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Land Sec. Group PLC (LAND)

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Tuesday 10 November, 2015

Land Sec. Group PLC

Half-yearly results 2015

RNS Number : 1121F
Land Securities Group PLC
10 November 2015
 



Forward-looking statements

These half-yearly results, our annual results, the Annual Report and the Land Securities' website may contain certain "forward-looking statements" with respect to Land Securities Group PLC and the Group's financial condition, results of operations and business, and certain of Land Securities Group PLC and the Group's plans, strategy, objectives, goals and expectations with respect to these items and the economies and markets in which the Group operates.

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as "anticipates", "aims", "due", "could", "may", "should", "expects", "believes", "intends", "plans", "targets", "goal" or "estimates" or, in each case, their negative or other variations or comparable terminology.  Forward-looking statements are not guarantees of future performance. By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Many of these assumptions, risks and uncertainties relate to factors that are beyond the Group's ability to control or estimate precisely. There are a number of such factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in the economies and markets in which the Group operates; changes in the legal, regulatory and competition frameworks in which the Group operates; changes in the markets from which the Group raises finance; the impact of legal or other proceedings against or which affect the Group; changes in accounting practices and interpretation of accounting standards under IFRS, and changes in interest and exchange rates.

Any written or verbal forward-looking statements, made in these half-yearly results, our annual results, the Annual Report or the Land Securities' website or made subsequently, which are attributable to Land Securities Group PLC or any other member of the Group or persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. Each forward-looking statement speaks only as of the date of these half-yearly results, our annual results, the Annual Report or on the date on which the forward-looking statement is made. Except as required by any legal or statutory obligation, Land Securities Group PLC does not intend to update any forward-looking statements.

Nothing contained in these half-yearly results, the Annual Report or the Land Securities website should be construed as a profit forecast or an invitation to deal in the securities of Land Securities Group PLC.

 

Half-yearly results for the six months ended 30 September 2015

10 November 2015

"Land Securities continues to deliver the right space at the right time, and it's paying off. Our Retail Portfolio is performing well and leasing levels in our London developments remain strong," said Chief Executive Robert Noel.

 

"In Retail, our portfolio is focused around our core themes of dominance, experience and convenience. Since the start of the financial year, we have sold selectively, recycling capital into the redevelopment of Westgate, Oxford, and other development opportunities. Operationally we are strong, with retailer sales and footfall up in our shopping centres and voids down.

 

"In London, we continue to benefit from our well-timed development programme delivering schemes into today's supply constrained market. So far this financial year, a further 500,000 sq ft has been let or is in solicitors' hands. We're focused on completing and letting up the remainder of our committed projects while progressing a future pipeline.

 

"Our strategy is working and we are well positioned for the future. We have better assets, with higher quality income, and our balance sheet is stronger than ever. We are delivering for our customers, our communities and our shareholders and look forward to the second half of the year with confidence."

Results summary


30 September 2015

31 March 2015

Change

Valuation surplus(1)

£519.3m

n/a

Up 3.8%(2)

Basic NAV per share

1,416p

1,343p

Up 5.4%

Adjusted diluted NAV per share(3)

1,367p

1,293p

Up 5.7%

Group LTV ratio(1)

26.5%

28.5%

 


6 months ended
30 September 2015

6 months ended
30 September 2014

Change

Profit before tax

£707.9m

£1,031.1m

 

Revenue profit(1)

£184.2m

£170.0m

Up 8.4%

Basic EPS

89.7p

130.6p

 

Adjusted diluted EPS(1)

23.2p

21.4p

Up 8.4%

Dividend

16.3p

15.8p

Up 3.2%

 

1.    Including our proportionate share of subsidiaries and joint ventures, as explained in the notes to the financial statements included within the half-yearly results.

2.    The % change for the valuation surplus represents the increase in value of the Combined Portfolio over the six month period, adjusted for net investment.

3.    Our key valuation measure.

 

Activity

·      £17.2m of development lettings

·      £17.0m of investment lettings

·      Acquisitions, development and refurbishment expenditure (including trading properties) of £317.3m

·      Disposals (including trading properties) of £406.5m

·      Supported 85 disadvantaged people into sustainable jobs in the communities where we operate through our Community Employment Programme

Results

·      Ungeared total property return 5.9%, underperforming the IPD Quarterly Universe at 6.8%

·      Total business return (dividends and adjusted diluted NAV growth) of 7.0%

·      Combined Portfolio valued at £14.6bn, with a valuation surplus of 3.8%

·      Valuation surplus of properties in the development programme of 6.8%

·      Revenue profit £184.2m, up 8.4%

·      Voids in the like-for-like portfolio remain low at 2.8% (31 March 2015: 3.2%)

Financials

·      Group LTV ratio at 26.5%, based on adjusted net debt of £4.0bn

·      Weighted average maturity of debt at 8.3 years

·      Weighted average cost of debt at 4.6%

·      Cash and available facilities of £1.4bn

·      First half dividend of 16.3p, up 3.2%

Development

·      1.4m sq ft being delivered in London over the next 12 months

·      0.8m sq ft Westgate, Oxford, due to open in October 2017

·      1.4m sq ft of retail development and extension opportunities including Ealing Filmworks, Selly Oak, Birmingham, Buchanan Galleries, Glasgow, and White Rose, Leeds

·      1.2m sq ft future London pipeline including 21 Moorfields, EC2, Nova East, SW1, 1 Sherwood Street, W1 and Portland House, SW1

Recognition

·      Winner of the Business in the Community Work Inclusion Award

·      Maintained EPRA gold status for sustainability reporting and membership of FTSE4Good and the Dow Jones Sustainability Index

·      Achieved ISO 50001 certification for energy management

·      Re-certification of ISO 14001 for environmental management

 

All measures above are presented on a proportionate basis, as explained in the notes to the financial statements included within the half-yearly results

 

Chief Executive's statement

We have continued to execute our strategy, achieving good progress on lettings in London, enhancing our Retail Portfolio and strengthening the balance sheet.

 

Once again, we funded high levels of activity by recycling capital rather than increasing debt. This approach is providing us with better assets, higher quality income and lower financial gearing as we move through the cycle. Over the six months, we invested £317.3m in acquisitions, development and refurbishment and completed disposals of £406.5m.

 

Our actions during the half-year enabled us to build on last year's exceptionally strong performance. We increased revenue profit by 8.4% compared to the same period last year. Adjusted diluted NAV per share was up 74p at 1,367p - an increase of 5.7%. The second quarterly dividend is 8.15p, making the first half dividend 16.3p - up 3.2% on the comparative period. Total business return for the six months was 7.0%.

 

In Retail, we have continued to shape the portfolio to suit changing customer expectations, pursuing our strategic themes of dominance, experience and convenience. In the first half we started construction of our development at Westgate, Oxford. This 800,000 sq ft shopping centre, being built in joint venture with The Crown Estate, will open in October 2017. We made progress on potential developments at Ealing Filmworks and Selly Oak, Birmingham. We completed £43.6m of disposals in the period and, since 1 October, we have exchanged contracts to sell a further £273.6m of non-core assets.

 

In London, we have continued to deliver exceptional work environments into a supply-constrained market. At the beginning of the financial year, we had 1.1m sq ft of space to let in our development schemes. 500,000 sq ft of that space is now let or in solicitors' hands and the remainder is well matched to customer demand. We made one acquisition, purchasing the 50% interest we did not already own at 6-17 Tottenham Court Road, W1, and £362.9m of disposals including Times Square, EC4. We also exchanged contracts to sell Haymarket House, SW1, for £155.2m and this sale will complete in the second half. We continue to progress a pipeline of future development opportunities in the capital.

 

Operationally, it is a busy time for the business, with over 3,000 people working on our construction sites. I am pleased to report that our highly acclaimed Community Employment Programme has so far enabled 668 of London's most disadvantaged people to train for a trade on and around our sites, and subsequently enter the construction industry. In July, this was recognised with the 2015 Business in the Community award for 'Work Inclusion'. We are now replicating the programme at Westgate, Oxford.

 

In the second half, we expect rental value growth to remain positive for our assets. We continue to track and assess new development opportunities --both inside and outside our current portfolios but, as we have previously indicated, we will not commit to further developments without substantial pre-lets. We are likely to be net disinvestors in the second half of the year as a result of some £565m of disposals we have agreed but not yet completed. For these reasons, both operational gearing as measured by the amount of speculative space we have to let, and financial gearing as measured by loan-to-value, are likely to be lower in March 2016.  

 

Robert Noel

Chief Executive

 

Financial review

Overview and headline results

Over the six months ended 30 September 2015, we delivered a profit before tax of £707.9m, compared with £1,031.1m for the same period last year, primarily due to a reduction in the valuation surplus from £880.2m to £519.3m (including our proportionate share of subsidiaries and joint ventures). Basic earnings per share were 89.7p compared with 130.6p. Underlying earnings were up; revenue profit was £184.2m compared with £170.0m in the comparative period and adjusted diluted earnings per share increased to 23.2p from 21.4p.

 

Our Combined Portfolio increased in value from £14.0bn at 31 March 2015 to £14.6bn principally as a result of our valuation surplus of £519.3m. Net assets per share increased by 5.4% to 1,416p at 30 September 2015. Adjusted diluted net assets per share were up by 5.7% over the six months, increasing from 1,293p to 1,367p. This 74p increase in adjusted diluted net assets per share together with the dividends paid in the period represents a 7.0% total business return.

