Final Results - Part 3- IFRS

Quintain Estates & Development PLC 07 June 2005 7 June 2005 Quintain Estates and Development PLC Unaudited results for the year ended 31 March 2005 under International Financial Reporting Standards ('IFRS') The following statements and accompanying notes restate the Group's 2004/05 results prepared under UK GAAP to reflect the adjustments that would be required under IFRS. The document includes an income statement, balance sheet, statement of changes in equity and cash flow statement together with an explanation of the principal reconciling items between the two bases of preparation. The information contained in this document has not been audited but complies with the current versions of the standards and interpretations released to date. As these may change, the figures presented should not be regarded as final. In addition, the statements do not reflect the requirements of IFRS 2, Share-based Payment; IAS 32, Financial Instruments : Disclosure and Presentation; IAS 39, Financial Instruments : Recognition and Measurement and IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, which apply to accounting periods commencing on or after 1 January 2005. Consequently, the numbers which will form the comparatives for the 2005/06 interim and final results could be different to those here presented. This document is not intended in its format or content to constitute a preliminary announcement under IFRS but merely to indicate the impact of the new standards and interpretations in their current form upon the Group's 2004/05 UK GAAP results. In these statements, the Group has identified certain properties which under UK GAAP were designated as investment properties but were acquired with the intention of development. Under IFRS, these properties have been classified as properties in the course of development and accounted for under IAS 16, Property, Plant and Equipment at fair value. Changes to fair value arising in connection with these properties are recognised directly through the revaluation reserve in equity rather than through the income statement. The adjustments which are material in relation to the Group's results relate to: • investment property valuation movements and revaluation deficits on development properties which are reflected in the income statement • the deferred tax on net property revaluation movements which is reflected in the income statement in respect of investment properties and through equity for development properties • the proposed final dividend which is not recognised in the financial statements until it becomes a legal obligation. The impact of these changes upon the key performance measures and indicators have been identified as: UK GAAP IFRS Net rental income £000 27,413 29,797 Profit before tax £000 15,763 37,329 Equity shareholders' funds £000 638,261 571,304 Basic earnings per share p 10.3 32.2 Adjusted earnings per share p 10.2 10.0 Basic net asset value per share p 495 443 Adjusted net asset value per share p 486 492 The main changes to the Group's profit before tax under UK GAAP are as follows: £000 UK GAAP for year ended 31 March 2005 15,763 Net revaluation gains on investment properties and deficits on development properties reflected in income statement 25,653 Tax on profits from joint ventures and associates (5,055) Other adjustments 968 ______ IFRS for year ended 31 March 2005 37,329 ===== The principal adjustments to equity shareholders' funds are as follows: £000 Balance as at 31 March 2005: UK GAAP 638,261 Deferred tax on net revaluation gains (75,394) Proposed final dividend 8,700 Other adjustments (263) ______ Balance as at 31 March 2005 : IFRS 571,304 ====== Quintain Estates and Development PLC Unaudited Consolidated Income Statement for the year ended 31 March 2005 Notes UK GAAP (*) Adjustments IFRS £000 £000 £000 Gross rental income 2a 36,159 235 36,394 Property related costs 2b (8,746) 2,149 (6,597) _______ _______ _______ Net rental income 27,413 2,384 29,797 ====== ====== ====== Proceeds from sale of trading properties 3a 25,852 (19,516) 6,336 Carrying value of trading properties sold 3b (22,036) 16,914 (5,122) _______ _______ _______ Profit from sale of trading properties 3,816 (2,602) 1,214 ====== ====== ====== Income from leisure activities 12,112 - 12,112 Outgoings on leisure activities (5,871) - (5,871) _______ _______ _______ Profit from leisure activities 6,241 - 6,241 ====== ====== ====== Other income receivable 4,253 - 4,253 Outgoings in relation to other income (2,050) - (2,050) _______ _______ _______ Profit from other income 2,203 - 2,203 ====== ====== ====== Total turnover 78,376 (19,281) 59,095 Total cost of sales (38,703) 19,063 (19,640) _______ _______ _______ Gross profit 39,673 (218) 39,455 Administrative expenses (19,130) - (19,130) _______ _______ _______ Operating profit before recognition of results from investment property sales and revaluation 20,543 (218) 20,325 Profit from sale of investment properties 4 6,286 (709) 5,577 Gains on revaluation of investment properties 5 - 23,574 23,574 Deficits on revaluation of investment properties 5 - (3,315) (3,315) Deficits on revaluation of development properties 6 - (1,232) (1,232) _______ _______ _______ Net operating profit before net finance expenses 26,829 18,100 44,929 Finance income 1,454 - 1,454 Finance expenses (17,323) (56) (17,379) Net finance expenses 7 (15,869) (56) (15,925) Share of profit from joint ventures and 8 4,803 3,522 8,325 associates _______ _______ _______ Profit before tax 15,763 21,566 37,329 Current tax (1,908) (283) (2,191) Deferred tax (446) 7,066 6,620 Tax (charge) credit for the year 9 (2,354) 6,783 4,429 _______ _______ _______ Profit for the financial year 13,409 28,349 41,758 ====== ====== ====== Attributable to : Equity shareholders of the parent 13,376 28,292 41,668 Minority interests 33 57 90 _______ _______ _______ Profit for the financial year 13,409 28,349 41,758 ====== ====== ====== Earnings per share - basic 10a 10.3p 32.2p ====== ====== - diluted 10a 10.2p 31.6p ====== ====== (*) Reformatted to reflect IFRS reporting requirements Quintain Estates and Development PLC Unaudited Statement of Changes in Equity for the year ended 31 March 2005 Share Share Convertible Revaluation Other Translation Retained Investment Total capital premium loan reserve capital reserve earnings in own attributable account stock reserves shares to equity shareholders £000 £000 £000 £000 £000 £000 £000 £000 £000 Balance as at 1 April 2004 : UK 32,323 45,076 - 267,604 112,330 - 66,180 - 523,513 GAAP IFRS opening adjustments: Gains on revaluation of investment properties - - - (130,911) - - 130,911 - - Deficits on revaluation of development - - - 5,411 - - (5,411) - - properties Deferred tax on revaluation gains - - - (31,904) - - (26,345) - (58,249) Equity element of convertible loan - - 786 - - - - - 786 stock Additional interest on convertible loan - - - - - - (498) - (498) stock Interest capitalised on development property in jointly administered arrangement - - - - - - (223) - (223) 2004 final dividend - - - - - - 7,757 - 7,757 ______ ______ ______ ______ ______ ______ ______ ______ ______ Balance as at 1 April 2004 : IFRS 32,323 45,076 786 110,200 112,330 - 172,371 - 473,086 ______ ______ ______ ______ ______ ______ ______ ______ ______ Changes in equity for the income and expenses recognised in year: Credit relating to Executive Directors' Performance Share - - - - - - 380 - 380 Plan Credit relating to 2004 Unapproved Share Plan - - - - - - 232 - 232 Development properties: Tax credit on capitalised - - - 1,218 - - - - 1,218 interest Revaluation gains in - - - 93,261 - - - - 93,261 year Deferred tax charge on revaluation gains - - - (24,102) - - - - (24,102) Realisation of revaluation gains on - - - (355) - - 355 - - sales Revaluation element of short leasehold amortisation - - - (120) - - 120 - - Exchange adjustment - - - - - 127 - - 127 ______ ______ ______ ______ ______ ______ ______ ______ ______ Net income recognised directly in equity - - - 69,902 - 127 1,087 - 71,116 Profit for the - - - - - - 41,668 - 41,668 financial year ______ ______ ______ ______ ______ ______ ______ ______ ______ Total recognised income and expense for the - - - 69,902 - 127 42,755 - 112,784 year Other changes to