Interim Results - Part 2

Slough Estates PLC 24 August 2005 Part 2 Slough Estates plc Group income statement For the half year to 30 June 2005 Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Note Â£m Â£m Â£m -------------------------- ----- ---------- --------- ---------- Revenue 5 232.5 161.6 342.7 -------------------------- ----- ---------- --------- ---------- Gross rental income from rental properties 153.0 132.6 257.4 Interest received on finance lease assets 0.4 0.4 0.9 Other property related income 5.9 6.5 13.4 Property outgoings (22.4) (19.7) (39.2) -------------------------- ----- ---------- --------- ---------- Net rental income 136.9 119.8 232.5 -------------------------- ----- ---------- --------- ---------- Proceeds on sale of trading properties 49.0 4.3 31.4 Carrying value of trading properties sold (26.1) (2.1) (27.7) Trading property rental income 1.6 2.0 4.2 Property outgoings relating to trading properties (0.4) (0.3) (1.1) -------------------------- ----- ---------- --------- ---------- Net income from trading properties 24.1 3.9 6.8 -------------------------- ----- ---------- --------- ---------- Income from sale of utilities and gas 22.6 15.8 35.4 Cost of sales (23.6) (20.7) (42.8) -------------------------- ----- ---------- --------- ---------- Net income from utilities and gas (1.0) (4.9) (7.4) -------------------------- ----- ---------- --------- ---------- Other investment income 3.3 3.2 10.5 Administration expenses (7.7) (6.3) (14.7) (Loss)/gain on disposal of property assets (3.0) 0.1 64.7 Net valuation gains 6 137.6 84.0 166.7 -------------------------- ----- ---------- --------- ---------- Operating income 290.2 199.8 459.1 Finance costs 7 (58.3) (49.6) (101.9) Exceptional loss on repayment of bonds 7 (125.6) - - -------------------------- ----- ---------- --------- ---------- (183.9) (49.6) (101.9) -------------------------- ----- ---------- --------- ---------- Finance income 8 7.7 2.6 6.7 Share of profit from joint ventures and associate after tax 9 5.0 20.8 24.1 -------------------------- ----- ---------- --------- ---------- Profit before tax 119.0 173.6 388.0 Taxation - current 10 (13.5) (11.0) (49.4) - deferred 10 (32.1) (35.7) (42.8) -------------------------- ----- ---------- --------- ---------- (45.6) (46.7) (92.2) -------------------------- ----- ---------- --------- ---------- Profit after tax 73.4 126.9 295.8 Preference dividends 11 - (5.6) (11.2) -------------------------- ----- ---------- --------- ---------- Profit for the period 73.4 121.3 284.6 -------------------------- ----- ---------- --------- ---------- Attributable to minority interests 1.8 (0.7) (1.2) Attributable to equity shareholders 19 71.6 122.0 285.8 -------------------------- ----- ---------- --------- ---------- 73.4 121.3 284.6 -------------------------- ----- ---------- --------- ---------- Basic earnings per ordinary share 12 17.1p 29.3p 68.5p Diluted earnings per ordinary share 12 16.7p 27.2p 63.4p Slough Estates plc Statement of recognised income and expense For the half year to 30 June 2005 Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Note Â£m Â£m Â£m ------------------------------- ----- -------- ------- -------- Revaluation gains and losses on properties in course of development 6 7.5 3.2 24.1 Exchange differences arising on translation of overseas operations 14.7 (6.3) (12.5) Actuarial losses on defined benefit pension schemes (3.0) (3.2) (10.6) Deferred tax liability arising on items taken directly to equity (5.7) (1.3) (3.3) ------------------------------- ----- -------- ------- -------- Net gain/(loss) recognised directly in equity 13.5 (7.6) (2.3) Profit for the period 73.4 121.3 284.6 ------------------------------- ----- -------- ------- -------- Total recognised income and expense for the period 86.9 113.7 282.3 ------------------------------- ----- -------- ------- -------- Attributable - equity shareholders 85.1 114.4 283.6 to - minority interests 1.8 (0.7) (1.3) --------- ------------------------ ----- -------- ------- -------- 86.9 113.7 282.3 ------------------------------- ----- -------- ------- -------- Statement of changes in shareholder equity For the half year to 30 June 2005 Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Note Â£m Â£m Â£m ------------------------------- ----- -------- ------- -------- Shareholders' funds at 1 January 2,165.1 1,942.4 1,942.4 Effect of adopting IAS 32 and 39 (103.6) - - ------------------------------- ----- -------- ------- -------- As restated 2,061.5 1,942.4 1,942.4 Preference share conversions 7.1 - - Issue of ordinary shares 1.4 0.8 3.0 Fair value of share based payments - 0.2 0.2 Purchase of shares in ESOP (2.6) - (0.8) Issue of shares in ESOP 0.9 0.8 0.8 ------------------------------- ----- -------- ------- -------- 2,068.3 1,944.2 1,945.6 Total recognised income and expense for the period 85.1 114.4 283.6 Ordinary dividend paid 11 (41.6) (38.4) (64.1) ------------------------------- ----- -------- ------- -------- Shareholders' funds at end of period 19 2,111.8 2,020.2 2,165.1 ------------------------------- ----- -------- ------- -------- Slough Estates plc Group balance sheet 30 June 30 June 31 December As at 30 June 2005 2005 2004 2004 Note Â£m Â£m Â£m -------------------------- ----- -------- -------- --------- Non-current assets Goodwill 13 0.6 - - Investment properties 14 3,816.8 3,370.5 3,452.7 Property, plant and equipment 15 381.6 353.8 394.8 Finance lease receivables 10.8 11.0 10.9 Available-for-sale investments 44.5 34.5 38.4 Investments in joint ventures and associate 16 94.1 220.8 84.1 Deferred tax asset 0.3 - 0.2 -------------------------- ----- -------- -------- --------- Total non-current assets 4,348.7 3,990.6 3,981.1 -------------------------- ----- -------- -------- --------- Current assets Inventories 1.8 1.7 1.9 Trading properties 104.7 124.5 125.3 Finance lease receivables 0.1 0.1 0.1 Trade and other receivables 121.9 90.9 115.0 Non-current assets classified as held-for-sale 87.3 - - Cash and cash equivalents 178.3 136.7 397.4 -------------------------- ----- -------- -------- --------- Total current assets 494.1 353.9 639.7 -------------------------- ----- -------- -------- --------- Total assets 4,842.8 4,344.5 4,620.8 -------------------------- ----- -------- -------- --------- Non-current liabilities Borrowings 17 1,634.6 1,644.7 1,683.5 Obligations under finance leases 0.5 0.5 0.5 Pension scheme deficit 18 30.2 27.3 41.5 Deferred tax provision 18 488.6 441.1 448.4 Provisions for liabilities and charges 18 0.3 20.4 18.3 Other payables 14.8 9.1 15.8 -------------------------- ----- -------- -------- --------- Total non-current liabilities 2,169.0 2,143.1 2,208.0 -------------------------- ----- -------- -------- --------- Current liabilities Borrowings 17 331.1 8.0 39.2 Liabilities relating to non-current assets 55.0 - - held-for-sale Tax liabilities 9.4 20.2 47.4 Trade and other payables 148.0 134.5 141.7 -------------------------- ----- -------- -------- --------- Total current liabilities 543.5 162.7 228.3 -------------------------- ----- -------- -------- --------- Total liabilities 2,712.5 2,305.8 2,436.3 -------------------------- ----- -------- -------- --------- -------------------------- ----- -------- -------- --------- Net assets 2,130.3 2,038.7 2,184.5 -------------------------- ----- -------- -------- --------- Equity Called up ordinary share capital 105.7 138.7 138.8 Share premium account 250.3 337.0 339.1 Own shares held (6.9) (4.4) (5.2) Other reserves 1,283.2 1,172.1 1,127.2 Retained earnings 479.5 376.8 565.2 -------------------------- ----- -------- -------- --------- 19 2,111.8 2,020.2 2,165.1 Minority interests 18.5 18.5 19.4 -------------------------- ----- -------- -------- --------- Total equity 2,130.3 2,038.7 2,184.5 -------------------------- ----- -------- -------- --------- Net assets per ordinary share: Basic 12 501p 451p 486p Diluted 12 472p 430p 461p Slough Estates plc Summarised group cash flow statement For the half year to 30 June 2005 Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Note Â£m Â£m Â£m -------------------------- ----- -------- -------- --------- Cash inflow generated from operations 22 154.1 104.5 202.4 Interest received on deposits 6.2 2.5 7.4 Dividends received from joint ventures and associate 2.8 4.3 8.4 Dividends received from available-for-sale investments 0.7 2.7 3.1 Interest paid (including penalty on bond repayment) (99.9) (51.9) (115.0) Dividend paid to preference shareholders (5.6) (5.7) (11.3) Minority dividends paid (3.9) (0.5) (0.9) Tax paid (49.8) (5.9) (15.3) Funding pension scheme deficit (15.0) - - -------------------------- ----- -------- -------- --------- Net cash (outflow)/inflow from operating activities (10.4) 50.0 78.8 -------------------------- ----- -------- -------- --------- Cash Flows from investing activities Purchase and development of investment properties (189.8) (21.5) (68.1) Sales of investment properties 14.2 2.7 237.1 Amount received from property swaps - - 3.4 Legal costs paid in relation to property swap (0.6) - (2.2) Purchase of property, plant and equipment (66.6) (27.5) (35.8) Sale of property, plant and equipment 3.7 0.9 0.9 Purchase of available-for-sale investments (2.7) (4.6) (16.2) Proceeds from disposal of available-for-sale investment 4.7 11.6 20.5 Proceeds from reduction in holding of subsidiary - - 3.3 Investment and loans to associate and joint ventures (5.3) (1.2) (3.8) Investment in longer term deposits 180.6 - (184.5) Acquisition of minority interests - - (4.0) Contribution from minorities - 0.2 4.6 -------------------------- ----- -------- -------- --------- Net cash used in investing activities (61.8) (39.4) (44.8) -------------------------- ----- -------- -------- --------- Cash flows from financing activities Dividend paid to ordinary shareholders (41.6) (38.4) (64.1) Net increase in borrowings 71.2 4.9 88.2 Proceeds from issue of ordinary shares 0.7 0.8 3.0 Purchase of own shares (1.0) - (0.8) -------------------------- ----- -------- -------- --------- Net cash used in financing activities 29.3 (32.7) 26.3 -------------------------- ----- -------- -------- --------- Net (decrease)/increase in cash and cash equivalents (42.9) (22.1) 60.3 Cash and cash equivalents at the beginning of the year 218.1 158.6 158.6 Effect of foreign exchange rate changes (0.1) (1.4) (0.8) -------------------------- ----- -------- -------- --------- Cash and cash equivalents at the end of the year 175.1 135.1 218.1 -------------------------- ----- -------- -------- --------- Cash and cash equivalents per balance sheet 178.3 136.7 397.4 Less restricted deposits - - (176.0) -------------------------- ----- -------- -------- --------- 178.3 136.7 221.4 Bank overdrafts (3.2) (1.6) (3.3) -------------------------- ----- -------- -------- --------- Cash and cash equivalents per cash flow 175.1 135.1 218.1 -------------------------- ----- -------- -------- --------- Independent review report to Slough Estates plc Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2005 which comprises the consolidated interim balance sheet as at 30 June 2005 and the related consolidated interim statements of income, cash flows, recognised income and expense, changes in equity and the related notes for the six months then ended. 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. As disclosed in note 2, the next annual financial statements of the group will be prepared in accordance with accounting standards adopted for use in the European Union. This interim report has been prepared in accordance with the basis set out in note 2 and 24. The accounting policies are consistent with those that the directors intend to use in the next annual financial statements. As explained in note 2, there is, however, a possibility that the directors may determine that some changes are necessary when preparing the full annual financial statements for the first time in accordance with accounting standards adopted for use in the European Union. The IFRS standards and IFRIC interpretations that will be applicable and adopted for use in the European Union at 31 December 2005, are not known with certainty at the time of preparing this interim financial information. 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 disclosed accounting policies have been applied. 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 and therefore provides a lower level of assurance. 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 June 2005. PricewaterhouseCoopers LLP, Chartered Accountants London 24 August 2005 Notes: a) The maintenance and integrity of the Slough Estates plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website. b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. SLOUGH ESTATES plc NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL Slough Estates plc ('the group') is a limited company incorporated in England. These financial statements are presented in millions and in sterling since that is the currency in which the majority of the group's transactions are denominated. The results for the year ended 31 December 2004 have been audited whilst the results for the six months ended 30 June 2004 and 30 June 2005 are unaudited. The Interim Report is unaudited and does not constitute statutory accounts within the meaning of s240 of the Companies Act 1985. The statutory accounts for 2004, which were prepared under UK Generally Accepted Accounting Principles ('GAAP'), have been delivered to the Registrar of Companies. The auditors' opinion on these accounts was unqualified and did not contain a statement made under s237(2) or s237(3) of the Companies Act 1985. The income statement and balance sheet have been prepared, in accordance with applicable International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and on the basis that all such standards will be endorsed by the European Union ('the EU'). These standards are also collectively referred to as 'IFRS'. 2. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) All listed companies in the EU are required to present their consolidated financial statements for accounting periods beginning on or after 1 January 2005 in accordance with IFRS as adopted by the EU. Therefore, the group's consolidated financial statements for the year ending 31 December 2005 will be presented on this basis with IFRS comparatives. These interim financial statements have been prepared on the basis of the IFRS accounting policies expected to be adopted in the year end consolidated financial statements. Reconciliations have been provided of certain key figures to UK GAAP and these, together with an explanation of the resulting changes in accounting policies, are set out in note 24. The group's transition date for the adoption of IFRS is 1 January 2004 and its transition date for the implementation of IAS 32 and IAS 39 dealing with financial instruments is 1 January 2005. These transition dates have been selected in accordance with IFRS 1, 'First-time adoption of International Financial Reporting Standards'. Although there is now a fairly stable platform, standards continue to evolve and those currently in issue and endorsed by the EU are subject to interpretation by the International Financial Reporting Interpretations Committee (IFRIC) and further standards may be issued and endorsed by the EU before 31 December 2005. These uncertainties could result in the need to change the basis of accounting or presentation of certain financial information from that applied in the preparation of this document. The group is required to apply its IFRS accounting policies retrospectively to determine its opening IFRS balance sheet at the transition date of 1 January 2004 and the comparative information for the year ending 31 December 2005. Business combinations prior to 1 January 2004 have not been restated to comply with IFRS 3, 'Business Combinations'. The group has applied IFRS 2, 'Share-based payment', retrospectively only to awards made after 7 November 2002 that had not vested at 1 January 2005. The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates. 3. ACCOUNTING POLICY CHANGES An explanation of the changes in accounting policies as a result of adopting IFRS, together with a full list of the revised accounting policies are shown in note 24. Notes to the financial statements (continued) 4. Segmental analysis Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m --------------------- -------- -------- -------- --------- Primary segments Investment property Turnover 159.3 139.5 271.7 Operating costs (22.4) (19.7) (39.2) ---------------------------- -------- -------- --------- Operating profit 136.9 119.8 232.5 (Loss)/gain on disposal of property assets (3.0) 0.1 64.7 Net valuation gains 137.6 84.0 166.7 Share of profit from joint ventures and associate after tax 5.3 20.9 24.9 ---------------------------- -------- -------- --------- Operating result 276.8 224.8 488.8 --------------------- -------- -------- -------- --------- Trading property Turnover 50.6 6.3 35.6 Operating costs/cost of sale (26.5) (2.4) (28.8) ---------------------------- -------- -------- --------- Operating profit 24.1 3.9 6.8 Share of loss from joint ventures after tax (0.3) (0.1) (0.8) ---------------------------- -------- -------- --------- Operating result 23.8 3.8 6.0 --------------------- -------- -------- -------- --------- Utilities and gas Turnover 22.6 15.8 35.4 Cost of sales (23.6) (20.7) (42.8) --------------------- -------- -------- -------- --------- Operating result (1.0) (4.9) (7.4) --------------------- -------- -------- -------- --------- Operating result of 299.6 223.7 487.4 segments Other investment income 3.3 3.2 10.5 Administration expenses (7.7) (6.3) (14.7) Net finance costs (176.2) (47.0) (95.2) Taxation (45.6) (46.7) (92.2) --------------------- -------- -------- -------- --------- Net profit for period 73.4 126.9 295.8 --------------------- -------- -------- -------- --------- Geographic segments Turnover United Kingdom 106.2 106.3 211.7 Australia - Gas 3.5 1.5 4.7 Canada - 1.2 2.3 USA 89.1 39.2 73.1 Europe 33.7 13.4 50.9 --------------------- -------- -------- -------- --------- 232.5 161.6 342.7 --------------------- -------- -------- -------- --------- Operating result of segments United Kingdom 193.4 150.6 301.4 Australia - Gas (1.8) (1.9) (3.3) Canada - 4.2 5.0 USA 87.1 54.1 150.4 Europe 20.9 16.7 33.9 --------------------- -------- -------- -------- --------- 299.6 223.7 487.4 --------------------- -------- -------- -------- --------- Notes to the financial statements (continued) 4. Segmental analysis (continued) Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m ----------------------------- -------- -------- -------- Property investment turnover comprises Rents United Kingdom 83.9 89.7 174.1 Canada - 0.9 1.7 USA 58.9 32.0 61.5 Europe 10.6 10.4 21.0 ----------------------------- -------- -------- -------- 153.4 133.0 258.3 ----------------------------- -------- -------- -------- Tenant recharges and other United Kingdom 2.2 2.3 4.4 Canada - 0.3 0.7 USA 3.4 3.7 7.8 Europe 0.3 0.2 0.5 ----------------------------- -------- -------- -------- 5.9 6.5 13.4 ----------------------------- -------- -------- -------- Total property investment revenue United Kingdom 86.1 92.0 178.5 Canada - 1.2 2.4 USA 62.3 35.7 69.3 Europe 10.9 10.6 21.5 ----------------------------- -------- -------- -------- 159.3 139.5 271.7 ----------------------------- -------- -------- -------- Rents include a significant surrender premium of Â£36.6m (half year 2004 Â£7.5m : year 2004 Â£7.5m). 5. Revenue Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m ----------------------------- -------- -------- -------- Rental income from investment properties 153.0 132.6 257.4 Interest received on finance lease assets 0.4 0.4 0.9 Service charge income 5.6 6.1 12.6 Miscellaneous property income 0.3 0.4 0.8 ----------------------------- -------- -------- -------- Total property investment revenue 159.3 139.5 271.7 Proceeds on sale of trading properties 49.0 4.3 31.4 Trading property rental income 1.6 2.0 4.2 Sale of electricity, water and steam 19.1 14.3 30.7 Sale of oil and gas 3.5 1.5 4.7 ----------------------------- -------- -------- -------- Total revenue 232.5 161.6 342.7 ----------------------------- -------- -------- -------- 6. Net valuation gains The total valuation gains and losses for the period are shown in the financial statements as follows: Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m ----------------------------- -------- -------- -------- Income statement 137.6 84.0 166.7 Statement of recognised income and expense 7.5 3.2 24.1 ----------------------------- -------- -------- -------- Total valuation gains of group companies 145.1 87.2 190.8 ----------------------------- -------- -------- -------- The valuation gains and losses of joint ventures and associate are included within their results shown on the face of the income statement and are excluded from the above figures. Notes to the financial statements (continued) 7. Finance costs Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m -------------------------------- -------- -------- -------- Interest on bank loans and overdrafts 11.6 9.7 20.5 Interest on other loans 46.6 46.9 95.9 Interest on convertible redeemable preference shares 6.6 - - Unwinding of discount on the pensions liability less return on assets 0.7 0.4 0.9 Unwinding of discount on provisions 0.2 0.2 0.5 -------------------------------- -------- -------- -------- Total borrowing costs 65.7 57.2 117.8 Less amount charged to : the development of trading properties (0.4) (0.7) (0.8) : the development of investment properties (8.5) (6.1) (14.0) : the development of other assets (0.5) (0.8) (1.2) -------------------------------- -------- -------- -------- Net borrowing cost 56.3 49.6 101.8 Fair value losses on interest rate swaps and other derivatives 2.0 - - Exchange differences - - 0.1 -------------------------------- -------- -------- -------- Total finance costs 58.3 49.6 101.9 -------------------------------- -------- -------- -------- -------------------------------- -------- -------- -------- Exceptional loss on exchange of bonds (see explanation below) 125.6 - - -------------------------------- -------- -------- -------- On 10 May 2005 the group announced a debt exchange programme whereby holders of the following bonds were offered the chance to exchange the bonds at market value plus an incentive into new longer dated current coupon bonds: Â£50m 10% Euro Bond 2007 Â£31.8m 12.375% Unsecured Loan Stock 2009 Â£100m 11.625% Euro Bond 2012 Â£100m 10% Euro Bond 2017 Â£40m 11.25% 1st Mortgage Debenture 2019 The three shorter dated bonds were exchanged into a new unsecured issue bearing a coupon of 5.5% with a maturity date of 2018. The two longer dated bonds were exchanged into a new unsecured issue bearing a coupon of 5.75% with a maturity date of 2035. Those investors unable to hold the new bonds because of duration mismatches or because of the unsecured nature of the new bonds were offered a cash-out alternative whereby the company bought back the new bonds for redemption. The proposals were voted on at bondholders' EGMs on 8 June 2005 and as over 75% of all holders of each issue voted in favour of the proposals, they were adopted in full and the old bonds were effectively redeemed on 21 June 2005 and were replaced with the following new debt. Â£200m 5.5% Euro Bond 2018 Â£100m 5.75% Euro Bond 2035 Â£146m of new bank line drawings at circa 5% The cost of the exchange reflecting the mark-to-market fair value of the old bonds plus the Â£4.9m incentive fee results in a once-off tax deductible finance charge of Â£125.6m to the half year income statement. However, future cash interest charges should be reduced by circa Â£11.0m per annum. -------------------------------- -------- -------- -------- 8. Finance income Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m -------------------------------- -------- -------- -------- Interest received on bank deposits 6.4 2.5 6.7 Fair value gains on interest rate swaps and other derivatives 0.7 - - Exchange differences 0.6 0.1 - -------------------------------- -------- -------- -------- 7.7 2.6 6.7 -------------------------------- -------- -------- -------- Notes to the financial statements (continued) 9. Share of profit from joint Half year to Half year to Year to ventures and associate after tax 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m ---------------------------------- -------- -------- -------- Group share of : Operating profit before finance and valuation gains 4.3 7.6 15.4 Finance cost (1.3) (1.3) (2.7) Valuation gains 2.4 17.7 15.4 ---------------------------------- -------- -------- -------- Profit before tax 5.4 24.0 28.1 Current taxation (0.5) (0.4) (1.1) Deferred taxation 0.1 (2.8) (2.9) ---------------------------------- -------- -------- -------- Profit after tax 5.0 20.8 24.1 ---------------------------------- -------- -------- -------- 10. Taxation Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m ---------------------------------- -------- -------- -------- Current tax Corporation tax charge at 30 per cent 13.5 11.0 15.0 (2004 30 per cent) Tax in respect of property disposals - - 34.4 ---------------------------------- -------- -------- -------- 13.5 11.0 49.4 ---------------------------------- -------- -------- -------- Deferred tax Origination and reversal of timing differences 10.9 10.7 30.1 Released in respect of property disposals in the period (0.9) - (51.6) On valuation surplus 38.8 21.8 58.2 ---------------------------------- -------- -------- -------- Total deferred tax in respect of investment properties 48.8 32.5 36.7 Released in respect of Quail West 12.7 - - Other deferred tax (29.4) 3.2 6.1 ---------------------------------- -------- -------- -------- Total deferred tax 32.1 35.7 42.8 ---------------------------------- -------- -------- -------- Total tax on profit on ordinary activities 45.6 46.7 92.2 ---------------------------------- -------- -------- -------- A contingent tax asset of Â£93.9m relating to unused indexation allowances has not been recognised in the financial statements due to the restrictions in IFRS (see note 24(a)). 11. Dividends Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m ---------------------------------- -------- -------- -------- Ordinary dividends paid Final dividend for the year ended 31 December 2004 @ 9.85p per share 41.6 - - Final dividend for the year ended 31 December 2003 @ 9.2p per share - 38.4 38.4 Interim dividend for the year ended 31 - - 25.7 December 2004 @ 6.15p per share -------- -------- -------- ---------------------------------- 41.6 38.4 64.1 ---------------------------------- -------- -------- -------- The board have proposed an interim dividend of 6.5p per share (2004 6.15p). As required by IFRS this dividend is not recognised in the financial statements until paid. The preference dividend paid during the period of Â£5.6m (2004 half year Â£5.6m; year 2004 Â£11.2m) is included in 2005 within finance costs. Notes to the financial statements (continued) 12. Earnings and net assets Half year to Half year to Year to per ordinary share 30 June 30 June 31 December 2005 2004 2004 --------------------------- ---- --- ------- -------- -------- -------- Earnings per ordinary share The weighted average number of shares used for the calculation of the earnings per share is as follows: Weighted average number of shares in issue Shares m 420.7 418.2 418.6 Less weighted average number of shares held by ESOP Shares m (1.7) (1.4) (1.4) --------------------------- ------- -------- -------- -------- Basic weighted average number of shares a Shares m 419.0 416.8 417.2 Dilution adjustments: Preference shares Shares m 47.1 50.4 50.4 Share options and save-as-you-earn schemes Shares m 1.5 1.3 1.3 --------------------------- --- ------- -------- -------- -------- Diluted weighted average number of shares b Shares m 467.6 468.5 468.9 --------------------------- ---- ------- -------- -------- -------- Earnings used for the calculation of earnings per share is as follows: Attributable profit c Â£m 71.6 122.0 285.8 Dividends on preference shares Â£m 6.6 5.6 11.2 --------------------------- ---- ------- -------- -------- -------- d Â£m 78.2 127.6 297.0 Deferred tax relating to investment properties Â£m 10.9 12.2 30.1 Revaluation surpluses including joint ventures and associate net of deferred tax and minority Â£m (101.7) (76.8) (146.3) Add back exceptional losses on repayment of bonds net of tax Â£m 88.0 - - Profits and losses on sale of investment properties net of tax and minorities Â£m 2.1 (0.1) (54.6) Add back profit on the sale of Quail West net of tax Â£m (9.5) - - --------------------------- ---- ------- -------- -------- -------- Adjusted diluted earnings e Â£m 68.0 62.9 126.2 --------------------------- ---- ------- -------- -------- -------- Adjusted basic earnings f Â£m 61.4 57.3 115.0 --------------------------- ---- ------- -------- -------- -------- Earnings per ordinary share Basic c/a pence 17.1 29.3 68.5 Basic adjusted f/a pence 14.7 13.7 27.6 Diluted d/b pence 16.7 27.2 63.4 Diluted adjusted e/b pence 14.5 13.4 26.9 Net assets per ordinary share The number of ordinary shares used for the calculation of net assets per share is as follows: Number of shares in issue Shares m 422.9 418.7 419.3 Less number