Presentation of financial information

A number of our financial measures include the results of our joint ventures and subsidiaries on a proportionate basis. Measures that are described as being presented on a proportionate basis include the Group's share of joint ventures on a line-by-line basis, and are adjusted to exclude the non-owned elements of our subsidiaries. This is in contrast to the Group's statutory financial statements, where the Group's interest in joint ventures is presented as one line on the income statement and balance sheet, and all subsidiaries are consolidated at 100% with any non-owned element being adjusted as a non-controlling interest or redemption liability, as appropriate. Our joint operations are presented on a proportionate basis in all financial measures.

Revenue profit

Revenue profit is our measure of underlying pre-tax profit, which is used internally to assess the Group's income performance. It excludes all items of a capital nature, such as valuation movements and profits and losses on the disposal of investment properties, as well as one-off items. A full definition of revenue profit is given in the glossary. The main components of revenue profit are presented on a proportionate basis in the table below and a more detailed reconciliation of revenue profit to our IFRS profit before tax is included in note 3 to the financial statements.

 

Table 1 shows the composition of our revenue profit including the contributions from London and Retail.

 

Table 1: Revenue profit


30 September 2015

30 September 2014



Retail Portfolio

London Portfolio

Total

Retail

Portfolio

London Portfolio

Total

Change


£m

£m

£m

£m

£m

£m

£m

Gross rental income(1)

178.4

145.0

323.4

185.5

135.8

321.3

2.1

Net service charge expense

(1.2)

(0.8)

(2.0)

(0.8)

0.7

(0.1)

(1.9)

Net direct property expenditure

(9.6)

(7.0)

(16.6)

(12.7)

(6.1)

(18.8)

2.2

Net rental income

167.6

137.2

304.8

172.0

130.4

302.4

2.4

Indirect costs

(12.9)

(9.1)

(22.0)

(13.3)

(10.2)

(23.5)

1.5

Segment profit before interest

154.7

128.1

282.8

158.7

120.2

278.9

3.9

Net unallocated expenses



(17.4)



(15.8)

(1.6)

Net interest expense - Group



(72.0)



(79.2)

7.2

Net interest expense - joint ventures


(9.2)



(13.9)

4.7

Revenue profit



184.2



170.0

14.2

 

1.    Includes finance lease interest, after rents payable.

 

Revenue profit increased by £14.2m from £170.0m in the comparative period to £184.2m in the six months ended 30 September 2015. The 8.4% increase was mainly due to lower net interest expense and higher net rental income. Our net interest expense has decreased by £11.9m to £81.2m, largely due to the repayment of joint venture debt in the prior year and utilisation of cheaper Group facilities. The increase in net rental income is primarily due to the impact of acquisitions made in the prior year, including Bluewater, Kent, together with development completions largely offset by the loss of income from properties sold last year. Approximately £4.5m of the net rental income in the period is from non-recurring items, including surrender receipts. Further information on the net rental income performance of the London and Retail portfolios is given in the respective business reviews.

 

The indirect costs of London and Retail and net unallocated expenses need to be considered together as, collectively, they represent the net indirect expenses of the Group including joint ventures. In total, net indirect expenses were £39.4m compared with £39.3m in the comparative period.

Change of valuer

In line with best practice, we conducted a tender exercise earlier this year, as a result of which we appointed CBRE to replace Knight Frank as our principal valuer. CBRE performed the valuation at 30 September 2015.

Valuation surplus and disposal profits

The movement in the values of our investment properties and any profits or losses on disposals are key components of our pre-tax profit. Over the period, the valuation surplus on our Combined Portfolio was £519.3m, or 3.8%. We made a profit on the disposal of investment properties of £9.8m (on a proportionate basis), down from £38.2m in the same period last year. A breakdown of the valuation surplus by category is shown in table 2 below.

 

Table 2: Valuation analysis


Market value

30 September 2015

Valuation movement

Rental value change(1)

Net initial
 yield

Equivalent
 yield

Movement in equivalent yield


£m

%

%

%

%

bps

Shopping centres and shops

2,673.1

2.6

1.0

4.5

4.8

(1)

Retail warehouses and food stores

1,159.4

(0.1)

(1.6)

5.5

5.5

(1)

Leisure and hotels

1,475.5

2.8

4.3

5.6

5.8

(8)

London offices

4,299.3

3.0

6.6

3.9

4.6

10

Central London shops

1,174.8

7.4

6.5

3.5

4.1

(27)

Other (Retail and London)

68.7

0.3

20.7

2.0

3.7

15

Total like-for-like portfolio

10,850.8

3.0

3.7

4.4

4.8

(1)

Proposed developments

285.0

(7.7)

n/a

4.9

n/a

n/a

Completed developments

1,010.4

10.7

6.7

0.9

4.1

(19)

Acquisitions

916.8

5.3

n/a

3.3

4.5

n/a

Development programme

1,518.5

6.8

n/a

(0.1)

4.3

n/a

Total Combined Portfolio

14,581.5

3.8

4.0

3.6

4.7

(3)

 

1.    Rental value change excludes units materially altered during the period and Queen Anne's Gate, SW1.

 

Over the six months to 30 September 2015, we have seen values rise in almost every category of our Combined Portfolio. Overall, values were up by 3.8%, with the like-for-like portfolio up by 3.0% largely due to rental value growth.

 

There is a slight difference in approach between CBRE and Knight Frank on how they look at the rental value and equivalent yield components of a valuation. The changes in rental values and equivalent yields over the period reflect both this difference in approach and market movements. As a result, there are some rental value and equivalent yield movements in the period which look counter-intuitive.

 

Our shopping centres increased in value by 2.6% predominantly due to rental value growth. The value of our retail warehouse and food store portfolio was broadly unchanged with a small reduction in rental values offset by yield movements. Leisure and hotels reported a 2.8% valuation surplus as a result of rental value growth and yield reduction.

 

London offices saw values rise by 3.0% with rental values up by 6.6% and yields moving outwards by 10 basis points. These movements are impacted by the change in approach between valuers (see above). This has led to a higher reported growth in rental values than we were expecting, coupled with a modest outward yield movement when market yields have generally tightened slightly.

 

Outside the like-for-like portfolio, completed developments increased in value by 10.7% due to a 19 basis points reduction in yields and rental values up by 6.7%. Within acquisitions, the value of the additional 50% interest in Thomas More Square, EC3, was up strongly on the back of rental growth and letting success. The development programme valuation surplus was up 6.8% due to continued construction and pre-letting progress on our major schemes.

Earnings per share

Basic earnings per share were 89.7p, compared with 130.6p for the same period last year, primarily due to the lower valuation surplus.

 

Similar to the adjustments we make to profit before tax, which remove capital and one-off items to give revenue profit, we also report adjusted earnings per share figures. Adjusted diluted earnings per share increased by 8.4% from 21.4p in the comparative period to 23.2p per share as a result of the increase in revenue profit.

Dividend

We will be paying a second quarterly dividend of 8.15p per share on 7 January 2016 to shareholders registered at the close of business on 4 December 2015, all of which will be paid as an ordinary dividend. Taken together with the first quarterly dividend of 8.15p (100% Property Income Distribution) paid on 9 October 2015, our first half dividend will be 16.3p per share (six months ended 30 September 2014: 15.8p), or £128.8m (six months ended 30 September 2014: £124.8m).

Net assets

At 30 September 2015, our net assets per share were 1,416p, an increase of 73p or 5.4% from 31 March 2015. The increase in our net assets was primarily driven by the increase in value of our investment properties, profits on disposal of investment properties and our adjusted earnings, partly offset by the dividends we paid.

 

In common with other property companies, we calculate an adjusted measure of net assets which we believe better reflects the underlying net assets attributable to shareholders. Our adjusted net assets are lower than our reported net assets primarily due to an adjustment to increase our debt to its nominal value. At 30 September 2015, adjusted diluted net assets per share were 1,367p per share, an increase of 74p or 5.7% from 31 March 2015.

 

Table 3 summarises the differences between net assets and our adjusted measure of net assets together with the key movements in the period.

 

Table 3: Net assets


Six months ended

30 September 2015

Year ended

31 March 2015


£m

£m

Net assets at the beginning of the period

10,606.3

8,418.3

Adjusted earnings

184.2

329.1

Valuation surplus on investment properties

519.3

2,036.9

Profit on disposal of investment properties

9.8

132.7

Profit on disposal of investments in joint ventures

-

3.3

(Loss)/profit on disposal of trading properties

(0.2)

31.5

Impairment of goodwill

(0.2)

(29.7)

Impairment of long-term development contracts

(0.2)

(11.3)

Fair value movement on interest-rate swaps

2.2

(34.8)

Other

(6.8)

(40.9)

Profit after tax

708.1

2,416.8

Cash dividends

(124.2)

(229.4)

Purchase of own shares and treasury shares

(12.4)

(12.0)

Other reserve movements

10.4

12.6

Net assets at the end of the period

11,188.2

10,606.3

Fair value of interest-rate swaps

31.8

39.8

Debt adjusted to nominal value

(380.3)

(391.7)

Deferred tax liability arising on business combination

5.6

5.8

Goodwill on deferred tax liability

(5.6)

(5.8)

Adjusted net assets at the end of the period

10,839.7

10,254.4

To the extent tax is payable, all items are shown post-tax.

