2) Net debt brought forward (2,589.3) (1,942.1) (1,942.1) ----------- ----------- ----------- Net debt carried forward (2,647.4) (2,512.6) (2,589.3) ====== ====== ====== NOTE: In the year to 31 March 2003, payments received from the joint venture were described as part repayments of loan capital. In the six months to 30 September 2003, payments from the joint venture were all in the form of partnership distributions. The presentation of the cashflow statement has been revised to show loan repayments and distributions from the joint venture separately and the comparative figures have been re-classified accordingly. Unaudited other primary statements for the six months ended 30 September 2003 Year Six months Six months to 31.3.03 to 30.9.03 to 30.9.02 audited STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Â£m Â£m Â£m ----------- ----------- ----------- Profit on ordinary activities after taxation 131.0 113.1 229.9 Unrealised surplus/(deficit) on revaluation of investment properties 153.0 21.9 (56.8) Taxation on revaluation surpluses realised on sales of investment properties (3.6) (17.5) (25.4) ----------- ----------- ----------- Total gains and losses recognised since last financial statements 280.4 117.5 147.7 ====== ====== ====== Year Six months Six months to 31.3.03 to 30.9.03 to 30.9.02 audited RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Â£m Â£m Â£m ----------- ----------- ----------- Profit on ordinary activities after taxation 131.0 113.1 229.9 Dividends (Note 5) (46.3) (45.7) (167.4) ----------- ----------- ----------- Retained profit for the financial year 84.7 67.4 62.5 Unrealised surplus/(deficit) on revaluation of investment properties 153.0 21.9 (56.8) Taxation on revaluation surpluses realised on sales of investment properties (3.6) (17.5) (25.4) Issues of shares 0.6 48.9 62.4 Repayment of B shares (18.8) (511.1) (511.1) Purchase and cancellation of own ordinary shares - - (5.1) ----------- ----------- ----------- Net change in shareholders' funds 215.9 (390.4) (473.5) Opening shareholders' funds 5,563.1 6,036.6 6,036.6 ----------- ----------- ----------- Closing shareholders' funds 5,779.0 5,646.2 5,563.1 ====== ====== ====== Notes to the interim results for the six months ended 30 September 2003 1. Interim results The Accounting Standards Board (ASB) has issued a non-mandatory statement 'Interim Reports', which seeks to codify best practice in the presentation of interim results. These Interim Results, which incorporate a revaluation of investment properties as at 30 September 2003, have been prepared having regard to the guidance in the ASB statement and on the basis of the accounting policies set out in the Group's audited financial statements for the year ended 31 March 2003. The financial information for the year to 31 March 2003 has been extracted from the Land Securities Group PLC consolidated financial statements to that date, which received an unqualified auditors' report and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985 and have been filed with the Registrar of Companies. The Interim Results for the six months ended 30 September 2003 were approved by the Directors on 18 November 2003. Six months Six months Six months Six months Six months to 30.9.03 to 30.9.03 to 30.9.03 to 30.9.03 to 30.9.03 unaudited unaudited unaudited unaudited unaudited Property Total investment property Joint and trading outsourcing Group venture Total 2. Segmental information Note 2 Â£m Â£m Â£m Â£m Â£m (iii) ----------- ----------- ----------- ----------- ----------- ----------- (i) PROFIT AND LOSS ACCOUNT (Note 2(iii) (a)) Rental income (b) 257.2 257.2 257.2 Service charges and other recoveries (c) 29.2 29.2 29.2 Property services income ----------- - Unitary charge 181.8 - Capital projects and other 74.5 reimbursable costs ----------- 256.3 256.3 82.2 338.5 Long term contract income 15.5 - 15.5 - 15.5 Proceeds of sales of trading properties 2.8 2.8 3.6 6.4 ----------- ----------- ----------- ----------- ----------- GROSS PROPERTY INCOME 304.7 256.3 561.0 85.8 646.8 Rents payable (6.8) (51.6) (58.4) (22.8) (81.2) ----------- ----------- ----------- ----------- ----------- Other direct property or contract (d) (38.5) (171.0) (209.5) (209.5) expenditure Long term contract expenditure (15.5) (15.5) (15.5) Indirect property or contract expenditure (e) (20.8) (5.0) (25.8) (4.9) (30.7) Bid costs (1.7) (1.7) (1.7) ----------- ----------- ----------- ----------- ----------- (74.8) (177.7) (252.5) (4.9) (257.4) Costs of sales of trading properties (1.8) (1.8) (1.8) (3.6) ----------- ----------- ----------- ----------- ----------- 221.3 27.0 248.3 56.3 304.6 Depreciation (2.0) (8.5) (10.5) (7.5) (18.0) Amortisation of goodwill (1.1) (1.1) - (1.1) ----------- ----------- ----------- ----------- ----------- 219.3 17.4 236.7 48.8 285.5 Profit on sales of fixed asset properties 11.7 0.1 11.8 2.9 14.7 ----------- ----------- ----------- ----------- ----------- SEGMENT PROFIT 231.0 17.5 248.5 51.7 300.2 ====== ====== ====== ====== Common