equity: Issue of shares 81 1,499 - - - - (1,046) - 534 Purchase of own shares for cancellation (106) - - - 106 - (2,243) - (2,243) Investment in own - - - - - - - (1,539) (1,539) shares Purchase of minority interest - - - - - - - - - Dividends paid - - - - - - (11,318) - (11,318) ______ ______ ______ _______ _______ ______ _______ ______ _______ Balance as at 31 March 2005 : IFRS 32,298 46,575 786 180,102 112,436 127 200,519 (1,539) 571,304 ===== ===== ===== ====== ====== ===== ====== ===== ====== Unaudited Statement of Changes in Equity for the year ended 31 March 2005 (continued) Total Minority Total attributable shareholders equity to equity shareholders £000 £000 £000 Balance as at 1 April 2004 : UK GAAP 523,513 1,446 524,959 IFRS opening adjustments: Gains on revaluation of investment properties - - - Deficits on revaluation of development properties - - - Deferred tax on revaluation gains (58,249) - (58,249) Equity element of convertible loan stock 786 - 786 Additional interest on convertible loan stock (498) - (498) Interest capitalised on development property in jointly administered arrangement (223) - (223) 2004 final dividend 7,757 - 7,757 ______ ______ ______ Balance as at 1 April 2004 : IFRS 473,086 1,446 474,532 ______ ______ ______ Changes in equity for the income and expenses recognised in year: Credit relating to Executive Directors' Performance Share Plan 380 - 380 Credit relating to 2004 Unapproved Share Plan 232 - 232 Development properties: Tax credit on 1,218 - 1,218 capitalised interest Revaluation gains in 93,261 - 93,261 year Deferred tax charge on revaluation gains (24,102) - (24,102) Realisation of revaluation gains on - - - sales Revaluation element of short leasehold amortisation - - - Exchange adjustment 127 - 127 ______ ______ ______ Net income recognised directly in equity 71,116 - 71,116 Profit for the 41,668 90 41,758 financial year ______ ______ ______ Total recognised income and expense for the 112,784 90 112,874 year Other changes to equity: Issue of shares 534 - 534 Purchase of own shares for cancellation (2,243) - (2,243) Investment in own (1,539) - (1,539) shares Purchase of minority interest - (1,296) (1,296) Dividends paid (11,318) - (11,318) _______ ______ _______ Balance as at 31 March 2005 : IFRS 571,304 240 571,544 ====== ===== ====== Quintain Estates and Development PLC Unaudited Consolidated Balance Sheet as at 31 March 2005 Notes UK GAAP (*) Adjustments IFRS £000 £000 £000 Non-current assets Investment properties 11 742,876 (452,674) 290,202 Development properties 11 - 463,893 463,893 Owner occupied properties, plant and equipment 12 9,215 1,201 10,416 Investment in joint ventures 13 62,023 8,209 70,232 Investment in associates 1,800 - 1,800 Other investments 188 - 188 _______ _______ _______ Total non-current assets 816,102 20,629 836,731 ====== ====== ====== Current assets Trading properties 13 17,487 (12,763) 4,724 Trade and other receivables 11/13 31,920 (2,649) 29,271 Short term investments 19 - 19 Cash and cash equivalents 13 11,744 (654) 11,090 _______ _______ _______ Total current assets 61,170 (16,066) 45,104 ====== ====== ====== Total assets 877,272 4,563 881,835 ====== ====== ====== Current liabilities Bank loans 14 (88) - (88) Trade and other payables 13/15 (35,913) 9,685 (26,228) Tax liabilities (11,294) (24) (11,318) _______ _______ _______ Total current liabilities (47,295) 9,661 (37,634) ====== ====== ====== Non-current liabilities Bank loans 14 (173,815) 6,795 (167,020) Other borrowings 16 (7,870) 203 (7,667) Deferred tax liability 17 (5,117) (75,429) (80,546) Obligations under finance leases 18 - (12,750) (12,750) Other payables (4,674) - (4,674) _______ _______ _______ Total non-current liabilities (191,476) (81,181) (272,657) ====== ====== ====== Total liabilities (238,771) (71,520) (310,291) _______ _______ _______ Net assets 638,501 (66,957) 571,544 ====== ====== ====== Equity Issued capital 32,298 - 32,298 Share premium account 46,575 - 46,575 Convertible loan stock (equity element) 16 - 786 786 Revaluation reserve 311,606 (131,504) 180,102 Other capital reserves 112,436 - 112,436 Translation reserve 19 - 127 127 