of shares held by ESOP Shares m (1.7) (1.2) (1.4) --------------------------- ----- ------- -------- -------- -------- Basic number of shares h Shares m 421.2 417.5 417.9 Dilution adjustments: Preference shares Shares m 47.1 50.4 50.4 Share options and save-as-you-earn schemes Shares m 1.5 1.4 1.3 --------------------------- ----- ------- -------- -------- -------- Diluted number of shares l Shares m 469.8 469.3 469.6 --------------------------- ----- ------- -------- -------- -------- Equity used for the calculation of net assets per ordinary share is as follows: Total equity attributable to ordinary shareholders Â£m 2,118.7 1,888.6 2,034.3 Less shares held by ESOP Â£m (6.9) (4.4) (5.2) --------------------------- ----- ------- -------- -------- -------- Restated equity j Â£m 2,111.8 1,884.2 2,029.1 Adjustment to exclude deferred tax on investment properties and latent CGT on revaluation surpluses Â£m 513.2 460.2 457.3 --------------------------- ----- ------- -------- -------- -------- Adjusted equity attributable k Â£m 2,625.0 2,344.4 2,486.4 to ordinary shareholders Dilution adjustment for preference shares Â£m 106.4 136.0 136.0 --------------------------- ----- ------- -------- -------- -------- Adjusted diluted equity attributable to ordinary shareholders m Â£m 2,731.4 2,480.4 2,622.4 --------------------------- ----- ------- -------- -------- -------- Diluted equity attributable to ordinary shareholders n Â£m 2,218.2 2,020.2 2,165.1 --------------------------- ----- ------- -------- -------- -------- Net assets per ordinary share Basic j/h pence 501 451 486 Basic adjusted for deferred tax on investment property k/h pence 623 562 595 Diluted n/l pence 472 430 461 Diluted adjusted for deferred tax on investment property m/l pence 581 529 558 Notes to the financial statements (continued) 12. Earnings and net assets per ordinary share (continued) The group has also presented an adjusted basic earnings per share figure to exclude the impact of profits and losses on the sale of investment properties (net of taxation and minority interests), profit from the sale of Quail West, loss on the refinancing of bonds, revaluation surpluses on investment properties and deferred tax that would arise on the sale of investment properties. Adjusted profit before tax for the six months to 30 June 2004 and the year to 31 December 2004 have also been reduced for comparative purposes, by a notional finance charge in respect of the preference shares. This is the approximate charge that would have applied for the periods had the group elected to apply IAS 32 and 39 with effect from 1 January 2004. The directors consider that this adjusted figure gives a more meaningful comparison for the periods shown in the consolidated financial statements. Deferred tax has been excluded from the adjusted calculation as the group has no plans to sell a significant proportion of its investment properties, and in any case, it is generally very unusual for UK capital allowances to be recaptured on the disposal of a property. Profits and losses on the sale of investment properties and the loss on the bond repayment are excluded from adjusted earnings as these are non-recurring items. Net assets per share are calculated using the equity shareholders' funds of Â£2,111.8 million (2004 half year Â£1,884.2 million: year 2004 Â£2,029.1 million). Adjusted net assets per share have been calculated on the same number of shares but shareholders' funds exclude the deferred tax liability of Â£513.2 million (2004 half year Â£460.2 million; year 2004 Â£457.3 million) as it is the opinion of the directors that deferred tax on capital allowances and valuation surplus in relation to investment properties is unlikely to crystallise materially in practice. 13. Goodwill The goodwill arising in the period relates to the acquisition of Mainland BV, a company incorporated in the Netherlands. The main activity of this company is the development and sale of trading properties. 14. Investment properties Investment properties consist of completed land and buildings and properties in the course of redevelopment. They exclude properties occupied by group companies and land held for development and developments in the course of construction. These are classified as property, plant and equipment in accordance with IAS 16 and are shown in note 15. UK North America Europe Total Â£m Â£m Â£m Â£m --------------------- ------- -------- --------- --------- -------- At 1 January 2005 2,776.8 411.1 264.8 3,452.7 Exchange movement - 37.8 (12.5 ) 25.3 Additions 27.6 171.7 (1.7 ) 197.6 Disposals (13.5) (3.7) - (17.2) Transfer from property, plant and equipment 11.5 3.0 - 14.5 Surplus on valuation 127.3 11.0 5.6 143.9 ------------------- ------- -------- --------- --------- -------- At 30 June 2005 2,929.7 630.9 256.2 3,816.8 ------------------- ------- -------- --------- --------- -------- At 30 June 2004 2,525.5 595.0 250.0 3,370.5 ------------------- ------- -------- --------- --------- -------- The group's properties were externally valued as at 30 June 2005 by CB Richard Ellis, DTZ Debenham Tie Leung or Colliers Conrad Ritblat Erdman in the United Kingdom, in the USA by Walden-Marling, Inc., in Belgium by De Crombrugghe & Partners s.a. and in France by CB Richard Ellis Bourdais. The valuation basis is fair value, conforms to international valuation standards and was arrived at by reference to market evidence of the transaction prices for similar properties. All the valuers listed above are qualified valuers who hold a recognised and relevant professional qualification and have recent experience in the relevant location and category of the properties being valued. CB Richard Ellis and DTZ Debenham Tie Leung also undertake some professional and letting work on behalf of the group, although this activity is limited in relation to the activities of the group as a whole. Both companies advise us that the total fees paid by the group represent less than 5 per cent of their total revenue in any year and have adopted policies for the regular rotation of the responsible valuer. Notes to the financial statements (continued) 14. Investment properties (continued) The external valuation is included on the balance sheet under the following headings: 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m ------------------ --------- --------- -------- --------- -------- Investment property 3,816.8 3,370.5 3,452.7 Property included in property, plant and equipment 337.4 244.2 276.7 ------------------ --------- --------- --------- -------- Total assets externally valued 4,154.2 3,614.7 3,729.4 ------------------ --------- --------- -------- --------- -------- 15. Property, plant and equipment Properties in Property Gas & Other plant the course of held for utilities fixtures development own use plant and fittings Total Â£m Â£m Â£m Â£m Â£m ------------------ --------- --------- -------- --------- -------- Cost or valuation At 1 January 2005 259.2 17.7 121.1 10.8 408.8 Exchange 8.0 - 2.0 - 10.0 Additions 70.2 - 7.6 0.9 78.7 Disposals (3.9) - - (0.2) (4.1) Transfer to investment property (14.5) - - - (14.5) Revaluation surplus during period 0.7 0.5 - - 1.2 Transfer to assets-for-sale - - (83.6) - (83.6) ------------------ --------- --------- -------- --------- -------- At 30 June 2005 319.7 18.2 47.1 11.5 396.5 ------------------ --------- --------- -------- --------- -------- Depreciation and impairment At 1 January 2005 - 0.2 6.3 7.5 14.0 Exchange - - 0.1 - 0.1 Additions - 0.3 2.1 0.5 2.9 Disposals - - - (0.1) (0.1) Transfer to assets-for-sale - - (2.0) - (2.0) ------------------ --------- --------- -------- --------- -------- At 30 June 2005 - 0.5 6.5 7.9 14.9 ------------------ --------- --------- -------- --------- -------- Net book value at 30 June 2005 319.7 17.7 40.6 3.6 381.6 ------------------ --------- --------- -------- --------- -------- Net book value at 31 December 2004 259.2 17.5 114.8 3.3 394.8 ------------------ --------- --------- -------- --------- -------- Net book value at 30 June 2004 226.7 17.5 106.3 3.3 353.8 ------------------ --------- --------- -------- --------- -------- Notes to the financial statements (continued) 16. Investments in joint ventures and associate 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m --------------------------- -------- -------- --------- Joint ventures At 1 January 80.2 199.4 199.4 Exchange movement 1.4 (0.7) (1.5) Additions 6.1 1.7 7.3 Disposal - - (140.4) Dividends received (2.5) (4.2) (8.2) Share of profits after tax 4.6 20.6 23.6 --------------------------- -------- -------- --------- At 30 June 89.8 216.8 80.2 --------------------------- -------- -------- --------- Associate At 1 January 3.9 3.9 3.9 Exchange movement 0.3 - (0.3) Dividends received (0.3) (0.1) (0.2) Share of profits after tax 0.4 0.2 0.5 --------------------------- -------- -------- --------- At 30 June 4.3 4.0 3.9 --------------------------- -------- -------- --------- Total investments in joint ventures and associate 94.1 220.8 84.1 --------------------------- -------- -------- --------- 17. Borrowings 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m --------------------------- -------- -------- --------- Maturity profile of group debt In one year or less 331.1 8.0 39.2 In more than one year but less than two 35.7 28.2 7.3 In more than two years but less than five 271.9 381.0 473.7 In more than five years but less than ten 438.1 488.9 466.6 In more than ten years 888.9 746.6 735.9 --------------------------- -------- -------- --------- Total group debt 1,965.7 1,652.7 1,722.7 --------------------------- -------- -------- --------- Split between secured and unsecured borrowings Secured (on land and buildings) 92.0 183.0 175.5 Unsecured 1,873.7 1,469.7 1,547.2 --------------------------- -------- -------- --------- 1,965.7 1,652.7 1,722.7 --------------------------- -------- -------- --------- Maturity profile of undrawn borrowing facilities In one year or less 54.5 41.2 47.3 In more than one year but less than two 20.4 11.5 - In more than two years 334.6 348.4 275.9 --------------------------- -------- -------- --------- Total available undrawn facilities 409.5 401.1 323.2 --------------------------- -------- -------- --------- Fair value of borrowings Book value 1,965.7 1,652.7 1,722.7 Net fair value 2,111.7 1,810.0 1,949.2 --------------------------- -------- -------- --------- Pre-tax mark to market adjustment 146.0 157.3 226.5 Tax relief due on early redemption/termination (43.8) (47.2) (68.0) --------------------------- -------- -------- --------- After tax mark to market adjustment 102.2 110.1 158.5 --------------------------- -------- -------- --------- The borrowings as at 30 June 2005 include preference shares reclassified out of equity amounting to Â£106.4m. Notes to the financial statements (continued) 18. Provisions for liabilities and charges, pension deficit and deferred tax Pension deficit Deferred tax Quail West Other Total liabilities Â£m Â£m Â£m Â£m Â£m ------------------------- ------- ------- ------- ------- ------- Balance at 1 January 2005 41.5 448.4 18.0 0.3 508.2 Exchange movement (0.1) 2.4 0.5 - 2.8 Charge/(credit) to income statement 1.7 32.1 (18.7) - 15.1 Charge to SORIE 3.1 5.7 - - 8.8 Unwinding of the discounted balance brought forward 0.7 - 0.2 - 0.9 Paid (16.7) - - - (16.7) ------------------------- ------- ------- ------- ------- ------- Balance at 30 June 2005 30.2 488.6 - 0.3 519.1 ------------------------- ------- ------- ------- ------- ------- Balance at 30 June 2004 27.3 441.1 19.8 0.6 488.8 ------------------------- ------- ------- ------- ------- ------- The other liabilities relate principally to provisions for onerous leases on rented properties and represent the estimated liability of future costs for lease rentals and dilapidation costs less the expected receipts from sub-letting these properties which are surplus to business requirements. 30 June 30 June 31 December 2005 2004 2004 Deferred taxation in respect of : Â£m Â£m Â£m ---------------------------------- ------- ------ -------- Investment properties 513.2 460.2 457.3 Quail West provision - (13.9) (13.1) Pension scheme deficit (10.0) (8.2) (11.9) Other reserves (14.6) 3.0 16.1 ---------------------------------- ------- ------ -------- 488.6 441.1 448.4 ---------------------------------- ------- ------ -------- Notes to the financial statements (continued) 19. Statement of movement in equity Balance Restate Retained 1st January for IAS profit for Shares 2005 39 Exchange period SORIE issued Â£m Â£m Â£m Â£m Â£m Â£m ------------------- -------- ------- -------- -------- ------ ------- Revaluation reserve net of deferred tax 1,090.8 - 1.7 - 4.2 - Equity reserve - 41.2 - - - - Share based payments reserve 0.3 - - - - - Fair value reserve - 4.1 0.3 - - - Unrealised surplus reserve 47.4 - - - - - Translation reserve net of deferred tax (11.3) 2.0 0.2 - 3.9 - ------------------- -------- ------- -------- -------- ------ ------- Total other reserves 1,127.2 47.3 2.2 - 8.1 - Revenue reserve 565.2 (18.7) 8.5 71.6 (5.4) - Ordinary share capital 104.8 - - - - 0.1 Preference shares 34.0 (34.0) - - - - Share premium 339.1 (98.2) - - - 1.3 Own shares held (5.2) - - - - - ------------------- -------- ------- -------- -------- ------ ------- Total equity attributable to equity shareholders 2,165.1 (103.6) 10.7 71.6 2.7 1.4 ------------------- -------- ------- -------- -------- ------ ------- Minority interests 19.4 - 0.8 1.8 - - ------------------- -------- ------- -------- -------- ------ ------- Total equity 2,184.5 (103.6) 11.5 73.4 2.7 1.4 ------------------- -------- ------- -------- -------- ------ ------- Preference Balance Dividend Reserve share 30 June Other paid transfers conversions 2005 Â£m Â£m Â£m Â£m Â£m ------------------- -------- -------- -------- -------- ------ ------- Revaluation reserve net of deferred tax - - 100.6 - 1,197.3 Equity reserve - - - (1.8) 39.4 Share based payments reserve 0.1 - - - 0.4 Fair value reserve - - (1.3) - 3.1 Unrealised surplus reserve - - - - 47.4 Translation reserve net of deferred tax - - 0.8 - (4.4) ------------------- -------- -------- -------- -------- ------ ------- Total other reserves 0.1 - 100.1 (1.8) 1,283.2 Revenue reserve - (41.6) (100.1) - 479.5 Ordinary share capital - - - 0.8 105.7 Preference shares - - - - - Share premium - - - 8.1 250.3 Own shares held (1.7) - - - (6.9) ------------------------ -------- -------- -------- ------ ------- Total equity attributable to equity shareholders (1.6) (41.6) - 7.1 2,111.8 ------------------------ -------- -------- ------ ------- Minority interests 0.6 (4.1) - - 18.5 ------------------- -------- -------- -------- -------- ------ ------- Total equity (1.0) (45.7) - 7.1 2,130.3 ------------------- -------- -------- -------- -------- ------ ------- SORIE is the term used for the Statement of Recognised Income and Expense. --------------------------------------------------- Notes to the financial statements (continued) 20. Post balance sheet events The group owns 54% of the common stock of Tipperary Corporation, an independent oil and gas company based in Denver that owns 90% of the TOGA operations in Queensland, Australia. The group has agreed to vote its shares in favour of the merger agreement under which Australia-based Santos Limited will acquire 100% of Tipperary Corporation's common stock at a price of US$7.39 per share. The group has also agreed to sell its 10% direct holding in Tipperary Oil and Gas Australia Pty Limited ('TOGA'). The group will receive US$222 million gross including US$23 million debt it has outstanding with the company. After expenses it is expected that the sale will produce in excess of US$175 million (approximately Â£98 million) profit for the group. The transaction was completed on 13 July 2005. The group entered into an option agreement with WB Woodside II, L.P. and WB Heywood L.P., two limited partnerships managed by a subsidiary of Moorfield Group Limited, to acquire a controlling interest in a Unit Trust owning two industrial estates for a consideration of Â£276 million in cash. These estates are situated in Dunstable and Manchester. The option was exercised on 18 July 2005 and the purchase was completed on 26 July 2005. 