costs (f) (5.7) Group reorganisation costs - ----------- ----------- OPERATING PROFIT 279.8 Profit on sales of fixed asset properties 14.7 ----------- PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND TAXATION 294.5 ====== Six months Six months Six months Six months Six months to 30.9.02 to 30.9.02 to 30.9.02 to 30.9.02 to 30.9.02 unaudited unaudited unaudited unaudited unaudited Property Total investment property Joint and trading outsourcing Group venture Total 2. Segmental information (continued) Note 2(iii) Â£m Â£m Â£m Â£m Â£m ----------- ----------- ----------- ----------- ----------- ----------- (i) PROFIT AND LOSS ACCOUNT (Note 2(iii) (a)) Rental income (b) 258.5 258.5 258.5 Service charges and other recoveries (c) 25.0 25.0 25.0 Property services income ---------- - Unitary charge 167.9 - Capital projects and other 38.8 reimbursable costs ---------- 206.7 206.7 84.5 291.2 Long term contract income - - - - - Proceeds of sales of trading properties 1.9 1.9 5.2 7.1 ----------- ----------- ----------- ----------- ----------- GROSS PROPERTY INCOME 285.4 206.7 492.1 89.7 581.8 Rents payable (9.4) (48.6) (58.0) (26.6) (84.6) ----------- ----------- ----------- ----------- ----------- Other direct property or contract (d) (30.3) (128.0) (158.3) - (158.3) expenditure Long term contract expenditure - - - - - Indirect property or contract expenditure (e) (19.1) (2.1) (21.2) (5.7) (26.9) Bid costs - (0.7) (0.7) (1.8) (2.5) ----------- ----------- ----------- ----------- ----------- (49.4) (130.8) (180.2) (7.5) (187.7) Costs of sales of trading properties (0.8) (0.8) (2.1) (2.9) ----------- ----------- ----------- ----------- ----------- 225.8 27.3 253.1 53.5 306.6 Depreciation (1.9) (7.4) (9.3) (6.5) (15.8) Amortisation of goodwill (1.1) (1.1) (1.1) ----------- ----------- ----------- ----------- ----------- 223.9 18.8 242.7 47.0 289.7 Profit on sales of fixed asset properties 10.6 0.1 10.7 8.9 19.6 ----------- ----------- ----------- ----------- ----------- SEGMENT PROFIT 234.5 18.9 253.4 55.9 309.3 ====== ====== ====== ====== Common costs (f) (6.0) Group reorganisation costs (6.3) ----------- ----------- OPERATING PROFIT 277.4 Profit on sales of fixed asset properties 19.6 ----------- PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND TAXATION 297.0 ====== Year Year Year Year Year to 31.3.03 to 31.3.03 to 31.3.03 to 31.3.03 to 31.3.03 audited audited audited audited audited Property Total investment property Joint and trading outsourcing Group venture Total 2. Segmental information (continued) Note 2 Â£m Â£m Â£m Â£m Â£m (iii) ----------- ----------- ----------- ----------- ----------- ---------- (i) PROFIT AND LOSS ACCOUNT (Note 2(iii) (a)) Rental income (b) 519.7 519.7 519.7 Service charges and other recoveries (c) 55.9 55.9 55.9 Property services income ----------- - Unitary charge 342.4 - Capital projects and other 149.6 reimbursable costs ----------- 492.0 492.0 166.3 658.3 Long term contract income - - - - - Proceeds of sales of trading properties 3.7 3.7 1.9 5.6 ----------- ----------- ----------- ----------- ----------- GROSS PROPERTY INCOME 579.3 492.0 1,071.3 168.2 1,239.5 Rents payable (17.0) (97.5) (114.5) (49.9) (164.4) ----------- ----------- ----------- ----------- ----------- Other direct property or contract (d) (71.1) (328.3) (399.4) - (399.4) expenditure Long term contract expenditure - - - - - Indirect property or contract expenditure (e) (35.3) (7.7) (43.0) (14.1) (57.1) Bid costs - (4.7) (4.7) - (4.7) ----------- ----------- ----------- ----------- ----------- (106.4) (340.7) (447.1) (14.1) (461.2) Costs of sales of trading properties (2.4) (2.4) (1.4) (3.8) ----------- ----------- ----------- ----------- ----------- 453.5 53.8 507.3 102.8 610.1 Depreciation (9.8) (14.9) (24.7) (15.0) (39.7) Amortisation of goodwill - (2.2) (2.2) - (2.2) ----------- ----------- ----------- ----------- ----------- 443.7 36.7 480.4 87.8 568.2 Profit on sales of fixed asset properties 26.5 0.1 26.6 15.1 41.7 ----------- ----------- ----------- ----------- ----------- SEGMENT PROFIT 470.2 36.8 507.0 102.9 609.9 ====== ====== ====== ====== Common costs (f) (11.7) Group reorganisation costs (6.3) ----------- ---------- OPERATING PROFIT 550.2 Profit on sales of fixed asset properties 41.7 ---------- PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND TAXATION 591.9 ====== 30.9.03 30.9.03 30.9.03 unaudited unaudited unaudited Property Total investment property and trading outsourcing Total 2. Segmental information (continued) Â£m Â£m Â£m ----------- ----------- ----------- (ii) NET ASSETS Properties in development programme (Note 9) 706.8 706.8 Other investment properties 7,270.0 - 7,270.0 Operating properties - 652.0 652.0 Other tangible and intangible fixed assets 15.0 67.0 82.0 ----------- ----------- ----------- FIXED ASSETS 7,991.8 719.0 8,710.8 INVESTMENT IN JOINT VENTURE - 89.0 89.0 NET CURRENT (LIABILITIES)/ASSETS (excluding financing and dividends) (116.5) 27.7 (88.8) ----------- ----------- ----------- 7,875.3 