Retained earnings 136,885 63,634 200,519 Investment in own shares (1,539) - (1,539) _______ _______ _______ Equity attributable to equity shareholders of the parent 20 638,261 (66,957) 571,304 Minority interest 240 - 240 _______ _______ _______ Total equity 638,501 (66,957) 571,544 ====== ====== ====== Net asset value per share - basic 10b 495p 443p ====== ====== - diluted 10b 486p 436p ====== ====== (*) Reformatted to reflect IFRS reporting requirements Quintain Estates and Development PLC Unaudited Consolidated Cash Flow Statement for the year ended 31 March 2005 UK GAAP (*) Adjustments IFRS £000 £000 £000 Operating activities Profit before tax 15,763 21,566 37,329 Adjustments for : Depreciation 1,088 (61) 1,027 Costs relating to share plans 612 - 612 Net finance expenses 15,869 56 15,925 Unrealised net revaluation gains on investment properties - (20,259) (20,259) Deficits on revaluation of development properties - 1,232 1,232 Share of the profit from joint ventures and associates (4,803) (3,522) (8,325) Profit on sale of investment properties (6,286) 709 (5,577) Impairment of investment property 425 (425) - _______ _______ _______ Operating profit before changes in working capital 22,668 (704) 21,964 Decrease in trade and other receivables 4,147 (97) 4,050 Decrease in trade and other payables (7,569) 2,846 (4,723) Decrease (increase) in trading properties 2,814 (5,776) (2,962) _______ _______ _______ Cash generated from operations 22,060 (3,731) 18,329 Interest paid (19,245) (492) (19,737) Profit on termination of hedging arrangement 722 - 722 Interest received 1,127 (21) 1,106 Tax paid (1,561) 1,460 (101) _______ _______ _______ Cash flows from operating activities 3,103 (2,784) 319 _______ _______ _______ Investing activities Purchase and development of property assets (110,615) - (110,615) Purchase of property, plant and equipment (9,007) - (9,007) Proceeds from property sales 287,486 - 287,486 Tax paid on property sales - (1,460) (1,460) Acquisition of subsidiary companies (15,153) - (15,153) Loans to joint ventures and associates (20,860) 2,212 (18,648) Distributions received from joint ventures and associates 2,165 - 2,165 _______ _______ _______ Cash flows from investing activities 134,016 752 134,768 _______ _______ _______ Financing activities Issue of shares 534 - 534 Purchase of own shares for cancellation (2,243) - (2,243) Investment in own shares (1,539) - (1,539) Decrease in borrowings (152,316) 3,323 (148,993) Payment of loan issue costs (2,858) - (2,858) Payment of finance lease liabilities - (1,663) (1,663) Equity dividends paid (11,318) - (11,318) _______ _______ _______ Cash flows from financing activities (169,740) 1,660 (168,080) _______ _______ _______ Net decrease in cash and cash equivalents (32,621) (372) (32,993) Cash and cash equivalents as at 1 April 2004 44,187 (282) 43,905 Effect of exchange rate fluctuations on cash held 197 - 197 _______ _______ _______ Cash and cash equivalents as at 31 March 2005 11,763 (654) 11,109 ====== ====== ====== (*) Reformatted to reflect IFRS reporting requirements Quintain Estates and Development PLC Notes to the unaudited financial statements for the year ended 31 March 2005 1. Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and interpretations adopted by the International Accounting Standards Board. The consolidated financial statements are prepared on a historical cost basis except for investment and development properties which are carried at fair value. 2. Property related income a Gross rental income Under IFRS, rent free periods are allocated over the whole lease term or to a tenant break option if appropriate, rather than the period to the first rent review as is the case under UK GAAP. £000 _______ UK GAAP for the year ended 31 March 2005 36,159 Reallocation of rent smoothing adjustment 235 _______ IFRS for the year ended 31 March 2005 36,394 ====== b Property related costs Notes £000 _______ _______ UK GAAP for the year ended 31 March 2005 8,746 Treatment of leasehold interests as finance leases i (1,663) Reversal of short leasehold amortisation on investment properties ii (61) Reversal of impairment on