Net debt and gearing

Over the period, our net debt decreased by £165.7m to £3,634.8m. The main elements behind this decrease are set out in our statement of cash flows.

 

Operating cash inflow after interest and tax was £155.5m, higher than the £109.8m received in the same period last year largely due to higher receipts from trading property sales. Capital expenditure was £123.6m, largely relating to our wholly owned developments in Victoria, and we contributed a net £27.7m to our joint ventures, principally Nova, Victoria, SW1 and Westgate, Oxford. We spent £94.8m on investment property acquisitions, including 6-17 Tottenham Court Road, W1. Offsetting these investments in our portfolio were sales proceeds of £344.3m, primarily from Times Square, EC4, and we paid cash dividends of £124.2m in the period to 30 September 2015.

 

Adjusted net debt, which is presented on a proportionate basis and includes the nominal value of our debt but excludes the mark-to-market on our swaps, was down £163.4m to £4,008.3m (31 March 2015: £4,171.7m). A reconciliation between net debt and adjusted net debt is given in note 14 to the financial statements.

 

Table 4 below sets out various measures of our gearing.

 

Table 4: Gearing


30 September
2015

31 March
2015


%

%

Adjusted gearing(1) - on a proportionate basis

37.0

40.7

Group LTV

29.6

31.6

Group LTV - on a proportionate basis

26.5

28.5

Security Group LTV

28.6

31.5

 

1.    Adjusted net debt divided by adjusted net asset value.

 

All of our gearing measures have decreased since 31 March 2015 as there has been an increase in the value of our assets coupled with a decrease in our adjusted net debt. The measure most widely used in our industry is loan-to-value (LTV). We focus most on Group LTV, presented on a proportionate basis. This LTV measure decreased from 28.5% at 31 March 2015 to 26.5% at 30 September 2015. This is consistent with our strategy at this stage in the property cycle of allowing gearing to decline as property values rise.

 

Our Security Group LTV decreased to 28.6% (31 March 2015: 31.5%) largely as a result of the disposal of a number of secured assets and capital growth in the secured asset pool.

Financing

The total capital of the Group consists of shareholders' equity and adjusted net debt. Under IFRS, a large part of our net debt is carried at below its final redemption amount and is increased over its life to its full nominal value. We view our capital structure as if the debt were carried at its full redemption amount. For further details see notes 14 and 15 to the financial statements.

 

During the period, we increased our syndicated revolving credit facility by £125.0m to £1,380.0m. This takes our total revolving credit facilities to £2,365.0m. The pricing of our facilities which fall due in more than one year ranges from LIBOR +75 basis points to LIBOR +120 basis points.  Borrowings under our commercial paper programme typically have a maturity of less than three months, carry an interest rate of approximately LIBOR +25 basis points and are unsecured. Overall the amounts drawn under the bilateral facilities, syndicated bank debt and commercial paper in issue totalled £797.8m, a £153.3m decrease since 31 March 2015, primarily due to property disposals exceeding capital investment.

 

The Group's debt (on a proportionate basis) has a weighted average maturity of 8.3 years, a weighted average cost of 4.6% and 91.8% is at fixed interest rates. At 30 September 2015, we had £1.4bn of cash and available facilities. This gives the business considerable flexibility to deploy capital quickly should an acquisition opportunity arise.

Taxation

As a consequence of the Group's REIT status, income and capital gains from our qualifying property rental business are exempt from UK corporation tax. There was a tax credit of £0.2m in the period, relating to deferred tax arising on the acquisition of Bluewater, Kent (six months ended 30 September 2014: £0.1m credit).

 

Martin Greenslade

Chief Financial Officer

 

 


Retail Portfolio

Highlights

·      Valuation surplus of 1.6% 

·      Ungeared total property return of 4.1%

·      The portfolio underperformed its IPD Quarterly Universe sector benchmark at 4.3%

·      £9.9m investment lettings

·      £0.6m development lettings

·      Like-for-like voids were 2.1% (31 March 2015: 2.4%)

·      Units in administration were 0.3% (31 March 2015: 0.9%)

Key indicators

·      Footfall in our shopping centres was up 4.1% (national benchmark down 1.1%)

·      Same store sales were up 3.8% (national benchmark up 2.6%)

·      Same centre sales, taking into account new lettings and occupier changes, were up 5.2%

·      Measured retailers' rent to sales ratio was 9.9%

·      Total occupancy costs (including rent, rates, service charges and insurance) represented 17.0% of sales

 

We have reshaped our portfolio over the past few years to ensure it meets the evolving requirements of our customers and consumers. Our retail park portfolio is focused on meeting consumers' convenience shopping needs, and our leisure properties and shopping centres are all vibrant destinations that provide consumers with a great experience.

Buy

We purchased three assets in the period for £33.4m, all of which are adjacent to existing properties and were acquired to unlock potential future development opportunities.

Develop

During the first half we started construction at Westgate in Oxford city centre. This 800,000 sq ft scheme, owned in joint venture with The Crown Estate, is due to open in October 2017. We have substantial retailer commitment to this exciting new retail and leisure destination, with 33% pre-lets secured. Retailers include John Lewis, Primark, Next, River Island, H&M, Schuh, Superdry, Ted Baker and Michael Kors. The leisure and catering line-up includes a state-of-the-art Curzon cinema and a broad food and beverage offer in a stunning rooftop environment.

 

At Worcester Woods, our planning application for a 240,000 sq ft development is due to be determined before the year end. This proposed retail park development is 67% pre-let with lettings to Sainsbury's, Next, M&S and John Lewis.

 

At Selly Oak, Birmingham, in joint venture with Sainsbury's, we have plans to develop 200,000 sq ft of open A1 retail space and 160,000 sq ft of student housing. The proposed retail scheme is 62% pre-let or in solicitors' hands, and we aim to start construction in the next financial year.

 

During the period we allowed the development agreement with Guildford Borough Council to lapse as the scheme was not financially viable. We have also deferred our plans to extend Buchanan Galleries in Glasgow while the Edinburgh Glasgow Improvement Programme is delivered by Network Rail, and will continue to review how we improve the retail, leisure and catering environment at the centre.

 

At White Rose, Leeds, we have detailed planning permission for a 65,000 sq ft leisure extension. We aim to start on site early next year with completion due in 2017. The extension is anchored by an 11 screen Cineworld cinema, including new IMAX technology, and six new restaurants, four of which are already in solicitors' hands.

 

In October, we received approval for a compulsory purchase order enabling us to progress our detailed plans at Filmworks in Ealing. This 219,000 sq ft mixed-use retail, leisure and residential development opportunity is adjacent to the new Crossrail station.

Manage

Every asset has a plan, and we work hard to ensure we are providing the right space for our customers.

 

A number of key retailers need more space to better showcase their brands within our shopping centres. Since the beginning of the financial year, we have delivered a significantly upsized unit for Polo Ralph Lauren at Gunwharf Quays, Portsmouth, and are currently creating new flagship units for retailers including Next at Bluewater, Kent and H&M at St David's, Cardiff. These upsizes demonstrate the importance of the best trading locations to retailers and their commitment to our high quality shopping centres.

 

With our strong customer relationships, we have also agreed a number of deals within our retail park and leisure portfolio. At Blackpool Retail Park, we decreased the size of one retailer's unit to give them the right amount of space for their needs, while simultaneously letting their surplus space and increasing rents. At Fountain Park, Edinburgh, we agreed a surrender from two large leisure occupiers and secured planning consent to refurbish and convert the space into four restaurants and a leisure unit. This initiative will benefit us by increasing net rental income while meeting the requirements of our consumers for more restaurants and family-focused leisure.

 

Leisure expenditure continues to increase in the UK. Throughout our portfolio, we have put our expertise in the leisure and catering sector to good use, increasing the breadth of food, beverage and entertainment on offer. This adds vibrancy to the consumer experience within our properties and encourages consumers to stay longer and spend more. Since 1 April, we have introduced numerous new brands to our centres, with almost 50 leisure and restaurant lettings completed or in solicitors' hands.

Sell

We have continued to fine-tune our portfolio by selling assets that do not fit with our key themes of dominance, experience and convenience. During the period we sold £43.6m of assets, and since the half year we have exchanged contracts to sell three mature retail park assets at Dundee, Derby and Gateshead for £273.6m. These disposals are in line with our strategy to focus on convenience parks with strong catchments, flexible planning consents and resilient property fundamentals.

 

Net rental income

Table 5: Net rental income(1)


30 September 2015

30 September 2014

Change


£m

£m

£m

Like-for-like investment properties

139.2

133.2

6.0

Proposed developments

5.0

3.6

1.4

Development programme

0.5

0.7

(0.2)

Completed developments

1.5

0.4

1.1

Acquisitions since 1 April 2014

15.0

7.1

7.9

Disposals since 1 April 2014

0.9

23.5

(22.6)

Non-property related income

5.5

3.5

2.0

Net rental income

167.6

172.0

(4.4)

 

1.    On a proportionate basis.

 

Net rental income reduced by £4.4m from £172.0m to £167.6m. This was largely due to our disposals since April 2014. These include The Bridges, Sunderland, sold in the first half of last year, as well as our 50% shares of Cabot Circus, Bristol and Princesshay, Exeter, both sold in the second half of last year. The £22.6m reduction due to disposals is partly offset by our acquisitions, predominantly Bluewater, which contributed an additional £7.9m, and our like-for-like portfolio which contributed an additional £6.0m of income. The increase in our like-for-like portfolio is largely due to new lettings, rent reviews and an increase in turnover rents from the Accor hotels. Approximately £2.0m of the net rental income in the period is from non-recurring items, including surrender receipts. The £1.1m increase in net rental income from completed developments relates to The Bishop Centre, Taplow, which completed in July 2014 and is fully let.