835.7 8,711.0 ----------- ----------- FINANCING AND DIVIDENDS PAYABLE (2,724.0) LONG TERM LIABILITIES AND PROVISIONS (208.0) ----------- NET ASSETS 5,779.0 ====== 30.9.02 30.9.02 30.9.02 31.3.03 31.3.03 31.3.03 unaudited unaudited unaudited audited audited audited Property Total Property Total investment property investment property and trading outsourcing Total and trading outsourcing Total 2. Segmental information (continued) Â£m Â£m Â£m Â£m Â£m Â£m ----------- ----------- ----------- ----------- ----------- ---------- (ii) NET ASSETS Properties in development programme (Note 9) 885.6 - 885.6 967.4 - 967.4 Other investment properties 6,843.5 - 6,843.5 6,856.5 - 6,856.5 Operating properties - 478.2 478.2 - 557.4 557.4 Other tangible and intangible fixed assets 17.8 65.9 83.7 12.0 66.2 78.2 ----------- ----------- ----------- ----------- ----------- ---------- FIXED ASSETS 7,746.9 544.1 8,291.0 7,835.9 623.6 8,459.5 INVESTMENT IN JOINT VENTURE - 131.7 131.7 - 106.8 106.8 NET CURRENT (LIABILITIES)/ASSETS (excluding financing and dividends) (6.9) (25.4) (32.3) (50.2) 37.9 (12.3) ----------- ----------- ----------- ----------- ----------- ---------- 7,740.0 650.4 8,390.4 7,785.7 768.3 8,554.0 ====== ====== ====== ====== FINANCING AND DIVIDENDS PAYABLE (2,586.5) (2,789.6) LONG TERM LIABILITIES AND PROVISIONS (157.7) (201.3) ----------- ---------- NET ASSETS 5,646.2 5,563.1 ====== ====== (iii) NOTES TO THE SEGMENTAL INFORMATION (a) Includes the results of investment properties under development and the Group's share of the results of its development partnerships (Note 16). (b) As a consequence of adopting UITF28, rental income includes Â£1.7m (2002 Â£2.2m) arising from the spreading of rent receivable allocated to rent free periods and incentive payments made to tenants in the respective financial periods. Rental income also includes the net income from managed operations e.g. car parks, food courts, serviced offices and flats. (c) Includes income in relation to service charges and directly recoverable expenditure together with any chargeable management fee. (d) Other direct property or contract expenditure represents costs incurred in the direct maintenance and upkeep of properties together with the costs of rent reviews, lease renewals and relettings of properties and in providing services in compliance with outsourcing contracts, together with additional costs incurred at the request of customers and reimbursable by them. Void costs, which include those relating to empty properties pending redevelopment and refurbishment and costs of development schemes which are not proceeded with are also included. It includes pre-commitment development costs written off of Â£2.0m (2002 Â£Nil). (e) Indirect property or contract expenditure represents indirect costs of managing the investment property portfolio and complying with the terms of total property outsourcing contracts. It includes the cost of staff involved in development projects and all office administration and operating costs other than common costs. Certain internal staff and associated overhead costs directly related to the project management of major development schemes during the conversion phase are capitalised. (f) Common costs comprise all costs associated with central group management including company secretarial and non-executive directors, certain premises costs and non-segment related depreciation charges. Six months Six months Six months to 30.9.03 to 30.9.03 to 30.9.03 unaudited unaudited unaudited Joint Group venture Total 3. Finance Â£m Â£m Â£m ----------- ----------- ----------- INTEREST RECEIVABLE: Short term deposits 1.9 0.9 2.8 Other interest receivable 1.5 - 1.5 Loan to joint venture 4.0 - 4.0 ----------- ----------- ----------- 7.4 0.9 8.3 ====== ====== ====== INTEREST PAYABLE: Borrowings not wholly repayable within five years 76.7 32.2 108.9 Borrowings wholly repayable within five years 33.6 - 33.6 Other interest payable 0.7 - 0.7 ----------- ----------- ----------- 111.0 32.2 143.2 Loans from joint venture partners - 4.0 4.0 Deficit on purchase and redemption of convertible bonds - - - Cost of cancellation of interest rate swaps - - - Less: Capitalised in relation to properties under development (26.1) - (26.1) ----------- ----------- ----------- 84.9 36.2 121.1 ====== ====== ====== Six months Six months Six months Year to Year to Year to to 30.9.02 to 30.9.02 to 30.9.02 31.3.03 31.3.03 31.3.03 unaudited unaudited unaudited audited audited audited Joint Joint Group venture Total Group venture Total 3. Finance (continued) Â£m Â£m Â£m Â£m Â£m Â£m ----------- ----------- ----------- --------- ----------- ---------- INTEREST RECEIVABLE: Short term deposits 0.3 - 0.3 0.9 - 0.9 Other interest receivable 2.5 1.3 3.8 3.4 2.4 5.8 Loan to joint venture 4.9 - 4.9 7.7 - 7.7 ----------- ----------- ----------- --------- ----------- ---------- 7.7 1.3 9.0 12.0 2.4 14.4 ====== ====== ====== ====== ====== ====== INTEREST PAYABLE: Borrowings not wholly repayable within five years 66.7 