investment property iii (425) ______ IFRS for the year ended 31 March 2005 6,597 ===== Notes : i Under IFRS, leasehold property interests held as investment property at fair value are accounted for as finance leases. The liability under these leases is recognised as the present value of the minimum lease payments at the date of inception or acquisition of the lease. A finance charge is shown in these IFRS accounts based on the discount rate used in the present value calculations. ii Under IFRS, revaluation surpluses and deficits on investment properties are recognised in the income statement, thus measuring the amortisation in the value of the Group's short leasehold investment properties. iii As revaluation deficits on investment properties are included in the IFRS income statement, these deficits would also reflect any impairment charge previously recognised in property related costs under UK GAAP. 3. Profit from sale of trading properties Under UK GAAP, the results of a jointly administered arrangement, Countryside Properties (Merton Abbey Mills) Limited, is accounted for on a proportional basis. Under IFRS, these results are equity accounted in the same way as those of the Group's other joint ventures. a Proceeds from sale of trading properties £000 _______ UK GAAP for the year ended 31 March 2005 25,852 Reclassification of sales revenue to share of profit from joint ventures and associates (19,516) _______ IFRS for the year ended 31 March 2005 6,336 ====== b. Carrying value of trading properties sold £000 _______ UK GAAP for the year ended 31 March 2005 22,036 Reclassification of cost of sales to share of profit from joint ventures and associates (16,914) ______ IFRS for the year ended 31 March 2005 5,122 ====== 4. Profit from sale of investment properties Under UK GAAP, the profit from the sale of investment properties arising in joint ventures and associates is shown together with the profit from this source arising directly within the Group. Under IFRS, this is included as part of the result from joint ventures and associates in the income statement. 5. Gains (deficits) on revaluation of investment properties Under IFRS, changes in the fair value of investment properties are recognised separately in the income statement. Under UK GAAP, such revaluation surpluses or temporary deficits are recognised as a net movement within equity. 6. Deficits on revaluation of development properties Under IAS 16, Property, Plant and Equipment, when the carrying amount of a development property is decreased as a result of a revaluation, the decrease should be recognised as an expense. However, a revaluation decrease is charged directly against any related revaluation surplus to the extent that the decrease does not exceed the amount held in the revaluation surplus in respect of the same asset. 7. Net finance expenses Notes £000 ______ ______ UK GAAP for the year ended 31 March 2005 15,869 Net interest incurred by joint ventures and associates i (1,689) Interest payable on finance leases 2bi 1,147 Interest payable on convertible loan stock ii 85 Reversal of interest capitalised on development property in joint iii 492 arrangement Reclassification of joint venture interest iv 21 ______ IFRS for the year ended 31 March 2005 15,925 ===== Notes : i Under UK GAAP, interest expense arising within joint ventures and associates is included with the Group's directly incurred finance costs. Under IFRS, this is netted off against the operating results from such arrangements. ii Under UK GAAP, the Group's convertible loan stock is included under liabilities. Under IFRS, the present value of the liability is estimated at the date of issue using an appropriate rate of discount and this amount is reflected in the balance sheet under liabilities with the equity element included within the equity section. Interest is charged at this rate to the income statement during the life of the obligation. iii Under UK GAAP, the Group accounts for jointly administered arrangements on a proportional basis and capitalises interest on its share of the cost of properties in the course of development. Under IFRS, all such arrangements with third parties are included in the financial statements on an equity accounted basis. As a result, the interest previously capitalised on such development expenditure has been reversed. iv Under UK GAAP, the joint arrangement with Countryside Properties is accounted for on a proportional basis and interest incurred or received within the Company shown as part of the Group's finance charge for the year. Under IFRS, this interest is included in the income statement within the share of profit from other joint ventures and associates. 