Outlook

We continue to see change across the fast-paced retail environment. Only high quality assets which offer exceptional customer service and choice in a great environment will be able to adapt to these changing consumer trends. This is why our focus on dominance, experience and convenience ensures that our portfolio continues to perform and is well placed for the future.

 

London Portfolio

Highlights

·      Valuation surplus of 5.6% 

·      Ungeared total property return of 7.3%

·      The portfolio underperformed its IPD Quarterly Universe sector benchmark at 10.4%

·      £7.1m investment lettings

·      £16.6m development lettings

·      Like-for-like voids were 3.6% (March 2015: 4.3%)

 

As we deliver the remainder of our large speculative development programme in London, we have continued to see strong demand for the workspace we are creating.

Buy

We made one acquisition in the period, acquiring our partner's 50% interest at 6-17 Tottenham Court Road, W1 for £59.5m. This retail property is located next to the new Tottenham Court Road Crossrail station, with good rental growth prospects and future redevelopment potential.

Develop

Our London development programme remains exceptionally busy. In the City, following completion last year, 20 Fenchurch Street, EC3 is now 98% let. During the first half we reached practical completion at 1 & 2 New Ludgate, EC4 and this 382,000 sq ft retail and office scheme is now 92% let. The 275,000 sq ft development at 1 New Street Square, EC4 is due for completion in July 2016 and is pre-let in its entirety to Deloitte. 

 

In Victoria, SW1, we have made good progress. 62 Buckingham Gate is now 96% let with the remainder in solicitors' hands. The Zig Zag Building is now 37% let with a further 51% in solicitors' hands. Jamie's Italian, Mango and Iberica are all open. Kings Gate, our residential scheme, completed in October. 85 of the 100 apartments were pre-sold and these sales will complete in the second half. At Nova, 12% of the 480,000 sq ft office space is pre-let to Advent and Egon Zehnder. 135 of the 170 apartments have been pre-sold and London's newest food quarter is 66% pre-let or in solicitors' hands to a vibrant mix of operators. 

 

Elsewhere in the West End, we will be completing 93,000 sq ft at 20 Eastbourne Terrace, W2 in April 2016.  The 6,000 sq ft floor plates would typically be let post completion, but 62% of the space is already in solicitors' hands.

 

We have an exciting future pipeline. At 21 Moorfields, EC2, we have a resolution to grant planning consent for 515,000 sq ft of offices and retail and are finalising the section 106 agreement. We have also submitted planning applications for 194,000 sq ft of space at Nova, SW1 and 142,000 sq ft of space at 1 Sherwood Street, W1, behind Piccadilly Lights.  Portland House, SW1, remains an opportunity for conversion to residential use in 2020.

Manage

Our refurbishment at Thomas More Square, E1 was completed in September and Holborn Gate, WC1 is progressing well; letting progress for both is ahead of expectations in terms of rental levels and timing.  We have decided to retain Portland House, SW1, as an office building with some light touch refurbishment for the time being, rather than commit to a residential development. 

Sell

During the first half we made disposals totalling £362.9m including the sale of Times Square, EC4 which completed in July 2015.  We also exchanged contracts to sell Haymarket House, W1 for £155.2m and the sale will complete in the second half of the year.

Net rental income

Table 6: Net rental income(1)


30 September 2015

30 September 2014

Change


£m

£m

£m

Like-for-like investment properties

105.8

102.6

3.2

Proposed developments

-

-

-

Development programme

6.5

(1.6)

8.1

Completed developments

12.7

11.4

1.3

Acquisitions since 1 April 2014

3.9

-

3.9

Disposals since 1 April 2014(2)

6.4

14.7

(8.3)

Non-property related income

1.9

3.3

(1.4)

Net rental income

137.2

130.4

6.8

 

1.    On a proportionate basis.

2.    Includes Non-current assets held for sale

 

Net rental income increased by £6.8m from £130.4m to £137.2m, with the loss of net rental income from properties sold last year more than offset by the contribution from developments. Approximately £2.5m of the net rental income in the period is from non-recurring items, including surrender receipts.

 

The sale of Times Square, EC4, 47 Mark Lane, EC3, 130 Wood Street, EC2, and our 50% interest in 12/24 Oxford Street, W1, are behind the £8.3m reduction in net rental income from disposals. However, this was offset by £8.1m of increased income from the development programme, principally at 1 & 2 New Ludgate, EC4, and £1.3m of increased income from our completed developments. Our like-for-like portfolio contributed an additional £3.2m largely due to surrender income, the settlement of a number of rent reviews and lower direct property expenditure.

 

Acquisitions reflect net rental income since the purchase of our partners' respective interests in Thomas More Square, E1 and 6-17 Tottenham Court Road, W1. A reduction in development management fee income from 20 Fenchurch Street, EC3 and the loss of asset management fee income from sold properties has led to a decrease in non-property related income.

Outlook

Looking ahead, there remains a relative shortage of prime office space to let and we expect rental values to continue to rise in the near term. With the number of development starts picking up at a faster rate than we expected, our focus remains on letting the 767,000 sq ft left in our committed development programme, where the final building is due to complete in September 2016.

 

Principal risks and uncertainties

The principal risks of the business are set out on pages 34-36 of the 2015 Annual Report alongside their potential impact and related mitigations. These risks fall into eight categories: customers; market cyclicality; acquisitions; liability structure; development; people; environment; and health and safety.

 

The Board has reviewed the principal risks in the context of the second half of the current financial year and believes there has been no material change to the risks outlined in the Annual Report, and that the existing mitigation measures within the business remain relevant for the risks highlighted.

 

Statement of Directors' Responsibilities

Each of the Directors, whose names and functions appear below, confirm to the best of their knowledge that the condensed consolidated interim financial statements have been prepared in accordance with IAS 34, 'Interim Financial Reporting', as issued by the IASB and adopted by the European Union and that the interim management report herein includes a fair review of the information required by the Disclosure and Transparency Rules (DTR), namely:

 

·      DTR 4.2.7 (R): an indication of important events that have occurred during the six month period ended 30 September 2015 and their impact on the condensed interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·      DTR 4.2.8 (R): any related party transactions in the six month period ended 30 September 2015 that have materially affected, and any changes in the related party transactions described in the 2015 Annual Report that could materially affect, the financial position or performance of the enterprise during that period.

 

The Directors of Land Securities Group PLC as at the date of this announcement are as set out below:

 

Dame Alison Carnwath*, Chairman

 

Robert Noel, Chief Executive

 

Martin Greenslade, Chief Financial Officer

 

Kevin O'Byrne*, Senior Independent Director

 

Chris Bartram*

 

Simon Palley*

 

Stacey Rauch*

 

Edward Bonham Carter*

 

Cressida Hogg CBE*

 

 

*Non-executive Directors

 

A list of the current Directors is maintained on the Land Securities Group PLC website at: www.landsecurities.com.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

 

By order of the Board

 

Tim Ashby

Group General Counsel and Company Secretary

9 November 2015

 

Independent review report to Land Securities Group PLC

Introduction

We have been engaged by the Company to review the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 September 2015 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related notes to the financial statements 1 to 18. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. As disclosed in note 1, the annual consolidated financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Ernst & Young LLP

London, 9 November 2015

 

 

Financial statements

Unaudited income statement

 

Six months ended
30 September 2015

Six months ended

30 September 2014

 


Revenue
profit

 Capital and other items

Total

Revenue
 profit

Capital and other items

Total


Notes

£m

£m

£m

£m

£m

£m

Revenue

4

364.3

5.9

370.2

346.1

1.8

347.9

Costs

5

(119.2)

(4.5)

(123.7)

(115.8)

(4.6)

(120.4)



245.1

1.4

246.5

230.3

(2.8)

227.5

Profit on disposal of investment properties

3

-

5.8

5.8

-

36.8

36.8

Net surplus on revaluation of investment properties

11

-

394.5

394.5

-

788.9

788.9

Operating profit


245.1

401.7

646.8

230.3

822.9

1,053.2

Share of post-tax profit from joint ventures

12

11.1

133.8

144.9

18.9

94.5

113.4

Interest income

6

16.5

2.2

18.7

14.9

-

14.9

Interest expense

6

(88.5)

(11.4)

(99.9)

(94.1)

(19.4)

(113.5)

Revaluation of redemption liabilities


-

(2.4)

(2.4)

-

(6.3)

(6.3)

Impairment of goodwill


-

(0.2)

(0.2)

-

(30.6)

(30.6)

Profit before tax


184.2

523.7

707.9

170.0

861.1

1,031.1

Taxation


-

0.2

0.2

-

0.1

0.1

Profit for the period attributable to owners of the parent

184.2

523.9

708.1

170.0

861.2

1,031.2









Earnings per share attributable to owners of the parent (pence):






Basic earnings per share

8



89.7



130.6

Diluted earnings per share

8



89.3



130.1

 