16.2 82.9 117.2 70.1 187.3 Borrowings wholly repayable within five years 27.1 19.4 46.5 76.2 - 76.2 Other interest payable 1.5 1.8 3.3 2.5 - 2.5 ----------- ----------- ----------- --------- ----------- ---------- 95.3 37.4 132.7 195.9 70.1 266.0 Loans from joint venture partners - 4.9 4.9 - 7.7 7.7 Deficit on purchase and redemption of convertible 28.2 - 28.2 28.2 - 28.2 bonds Cost of cancellation of interest rate swaps - - - 23.5 0.3 23.8 Less: Capitalised in relation to properties under (16.9) - (16.9) (39.0) - (39.0) development ----------- ----------- ----------- ---------- ----------- ---------- 106.6 42.3 148.9 208.6 78.1 286.7 ====== ====== ====== ====== ====== ====== Interest has been capitalised at the Group's pre-tax weighted average borrowing rate for non-specific borrowings for the period of 7.9% (2002 8.5%). Non-specific borrowings exclude certain bank debt which is specific to the PRIME contract. Six months Six months Year to to 30.9.03 to 30.9.02 31.3.03 unaudited unaudited audited 4. Taxation Â£m Â£m Â£m ----------- ----------- --------- Current tax Corporation tax on Group profit for the period at 30% (2002 30%) 37.3 31.0 32.0 Adjustments to current taxation in respect of prior periods (1.3) 0.6 (7.8) Share of joint venture's taxation 7.2 6.5 14.5 ----------- ----------- --------- Current tax 43.2 38.1 38.7 Deferred tax - Group (Note 13) 7.5 4.2 51.0 Deferred tax - joint venture - 1.7 - ----------- ----------- --------- Tax charge for the period 50.7 44.0 89.7 ====== ====== ====== Factors affecting the tax charge for the period The tax assessed for the period is lower than the standard rate of corporation tax in the UK of 30% (2002 30%). The differences are explained below: Profit on ordinary activities before taxation 181.7 157.1 319.6 ====== ====== ====== Tax at 30% 54.5 47.1 95.9 Effects of: Capital allowances (11.0) (11.4) (29.1) Depreciation of fixed assets qualifying for allowances 2.2 2.8 7.9 ----------- ----------- --------- 45.7 38.5 74.7 Tax relief on capitalised interest and other timing differences (6.1) (6.8) (32.0) Reduced rate of tax on profit on disposal of assets (2.9) 0.5 (3.4) Telereal depreciation and goodwill amortisation 2.2 2.3 5.3 Non-allowable expenses and non-taxable items 5.6 3.0 1.9 Prior year corporation tax adjustments (1.3) 0.6 (7.8) ----------- ----------- --------- Current tax 43.2 38.1 38.7 ====== ====== ====== The Group's share of the joint venture's tax charge is stated after disallowing depreciation charges but without the availability of capital allowances which were retained by British Telecom plc. Dividends per Dividends per Dividends per Profit and Profit and Profit and ordinary ordinary ordinary loss account loss loss share share share account account Six months Six months Year to Six months Six months Year to to 30.9.03 to 30.9.02 31.3.03 to 30.9.03 to 30.9.02 31.3.03 unaudited unaudited audited unaudited unaudited audited 5. Dividends pence pence pence Â£m Â£m Â£m ----------- ----------- ----------- ----------- ----------- ----------- Ordinary shares - interim 9.90 9.50 9.50 46.1 44.1 44.1 - final - - 26.00 - - 121.1 B shares - - - 0.2 - 0.5 Additional prior period dividends - - 1.6 1.7 ordinary shares ----------- ----------- ----------- ----------- ----------- ----------- 9.90 9.50 35.50 46.3 45.7 167.4 ====== ====== ====== ====== ====== ====== B shares carry the right to a dividend of 70% of six month LIBOR paid twice yearly. The dividend rate for the second dividend period to 17 October 2003 was 2.5% 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 Profit Profit Profit Weighted Weighted Weighted Earnings Earnings Earnings after after after average average average per per per taxation taxation taxation number number number share share share and and and of of of B share B share B share ordinary ordinary ordinary dividends dividends dividends shares shares shares Six months Six months Year Six months Six months Year Six months Six months Year to 30.9.03 to 30.9.02 to 31.3.03 to 30.9.03 to 30.9.02 to 31.3.03 to 30.9.03 to 30.9.02 to 31.3.03 unaudited unaudited audited unaudited unaudited audited unaudited unaudited audited EARNINGS PER SHARE Â£m Â£m Â£m m m m pence pence pence ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Earnings per share 130.8 113.1 229.4 465.6 521.7 493.8 28.10 21.69 46.46 Effect of dilutive securities: Share options 0.2 0.2 0.1 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Diluted earnings per share 130.8 113.1 229.4 465.8 521.9 493.9 28.09 21.67 46.44 ====== ====== ====== ====== ====== ====== ====== ====== ====== ADJUSTED EARNINGS PER SHARE Earnings per share 130.8 113.1 229.4 465.6 521.7 493.8 28.10 21.69 46.46 Effect of results of fixed asset property disposals, bid costs and exceptional items after taxation (11.5) 15.3 16.5 (2.48) 2.93 3.35 Effect of deferred tax arising from capital allowances on investment properties 4.8 (1.6) 2.9 1.04 (0.31) 0.58 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Adjusted earnings per share 124.1 