21. Capital commitments 30 June 31 December 2005 2004 Â£m Â£m ------------------------------ -------- -------- -------- Property - United Kingdom 55.1 36.6 - Overseas 153.3 147.5 Utilities 0.5 0.6 Other 0.2 17.3 ------------------------------ -------- -------- -------- Total capital commitments 209.1 202.0 ------------------------------ -------- -------- -------- 22. Reconciliation of cash generated Half year to Half year to Year to from operations 30 June 30 June 31 December 2005 2004 2004 Â£m Â£m Â£m ------------------------------ -------- -------- -------- Net operating income 290.2 199.8 459.1 Adjustments for: Depreciation of property, plant and equipment 2.9 1.8 4.5 Loss/(profit) on sale of properties 3.0 (0.1) (64.7) Revaluations surplus on investment properties (137.6) (84.0) (166.7) Other provisions (18.7) (0.9) (1.7) Other income re-allocated (3.3) (3.9) (11.0) Changes in working capital: Decrease/(increase) in trading properties 26.4 (7.2) 6.9 Decrease/(Increase) in inventories 0.1 (0.1) (0.3) Increase in debtors (10.5) (1.8) (33.6) Increase in creditors 1.6 0.9 9.9 ------------------------------ -------- -------- -------- Net cash inflow generated from operations 154.1 104.5 202.4 ------------------------------ -------- -------- -------- Notes to the financial statements (continued) 23. Acquisitions On 28 June 2005, Anglo French Industrial Developments Limited, a group company, incorporated a subsidiary, Slough BV, with issued share capital of 30,000 ordinary shares of â‚¬100.00 each. This company acquired 60% of the voting equity in Mainland BV, a Kuiper Group company, on 28 June 2005 for Â£1.7 million cash. Mainland BV specialises in the development of offices and industrial accommodation in the Randstad region of the Netherlands. Based in Hoofdorp, close to Schiphol airport, Mainland BV has an established and experienced management team as well as a development pipeline comprising six sites located around Schiphol and elsewhere in the Randstad which will enable the development of 130,000 m(2) of office and industrial accommodation. The acquisition has been accounted for using the purchase method of accounting. Details of the book value and the fair value of the assets and liabilities at the date of acquisition, after making the necessary adjustments, are summarised as follows: Book Fair value value adjustment* Fair value Â£m Â£m Â£m -------------------------------- ------- -------- -------- Non-current assets - plant and office equipment 0.1 - 0.1 Non-current assets - investment property 6.5 3.3 9.8 Receivables 1.2 - 1.2 Non-current liabilities falling due after more than one year - Borrowings (4.0) - (4.0) Non-current liabilities falling due after more than one year - Other (0.8) - (0.8) Current liabilities falling due within one year - Borrowings (0.8) - (0.8) Current liabilities falling due within one year - Other (0.5) (3.3) (3.8) -------------------------------- ------- -------- -------- Net assets of Mainland BV at date of acquisition 1.7 - 1.7 Minority interests (0.6) - (0.6) -------------------------------- ------- -------- -------- Group share of net assets 1.1 - 1.1 -------------------------------- ------- -------- -------- Goodwill 0.6 -------------------------------- ------- -------- -------- Total consideration 1.7 -------------------------------- ------- -------- -------- * Fair value of contractual liability to purchase investment property. The group believes the premium paid over its share of the net assets of Mainland BV represents the additional value of a strong local management team; a fully established office in the Netherlands; a good network of contacts in the Netherlands including local and regional authorities, agents, possible tenants, and suppliers; and a well-known brand in the Dutch real estate market with a proven history of successfully completing new developments. Neither the group nor Mainland BV decided to dispose of any operations as a result of the business combination. The summary results of Mainland BV from the beginning of its financial year to the date of acquisition are as follows: 1 January 2005 Year to to 28 June 31 December 2005 2004 Â£m Â£m ------------------------------------ --------- ---------- Turnover - 2.2 ------------------------------------ --------- ---------- Operating profit (0.3) (0.3) Taxation 0.1 0.1 ------------------------------------ --------- ---------- Profit after tax attributable to shareholders 0.2 0.2 ------------------------------------ --------- ---------- There were no recognised gains or losses in the period other than the profit attributable to shareholders. Mainland BV had no turnover and incurred no costs during the period between the date of acquisition and 30 June 2005. Notes to the financial statements (continued) 24. Transition to International Financial Reporting Standards 24(a) Significant differences between UK GAAP and IFRS as at 31 December 2004 are summarised as follows:- IAS 40 - Investment property Under IAS 40, an investment property is recognised in the accounts at fair value, with revaluation gains being taken directly to the group income statement rather than the revaluation reserve. Accumulated revaluation surpluses relating to investment properties as at the transition date have been reallocated to retained earnings. This treatment does not, however, have any impact on the distributable profits. As at 31 December 2004 valuation gains relating to development properties amounting to Â£36.3m are held within revaluation reserves under IAS 16 until the developments are completed, at which point the surplus will be transferred to retained earnings. IAS 12 - Income taxes Under IAS 12, deferred tax is recognised on 'temporary differences' rather than timing differences, which has been the basis in the UK under SSAP 15. Timing differences, which focus on profit and loss movements, are the difference between the taxable amount and the pre-tax accounting profit that originate in one reporting period and reverse in one or more subsequent periods. Temporary differences, which focus on balance sheet movements, are the differences between the carrying amount of an asset or liability in the balance sheet and its tax base. In many cases, the deferred tax provision is the same under IAS 12 as under FRS 19. However, under FRS 19, deferred tax is not provided on the revaluation surplus when a fixed asset is revalued without there being any commitment or intention to sell the asset. IAS 12 requires deferred tax to be provided in these circumstances. Where the revaluation has been reflected directly in reserves, the deferred tax is also charged directly to reserves, with no impact on earnings. The tax provision has been mitigated by recognising indexation allowances on the land element of the investment properties. As the group has no intention to sell its investment properties, it cannot recognise the indexation relating to the building element. The amount remains as a contingent asset and is disclosed in note 10 of these financial statements. IAS 19 - Employee benefits This standard continues the measurement requirements of FRS 17 for defined benefit pension schemes. In the group's 2004 financial statements these measurement bases were disclosures whilst the accounts were drawn up under SSAP 24. The net effect for the year ended 31 December 2004 is to reduce profit before tax by Â£0.7m. In addition, the prepayment recognised under UK GAAP in respect of additional contributions (Â£0.5m at 31 December 2004) is not recognised under IAS 19, while the net actuarial deficit of Â£41.5m is recognised in full. Service costs, the expected return on pension scheme assets and interest on pension scheme liabilities are charged in arriving at profit before tax, while experience gains and losses flow through the Statement of Recognised Income and Expense, broadly equivalent to UK GAAP's Statement of Recognised Gains and Losses. The group has decided to take advantage of the exemption in IAS 19 in relation to defined benefit schemes not to adopt the corridor approach and has recognised in full the pension scheme deficit on the balance sheet. The group is expecting that the revised IAS 19 which permits this policy will receive EU endorsement. IAS 31 - Interests in joint ventures and associate Under UK GAAP, the group was required to recognise its share of the joint ventures' and associate's profit before interest and its share of interest and tax with the group figures on the face of the profit and loss account. The group's aggregate share of the gross assets and gross liabilities of the joint ventures and associate were shown separately on the balance sheet. IAS 31 allows companies to make a one-time choice as to whether joint ventures will be accounted under the equity method or proportionally consolidated. The group has opted to use the equity method and report its joint ventures' and associate's profit after tax as a single line in the income statement and its share of the net assets as a single line in the balance sheet. Additional disclosures will be made of the underlying income, expenditure, assets and liabilities for the joint ventures, together with supplemental notes. IAS 17 - Leases IAS 17 requires a lease to be classified as either a finance lease or an operating lease. A finance lease exists if substantially all the risks and rewards are transferred to the tenant. The classification test is done separately for the land and buildings elements of a lease whereas under UK GAAP the test is done on the lease itself. The group has tested all of its leases and has established that the majority are operating leases. Some twelve finance leases have been identified and these are accounted for as such. Notes to the financial statements (continued) 24(a). Transition to International Financial Statements (continued) The accounting treatment of a finance lease under IFRS is to assume that the building has been effectively sold to the tenant. A receivable is recognised in the balance sheet at the inception of the lease at an amount equal to the net present value of the minimum lease payments. The impact on the balance sheet at 31 December 2004 is to reduce investment properties by Â£21.7m, increase receivables by Â£11.0m and reduce retained earnings by Â£10.7m. Under IFRS the rental income for the whole property is split into three elements: Rental income on the land; Interest income on the debtor balance due from the tenant; and Repayment of the debtor. The impact on the previously reported 2004 UK GAAP net rental income is minimal. Since the carrying value of the finance lease is not reassessed at each reporting date, the open market value of the building may differ significantly from the value of the finance lease receivable at that date. Where an investment property is itself subject to a head or groundlease, that headlease is treated as if it were a finance lease. In total four properties are affected, leading to the recognition of a finance lease liability of Â£0.5m at 31 December 2004 and an increase in the carrying value of the group's properties by Â£0.5m. IAS 10 - Events after the balance sheet date IAS 10 requires that a liability should not be recognised in respect of a dividend until the paying company has an obligation to make the payment. This would normally be when it was declared or approved at the annual general meeting in the case of the final dividend for the year. As a result the 2004 proposed final dividend of Â£41.3m is excluded from the IFRS balance sheet and written back to retained earnings IFRS also requires that dividends and distributions are presented in a different way to current UK GAAP. Under IFRS, dividends are not considered to be an expense of the paying company so they are not included in the income statement. Instead, dividends are treated as a reserve item and are, therefore, presented in the statement of changes in equity alongside other transactions with shareholders. IAS 32 and 39 - Financial instruments The group has chosen to take the exemption permitted under IFRS from applying IAS 32 and 39 in the year ended 31 December 2004. However, there are a number of effects on the group's financial statements which will apply from 1 January 2005. a) Preference shares Under UK GAAP the group's cumulative redeemable convertible preference shares were shown within share capital on the group's balance sheet. Under IFRS the shares are considered to be a form of debt with an embedded derivative (known as an equity instrument) in respect of the option for shareholders to convert. The group has therefore split the value of the shares between a financial liability (which is shown within liabilities) and an equity instrument (which is shown within equity). Interest costs increase as a charge will arise in relation to the financial liability shown within liabilities. The effect of this accounting is to reduce the group's net assets, reduce profits and increase liabilities. There is no effect on the 2004 amounts as we have decided to apply IAS 32 and 39 with effect from 1 January 2005 as allowed by the standards. However, finance charges increase by Â£13.8m in 2005, as a