Unaudited statement of comprehensive income

 

Six months ended
30 September 2015

Six months ended

30 September 2014


 

 

Total

 

 

Total


Notes

 

£m

 

 

£m

 







Profit for the period attributable to owners of the parent



708.1



1,031.2








Items that may be subsequently reclassified
to the income statement:







Share of joint ventures' fair value movements on interest-
rate swaps treated as cash flow hedges

12


0.3



(0.2)

Revaluation of other investments



0.2



-








Items that will not be subsequently reclassified
to the income statement:







Re-measurement gain/(losses) on defined benefit pension scheme



5.0



(0.7)

Deferred tax on re-measurement gain on defined benefit pension scheme



(0.9)



-








Other comprehensive income for the period attributable to owners of the parent



4.6



(0.9)








Total comprehensive income for the period attributable to owners of the parent



712.7



1,030.3

 

 

Unaudited balance sheet


30 September

31 March



2015

2015


Notes

£m

£m

Non-current assets




Investment properties

11

12,611.6

12,158.0

Intangible assets


33.7

34.7

Other property, plant and equipment


10.8

9.6

Net investment in finance leases


183.9

185.1

Loan investment


-

49.5

Investments in joint ventures

12

1,550.7

1,433.5

Other investments


13.6

12.8

Trade and other receivables


72.3

54.0

Pension surplus


11.9

7.0

Total non-current assets


14,488.5

13,944.2





Current assets




Trading properties and long-term development contracts

13

235.6

222.3

Trade and other receivables


393.1

402.7

Derivative financial instruments


6.5

-

Monies held in restricted accounts and deposits


7.4

10.4

Cash and cash equivalents


16.7

14.3

Total current assets


659.3

649.7

 




Non-current assets held for sale

18

154.3

283.4





Total assets


15,302.1

14,877.3





Current liabilities




Borrowings

15

(793.2)

(190.7)

Trade and other payables


(372.3)

(367.3)

Provisions


(1.6)

(2.6)

Derivative financial instruments


-

(3.8)

Current tax liabilities


(3.4)

(3.7)

Total current liabilities


(1,170.5)

(568.1)





Non-current liabilities




Borrowings

15

(2,842.1)

(3,593.0)

Trade and other payables


(28.8)

(29.6)

Derivative financial instruments


(30.1)

(37.7)

Redemption liabilities


(34.4)

(35.3)

Deferred tax


(8.0)

(7.3)

Total non-current liabilities


(2,943.4)

(3,702.9)





Total liabilities


(4,113.9)

(4,271.0)





Net assets


11,188.2

10,606.3





Equity




Capital and reserves attributable to the owners of the parent




Ordinary shares


80.1

80.1

Share premium


790.0

789.4

Capital redemption reserve


30.5

30.5

Share-based payments


7.4

8.7

Retained earnings


10,289.3

9,708.7

Own shares


(9.1)

(11.1)

Total equity


11,188.2

10,606.3

 

Unaudited statement of changes in equity

Attributable to owners of the parent

 

 

Ordinary shares

Share premium

Capital redemption reserve

Share-based payments

Retained earnings

Own
 shares

Total
equity

 

£m

£m

£m

£m

£m

£m

£m









At 1 April 2014

79.9

788.3

30.5

6.3

7,522.5

(9.2)

8,418.3









Total comprehensive income for the period

-

-

-

-

1,030.3

-

1,030.3

Transactions with owners:








Exercise of options

-

1.2

-

-

-

-

1.2

Dividends to owners of the parent

0.2

(0.2)

-

-

(105.0)

-

(105.0)

Fair value of share-based payments

-

-

-

3.0

-

-

3.0

Release on exercise of share options

-

-

-

(3.5)

3.5

-

-

Settlement and transfer of shares to employees on exercise of share options, net of proceeds

-

-

-

-

(4.1)

6.8

2.7

Acquisition of own shares and treasury shares

-

-

-

-

(0.2)

(5.7)

(5.9)

Total transactions with owners of the parent

0.2

1.0

-

(0.5)

(105.8)

1.1

(104.0)









At 30 September 2014

80.1

789.3

30.5

5.8

8,447.0

(8.1)

9,344.6









Total comprehensive income for the period

-

-

-

-

1,387.0

-

1,387.0

Transactions with owners:








Exercise of options

-

0.1

-

-

-

-

0.1

Dividends to owners of the parent

-

-

-

-

(124.8)

-

(124.8)

Fair value of share-based payments

-

-

-

3.0

-

-

3.0

Release on exercise of share options

-

-

-

(0.1)

0.1

-

-

Settlement and transfer of shares to employees on exercise of share options, net of proceeds

-

-

-

-

(0.6)

3.1

2.5

Acquisition of own shares and treasury shares

-

-

-

-

-

(6.1)

(6.1)

Total transactions with owners of the parent

-

0.1

-

2.9

(125.3)

(3.0)

(125.3)









At 31 March 2015

80.1

789.4

30.5

8.7

9,708.7

(11.1)

10,606.3









Total comprehensive income for the period

-

-

-

-

712.7

-

712.7

Transactions with owners:








Exercise of options

-

0.6

-

-

-

-

0.6

Dividends to owners of the parent

-

-

-

-

(126.6)

-

(126.6)

Fair value of share-based payments

-

-

-

4.2

-

-

4.2

Release on exercise of share options

-

-

-

(5.5)

5.5

-

-

Settlement and transfer of shares to employees on exercise of share options, net of proceeds

-

-

-

-

(11.0)

14.4

3.4

Acquisition of own shares

-

-

-

-

-

(12.4)

(12.4)

Total transactions with owners of the parent

-

0.6

-

(1.3)

(132.1)

2.0

(130.8)









At 30 September 2015

80.1

790.0

30.5

7.4

10,289.3

(9.1)

11,188.2

 

Unaudited statement of cash flows


Six months ended



30 September



2015

2014


Notes

£m

£m

Cash flows from operating activities




Net cash generated from operations

10

216.5

210.2

Interest received


1.0

3.4

Interest paid


(99.7)

(97.9)

Employer contributions to defined benefit pension scheme


(0.4)

(1.4)

Capital expenditure on trading properties


(20.1)

(22.9)

Disposal of trading properties


58.3

18.4

Corporation tax paid


(0.1)

-

Net cash inflow from operating activities


155.5

109.8





Cash flows from investing activities




Investment property development expenditure


(55.6)

(109.0)

Acquisition of investment properties and other investments


(94.8)

(0.2)

Acquisitions treated as business combinations (net of cash acquired)


-

(694.3)

Other investment property related expenditure


(65.3)

(23.5)

Disposal of investment properties


344.3

161.9

Expenditure on non-property related non-current assets


(2.7)

-

Receipt of long-term loan investment


49.5

-

Cash contributed to joint ventures

12

(14.6)

(5.7)

Loan advances to joint ventures

12

(63.1)

(111.3)

Loan repayments by joint ventures

12

6.4

7.8

Distributions from joint ventures

12

43.6

10.4

Net cash inflow/(outflow) from investing activities


147.7

(763.9)





Cash flows from financing activities




Cash received on issue of shares arising from exercise of share options


4.0

3.9

Purchase of own shares and treasury shares


(12.4)

(5.9)

Proceeds from new loans (net of finance fees)

15

142.1

768.5

Repayment of loans

15

(312.1)

(6.5)

Decrease/(increase) in monies held in restricted accounts and deposits


3.0

(1.6)

Decrease in finance leases payable


-

-

Dividends paid to owners of the parent

9

(124.2)

(101.9)

Distributions paid by non-wholly owned subsidiaries


(1.2)

(1.3)

Net cash (outflow)/inflow from financing activities


(300.8)

655.2





Increase in cash and cash equivalents for the period


2.4

1.1

Cash and cash equivalents at the beginning of the period


14.3

20.9

Cash and cash equivalents at the end of the period


16.7

22.0

 


 

Notes to the financial statements

1. Basis of preparation and consolidation


Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 September 2015 has been prepared on a going concern basis and in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and IAS 34 'Interim Financial Reporting' as adopted by the European Union (EU). In order to satisfy themselves that the Group has adequate resources to continue in operational existence for the foreseeable future, the Directors have reviewed an 18 month forecast extracted from the Group's current five year plan, which includes assumptions about future trading performance, valuation projections and debt requirements and an assessment of the impact of variations in the assumptions. This, together with available market information and experience of the Group's property portfolio and markets, has given the Directors sufficient confidence to adopt the going concern basis in preparing the financial statements.

 

The condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2015, presented in accordance with IFRS, were approved by the Board of Directors on 18 May 2015 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The condensed consolidated interim financial information has been reviewed, not audited.

 

The condensed consolidated interim financial information should be read in conjunction with the Group's annual financial statements for the year ended 31 March 2015, which have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (IFRSs).

 

This condensed consolidated interim financial information was approved for issue on 9 November 2015.

Presentation of results

The Group income statement is presented in a columnar format, split into those items that relate to revenue profit and capital and other items. The total column represents the Group's results presented in accordance with IFRSs; the other columns provide additional information. This is intended to reflect the way in which the Group's senior management review the results of the business and to aid reconciliation to the segmental reporting.

 

The presentation of individual cost items in the Income Statement has been reviewed in the period and some less significant items are now aggregated within Costs.