126.8 248.8 465.6 521.7 493.8 26.66 24.31 50.39 ====== ====== ====== ====== ====== ====== ====== ====== ====== Diluted earnings per share 130.8 113.1 229.4 465.8 521.9 493.9 28.09 21.67 46.44 Effect of results of fixed asset property disposals, bid costs and exceptional items after taxation (11.5) 15.3 16.5 (2.47) 2.93 3.34 Effect of deferred tax arising from capital allowances on investment properties 4.8 (1.6) 2.9 1.03 (0.31) 0.58 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Adjusted diluted earnings per share 124.1 126.8 248.8 465.8 521.9 493.9 26.65 24.29 50.36 ====== ====== ====== ====== ====== ====== ====== ====== ====== Profits on the sales of fixed asset properties, bid costs and exceptional items (comprising the deficit arising on the purchase and redemption of convertible bonds, cost of cancellation of interest rate swaps and the costs of reorganising the Group) are excluded from adjusted earnings as these are non-recurring items. The additional deferred tax arising from capital allowances on investment properties 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 also been disclosed, therefore, to show measures of earnings that better reflect the principal operating activities of the Group. 7. Net assets per share Equity Equity Equity Number of Number of Number of Net Net Net shareholders' shareholders' shareholders' ordinary ordinary ordinary assets assets assets funds funds funds shares shares shares per share per share per share 30.9.03 30.9.02 31.3.03 30.9.03 30.9.02 31.3.03 30.9.03 30.9.02 31.3.03 unaudited unaudited audited unaudited unaudited audited unaudited unaudited audited Â£m Â£m Â£m m m m pence pence pence ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net assets per share 5,767.4 5,615.8 5,532.7 465.7 464.4 465.6 1239 1209 1188 Effect of deferred tax arising from capital allowances on investment properties 121.1 120.5 124.7 26 26 27 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Adjusted net assets per share 5,888.5 5,736.3 5,657.4 465.7 464.4 465.6 1265 1235 1215 ====== ====== ====== ====== ====== ====== ====== ====== ====== Net assets per share 5,767.4 5,615.8 5,532.7 465.7 464.4 465.6 1239 1209 1188 Exercise of outstanding 0.4 0.1 0.1 (1) - - share options ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Diluted net assets per share 5,767.4 5,615.8 5,532.7 466.1 464.5 465.7 1238 1209 1188 ====== ====== ====== ====== ====== ====== ====== ====== ====== Diluted net assets per share 5,767.4 5,615.8 5,532.7 466.1 464.5 465.7 1238 1209 1188 Effect of deferred tax arising from capital allowances on investment properties 121.1 120.5 124.7 26 26 27 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- Adjusted diluted net assets per share 5,888.5 5,736.3 5,657.4 466.1 464.5 465.7 1264 1235 1215 ====== ====== ====== ====== ====== ====== ====== ====== ====== The additional deferred tax liability arising from capital allowances on investment properties is excluded from the calculations of the adjusted values as the Group's experience is that deferred tax on capital allowances in relation to such properties is unlikely to crystallise in practice. Leasehold Leasehold Over 50 Under 50 Total Investment Operating Freehold years to run years to run properties properties 8. Properties Â£m Â£m Â£m Â£m Â£m Â£m ----------- ----------- ----------- ----------- ---------- ---------- BOOK AMOUNT/COST At 1 April 2003 6,222.5 2,057.1 120.4 8,400.0 7,826.5 573.5 Additions 197.6 140.4 5.6 343.6 243.6 100.0 Reclassification (2.3) 2.3 Sales (216.3) (26.8) (0.1) (243.2) (242.9) (0.3) ----------- ----------- ----------- ----------- ---------- ---------- 6,203.8 2,168.4 128.2 8,500.4 7,827.2 673.2 Unrealised surplus/(deficit) on revaluation 121.5 33.5 (2.0) 153.0 153.0 - ----------- ----------- ----------- ----------- -------- ----------- At 30 September 2003 6,325.3 2,201.9 126.2 8,653.4 7,980.2 673.2 ====== ====== ====== ====== ====== ====== ACCUMULATED DEPRECIATION At 1 April 2003 (10.2) (2.0) (6.5) (18.7) (2.6) (16.1) Depreciation for the period (2.5) (0.3) (3.1) (5.9) (0.8) (5.1) ----------- ----------- ----------- ----------- -------- ---------- At 30 September 2003 (12.7) (2.3) (9.6) (24.6) (3.4) (21.2) ====== ====== ====== ====== ====== ====== NET BOOK AMOUNT At 30 September 2003 unaudited 6,312.6 2,199.6 116.6 8,628.8 7,976.8 652.0 ====== ====== ====== ====== ====== ====== At 30 September 2002 unaudited 6,079.0 2,010.0 118.3 8,207.3 7,729.1 478.2 ====== ====== ====== ====== ====== ====== At 31 March 2003 audited 6,212.3 2,055.1 113.9 8,381.3 7,823.9 557.4 ====== ====== ====== ====== ====== ====== 'Investment properties' in this note refer to all investment and development properties excluding Land Securities Trillium properties (referred to as 'operating properties') and trading properties. Investment properties are included at their valuation at 30 September 2003 of Â£7,996.1m (30 September 2002 Â£7,743.1m; 31 March 2003 Â£7,844.0), as determined by the Group's professional valuers, Knight Frank, less the amount of Â£19.3m (30 September 2002 Â£14.0m; 31 March 2003 Â£20.1m) included in prepayments and accrued income under UITF28 in Note 10. Operating properties are carried at depreciated cost and not revalued. Freeholds include Â£430.2m (2002 Â£382.3m) of leaseholds with unexpired terms exceeding 900 years; leaseholds under 50 years to run include Â£11.2m (2002 Â£13.0m) with unexpired terms of 20 years or less. At 30 September 2003, the cumulative capitalised interest in investment and operating properties amount to Â£87.7m (2002 Â£53.7m) and Â£17.9m (2002 Â£3.8m) respectively. 