8. Share of profit from joint ventures and associates Notes £000 ______ ______ UK GAAP for the year ended 31 March 2005 : share of operating profit from joint ventures 4,608 share of operating profit from associates 195 ______ 4,803 Reclassification of share of profit in Countryside Properties (Merton i 2,623 Abbey Mills) Limited Cost of sales adjustment in respect of capitalised interest ii 308 Profit from sale of investment properties arising within joint ventures iii 709 and associates Net interest incurred by joint ventures and associates 7i (1,689) Share of revaluation gains in year iv 6,626 Current year tax on share of profit v (935) Deferred tax on revaluation gains in year vi (4,120) ______ IFRS for the year ended 31 March 2005 8,325 ===== Notes : i Under IFRS, the Group's joint arrangement, Countryside Properties (Merton Abbey Mills) Limited is accounted for on an equity basis rather than on a proportional basis. The entries required to arrive at this adjustment are as follows: £000 _______ Proceeds from sale of trading properties (19,516) Carrying value of trading properties sold 16,914 Financial income (21) Reclassification of share of profit in Countryside Properties (Merton Abbey Mills) Limited 2,623 _______ - ====== ii Under IFRS, as Countryside Properties (Merton Abbey Mills) Limited, is reclassified as a joint venture, interest previously capitalised on development expenditure under the proportional basis of accounting has been reversed. iii Under UK GAAP, the profit arising from the sale of investment properties within joint ventures and associates is included together with the Group's own profit from such sales. Under IFRS, this profit is shown in the income statement as part of the result from joint ventures and associates. iv Under UK GAAP, gains on revaluation of investment properties in joint ventures and associates are accounted for through equity. Under IFRS, movements in revaluation are included within the share of profit from joint ventures and associates in the income statement. v Under UK GAAP, the current year tax charge on the share of profit from joint ventures and associates is shown as part of the Group's tax charge. Under IFRS, this element of the current year charge is included within the results from joint ventures and associates. vi Under UK GAAP, deferred tax on revaluation gains is shown by way of a note to the accounts. Under IFRS, deferred tax on such gains is included as part of the share of profit from joint ventures and associates in income statement. 9 Taxation a. Tax (charge) credit for the year Current Deferred Total UK Overseas Total tax corporation tax tax £000 £000 £000 £000 £000 ______ _______ ________ __________ _______ UK GAAP for the year ended 31 March 2005 1,822 86 1,908 446 2,354 Adjustments 283 - 283 (7,066) (6,783) ______ _______ ________ __________ _______ IFRS for the year ended 31 March 2005 2,105 86 2,191 (6,620) (4,429) ===== ====== ======= ========= ====== The deferred tax release relates to the use of prior year tax losses and surplus ACT, which has offset the charge on the net revaluation gains reflected in the income statement. b Reconciliation of tax charge £000 _______ Profit before tax 37,329 Add : tax deducted from share of profit from joint ventures and associates 5,055 _______ 42,384 Tax @ 30% 12,715 Adjustments : ACT offset against chargeable gains (9,498) Locked-in capital allowances (3,801) Prior year tax movements 320 Tax charges taken to share of profit from joint ventures and associates (5,055) Indexation allowance (1,607) Overseas tax rates 351 Use of losses (797) Other