result of this change in accounting policy. b) Interest rate hedges and other derivatives Under IFRS and as from 1 January 2005 the group is required to recognise the fair value of its derivatives including interest rate hedges and currency swaps on the balance sheet and movements in those values within the income statement. Previously these were disclosed but not recognised in the group's accounts. The group's interest rate hedges and currency swaps do not meet the strict criteria set out in the standard for hedge accounting. Although the group is satisfied that, economically, all of its interest rate hedges do indeed offset interest rate exposures, the practical difficulty in forecasting accurately the amount and timing of cash receipts and payments associated with investment portfolio transactions means that the IAS 39 tests on hedge effectiveness may not be met. In addition, in many cases, the length of the hedge could exceed the remaining term of the group's committed bank facilities. As a result shareholders' funds have been reduced by Â£2.9m at 1 January 2005. Notes to the financial statements (continued) 24(a). Transition to International Financial Reporting Standards (continued) c) Available-for-sale investments Under UK GAAP, the group accounted for its available-for-sale investments at the lower of cost and market value and these were shown in current assets on the balance sheet. Profits and losses arising from their disposal were taken to income. Under IAS 39, these investments are carried at fair value and classified in the balance sheet as available-for-sale investments under non-current assets. Movements in fair value are taken directly to equity and recycled through the income statement when the investments are realised. SIC-15 - Operating leases - incentives The cost of rent free periods and other incentives given to tenants under operating leases are spread over the term of the lease rather than, as under UK GAAP, to the first review to market rents. Further, there are no transitional provisions so that incentives granted before IFRS came into effect have now been brought back into account. This will change the timing but not the aggregate amount recognised in relation to lease incentives. IFRS 3 - Business combinations Goodwill arising on acquisitions is not amortised under IFRS, but is subject to impairment review at each reporting date. The group's property acquisition arising from the exchange of properties with Land Securities Group plc has been treated as an acquisition of assets rather than a business combination. Adjustments have therefore been made in 2004 to remove the negative goodwill of Â£4.7m and deferred tax of Â£4.1m created under UK GAAP. IFRS 2 - Share-based payment IFRS 2 requires the cost of granting share options and other share-based remuneration to employees and directors to be recognised through the income statement. The group has used the Black-Scholes option valuation model and the resulting fair value is being charged through the income statement over the vesting period of the options. Fair value takes account of the likelihood of the options becoming 'in the money' in the future. This results in a credit to the income statement in the year of Â£0.4m, which is net of provisions previously made by the group in respect of the cost of certain of the share-based compensation arrangements. Only share based transactions after 7 November 2002 that had not vested by 1 January 2005 have been restated, as permitted by the Standard. 24(b) Summary of significant accounting policies under IFRS Basis of consolidation Prior to the introduction of IFRS, the group had prepared its financial statements under United Kingdom accounting standards. As a result of adopting IFRS it has been necessary to change many of the group's accounting policies and these are shown below. The consolidated financial statements of the group include the financial statements of Slough Estates plc ('the Company') its subsidiaries(collectively referred to as 'the group') and the group's share of profits and losses and net assets of joint ventures and associate made up to 30 June 2005. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group. Intra-group balances and any unrealised gains and losses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with joint ventures are eliminated to the extent of the group's interest in the joint venture concerned. Unrealised losses are eliminated in the same way, but only to the extent that there is no evidence of impairment. Investments in associates An associate is an entity over which the group is in a position to exercise significant influence, but not control, through participation in the financial and operating policy decisions of the investee. The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Investments in associates are carried in the balance sheet at cost, adjusted by post-acquisition changes in the group's share of the net assets of the associates, less any impairment in the value of individual investments of the associates. Where a group entity transacts with an associate of the group, unrealised profits and losses are eliminated to the extent of the group's interest in the relevant associate, except to the extent that unrealised losses provide evidence of an impairment of the asset transferred. Interests in joint ventures A joint venture is a contractual arrangement whereby the group and other parties undertake an economic activity that is subject to joint control. Notes to the financial statements (continued) 24(b). Summary of significant accounting policies under IFRS (continued) Where a group company undertakes its activities under joint venture arrangements directly, the group's share of jointly controlled assets and any liabilities incurred jointly with other venturers are recognised in the financial statements of the group and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Joint venture arrangements which involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. The group reports its interests in jointly controlled entities using the equity method of accounting. Investments in joint ventures are carried in the balance sheet at cost as adjusted by post-acquisition changes in the group's share of the net assets of the joint ventures, less any impairment in the value of individual investments of the joint ventures. Where the group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the extent of the group's interest in the relevant joint venture, except to the extent that unrealised losses provide evidence of an impairment of the asset transferred. On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Goodwill On acquisition, the assets and liabilities of a subsidiary, joint venture or associate that are accounted for as business combinations are measured at their fair value at the date of acquisition. Any excess (deficiency) of the joint venture's or associate's cost of acquisition over (below) the fair value of the identifiable net assets acquired is recognised as goodwill (negative goodwill). Goodwill is carried in the balance sheet at cost less any accumulated impairment. Negative goodwill is immediately recognised in the income statement. Derivative financial instruments (derivatives) The group uses derivatives, particularly interest rate swaps, to help manage its interest rate risk. The group does not hold or issue derivatives for trading purposes. Derivatives are recognised initially at cost. Subsequent to initial recognition, derivatives are stated at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the income statement, unless the derivatives qualify for hedge accounting, in which case recognition depends on the nature of the item being hedged. Currently none of the group's derivatives qualify for hedge accounting. Foreign currencies Transactions in currencies other than sterling are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the rates prevailing on the balance sheet date. Profits and losses arising on retranslation are included in the income statement, except where foreign currency denominated loans are designated as a hedge of the group's investment in its overseas subsidiaries. In this case the exchange difference is taken to equity until the realisation of the overseas investment and then it is transferred to the income statement as part of the profit or loss on realisation. On consolidation, the assets and liabilities of the group's overseas operations are translated into sterling at exchange rates prevailing on the balance sheet date. Exchange differences arising, if any, are classified as equity and transferred to the group's translation reserve. Such translation differences are recognised as income or expenses in the period in which the operation is disposed of. Income and expense items are translated at the average exchange rates for the period. Investment property Investment properties are those properties that are held either to earn rental income or for capital appreciation or both. Investment properties may be freehold properties or leasehold properties. For leasehold properties that are classified as investment properties, the associated leasehold obligations are accounted for as finance lease obligations. Valuation surpluses and deficits arising in the period are included in the income statement. Existing investment properties undergoing redevelopment, for the purpose of earning future rental income, continue to be accounted for as investment properties. Investment properties are measured initially at cost, including related transaction costs. After initial recognition at cost, investment properties are carried at their fair values based on a professional valuation made as of each reporting date. Properties are treated as acquired at the point when the group assumes the significant risks and returns of ownership and as disposed when these are transferred to the buyer. Additions to investment properties consist of costs of a capital nature and, in the case of investment properties under development, capitalised interest. Certain internal staff and associated costs directly attributable to the management of developments under construction are also capitalised. When the group begins to redevelop an existing investment property with a view to sale, the property is transferred to trading properties and held as a current asset. The property is re-stated to fair value as at the date of the transfer, with any gain or loss being taken to the group income statement. The re-stated amount becomes the deemed cost at which the property is then carried in trading properties. Notes to the financial statements (continued) 24(b). Summary of significant accounting policies under IFRS (continued) Property that is being constructed or developed for future use as an investment property, but which has not previously been classified as such, is classified as investment property under development within property, plant and equipment. This is recognised initially at cost but is subsequently re-stated to fair value at each reporting date. Any gain or loss on re-statement is taken direct to equity unless a loss in the period exceeds the net cumulative gain previously recognised in equity. In the latter case, the amount by which the loss in the period exceeds the net cumulative gain previously recognised is taken to the income statement. On completion, the property is transferred to investment property with any final difference on re-measurement accounted for in accordance with the foregoing policy. The gain or loss arising on the disposal of a property is determined as the difference between the sales proceeds and the carrying amount of the asset at the beginning of the period and is recognised in the group income statement. Property, plant and equipment Properties under this heading comprise those properties acquired for development and completed properties occupied by group companies. They are fair valued on the same basis as investment properties. Surpluses and deficits arising on the revaluation of such land and buildings is credited to the revaluation reserve, except to the extent that it reverses a revaluation deficit for the same asset previously recognised in income, in which case the increase is credited to the income statement to the extent of the deficit previously charged. A decrease in carrying amount arising on the revaluation of such land and buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the revaluation reserve is transferred directly to accumulated profits. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset at the beginning of the period and is recognised in the income statement. Owner-occupied properties are depreciated over their estimated useful lives, normally 30 years. Plant and equipment comprise the power station assets, oil and gas plant and equipment of Tipperary Corporation, computers, motor vehicles, furniture, fixtures and fittings, and improvements to group offices. These assets are stated at cost less accumulated depreciation and are depreciated on a straight-line basis over their estimated useful lives. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Group company as lessee a) Operating leases - leases in which the group does not have substantially all risks and rewards of ownership are classified as operating leases. Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. b) Finance leases - leases of assets where the group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease commencement at the lower of the fair value of the asset and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in current and non-current borrowings. The finance charges are charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Investment properties acquired under finance leases are carried at their fair value. Group company as lessor a) Operating leases - properties leased out to tenants under operating leases are included in investment properties in the balance sheet. b) Finance leases - when assets are leased out under a finance lease, the present value of the minimum lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is recognised over the term of the lease using the net investment method before tax, which reflects a constant periodic rate of return. Where only the buildings element of a property lease is classified as a finance lease, the land element is shown within investment properties. Trading properties Properties developed and held for sale are classified as trading properties and are shown at the lower of cost and net realisable value. Cost includes direct expenditure and interest capitalised during the development period. The development period ends on practical completion. Notes to the financial statements (continued) 24(b). Summary of significant accounting policies under IFRS (continued) Profit from pre-sold trading developments is recognised according to the stage reached in the contract by reference to the value of work completed using the percentage of completion method. An appropriate estimate of the profit attributable to work completed is recognised once the outcome of the contract can be estimated reliably. The amount due from customers for contract work is shown as a receivable. The amount due comprises costs incurred plus recognised profits, less the sum of recognised losses and progress billings. Where the sum of recognised losses and progress billings exceeds costs incurred plus recognised profits, the amount is shown as a liability. Inventories Inventories (utilities and oil and gas) are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated on a first in, first out basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Trade and other receivables Trade and other receivables are recognised initially at fair value. A provision for impairment of trade receivables is established where there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables concerned. Available-for-sale investments Available-for-sale investments are non-derivative financial assets that are designated as available-for-sale. These represent mainly the investments in Charterhouse USA, Candover and certain warrants in US companies who are tenants of the group. The investments are held at fair value with gains and losses taken to equity. The gains and losses taken to equity are recycled through the income statement on realisation. If there is objective evidence that the asset is impaired the cumulative loss that had been recognised directly in equity is removed from equity and recognised in the income statement. The amount removed from equity and recognised in the income statement, is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in income. Impairment losses recognised in the income statement are not reversed through income. Cash and cash equivalents Cash and cash equivalents comprise cash balances, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts that are repayable on demand and which form an integral part of the group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Impairment The group's assets are, other than investment properties, reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated (see below). An impairment loss is recognised in income whenever the carrying amount of an asset exceeds its recoverable amount. For the purposes of assessing impairment, assets are grouped together at the lowest levels for which there are separately identifiable cash flows. The recoverable amount of an asset is the greater of its net selling price and its value-in-use. The value-in-use is determined as the net present value of the future cash flows expected to be derived from the asset, discounted using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Any impairment of financial assets is based on the original effective interest rate attributable to the financial asset on acquisition. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount after the reversal does not exceed the amount that would have been determined, net of applicable depreciation, if no impairment loss had been recognised. Share capital Ordinary shares are classed as equity. External costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Where any group company purchases the company's equity share capital, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the company's equity holder until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects is included in equity attributable to the company's equity holders. Notes to the financial statements (continued) 24(b). Summary of significant accounting policies under IFRS (continued) Borrowings Borrowings other than bank overdrafts are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in the income statement over the period of the borrowings, using the effective interest method. Convertible redeemable preference shares The convertible redeemable preference shares are regarded as compound instruments, consisting of a liability component and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate at the time of issue for similar non-convertible debt. The difference between the net proceeds of issue of the convertible redeemable preference shares and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the group, is included in equity (capital reserves). Issue costs are apportioned between the liability and equity components of the convertible redeemable preference shares based on their relative carrying amounts at the date of issue. The portion relating to the equity component is charged directly against equity. The interest expense on the liability component is calculated by applying the prevailing market interest rate at the time of issue for similar non-convertible debt to the liability component of the instrument. The difference between this amount and the interest paid is added to the carrying amount of the convertible loan note. Pensions The obligations of defined benefit pension schemes are measured at discounted present value while scheme assets are measured at their fair value. The operating and financing costs of such plans are recognised separately in the income statement; service costs are spread systematically over the working lives of the employees concerned and financing costs are recognised in the periods in which they arise. Actuarial gains and losses arising from either experience differing from previous actuarial assumptions or changes to those assumptions are recognised immediately in the statement of recognised income and expense. Contributions to defined contribution schemes are expensed as incurred. The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation. Provisions A provision is recognised in the balance sheet when the group has a constructive or legal obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. A provision for onerous contracts is recognised when the expected benefits to be derived by the group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. Provision is made for dilapidations that will crystallise in the future where, on the basis of the present condition of the property, an obligation exists at the reporting date and can be reliably measured. The estimate is revised over the remaining period of the lease to reflect changes in the condition of the building or other changes in circumstances. The estimate of the obligation takes account of relevant external advice. Trade and other payables Trade and other payables are stated at cost. Revenue Revenue comprises rental income, service charges and other recoveries from tenants of the group's investment and trading properties and proceeds of sales of its trading properties. Rental income includes the net income from managed operations such as car parks, food courts and serviced offices. Service charges and other recoveries include income in relation to service charges and directly recoverable expenditure together with any chargeable management fees. Where revenue is obtained from the rendering of services, it is recognised by reference to the stage of completion of the relevant transactions at the reporting date. Rental income from investment property leased out under operating lease is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the net consideration for the use of the property and are therefore also recognised on the same, straight-line basis. When property is let out under a finance lease, the group recognises a receivable at an amount equal to the net investment in the lease at inception of the lease. Rentals received are accounted for as repayments of principal and finance income as appropriate. Notes to the financial statements (continued) 24(b). Summary of significant accounting policies under IFRS (continued) Minimum lease payments receivable on finance leases are apportioned between finance income and reduction of the outstanding receivable. Finance income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining net investment in the finance lease. Contingent rents, being those lease payments that are not fixed at the inception of a lease, for example increases arising on rent reviews, are recorded as income in the periods in which they are earned. Rent reviews are recognised as income when it is reasonable to assume that they will be received. Rent reviews are recognised as income based on estimates to be received or amounts received. Surrender premiums received in the period from tenants vacating the property before the end of the lease are included in rental income. A property is regarded as sold when the significant risks and returns have been transferred to the buyer. For conditional exchanges, sales are recognised as the conditions are satisfied. Share-based payments The cost of granting share options and other share-based remuneration to employees and directors is recognised through the income statement. The group has used the Black-Scholes option valuation model and the resulting value is amortised through the income statement over the vesting period of the options. The charge is reversed if it appears likely that the performance criteria will not be met. Own shares held in connection with employee share plans or other share based payment arrangements are treated as treasury shares and deducted from equity, and no profit or loss is recognised on their sale, issue or cancellation. Borrowing costs Gross borrowing costs relating to direct expenditure on properties under development or undergoing major refurbishment are capitalised. The interest capitalised is calculated using the group's weighted average cost of borrowings. Interest is capitalised as from the commencement of the development work until the date of practical completion. The capitalisation of finance costs is suspended if there are prolonged periods when development activity is interrupted. All other borrowing costs are recognised in the group income statement in the period in which they are incurred. Income tax Income tax expense represents the sum of the tax currently payable and deferred tax. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets are not recognised if the temporary differences arise from goodwill (or negative goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. No provision is made for temporary differences arising on the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. Indexation relief on land is recognised as a reduction of the deferred tax liability but not on the buildings unless the properties are in the process of being sold. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the group is entitled to settle its current tax assets and liabilities on a net basis. Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. The group's primary reporting segments are investment properties and trading properties. Notes to the financial statements (continued) 24(b). Summary of significant accounting policies under IFRS (continued) Dividend distribution Dividend distribution to the Company's shareholders is recognised as a liability in the group's financial statements in the period in which the dividends are approved. Interim measurement note Current income tax Current income tax expense is recognised in these interim consolidated financial statements based on management's best estimates of the weighted average annual income tax rate expected for the full financial year. Costs Costs that incur unevenly during the financial year are anticipated or deferred in the interim report only if it would also be appropriate to anticipate or defer such costs at the end of the financial year. Notes to the financial statements (continued) 24(c) Restatement for International Financial Reporting Standards Reconciliation of opening shareholders' equity as previously reported under UK GAAP to International Financial Reporting Standards Year to Half year to Year to 31 December 30 June 31 December Note 2004 2004 2003 Â£m Â£m Â£m ---------------------------- ----- -------- ------- -------- Shareholders' equity previously reported under UK GAAP 2,446.2 2,293.1 2,176.1 Effects of adopting IAS Proposed dividends 1 41.3 25.7 38.4 Business combinations 2 7.4 - - Operating lease incentives 3 (9.4) (6.4) (4.7) Joint ventures and associate 4 (8.2) (8.9) (6.1) Finance leases as lessor 5 (10.7) (8.8) (8.5) Deferred tax 6 (260.3) (247.0) (225.0) Pension scheme deficit 7 (41.0) (26.7) (29.5) Fair value of share based payments 8 1.3 0.9 0.8 Other (1.5) (1.7) 0.9 ---------------------------- ----- -------- ------- -------- Shareholders' equity restated under IAS 2,165.1 2,020.2 1,942.4 ---------------------------- ----- -------- ------- -------- Notes 1. IAS 10 - Ordinary dividend excluded from the income statement. Recognised on the balance sheet when approved. 2. IFRS 3 - The acquisition of Ravenseft has been treated as a property acquisition. Goodwill and deferred tax on acquisition have been eliminated. Opted to apply this standard with effect from 1 January 2004. 3. SIC 15 - Lease incentives amortised over period of lease or to the first break whichever is the shorter. 4. IAS 28 & 31 - Equity account for the results of joint ventures and associate's profits, including its share of valuation surpluses and deficits, interest and taxation as a one line entry in profit before tax. The reduction in shareholders' funds arises principally from deferred taxation provided on revaluation surpluses. 5. IAS 17 - Finance leases included on the balance sheet as a debtor. No revaluation. Previously accounted for as investment property. 6. IAS 12 - Mainly deferred tax on investment property valuation surpluses, with movements in the income statement. Previously disclosed in the notes. 7. IAS 19 - Recognise in full the cumulative deficits at the transition date 1 January 2004 - corridor approach not adopted. 