 

A number of the financial measures used internally by the Group to measure performance include the results of partly-owned subsidiaries and joint ventures on a proportionate basis. Measures that are described as being on a proportionate basis include the Group's share of joint ventures on a line-by-line basis and are adjusted to exclude the non-owned elements of our subsidiaries. These measures are non-GAAP measures and therefore not presented in accordance with IFRSs. This is in contrast to the Group's statutory financial statements, where the Group applies equity accounting to its interest in joint ventures, presenting its interest as one line on the income statement and balance sheet, and consolidating all subsidiaries at 100% with any non-owned element being adjusted as a non-controlling interest or redemption liability, as appropriate. Our joint operations are presented on a proportionate basis in all financial measures. 

 

Revenue profit is the Group's measure of underlying pre-tax profit, which is used by senior management to assess the Group's income performance. It excludes all items of a capital nature, such as valuation movements and profits and losses on the disposal of investment properties, as well as one-off items. A full definition of revenue profit is given in the glossary. The components of revenue profit are presented on a proportionate basis in note 3. Revenue profit is a non-GAAP measure.

 

2. Significant accounting policies

 

 

Except as described below, the condensed consolidated interim financial information has been prepared on the basis of the accounting policies, significant judgements, key assumptions and estimates as set out in the notes to the Group's annual financial statements for the year ended 31 March 2015. Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

 

The following accounting standards or interpretations were effective for the financial year beginning 1 April 2015 and have been applied in preparing these interim financial statements to the extent they are relevant to the preparation of interim financial information:

 

·      IAS 19 (amendment) 'Defined Benefit Plans: Employee Contributions'

 

·      Annual Improvements to the IFRSs 2010-2012 Cycle which include amendments to:

 

IFRS 2 'Share-based Payments'

IFRS 3 'Business Combinations'

IFRS 8 'Operating Segments'

IFRS 13 'Fair Value Measurement'

IAS 16 'Property, Plant and Equipment'

IAS 24 'Related Party Disclosures'

IAS 38 'Intangible Assets'

IAS 40 'Investment Property'

 

None of the standards above have impacted the Group's reporting.

 

The following accounting standards and interpretations which are relevant to the Group have been issued, but are not yet effective:

 

·      IFRS 9 'Financial Instruments'

·      IFRS 11 (amendment) 'Accounting for Acquisitions of Interest in Joint Operations'

·      IFRS 15 'Revenue from Contracts with Customers'

·      IAS 1 'Disclosure initiative - amendments to IAS1'

·      IAS 27 (amendment) 'Equity Method in Separate Financial Statements'

·      IAS 28 and IFRS 10 (amendment) 'Sale or Contribution of Assets between an Investor and its Associate or Joint Venture'

·      IAS 16 (amendment) 'Property, Plant and Equipment'

·      IAS 38 (amendment) 'Intangible Assets'

·      Annual Improvements to the IFRSs 2012-2014 Cycle (various standards)

 

These standards and interpretations have not been early adopted by the Group. The Group is in the process of assessing the impact of these new standards and interpretations on its financial reporting.

 

3. Segmental information

 

 

The Group's operations are organised into two operating segments, being the Retail Portfolio and the London Portfolio. The London Portfolio includes all our London offices and central London shops and the Retail Portfolio includes all our shopping centres and shops (excluding central London shops), hotels and leisure assets and retail warehouse properties. All of the Group's operations are in the UK.

 

Management has determined the Group's operating segments based on the information reviewed by senior management to make strategic decisions. During the year, the chief operating decision maker was the Executive Committee (ExecCom), which comprised the Executive Directors, the managing directors of the Retail and London portfolios, the Group General Counsel and Company Secretary, the Group HR Director, and the Director of Corporate Affairs and Sustainability. The information presented to ExecCom includes reports from all functions of the business as well as strategy, financial planning, succession planning, organisational development and Group-wide policies.

 

The Group's primary measure of underlying profit before tax is revenue profit. However, segment profit is the lowest level to which the profit arising from the on-going operations of the Group is analysed between the two segments. The Group manages its financing structure, with the exception of joint ventures, on a pooled basis and, as such, debt facilities and interest charges (other than those relating to joint ventures) are not specific to a particular segment. Unallocated income and expenses (Group services) are items incurred centrally which are neither directly attributable nor can be reasonably allocated to individual segments.

 

The Group's financial performance is not impacted by seasonal fluctuations.

 


Six months ended 30 September 2015

 

Retail Portfolio

London Portfolio

Total

Revenue profit

Group

£m

Joint ventures

£m

Total

£m

Group

£m

Joint  ventures

£m

Total

£m

Group(1)

£m

Joint ventures

£m

Total

£m

Rental income

166.6

15.3

181.9

132.6

9.3

141.9

299.2

24.6

323.8

Finance lease interest

0.7

-

0.7

4.5

-

4.5

5.2

-

5.2

Gross rental income (before rents payable)

167.3

15.3

182.6

137.1

9.3

146.4

304.4

24.6

329.0

Rents payable(2)

(3.7)

(0.5)

(4.2)

(1.4)

-

(1.4)

(5.1)

(0.5)

(5.6)

Gross rental income (after rents payable)

163.6

14.8

178.4

135.7

9.3

145.0

299.3

24.1

323.4

Service charge income

22.5

2.3

24.8

19.7

1.7

21.4

42.2

4.0

46.2

Service charge expense

(23.4)

(2.6)

(26.0)

(20.1)

(2.1)

(22.2)

(43.5)

(4.7)

(48.2)

Net service charge (expense)/income

(0.9)

(0.3)

(1.2)

(0.4)

(0.4)

(0.8)

(1.3)

(0.7)

(2.0)

Other property related income

9.8

0.3

10.1

6.1

0.4

6.5

15.9

0.7

16.6

Direct property expenditure

(17.5)

(2.2)

(19.7)

(12.7)

(0.8)

(13.5)

(30.2)

(3.0)

(33.2)

Net rental income

155.0

12.6

167.6

128.7

8.5

137.2

283.7

21.1

304.8

Indirect property expenditure

(12.3)

(0.5)

(12.8)

(8.4)

(0.3)

(8.7)

(20.7)

(0.8)

(21.5)

Depreciation

(0.1)

-

(0.1)

(0.4)

-

(0.4)

(0.5)

-

(0.5)

Segment profit before interest

142.6

12.1

154.7

119.9

8.2

128.1

262.5

20.3

282.8

Joint venture net interest expense

-

(1.6)

(1.6)

-

(7.6)

(7.6)

-

(9.2)

(9.2)

Segment profit

142.6

10.5

153.1

119.9

0.6

120.5

262.5

11.1

273.6

Group services - other income







1.8

-

1.8

                         - expense







(19.2)

-

(19.2)

Interest income







16.5

-

16.5

Interest expense







(88.5)

-

(88.5)

Revenue profit







173.1

11.1

184.2

 

1.    Group income figures shown in this column are included in note 4 and agree to the revenue figure included in the revenue profit column in the income statement.

2.    Included within rents payable is finance lease interest payable of £0.3m and £0.2m for the Retail and London portfolios, respectively.

 

Reconciliation of revenue profit to profit before tax

 

Total

 

 

Group

£m

Joint ventures

£m

Total

£m






Revenue profit


173.1

11.1

184.2






Capital and other items





Impairment of long-term development contracts


(0.1)

(0.1)

(0.2)

Loss on disposal of trading properties


(0.2)

-

(0.2)

Profit on disposal of investment properties


5.8

4.0

9.8

Net surplus on revaluation of investment properties


393.6

125.7

519.3

Movement in impairment of trading properties(3)


1.2

4.4

5.6

Fair value movement on interest-rate swaps


2.2

-

2.2

Fair value movement on foreign exchange swaps


9.5

-

9.5

Foreign exchange movement on borrowings


(9.5)

-

(9.5)

Amortisation of bond exchange de-recognition adjustment


(11.4)

-

(11.4)

Revaluation of redemption liabilities


(2.4)

-

(2.4)

Joint venture taxation


-

(0.2)

(0.2)

Impairment of goodwill


(0.2)

-

(0.2)

Amortisation of intangible asset


(0.8)

-

(0.8)

Adjustment for non-wholly owned subsidiaries(4)


2.2

-

2.2

Profit before tax


563.0

144.9

707.9

 

3.    The net release of impairment of trading properties of £5.6m relates entirely to the London Portfolio.

4.    All items in the segment note are presented on a proportionate basis (see note 1). This adjustment represents the non-owned element of the Group's subsidiaries which is excluded from the numbers presented in the tables above. Included within the £2.2m adjustment above is revenue of £1.7m, net surplus on revaluation of investment properties of £0.9m, joint venture profits in non-wholly owned subsidiaries of £nil, less costs of £0.4m.