movements 2,943 _______ (4,429) ====== c Deferred tax UK GAAP IFRS 1 April Recognised Recognised 31 March 2004 in income in equity 2005 £000 £000 £000 £000 ______ _______ ________ _______ Short term timing differences 4,671 481 - 5,152 Gains on revaluation of properties - 18,151 57,243 75,394 ______ _______ ________ _______ 4,671 18,632 57,243 80,546 ===== ====== ======= ====== 10. Earnings per share and net asset value per share a Earnings per share UK GAAP UK UK IFRS IFRS IFRS GAAP GAAP Profit Average Earnings Profit Average Earnings for the weighted per share for the weighted per share financial number financial number year of shares year of shares £000 000 pence £000 000 pence ________ ________ _______ ________ ________ _______ Basic 13,376 129,349 10.3 41,668 129,349 32.2 Adjustments: In respect of 8% convertible loan stock 168 2,000 228 2,000 In respect of employee share option arrangements - 1,031 - 1,031 ________ ________ ________ ________ Diluted 13,544 132,380 10.2 41,896 132,380 31.6 Adjustments: Net gains on revaluation of investment and development properties in income statement - - (25,653) - Deferred tax on net revaluation gains - - (2,946) - ________ ________ ________ _______ Adjusted 13,544 132,380 10.2 13,297 132,380 10.0 ======= ====== ====== ======= ====== ====== b Net asset value per share UK GAAP UK UK IFRS IFRS IFRS GAAP GAAP Net assets Number Net asset Net Number Net asset of shares value assets of shares value per share per share £000 000 pence £000 000 pence ________ ________ _______ ________ _______ _______ Basic 638,261 128,891 495 571,304 128,891 443 Adjustments: In respect of 8% convertible loan stock 3,000 2,000 2,797 2,000 In respect of employee share option 9,310 2,919 9,310 2,919 arrangements ________ _______ ________ _______ Diluted 650,571 133,810 486 583,411 133,810 436 Adjustments: Deferred tax on net revaluation gains - - 75,394 - ________ ________ _______ _______ Adjusted 650,571 133,810 486 658,805 133,810 492 ======= ======= ====== ======= ====== ====== 11. Investment and development properties Investment Development Notes properties properties £000 £000 _____ _______ _______ Balance as at 31 March 2005 : UK GAAP 742,876 - Transfer to development properties i (453,817) 453,817 Recalculation of rent free periods ii (330) - Gross-up of book value of leasehold property interests iii 1,473 10,076 _______ _______ Balance as at 31 March 2005 : IFRS 290,202 463,893 ====== ====== Notes : i Under IFRS, investment properties, mainly comprising land holdings, acquired with the intention of development have been redesignated properties in the course of development and are accounted for under IAS 16, Property, Plant and Equipment at fair value. Movements in the valuation of these properties are recognised not in the income statement but directly in the revaluation reserve in equity. ii Under IFRS, rent free periods are allocated over the whole lease term or to a tenant break option if appropriate. Under UK GAAP, rent free periods are allocated usually over the period to the first review. The corresponding adjustment is shown in Trade and other receivables. iii Under IFRS, the obligation to the lessor at the inception or acquisition of a lease is recognised as a separate liability. Under UK GAAP, this liability is included within the property valuation. Accordingly, the amount shown under non-current assets under IFRS has been grossed-up to reflect this adjustment. iv Investment and development properties have been valued as at 31 March 2005 at fair value by professionally qualified external valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors. 12. Owner occupied property, plant and equipment Notes £000 _____ ______ Balance as at 31 March 2005 : UK GAAP 9,215 Gross-up of carrying value of leasehold property interests i 1,201 ______ Balance as at 31 March 2005 : IFRS 10,416 ===== Notes : i. Under IFRS, the obligation to the lessor at the inception or acquisition of a lease is recognised as a separate liability. Under UK GAAP, this liability is included within the carrying value of the property. Accordingly, the amount shown under Owner occupied