9. Development programme The movement in the carrying value of investment properties forming the development programme (excluding the BBC developments and trading properties) included under 'investment properties' in note 8 are as follows: Â£m ----------- At 1 April 2003: at market value 967.4 Properties transferred into the development programme during the period (at 1 April 2003 valuation) 12.4 Expenditure during the period, including development property acquisitions 119.0 Capitalised interest 16.9 Deficit on valuation (15.2) ----------- 1,100.5 Developments completed, let and transferred out of development programme during the (393.7) period ----------- At 30 September 2003: at market value 706.8 ====== Projects forming the 'development programme' comprise: - Developments which are complete but less than 95% let - Developments on site - Committed developments (being projects which are approved and the building contract let) - Authorised developments (Board approved projects for which the building contract has not yet been let) '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 Â£137.5m in respect of proposed developments. Developments are taken out of the development programme when physically complete and 95% let. Schemes completed during the period comprise The Bullring, Birmingham, Kingsway West (Phase I), Dundee and Portman House, W1. The total development profit earned on schemes completed in the period was Â£78.8m. 30.9.03 30.9.02 31.3.03 unaudited unaudited audited 10. Debtors Â£m Â£m Â£m ----------- ----------- ----------- Trade debtors 104.6 107.3 112.4 Property sales debtors 0.7 115.9 24.6 Amount receivable from long term contract 15.5 - - Other debtors 49.2 51.0 67.2 Prepayments and accrued income 92.4 89.2 84.5 ----------- ----------- ----------- 262.4 363.4 288.7 ====== ====== ====== Included within trade debtors are balances of Â£51.6m (2002 Â£43.6m) and Â£8.3m (2002 Â£11.4m) due to Land Securities Trillium from the DWP and the BBC respectively. Prepayments and accrued income include Â£19.3m (2002 Â£14.0m) in respect of UITF28. 30.9.03 30.9.02 31.3.03 11. Creditors falling due within one year unaudited unaudited audited Â£m Â£m Â£m ----------- ----------- ----------- Debentures and loans (Note 12) 508.0 1.3 23.5 Overdrafts - - 16.8 Trade and other creditors 89.1 80.6 73.9 Taxation and Social Security 19.2 65.3 23.9 Proposed dividend 46.2 44.1 121.1 Capital creditors 77.0 74.2 69.2 Accruals and deferred income 249.0 246.7 266.5 ----------- ----------- ----------- 988.5 512.2 594.9 ====== ====== ====== Capital creditors represent amounts due under contracts to purchase properties, which were unconditionally exchanged at period ends, and for development and refurbishment works completed on investment properties but not paid for at period ends. 30.9.03 30.9.02 31.3.03 12. Debentures, bonds and loans unaudited unaudited audited Â£m Â£m Â£m ----------- ----------- ----------- Unsecured ----------- ----------- ----------- Bonds 1,010.3 417.9 1,009.9 Commercial paper 236.8 - - Bank debt 527.0 1,102.0 600.5 ----------- ----------- ----------- 1,774.1 1,519.9 1,610.4 Secured ----------- ----------- ----------- Debentures 837.8 855.0 854.6 Bank loan 205.2 206.9 206.9 ----------- ----------- ----------- 1,043.0 1,061.9 1,061.5 ----------- ----------- ----------- 2,817.1 2,581.8 2,671.9 Falling due within one year (Note 11) (508.0) (1.3) (23.5) ----------- ----------- ----------- 2,309.1 2,580.5 2,648.4 ====== ====== ====== Net debt Debentures, bonds and loans 2,817.1 2,581.8 2,671.9 Net bank balance (65.9) (29.8) (79.2) Short term deposits (103.8) (39.4) (3.4) ----------- ----------- ----------- 2,647.4 2,512.6 2,589.3 ====== ====== ====== In addition to the above borrowings, the Group had Â£1,087.0m and Â£134.0m of undrawn committed and uncommitted facilities respectively at 30 September 2003. It is the Group's policy to maintain a level of undrawn committed bank facilities, at least equal to, and with a maturity no shorter than, its commercial paper outstandings. Â£196.6m of the increase in debt falling due within one year reflects changes in the terms of a loan originally provided to Trillium Investments GP Limited to finance the PRIME contract. The terms of the loan have been changed to facilitate the expansion of the PRIME contract to incorporate the Employment Services estate. In the event that the contract is not extended the lenders have the right to