 


Six months ended 30 September 2014

 

Retail Portfolio

London Portfolio

Total

Revenue profit

Group

£m

Joint ventures

£m

Total

£m

Group

£m

Joint  ventures

£m

Total

£m

Group(1)

£m

Joint ventures

£m

Total

£m

Rental income

160.3

30.2

190.5

122.1

10.1

132.2

282.4

40.3

322.7

Finance lease interest

0.7

0.1

0.8

4.5

-

4.5

5.2

0.1

5.3

Gross rental income (before rents payable)

161.0

30.3

191.3

126.6

10.1

136.7

287.6

40.4

328.0

Rents payable(2)

(4.9)

(0.9)

(5.8)

(0.9)

-

(0.9)

(5.8)

(0.9)

(6.7)

Gross rental income (after rents payable)

156.1

29.4

185.5

125.7

10.1

135.8

281.8

39.5

321.3

Service charge income

22.8

4.2

27.0

18.0

1.0

19.0

40.8

5.2

46.0

Service charge expense

(23.2)

(4.6)

(27.8)

(17.1)

(1.2)

(18.3)

(40.3)

(5.8)

(46.1)

Net service charge expense

(0.4)

(0.4)

(0.8)

0.9

(0.2)

0.7

0.5

(0.6)

(0.1)

Other property related income

8.1

0.5

8.6

7.8

0.3

8.1

15.9

0.8

16.7

Direct property expenditure

(17.2)

(4.1)

(21.3)

(13.0)

(1.2)

(14.2)

(30.2)

(5.3)

(35.5)

Net rental income

146.6

25.4

172.0

121.4

9.0

130.4

268.0

34.4

302.4

Indirect property expenditure

(12.2)

(1.0)

(13.2)

(9.1)

(0.6)

(9.7)

(21.3)

(1.6)

(22.9)

Depreciation

(0.1)

-

(0.1)

(0.5)

-

(0.5)

(0.6)

-

(0.6)

Segment profit before interest

134.3

24.4

158.7

111.8

8.4

120.2

246.1

32.8

278.9

Joint venture net interest expense

-

(5.4)

(5.4)

-

(8.5)

(8.5)

-

(13.9)

(13.9)

Segment profit

134.3

19.0

153.3

111.8

(0.1)

111.7

246.1

18.9

265.0

Group services - other income







1.8

-

1.8

                         - expense







(17.6)

-

(17.6)

Interest income







14.9

-

14.9

Interest expense







(94.1)

-

(94.1)

Revenue profit







151.1

18.9

170.0

 

1.    Group income figures shown in this column are included in note 4 and agree to the revenue figure included in the revenue profit column in the income statement.

2.    Included within rents payable is finance lease interest payable of £0.8m and £0.2m for the Retail and London portfolios, respectively.

 

Reconciliation of revenue profit to profit before tax


Total

 

 

Group

£m

Joint ventures

£m

Total

£m






Revenue profit


151.1

18.9

170.0






Capital and other items





(Loss)/ profit on disposal of trading properties


(0.4)

0.2

(0.2)

Profit on disposal of investment properties


36.8

1.4

38.2

Net surplus on revaluation of investment properties


787.3

92.9

880.2

Movement in impairment of trading properties(3)


(0.6)

(0.4)

(1.0)

Fair value movement on interest-rate swaps


(8.9)

0.1

(8.8)

Amortisation of bond exchange de-recognition adjustment


(10.5)

-

(10.5)

Revaluation of redemption liabilities


(6.3)

-

(6.3)

Business combination costs


(2.7)

-

(2.7)

Impairment of goodwill


(30.6)

-

(30.6)

Amortisation of intangible asset


(0.4)

-

(0.4)

Adjustment for non-wholly owned subsidiaries(4)


2.9

0.3

3.2

Profit before tax


917.7

113.4

1,031.1

 

3.    Of the impairment of trading properties of £1.0m, an impairment of £0.2m relates to the Retail Portfolio and £0.8m relates to the London Portfolio.

4.    All items in the segment note are presented on a proportionate basis (see note 1). This adjustment represents the non-owned element of the Group's subsidiaries which is excluded from the numbers presented in the tables above. Included within the £3.2m adjustment above is revenue of £1.8m, a net surplus on revaluation of investment properties of £1.6m, joint venture profits in non-wholly owned subsidiaries of £0.3m, less costs of £0.5m.

 

4. Revenue

 

 

All revenue is classified within the 'Revenue profit' column of the income statement, with the exception of proceeds on the sale of trading properties and income arising on long-term development contracts, which are presented in the 'Capital and other items' column. Also included in the 'Capital and other items' column is the non-owned element of the Group's subsidiaries which is excluded from revenue profit.

 


Six months ended
30 September 2015

Six months ended

30 September 2014

 

Revenue
 profit

Capital and other items

Total

Revenue
profit

Capital and other items

Total

 

£m

£m

£m

£m

£m

£m

Rental income (excluding adjustment for lease incentives)

289.5

1.4

290.9

273.1

1.4

274.5

Adjustment for lease incentives

9.7

-

9.7

9.3

0.1

9.4

Rental income

299.2

1.4

300.6

282.4

1.5

283.9

Service charge income

42.2

0.3

42.5

40.8

0.3

41.1

Other property related income

15.9

-

15.9

15.9

-

15.9

Trading property sales proceeds

-

4.2

4.2

-

-

-

Finance lease interest

5.2

-

5.2

5.2

-

5.2

Other income

1.8

-

1.8

1.8

-

1.8


364.3

5.9

370.2

346.1

1.8

347.9

 

5. Costs

 

 

All costs are classified within the 'Revenue profit' column of the income statement, with the exception of the cost of sale of trading properties, costs arising on long-term development contracts, amortisation of intangible assets and business combination costs which are presented in the 'Capital and other items' column. Also included in the 'Capital and other items' column is the non-owned element of the Group's subsidiaries which is excluded from revenue profit.

 


Six months ended
30 September 2015

Six months ended

30 September 2014


Revenue
 profit

Capital and other items

Total

Revenue
 profit

Capital and other items

Total


£m

£m

£m

£m

£m

£m

Rents payable

5.1

-

5.1

5.8

-

5.8

Service charge expense(1)

43.5

0.3

43.8

40.3

0.3

40.6

Direct property expenditure(1)

30.2

0.1

30.3

30.2

0.2

30.4

Indirect property expenditure(1)

40.4

-

40.4

39.5

-

39.5

Impairment of long-term development contracts

-

0.1

0.1

-

-

-

Trading property disposals

-

4.4

4.4

-

0.4

0.4

Movement in impairment of trading properties

-

(1.2)

(1.2)

-

0.6

0.6

Amortisation of intangible asset

-

0.8

0.8

-

0.4

0.4

Business combination costs

-

-

-

-

2.7

2.7


119.2

4.5

123.7

115.8

4.6

120.4

 

1.    The table above includes Group employee costs for the period of £29.7m (2014: £26.4m), which has been split into £3.6m (2014: £3.7m) within service charge expense, £0.2m (2014: £0.1m) within direct property expenditure and £25.9m (2014: £22.6m) within indirect property expenditure.

 

6. Interest

Six months ended
30 September 2015


Six months ended
30 September 2014


Revenue

profit

Capital and other items

 

Total

Revenue profit

Capital and other items

 

Total


 £m

£m

£m

£m

£m

£m

Interest income







Interest received on loan investments

0.5

-

0.5

1.4

-

1.4

Other interest receivable

0.5

-

0.5

0.1

-

0.1

Net interest receivable from joint ventures

15.3

-

15.3

13.3

-

13.3

Net pension interest

0.2

-

0.2

0.1

-

0.1

Fair value movement on interest rate swaps

-

2.2

2.2

-

-

-

Total interest income

16.5

2.2

18.7

14.9

-

14.9








Interest expense







Bond and debenture debt

(84.7)

-

(84.7)

(84.9)

-

(84.9)

Bank and other short term borrowings

(11.3)

-

(11.3)

(15.2)

-

(15.2)

Amortisation of bond exchange de-recognition adjustment

-

(11.4)

(11.4)

-

(10.5)

(10.5)

Fair value movement on interest-rate swaps

-

-

-

-

(8.9)

(8.9)

Fair value movement on foreign exchange swaps

-

9.5

9.5

-

-

-

Foreign exchange movement on borrowings

-

(9.5)

(9.5)

-

-

-

Other interest payable

(0.3)

-

(0.3)

(0.2)

-

(0.2)


(96.3)

(11.4)

(107.7)

(100.3)

(19.4)

(119.7)

Interest capitalised in relation to properties under development

7.8

-

7.8

6.2

-

6.2

Total interest expense

(88.5)

(11.4)

(99.9)

(94.1)

(19.4)

(113.5)

 







Net interest expense

(72.0)

(9.2)

(81.2)

(79.2)

(19.4)

(98.6)

Joint venture net interest expense

(9.2)



(13.9)



Net interest expense included in revenue profit

(81.2)



(93.1)



 

Finance lease interest payable of £0.5m (2014: £1.0m) is included within rents payable as detailed in note 3.