8. IFRS 2 - Share option plans fair valued at the date of grant and costs taken to the income statement over the vesting period. Transitional exemption used. Notes to the financial statements (continued) 24(c). Restatement for International Financial Reporting Standards (continued) Group income statement - Reconciliation of reported profits between UK GAAP and IFRS for the twelve months ended 31 December 2004 Investments Year Events after in associate 31 December the balance Income Employee & joint 2004 sheet date taxes Leases benefits ventures UK GAAP IAS 10 IAS 12 IAS 17 IAS 19 IAS 28 & 31 Â£m Â£m Â£m Â£m Â£m Â£m --------------------- ------- ------- ------- ------ ------- ------- Gross rental income from investment properties 252.1 (0.9) Interest received on finance lease assets - 0.9 Other property related income 13.1 Property outgoings (34.3) --------------------- ------- ------- ------- ------ ------- ------- Net rental income 230.9 - - - - - --------------------- ------- ------- ------- ------ ------- ------- Proceeds on sale of trading properties 32.3 Carrying value of trading properties sold (28.4) Trading property rental income 4.4 Property outgoings relating to trading properties (1.2) --------------------- ------- ------- ------- ------ ------- ------- Net income from trading properties 7.1 - - - - - --------------------- ------- ------- ------- ------ ------- ------- Income from sale of utilities and gas 35.1 Cost of sales (42.3) --------------------- ------- ------- ------- ------ ------- ------- Net income from utilities and gas (7.2) - - - - - --------------------- ------- ------- ------- ------ ------- ------- Other investment income 10.0 Administration expenses (15.2) 0.2 Gain on disposal of property assets 62.3 Valuation gains and losses - (2.1) --------------------- ------- ------- ------- ------ ------- ------- Operating income 287.9 - - (2.1) 0.2 - --------------------- ------- ------- ------- ------ ------- ------- Finance costs (101.4) (0.9) 2.7 Finance income 6.7 Share of profit from associate and joint ventures after tax 15.9 8.0 --------------------- ------- ------- ------- ------ ------- ------- Profit before tax 209.1 - - (2.1) (0.7) 10.7 --------------------- ------- ------- ------- ------ ------- ------- Taxation - current and deferred (41.7) (35.8) 1.1 --------------------- ------- ------- ------- ------ ------- ------- 167.4 - (35.8) (2.1) (0.7) 11.8 Preference dividends (11.2) --------------------- ------- ------- ------- ------ ------- ------- 156.2 - (35.8) (2.1) (0.7) 11.8 Ordinary dividends (67.0) 67.0 --------------------- ------- ------- ------- ------ ------- ------- Profit for the year 89.2 67.0 (35.8) (2.1) (0.7) 11.8 --------------------- ------- ------- ------- ------ ------- ------- Attributable to minority interests (1.6) Attributable to equity shareholders 90.8 67.0 (35.8) (2.1) (0.7) 11.8 --------------------- ------- ------- ------- ------ ------- ------- 89.2 67.0 (35.8) (2.1) (0.7) 11.8 --------------------- ------- ------- ------- ------ ------- ------- Notes to the financial statements (continued) 24(c). Restatement for International Financial Reporting Standards (continued) Group income statement - Reconciliation of reported profits between UK GAAP and IFRS for the twelve months ended 31 December 2004 (continued) Effects of changes in Share- Operating foreign Year Investment based Business lease exchange 31 December property payments combinations incentives rates and 2004 IAS 40 IFRS 2 IFRS 3 SIC-15 other IFRS Â£m Â£m Â£m Â£m Â£m Â£m -------------------- ------- ------- -------- ------- ------- -------- Gross rental income from investment properties 4.7 1.5 257.4 Interest received on finance lease assets - 0.9 Other property related income 0.3 13.4 Property outgoings (4.9) (39.2) -------------------- ------- ------- -------- ------- ------- -------- Net rental income - - - 4.7 (3.1) 232.5 -------------------- ------- ------- -------- ------- ------- -------- Proceeds on sale of trading properties (0.9) 31.4 Carrying value of trading properties sold 0.7 (27.7) Trading property rental income (0.2) 4.2 Property outgoings relating to trading properties 0.1 (1.1) -------------------- ------- ------- -------- ------- ------- -------- Net income from trading properties - - - - (0.3) 6.8 -------------------- ------- ------- -------- ------- ------- -------- Income from sale of utilities and gas 0.3 35.4 Cost of sales (0.5) (42.8) -------------------- ------- ------- -------- ------- ------- -------- Net income from utilities and gas - - - - (0.2) (7.4) -------------------- ------- ------- -------- ------- ------- -------- Other investment income 0.5 10.5 Administration expenses 0.4 (0.1) (14.7) Gain on disposal of property assets 2.4 64.7 Valuation gains and losses 164.0 7.4 (8.6) 6.0 166.7 -------------------- ------- ------- -------- ------- ------- -------- Operating income 164.0 0.4 7.4 (3.9) 5.2 459.1 -------------------- ------- ------- -------- ------- ------- -------- Finance costs (2.3) (101.9) Finance income - 6.7 Share of profit from associate and joint ventures after tax 0.2 24.1 -------------------- ------- ------- -------- ------- ------- -------- Profit before tax 164.0 0.4 7.4 (3.9) 3.1 388.0 -------------------- ------- ------- -------- ------- ------- -------- Taxation - current and deferred (14.7) (1.1) (92.2) -------------------- ------- ------- -------- ------- ------- -------- 149.3 0.4 7.4 (3.9) 2.0 295.8 Preference dividends (11.2) -------------------- ------- ------- -------- ------- ------- -------- 149.3 0.4 7.4 (3.9) 2.0 284.6 Ordinary dividends - - -------------------- ------- ------- -------- ------- ------- -------- Profit for the year 149.3 0.4 7.4 (3.9) 2.0 284.6 -------------------- ------- ------- -------- ------- ------- -------- Attributable to minority interests 0.4 - (1.2) Attributable to equity shareholders 148.9 0.4 7.4 (3.9) 2.0 285.8 -------------------- ------- ------- -------- ------- ------- -------- 149.3 0.4 7.4 (3.9) 2.0 284.6 -------------------- ------- ------- -------- ------- ------- -------- IAS 10 Ordinary dividend excluded from the income statement. Recognised on the balance sheet when approved. IAS 12 Mainly deferred tax on investment property valuation surpluses, with movements in the income statement. Previously disclosed in the notes. IAS 40 Investment property valuation surpluses taken to the income statement. IAS 17 Finance leases included on the balance sheet as a debtor. No revaluation. Previously accounted for as investment property. IAS 19 Recognise in full the cumulative deficits at the transition date 1 January 2004 - corridor approach not adopted. IAS 28&31 Equity account for the results of joint ventures' and associate's profits, including its share of valuation surpluses and deficits, interest and taxation as a one line entry in PBT. IFRS 2 Share option plans fair valued at the date of grant and costs taken to the income statement over the vesting period. Transitional exemption used. IFRS 3 The acquisition of Ravenseft has been treated as a property acquisition. Goodwill and deferred tax on acquisition is eliminated. Opted to apply this standard with effect from 1 January 2004. SIC 15 Lease incentives amortised over period of lease or to the first break whichever is the shorter. Notes to the financial statements (continued) 24(c). Restatement for International Financial Reporting Standards (continued) Group balance sheet - Reconciliation of assets, liabilities and equity between UK GAAP and IFRS as at 31 December 2004 As at Events after Property, 31 December the balance Income plant & 2004 sheet date taxes equipment Leases UK GAAP IAS 10 IAS 12 IAS 16 IAS 17 Â£m Â£m Â£m Â£m Â£m ------------------------ -------- ------- ------ ------- ------- Non-current assets Investment properties 3,795.6 (276.8) (21.2) Property, plant and equipment 118.0 276.8 Negative goodwill (4.7) Finance lease receivables - 10.9 Available-for-sale investments 38.4 Investments in joint ventures and associate 92.3 Deferred taxation asset 0.3 ------------------------ -------- ------- ------ ------- ------- Total non-current assets 4,039.9 - - - (10.3) ------------------------ -------- ------- ------ ------- ------- Current assets Inventories 1.9 Trading properties 125.3 Finance lease - 0.1 receivables Trade and other receivables 84.0 Derivative assets - Cash and cash equivalents 397.4 ------------------------ -------- ------- ------ ------- ------- Total current assets 608.6 - - - 0.1 ------------------------ -------- ------- ------ ------- ------- ------------------------ -------- ------- ------ ------- ------- Total assets 4,648.5 - - - (10.2) ------------------------ -------- ------- ------ ------- ------- Non-current liabilities Borrowings 1,683.5 Obligations under finance leases - 0.5 Pension scheme deficit 1.2 Deferred tax provision 192.1 260.3 Provisions for liabilities 18.3 and charges Other creditors 15.2 ------------------------ -------- ------- ------ ------- ------- Total non-current 1,910.3 - 260.3 - 0.5 liabilities -------- ------- ------ ------- ------- ------------------------ Current liabilities Borrowings 39.2 Tax liabilities 46.2 1.2 Trade and other payables 185.3 (41.3) Derivative liabilities - ------------------------ -------- ------- ------ ------- ------- Total current liabilities 270.7 (41.3) 1.2 - - ------------------------ -------- ------- ------ ------- ------- ------------------------ -------- ------- ------ ------- ------- Total liabilities 2,181.0 (41.3) 261.5 - 0.5 ------------------------ -------- ------- ------ ------- ------- ------------------------ -------- ------- ------ ------- ------- Net assets 2,467.5 41.3 (261.5) - (10.7) ------------------------ -------- ------- ------ ------- ------- Equity Called up ordinary share capital 138.8 Share premium account 339.1 Own shares held (5.2) Other reserves 1,664.6 (14.0) Retained earnings 308.9 41.3 (245.6) - (10.7) ------------------------ -------- ------- ------ ------- ------- 2,446.2 41.3 (259.6) - (10.7) ------------------------ -------- ------- ------ ------- ------- Minority interests 21.3 (1.9) ------------------------ -------- ------- ------ ------- ------- Total equity 2,467.5 41.3 (261.5) - (10.7) ------------------------ -------- ------- ------ ------- ------- Notes to the financial statements (continued) 24(c). Restatement for International Financial Reporting Standards (continued) Group balance sheet - Reconciliation of assets, liabilities and equity between UK GAAP and IFRS as at 31 December 2004 (continued) Lettings Investments Share- fees Employee in associate & based Business & other benefits joint ventures payments combinations IAS 17 IAS 19 IAS 28 & 31 IFRS 2 IFRS 3 Â£m Â£m Â£m Â£m Â£m ---------------------- ------- ------- --------- -------- -------- Non-current assets Investment properties (9.9) Property, plant and equipment Negative goodwill 4.7 Finance lease receivables Available-for-sale investments Investments in joint ventures and associate (8.2) Deferred taxation asset ---------------------- ------- ------- --------- -------- -------- Total non-current assets (9.9) - (8.2) - 4.7 ---------------------- ------- ------- --------- -------- -------- Current assets Inventories Trading properties Finance lease receivables Trade and other receivables 9.8 (0.5) (1.4) Derivative assets Cash and cash equivalents ------- ------- --------- -------- -------- ---------------------- Total current assets 9.8 (0.5) - - (1.4) ---------------------- ------- ------- --------- -------- -------- ---------------------- ------- ------- --------- -------- -------- Total assets (0.1) (0.5) (8.2) - 3.3 ---------------------- ------- ------- --------- -------- -------- Non-current liabilities Borrowings Obligations under finance leases Pension scheme deficit 40.3 Deferred tax provision (4.1) Provisions for liabilities and charges Other creditors 1.9 (1.3) ---------------------- ------- ------- --------- -------- -------- Total non-current liabilities 1.9 40.3 - (1.3) (4.1) ---------------------- ------- ------- --------- -------- -------- Current liabilities Borrowings Tax liabilities Trade and other payables 0.2 0.2 Derivative liabilities ---------------------- ------- ------- --------- -------- -------- Total current liabilities 0.2 0.2 - - - ---------------------- ------- ------- --------- -------- -------- ---------------------- ------- ------- --------- -------- -------- Total liabilities 2.1 40.5 - (1.3) (4.1) ---------------------- ------- ------- --------- -------- -------- ---------------------- ------- ------- --------- -------- -------- Net assets (2.2) (41.0) (8.2) 1.3 7.4 ---------------------- ------- ------- --------- -------- -------- Equity Called up ordinary share capital Share premium account Own shares held Other reserves 0.2 Retained earnings (2.2) (41.0) (8.2) 1.1 7.4 ---------------------- ------- ------- --------- -------- -------- (2.2) (41.0) (8.2) 1.3 7.4 ---------------------- ------- ------- --------- -------- -------- Minority interests ---------------------- ------- ------- --------- -------- -------- Total equity (2.2) (41.0) (8.2) 1.3 7.4 ---------------------- ------- ------- --------- -------- -------- Notes to the financial statements (continued) 24(c). Restatement for International Financial Reporting Standards (continued) Group balance sheet - Reconciliation of assets, liabilities and equity between UK GAAP and IFRS as at 31 December 2004 (continued) Operating As at As at lease 31 December Financial 1 January incentives Reserve 2004 instruments 2005 SIC-15 transfers IFRS IAS 39 IFRS Â£m Â£m Â£m Â£m Â£m ---------------------- ------- ------- --------- -------- ------- Non-current assets Investment properties (35.0) 3,452.7 - 3,452.7 Property, plant and equipment 394.8 - 394.8 Negative goodwill - - - Finance lease receivables 10.9 - 10.9 Available-for-sale investments 38.4 4.1 42.5 Investments in joint ventures and associate 84.1 - 84.1 Deferred taxation asset (0.1) 0.2 - 0.2 ---------------------- ------- ------- --------- -------- ------- Total non-current assets (35.1) - 3,981.1 4.1 3,985.2 ---------------------- ------- ------- --------- -------- ------- Current assets Inventories 1.9 - 1.9 Trading properties 125.3 - 125.3 Finance lease 0.1 - 0.1 receivables Trade and other receivables 23.1 115.0 (0.3) 114.7 Derivative assets - 3.8 3.8 Cash and cash equivalents 397.4 - 397.4 ---------------------- ------- ------- --------- -------- ------- Total current assets 23.1 - 639.7 3.5 643.2 ---------------------- ------- ------- --------- -------- ------- ---------------------- ------- ------- --------- -------- ------- Total assets (12.0) - 4,620.8 7.6 4,628.4 ---------------------- ------- ------- --------- -------- ------- Non-current liabilities Borrowings 1,683.5 110.1 1,793.6 Obligations under finance leases 0.5 - 0.5 Pension scheme deficit 41.5 - 41.5 Deferred tax provision 0.1 448.4 - 448.4 Provisions for liabilities and charges 18.3 - 18.3 Other creditors 15.8 - 15.8 ---------------------- ------- ------- --------- -------- ------- Total non-current liabilities 0.1 - 2,208.0 110.1 2,318.1 ---------------------- ------- ------- --------- -------- ------- Current liabilities Borrowings 39.2 (0.1) 39.1 Tax liabilities 47.4 (1.0) 46.4 Trade and other (2.7) 141.7 (4.2) 137.5 payables Derivative liabilities - 6.7 6.7 ---------------------- ------- ------- --------- -------- ------- Total current liabilities (2.7) 228.3 1.4 229.7 ---------------------- ------- ------- --------- -------- ------- ---------------------- ------- ------- --------- -------- ------- Total liabilities (2.6) - 2,436.3 111.5 2,547.8 ---------------------- ------- ------- --------- -------- ------- ---------------------- ------- ------- --------- -------- ------- Net assets (9.4) - 2,184.5 (103.9) 2,080.6 ---------------------- ------- ------- --------- -------- ------- Equity Called up ordinary share capital 138.8 (34.0) 104.8 Share premium account 339.1 (98.2) 240.9 Own shares held (5.2) - (5.2) Other reserves (523.6) 1,127.2 43.1 1,170.3 Retained earnings (9.4) 523.6 565.2 (14.5) 550.7 ---------------------- ------- ------- --------- -------- ------- (9.4) - 2,165.1 (103.6) 2,061.5 ---------------------- ------- ------- --------- -------- ------- Minority interests 19.4 (0.3) 19.1 ---------------------- ------- ------- --------- -------- ------- Total equity (9.4) - 2,184.5 (103.9) 2,080.6 ---------------------- ------- ------- --------- -------- ------- IAS39 Convertible preference shares are treated as debt with accrued interest and an equity element. Derivatives and available-for-sale investments are stated at fair value. Previously preference shares were treated as share capital, derivatives were hedge accounted and available-for-sale investments were held at the lower of cost and realisable value. Notes to the financial statements (continued) 24(c). Restatement for International Financial Reporting Standards (continued) Group income statement - reconciliation of reported profits between UK GAAP and IFRS for the six months ended 30 June 2004 Events Investments after the in associate 30 June balance Income Employee & joint 2004 sheet date taxes Leases benefits ventures UK GAAP IAS 10 IAS 12 IAS 17 IAS 19 IAS 28 & 31 Â£m Â£m Â£m Â£m Â£m Â£m --------------------- ------- -------- ------- ------- ------- -------- Gross rental income from investment properties 131.0 (0.5) Interest received on finance lease assets - 0.4 Other property related income 6.5 Property outgoings (17.8) --------------------- ------- -------- ------- ------- ------- -------- Net rental income 119.7 - - (0.1) - - --------------------- ------- -------- ------- ------- ------- -------- Proceeds on sale of trading properties 4.3 Carrying value of trading properties sold (2.1) Trading property rental income 2.0 Property outgoings relating to trading properties (0.3) --------------------- ------- -------- ------- ------- ------- -------- Net income from trading properties 3.9 - - - - - --------------------- ------- -------- ------- ------- ------- -------- Income from sale of utilities and gas 15.8 Cost of sales (20.6) --------------------- ------- -------- ------- ------- ------- -------- Net income from utilities and gas (4.8) - - - - - --------------------- ------- -------- ------- ------- ------- -------- Other investment income 3.2 Administration expenses (6.5) 0.1 Gain on disposal of property assets 0.1 Valuation gains and losses - (0.3) --------------------- ------- -------- ------- ------- ------- -------- Operating income 115.6 - - (0.4) 0.1 - --------------------- ------- -------- ------- ------- ------- -------- Finance costs (49.8) (0.4) 1.3 Finance income 2.5 Share of profit from associate and joint ventures after tax 7.9 13.0 --------------------- ------- -------- ------- ------- ------- -------- Profit before tax 76.2 - - (0.4) (0.3) 14.3 --------------------- ------- -------- ------- ------- ------- -------- Taxation - current and deferred (24.7) (22.5) 0.4 --------------------- ------- -------- ------- ------- ------- -------- 51.5 - (22.5) (0.4) (0.3) 14.7 Preference dividends (5.6) --------------------- ------- -------- ------- ------- ------- -------- 45.9 - (22.5) (0.4) (0.3) 14.7 Ordinary dividends (25.8) 25.8 --------------------- ------- -------- ------- ------- ------- -------- Profit for the year 20.1 25.8 (22.5) (0.4) (0.3) 14.7 --------------------- ------- -------- ------- ------- ------- -------- Attributable to minority interests (0.9) Attributable to equity shareholders 21.0 25.8 (22.5) (0.4) (0.3) 14.7 --------------------- ------- -------- ------- ------- ------- -------- 20.1 25.8 (22.5) (0.4) (0.3) 14.7 --------------------- ------- -------- ------- ------- ------- -------- Notes to the financial statements (continued) 24(c). Restatement for International Financial Reporting Standards (continued) Group income statement - reconciliation of reported profits between UK GAAP and IFRS for the six months ended 30 June 2004 (continued) Effects of changes in Share- Operating foreign Investment based lease exchange 30 June property payments incentives rates and 2004 IAS 40 IFRS 2 SIC-15 other IFRS Â£m Â£m Â£m Â£m Â£m --------------------- -------- -------- ------- -------- -------- Gross rental income from investment properties 2.1 132.6 Interest received on finance lease assets 0.4 Other property related 6.5 income Property outgoings (1.9) (19.7) --------------------- -------- -------- ------- -------- -------- Net rental income - - 2.1 (1.9) 119.8 --------------------- -------- -------- ------- -------- -------- Proceeds on sale of trading properties 4.3 Carrying value of trading properties sold (2.1) Trading property rental 2.0 income Property outgoings relating to trading properties (0.3) --------------------- -------- -------- ------- -------- -------- Net income from trading properties - - - - 3.9 --------------------- -------- -------- ------- -------- -------- Income from sale of utilities and gas 15.8 Cost of sales (0.1) (20.7) --------------------- -------- -------- ------- -------- -------- Net income from utilities and gas - - - (0.1) (4.9) --------------------- -------- -------- ------- -------- -------- Other investment 3.2 income Administration expenses 0.1 (6.3) Gain on disposal of property assets 0.1 Valuation gains and losses 85.4 (3.8) 2.7 84.0 --------------------- -------- -------- ------- -------- -------- Operating income 85.4 0.1 (1.7) 0.7 199.8 --------------------- -------- -------- ------- -------- -------- Finance costs (0.6) (49.5) Finance income 2.5 Share of profit from associate and joint ventures after tax (0.1) 20.8 --------------------- -------- -------- ------- -------- -------- Profit before tax 85.4 0.1 (1.7) - 173.6 --------------------- -------- -------- ------- -------- -------- Taxation - current and deferred - 0.1 (46.7) --------------------- -------- -------- ------- -------- -------- 85.4 0.1 (1.7) 0.1 126.9 Preference dividends (5.6) --------------------- -------- -------- ------- -------- -------- 85.4 0.1 (1.7) 0.1 121.3 Ordinary dividends - --------------------- -------- -------- ------- -------- -------- Profit for the year 85.4 0.1 (1.7) 0.1 121.3 --------------------- -------- -------- ------- -------- -------- Attributable to minority interests 0.2 (0.7) Attributable to equity shareholders 85.2 0.1 (1.7) 0.1 122.0 --------------------- -------- -------- ------- -------- -------- 85.4 0.1 (1.7) 0.1 121.3 --------------------- -------- -------- ------- -------- -------- IAS 10 Ordinary dividend excluded from the income statement. Recognised on the balance sheet when approved. IAS 12 Mainly deferred tax on investment property valuation surpluses, with movements in the income statement. Previously disclosed in the notes. IAS 40 Investment property valuation surpluses taken to the income statement. IAS 17 Finance leases included on the balance sheet as a debtor. No revaluation. Previously accounted for as investment property. IAS 19 Recognise in full the cumulative deficits at the transition date 1 January 2004 - corridor approach not adopted. IAS 28&31 Equity account for the results of joint ventures' and associate's profits, including its share of valuation surpluses and deficits, interest and taxation as a one line entry in PBT. IFRS 2 Share option plans fair valued at the date of grant and costs taken to the income statement over the vesting period. Transitional exemption used. SIC 15 Lease incentives amortised over period of lease or to the first break whichever is the shorter. Notes to the financial statements (continued) 24(c). Restatement for International Financial Reporting Standards (continued) Group balance sheet - Reconciliation of equity between UK GAAP and IFRS as at 30 June 2004 As at Events after Property, Letting 30 June the balance Income plant & fees 2004 sheet date taxes equipment Leases & other UK GAAP IAS 10 IAS 12 IAS 16 IAS 17 IAS 17 Â£m Â£m Â£m Â£m Â£m Â£m --------------------- -------- -------- ------ ------- ------- ------ Non-current assets Investment properties 3,680.9 (244.1) (19.4) (11.1) Property, plant and equipment 43.4 310.4 Finance lease receivables - 11.0 Available-for-sale investments 100.8 (66.3) Investments in joint ventures and associate 229.7 --------------------- -------- -------- ------ ------- ------- ------ Total non-current assets 4,054.8 - - - (8.4) (11.1) --------------------- -------- -------- ------ ------- ------- ------ Current assets Inventories 1.7 Trading properties 124.5 Finance lease receivables - 0.1 Trade and other receivables 51.1 11.1 Cash and cash equivalents 136.7 --------------------- -------- -------- ------ ------- ------- ------ Total current assets 314.0 - - - 0.1 11.1 --------------------- -------- -------- ------ ------- ------- ------ --------------------- -------- -------- ------ ------- ------- ------ Total assets 4,368.8 - - - (8.3) - --------------------- -------- -------- ------ ------- ------- ------ Non-current liabilities Borrowings 1,644.7 Obligations under finance leases - 0.5 Pension scheme deficit 1.2 Deferred tax provision 194.2 246.9 Provisions for liabilities and charges 20.3 0.1 Other creditors 7.9 2.3 --------------------- -------- -------- ------ ------- ------- ------ Total non-current liabilities 1,868.3 - 246.9 - 0.5 2.4 --------------------- -------- -------- ------ ------- ------- ------ Current liabilities Borrowings 8.0 Tax liabilities 19.0 1.2 Trade and other payables 159.8 (25.7) 0.3 --------------------- -------- -------- ------ ------- ------- ------ Total current liabilities 186.8 (25.7) 1.2 - - 0.3 --------------------- -------- -------- ------ ------- ------- ------ --------------------- -------- -------- ------ ------- ------- ------ Total liabilities 2,055.1 (25.7) 248.1 - 0.5 2.7 --------------------- -------- -------- ------ ------- ------- ------ --------------------- -------- -------- ------ ------- ------- ------ Net assets 2,313.7 25.7 (248.1) - (8.8) (2.7) --------------------- -------- -------- ------ ------- ------- ------ Equity Called up ordinary share capital 138.7 Share premium account 337.0 Own shares held (4.4) Other reserves 1,539.0 (5.0) 0.5 Retained earnings 282.8 25.7 (241.0) - (8.8) (3.2) --------------------- -------- -------- ------ ------- ------- ------ 2,293.1 25.7 (246.0) - (8.8) (2.7) --------------------- -------- -------- ------ ------- ------- ------ Minority interests 20.6 (2.1) --------------------- -------- -------- ------ ------- ------- ------ Total equity 2,313.7 25.7 (248.1) - (8.8) (2.7) --------------------- -------- -------- ------ ------- ------- ------ Notes to the financial statements (continued) 24(c). Restatement for International Financial Reporting Standards (continued) Group balance sheet - Reconciliation of equity between UK GAAP and IFRS as at 30 June 2004 (continued) Investments in Share- Operating As at Employee associate & based lease 30 June benefits joint ventures payments incentives Reserve 2004 IAS 19 IAS 28 & 31 IFRS 2 SIC-15 transfers IFRS Â£m Â£m Â£m Â£m Â£m Â£m -------------------- -------- --------- ------- ------- ------- ------ Non-current assets Investment properties (35.8) 3,370.5 Property, plant and equipment 353.8 Finance lease receivables 11.0 Available-for-sale investments 34.5 Investments in joint ventures and associate (8.9) 220.8 -------------------- -------- --------- ------- ------- ------- ------ Total non-current assets - (8.9) - (35.8) - 3,990.6 -------------------- -------- --------- ------- ------- ------- ------ Current assets Inventories 1.7 Trading properties 124.5 Finance lease receivables 0.1 Trade and other receivables (0.6) 29.3 90.9 Cash and cash equivalents 136.7 -------------------- -------- --------- ------- ------- ------- ------ Total current assets (0.6) - - 29.3 - 353.9 -------------------- -------- --------- ------- ------- ------- ------ -------------------- -------- --------- ------- ------- ------- ------ Total assets (0.6) (8.9) - (6.5) - 4,344.5 -------------------- -------- --------- ------- ------- ------- ------ Non-current liabilities Borrowings 1,644.7 Obligations under finance leases 0.5 Pension scheme deficit 26.1 27.3 Deferred tax provision 441.1 Provisions for liabilities and charges 20.4 Other creditors (1.1) 9.1 -------------------- -------- --------- ------- ------- ------- ------ Total non-current liabilities 26.1 - (1.1) - - 2,143.1 -------------------- -------- --------- ------- ------- ------- ------ Current liabilities Borrowings 8.0 Tax liabilities 20.2 Trade and other payables - 0.2 (0.1) 134.5 -------------------- -------- --------- ------- ------- ------- ------ Total current liabilities - - 0.2 (0.1) 162.7 -------------------- -------- --------- ------- ------- ------- ------ -------------------- -------- --------- ------- ------- ------- ------ Total liabilities 26.1 - (0.9) (0.1) - 2,305.8 -------------------- -------- --------- ------- ------- ------- ------ -------------------- -------- --------- ------- ------- ------- ------ Net assets (26.7) (8.9) 0.9 (6.4) - 2,038.7 -------------------- -------- --------- ------- ------- ------- ------ Equity Called up ordinary share capital 138.7 Share premium account 337.0 Own shares held (4.4) Other reserves (362.4) 1,172.1 Retained earnings (26.7) (8.9) 0.9 (6.4) 362.4 376.8 -------------------- -------- --------- ------- ------- ------- ------ (26.7) (8.9) 0.9 (6.4) - 2,020.2 -------------------- -------- --------- ------- ------- ------- ------ Minority interests 18.5 -------------------- -------- --------- ------- ------- ------- ------ Total equity (26.7) (8.9) 0.9 (6.4) - 2,038.7 -------------------- -------- --------- ------- ------- ------- ------ This information is provided by RNS The company news service from the London Stock Exchange

Companies

SEGRO (SGRO)

Full Archive

UK 100

Latest directors dealings

19 hours ago IntegraFin Holding
19 hours ago Spirent Communications
19 hours ago CRH (CDI)
19 hours ago Bezant Resources
20 hours ago EJF Investments Ltd NPV

All directors dealings today