require repayment of the loan. At 30 September 2003, Â£75.3m (2002 Â£Nil) of short term deposits were charged as temporary security for borrowings pending substitution for a property taken out of charge. The charge was released on 31 October 2003. Short term deposits also include Â£27.4m (2002 Â£Nil) held as cash collateral in respect of an interest rate swap. The cash collateral was reduced to Â£20.0m on 16 October 2003. Deferred 13. Provisions for liabilities and charges Dilapidations taxation Total Â£m Â£m Â£m ----------- ----------- ----------- At 1 April 2003 audited 5.9 173.1 179.0 Net charge for the period 0.3 15.9 16.2 Released in respect of property disposals during the period (8.4) (8.4) Other movements 0.3 0.3 ----------- ----------- ----------- At 30 September 2003 unaudited 6.2 180.9 187.1 ====== ====== ====== 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 their tax written down values would be Â£121.1m (2002 Â£120.5m). On the same assumption the amount of tax on capital gains that would become payable by the group on disposals at amounts at which they are stated in Note 8 is in the region of Â£490m (2002 Â£450m). If the shares in certain asset owning companies, which own marketable portfolios of properties, were sold at underlying asset values the tax on capital gains would be in the region of Â£397m (2002 Â£450m) without taking into account any further mitigation that might be available. 14. Reconciliation of Group operating profit to net cash inflow from operating Six months Six months Year activities to 30.9.03 to 30.9.02 to 31.3.03 unaudited unaudited audited Â£m Â£m Â£m ----------- ----------- ----------- Operating profit (Group) 231.0 230.4 462.4 Depreciation and amortisation 12.5 11.2 28.6 Decrease/(increase) in trading properties 0.6 (3.7) (15.7) Increase in debtors (6.3) (14.6) (16.1) (Decrease)/increase in creditors (10.9) 21.2 25.2 ----------- ----------- ----------- Net cash inflow from operating activities 226.9 244.5 484.4 ====== ====== ====== 15. Financial assets and liabilities Book value Book value Book value Fair value Fair value Fair value 30.9.03 30.9.02 31.3.03 30.9.03 30.9.02 31.3.03 unaudited unaudited audited unaudited unaudited audited The Group's financial assets and liabilities Â£m Â£m Â£m Â£m Â£m Â£m and their fair values are: ----------- ----------- ----------- ----------- ----------- ----------- FINANCIAL ASSETS Short term investments and cash 170.7 71.0 102.0 170.7 71.0 102.0 FINANCIAL LIABILITIES Debentures, bonds, other loans and overdraft (2,817.1) (2,581.8) (2,688.7) (3,432.6) (3,148.2) (3,204.9) Non-equity B shares (11.5) (30.3) (30.3) (11.5) (30.3) (30.3) FINANCIAL INSTRUMENTS Interest rate swaps - - - (69.5) (78.9) (82.3) ----------- ----------- ----------- ----------- ----------- ----------- (2,657.9) (2,541.1) (2,617.0) (3,342.9) (3,186.4) (3,215.5) Excess of fair value over book value (685.0) (645.3) (598.5) ----------- ----------- ----------- ----------- ----------- ----------- (3,342.9) (3,186.4) (3,215.5) (3,342.9) (3,186.4) (3,215.5) ====== ====== ====== ====== ====== ====== Fair value has been calculated by taking the 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 borrowings were to be purchased in the market, or repaid, at a price different to the nominal value. The weighted average cost of debt during the period was 7.6% (2002 8.3%). The Group has entered into a number of interest rate swaps in the name of Land Securities PLC to hedge current and future interest rate risk on general corporate floating rate debt. In each case the Group pays a fixed rate of interest and receives six-month LIBOR. The total notional principal of the interest rate swaps is Â£900m all of which are now operational. The end dates of these swaps are from March 2012 to September 2030 and the interest rates payable range from 5.00% to 5.58%. In the case of four swaps, which have a total notional principal of Â£400m and end dates of June 2022 and September 2030, the counterparties have the right to terminate the swaps in June 2012 and September 2015 respectively. As the intention of these swaps is to fix the interest rates on existing and prospective borrowings, their mark to market values have not been incorporated into the financial statements and instead net interest is accrued through the profit and loss account. In addition there is a further swap taken out by Trillium to hedge the secured bank loan, referred to in Note 12, which funds the PRIME contract. This swap has a maximum life of 15 years and substantially mirrors the repayment schedule for the associated bank loan. As part of the fair value accounting exercise on the acquisition of Trillium, this swap was marked to market in November 2000 and a provision of Â£14.9m was established. The provision is being amortised over the life of the swap as a credit to interest payable. 