property, plant and equipment under IFRS in respect of long leasehold and short leasehold properties has been grossed-up to reflect this adjustment. The Group continues to show assets held under this heading at net book cost. 13. Investment in joint ventures Notes £000 _____ ______ Balance as at 31 March 2005 : UK GAAP 62,023 Restatement of investment in Countryside Properties (Merton Abbey Mills) i 8,616 Limited Adjustment in respect of capitalised interest included in carrying value of ii (407) property asset ______ Balance as at 31 March 2005 : IFRS 70,232 ===== Notes: i. Under UK GAAP, the results of a jointly administered arrangement, Countryside Properties (Merton Abbey Mills) Limited, is accounted for on a proportional basis. Under IFRS, these results are equity accounted in the same way as those of the Group's other joint ventures. The entries required to arrive at this adjustment are as follows: £000 ______ Trading properties (12,763) Trade and other receivables (2,979) Cash and cash equivalents (654) Trade and other payables 985 Non-current liabilities : Bank loans 6,795 Restatement of investment in Countryside Properties (Merton Abbey Mills) Limited 8,616 ______ - ===== ii As Countryside Properties (Merton Abbey Mills) Limited is now accounted for on an equity basis, interest previously capitalised on development expenditure has been reversed. 14. Borrowings As a result of the transitional arrangements under IAS 39, Financial Instruments : Recognition and Measurement, which applies to accounting periods commencing on or after 1 January 2005, borrowings as at 31 March 2005 remain unchanged. With effect from 1 April 2005, the Group's interest rate swaps will be included in the balance sheet at fair value with changes in fair value being recognised through equity in the case of effective cash flow hedges and through the income statement in the case of ineffective hedges and the ineffective portions of other hedges. The IFRS balance sheet as at 31 March 2005 will be restated for the adoption of IAS 39 by including interest rate swaps with a negative value of £8,651,000 together with a tax credit of £2,595,000, reducing net assets as at that date by £6,056,000. 15. Trade and other payables The accrual for the proposed final dividend of £8,700,000 provided under UK GAAP has not been recognised within these IFRS statements, but will henceforward be shown by way of a note. 16. Other borrowings Under UK GAAP, the Group's convertible loan stock is included under liabilities. Under IFRS, the liability has been estimated at the date of issue as the present value of payments due under the obligation using an appropriate discount rate. The equity element is shown within the equity section of the balance sheet. 17. Deferred tax liability £000 _______ Balance as at 31 March 2005 : UK GAAP 5,117 Deferred tax on short term timing differences 35 Deferred tax arising on revaluation gains 78,195 Deferred tax assets arising on revaluation deficits (2,801) _______ Balance as at 31 March 2005 : IFRS 80,546 ====== The amount of tax losses offset against the deferred tax on revaluation gains is £2,895,000. 18. Obligations under finance leases Notes £000 ______ ______ Balance as at 31 March 2005 : UK GAAP - Investment properties 11 1,473 Development properties 11 10,076 Owner occupied properties 12 1,201 ______ Balance as at 31 March 2005 : IFRS 12,750 ===== 19. Translation reserve Under UK GAAP, differences arising from the translation of the net equity investment in overseas subsidiaries were dealt with through retained earnings. Under IFRS, these are shown in a translation reserve which is disclosed separately within the equity section of the balance sheet. 20. Equity attributable to equity shareholders of the parent Notes £000 _______ _______ Balance as at 31 March 2005 : UK GAAP 638,261 Deferred tax on net revaluation gains 17 (75,394) Proposed final dividend 15 8,700 Other adjustments (263) _______ Balance as at 31 March 2005 : IFRS 571,304 ====== This information is provided by RNS The company news service from the London Stock Exchange

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