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 dates indicated below, are dealt with in the Group's financial statements as 'joint arrangements'. Gross Gross Gross Group assets assets assets share 30.09.03 30.9.02 31.3.03 unaudited unaudited audited Partnership % Â£m Â£m Â£m ----------- ----------- ----------- ----------- Martineau Limited Partnership (31 December)* 33 1/3 132.7 125.0 132.0 Martineau Galleries Limited Partnership (31 December)* 33 1/3 112.6 117.8 112.2 Bullring Limited Partnership (31 December)* 33 1/3 427.6 310.3 362.9 Gunwharf Quays Limited Partnership (31 March) 50 149.5 131.1 147.9 Ebbsfleet Limited Partnership (31 March) 50 30.1 35.3 35.3 ====== ====== ====== ====== *forming the Birmingham Alliance 16. Membership of certain undertakings (continued) Profit/ Profit/ Profit/ (loss) (loss) (loss) Gross Gross Gross before before before Group Liabilities Liabilities Liabilities tax tax tax share 30.9.03 30.9.02 31.3.03 30.9.03 30.9.02 31.3.03 unaudited unaudited audited unaudited unaudited audited Partnership % Â£m Â£m Â£m Â£m Â£m Â£m ----------- ----------- ----------- ----------- ----------- ----------- ----------- Martineau Limited Partnership (31 December)* 33 1/3 (3.2) (3.7) (3.5) 2.7 2.4 5.4 Martineau Galleries Limited Partnership (31 December)* 33 1/3 (2.3) (2.5) (2.1) 1.9 2.1 4.0 Bullring Limited Partnership (31 December)* 33 1/3 (277.1) (160.7) (213.5) 0.4 (0.5) (0.7) Gunwharf Quays Limited Partnership (31 March) 50 (1.9) (1.8) (3.3) 4.8 3.4 7.7 Ebbsfleet Limited Partnership (31 March) 50 (0.1) (0.1) (0.4) - - - ====== ====== ====== ====== ====== ====== ====== *forming the Birmingham Alliance The gross liabilities of these partnerships consist generally of capital and revenue accruals and also, in the case of Bullring Limited Partnership, Â£249.2m (2002 Â£136.5m) of loans from partners at 30 September 2003. There was no third party debt in these partnerships (2002: Â£Nil). 17. Joint venture The group has a 50% interest in the Telereal entities ('Telereal'), which draw up accounts to 31 March. Telereal, a 50:50 joint venture between Land Securities Trillium and the Pears Group, acquired the majority of the properties of British Telecommunications PLC ('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 initially funded externally by a Â£1.8bn securitisation and Â£400m of bank debt, both secured on Telereal's properties without any recourse to the shareholders of Telereal, and an initial equity investment by the shareholders of Â£292.8m shared equally. The following table presents summary financial information, showing the Group's 50% shares of Telereal's results and net assets, adjusted to adopt the Group's accounting policies. Six months Six months Year to to to 30.09.03 30.09.02 31.3.03 unaudited unaudited audited SUMMARY FINANCIAL INFORMATION OF TELEREAL (Group's share) Â£m Â£m Â£m ----------- ----------- ----------- Turnover 85.8 89.7 168.2 Operating profit 48.8 47.0 87.8 Depreciation (7.5) (6.5) (15.0) Profit on sales of fixed asset properties 2.9 8.9 15.1 Bid costs written off - (1.8) - Finance costs (net) (35.3) (41.0) (75.7) Profit before tax 16.4 14.9 27.2 Profit after tax 9.2 6.7 12.7 ====== ====== ====== 30.09.03 30.09.02 31.3.03 unaudited unaudited audited Â£m Â£m Â£m ----------- ----------- ----------- ----------- ----------- ----------- Fixed assets - properties (at depreciated cost) 1,049.5 1,059.9 1,056.9 Current assets 86.5 109.4 113.3 ----------- ----------- ----------- 1,136.0 1,169.3 1,170.2 ----------- ----------- ----------- Securitisation (878.1) (880.8) (878.0) Bank debt (108.3) (107.3) (110.1) Other liabilities (60.6) (49.5) (75.3) ----------- ----------- ----------- (1,047.0) (1,037.6) (1,063.4) ----------- ----------- ----------- Net assets 89.0 131.7 106.8 ====== ====== ====== The Group's 50% share of the fair value of Telereal's bank and securitisation liabilities as at 30 September 2003 was Â£1,033.6m (2002 Â£1,028.2m). 18. Contingent liabilities The Group has a contingent liability arising from a performance guarantee that Land Securities PLC, as the parent company of Land Securities Trillium 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 Â£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 Â£50.7m. The transaction element of the guarantee is capped at Â£10m. The maximum potential liability which the Company could be exposed to under such arrangements is capped at Â£110.7m. The total maximum liability of Â£110.7m will, however, amortise over time in accordance with a contractual formula included and defined in the agreement with BT. At 30 September 2003, the estimated amount of the Group's exposure to the guarantee was approximately Â£100.7m (2002 Â£100.7m). Review report by the auditors Independent review report to Land Securities Group PLC Introduction We have been instructed by the Company to review the financial information set out on pages 26 to 40. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 2003. PricewaterhouseCoopers LLP Chartered Accountants London 18 November 2003 This information is provided by RNS The company news service from the London Stock Exchange

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