 

7. Net assets per share

30 September

31 March

2015

 2015

£m

£m

Net assets attributable to the owners of the parent

11,188.2

10,606.3

Fair value of interest-rate swaps - Group

30.1

37.7

                                                    - Joint ventures

1.7

2.1

Deferred tax liability arising on business combination

5.6

5.8

Goodwill on deferred tax liability

(5.6)

(5.8)

EPRA adjusted net assets

11,220.0

10,646.1

Reverse bond exchange de-recognition adjustment

(380.3)

(391.7)

Adjusted net assets attributable to the owners of the parent

10,839.7

10,254.4

Reinstate bond exchange de-recognition adjustment

380.3

391.7

Fair value of interest-rate swaps - Group

(30.1)

(37.7)

                                                    - Joint ventures

(1.7)

(2.1)

Deferred tax liability arising on business combination

(5.6)

(5.8)

Excess of fair value of debt over book value (note 15)

(997.9)

(1,161.4)

EPRA triple net assets

10,184.7

9,439.1

 


30 September 2015

31 March
2015

million

million

Number of ordinary shares in issue

801.1

801.0

Number of treasury shares

(10.5)

(10.5)

Number of own shares

(0.8)

(1.0)

Number of ordinary shares - basic net assets per share

789.8

789.5

Dilutive effect of share options

3.2

3.7

Number of ordinary shares - diluted net assets per share

793.0

793.2

 


30 September 2015

31 March
2015

pence

pence

Net assets per share

1,416

1,343

Diluted net assets per share

1,411

1,337

 



Adjusted net assets per share

1,372

1,299

Adjusted diluted net assets per share

1,367

1,293

 



EPRA measure - adjusted diluted net assets per share

1,415

1,342

                           - diluted triple net assets per share

1,284

1,190

 

Adjusted net assets per share excludes the fair value of interest rate swaps used for hedging purposes and the bond exchange de-recognition adjustment as management consider this better represents the expected future cash flows of the Group. EPRA measures have been included to assist comparison between European property companies. We believe our measure of adjusted net assets attributable to the owners of the parent is more indicative of underlying performance.

 

8. Earnings per share


 

Earnings per share (EPS) is the amount of post-tax profit attributable to each share.

 

The Group has also chosen to disclose adjusted earnings per share in order to provide an indication of the Group's underlying business performance. Adjusted earnings and adjusted earnings per share are calculated on a proportionate basis and exclude capital and one-off items. We believe our measure of adjusted diluted earnings per share is more appropriate than the EPRA measure in the context of our business.

 


Six months ended
30 September

2015

2014

£m

£m




Profit for the period attributable to the owners of the parent

708.1

1,031.2




Loss on disposal of trading properties

0.2

0.2

Profit on disposal of investment properties

(9.8)

(38.2)

Net surplus on revaluation of investment properties

(519.3)

(880.2)

Movement in impairment of trading properties

(5.6)

1.0

Fair value movement on interest-rate swaps

(2.2)

8.8

Fair value movement on foreign exchange swaps

(9.5)

-

Foreign exchange movement on borrowings

9.5

-

Revaluation of redemption liabilities

2.4

6.3

Business combination costs

-

2.7

Impairment of goodwill

0.2

30.6

Amortisation of intangible asset

0.8

0.4

Joint venture taxation

0.2

-

Group taxation

(0.2)

(0.1)

Adjustment for non-wholly owned subsidiaries(1)

(2.2)

(3.2)

EPRA adjusted earnings attributable to the owners of the parent

172.6

159.5

Eliminate:



Impairment of long-term development contracts(2)

0.2

-

Amortisation of bond exchange de-recognition adjustment

11.4

10.5

Adjusted earnings attributable to the owners of the parent

184.2

170.0

 

1.    This adjustment represents the non-owned element of the Group's subsidiaries which is excluded from adjusted earnings.

2.    The impairment of long-term development contracts has been removed from our adjusted earnings due to the long-term, capital nature of these programmes.

 


Six months ended

30 September

2015

2014

million

million

Weighted average number of ordinary shares

801.1

800.8

Weighted average number of treasury shares

(10.5)

(10.5)

Weighted average number of own shares

(0.8)

(1.0)

Weighted average number of ordinary shares - basic earnings per share

789.8

789.3

Dilutive effect of share options

3.3

3.2

Weighted average number of ordinary shares - diluted earnings per share

793.1

792.5

 


Six months ended

30 September

2015

2014

pence

pence

Basic earnings per share

89.7

130.6

Diluted earnings per share

89.3

130.1

 



Adjusted earnings per share

23.3

21.5

Adjusted diluted earnings per share

23.2

21.4

 



EPRA adjusted earnings per share

21.9

20.2

EPRA adjusted diluted earnings per share

21.8

20.1

 



 

9. Dividends



Six months ended
30 September





Pence per share

2015

2014

Ordinary dividends paid

Payment date



£m

£m

For the year ended 31 March 2014:







Third interim

 11 April 2014



7.6


59.8

Final

 22 July 2014



7.9


62.4

For the year ended 31 March 2015:







Third interim

 10 April 2015



7.9

62.4


Final

 24 July 2015



8.15

64.4


Gross dividends





126.8

122.2

Dividends settled in shares





-

(17.2)

Historic unclaimed dividends refunded





(0.2)

-

Dividends in the statement of changes in equity





126.6

105.0

Timing difference relating to payment of withholding tax




(2.4)

(3.1)

Dividends in the statement of cash flows





124.2

101.9

 

The Company paid a first interim dividend in respect of the current financial year of 8.15p per ordinary share, wholly as a Property Income Distribution (PID), representing £64.4m in total (2014: 7.9p or £62.4m), on 9 October 2015.

 

The Board has declared a second interim dividend of 8.15p per ordinary share to be paid as an ordinary dividend (2014: 7.9p, of which 6.0p was paid as a PID and 1.9p as an ordinary dividend). This second interim dividend will result in a further estimated distribution of £64.4m (2014: £62.4m) and will be paid on 7 January 2016 to shareholders registered at the close of business on 4 December 2015.

 

The Company operated a Scrip Dividend Scheme for part of last year and the scrip dividend amount of £17.2m comprised wholly non-PID distributions. A Dividend Reinvestment Plan (DRIP) was introduced in place of the Scrip Dividend Scheme and was operated for the first time in respect of last year's final dividend paid on 22 July 2014.

 

10. Net cash generated from operations



Six months ended





30 September




2015

2014

Reconciliation of operating profit to net cash generated from operations:



£m

£m






Operating profit



646.8

1,053.2






Adjustments for:





Depreciation



0.9

1.4

Impairment of long-term development contracts



0.1

-

Loss on disposal of trading properties



0.2

0.4

Profit on disposal of investment properties



(5.8)

(36.8)

Net surplus on revaluation of investment properties



(394.5)

(788.9)

Movement in impairment of trading properties



(1.2)

0.6

Amortisation of intangible asset



0.8

0.4

Share-based payment charge



4.2

3.0

Defined benefit pension scheme charge



0.6

0.5




252.1

233.8

Changes in working capital:





Increase in long-term development contracts



-

(0.4)

Increase in receivables



(33.3)

(11.6)

Decrease in payables and provisions



(2.3)

(11.6)

Net cash generated from operations



216.5

210.2

 

 

11. Investment properties

2015

2015

2014

£m

£m

£m

Net book value at the beginning of the period

12,158.0

11,279.3

9,847.7

Acquisitions

150.0

108.9

-

Acquired in business combination

-

275.0

635.8

Capital expenditure: Like-for-like portfolio

66.9

61.0

22.4

                                 Development portfolio

62.4

75.6

117.2

Capitalised interest

5.5

6.9

4.5

Disposals

(71.4)

(344.5)

(126.1)

Net movement in finance leases

-

(2.5)

(11.1)

Transfer to non-current assets held for sale (note 18)

(154.3)

(283.4)

-

Valuation surplus

394.5

981.7

788.9

Net book value at the end of the period

12,611.6

12,158.0

11,279.3

 




 

The fair value of investment properties at 30 September 2015 was determined by the Group's external valuers: CBRE and Knight Frank. The valuations are in line with RICS standards and were arrived at by reference to market evidence of transactions for similar properties. The valuations performed by the independent valuers are reviewed internally by senior management and relevant people within the London and Retail business units. This includes discussions of the assumptions used by the external valuers, as well as a review of the resulting valuations. Discussions of the valuation process and results are held between senior management, the audit committee and the external valuers on a half-yearly basis.

 

The market value of the Group's investment properties, as determined by the Group's external valuers, differs from the net book value presented in the balance sheet due to the Group presenting lease incentives, tenant finance leases and head leases separately. The following table reconciles the net book value of the investment properties to the market value.

 

 

30 September 2015

31 March 2015

 

Group
(excl. joint ventures)

Joint ventures(1)

Adjustment for proportionate share(2)

Combined Portfolio

Group
 (excl. joint ventures)

Joint
ventures(1)

Adjustment for proportionate share(2)

Combined Portfolio

 

£m

£m

£m

£m

£m

£m

£m

£m

Net book value

12,611.6

1,495.4

(33.0)

14,074.0

12,158.0

1,403.0

(31.8)

13,529.2

Plus: tenant lease incentives

263.1

34.1

(0.2)

297.0

251.0

26.5

(0.2)

277.3

Less: head leases capitalised

(16.5)

-

0.2

(16.3)

(16.5)

-

0.2

(16.3)

Plus: properties treated as finance leases

227.5

-

(0.7)

226.8

242.4

-

(1.2)

241.2

Market value

13,085.7

1,529.5

(33.7)

14,581.5

12,634.9

1,429.5

(33.0)

14,031.4

 









1.    Refer to note 12 for a breakdown of this amount by entity.

2.    This represents the interest in X-Leisure which we do not own, but which is consolidated in the Group numbers.

 

12. Joint arrangements

 

 

The Group's joint arrangements are described below:

 

Joint ventures

Percentage owned &
voting rights

Business
segment

Year end date(1)

Joint venture partners

Held at 30 September 2015

20 Fenchurch Street Limited Partnership

50.0%

London Portfolio

31 March

Canary Wharf Group plc

Nova, Victoria(2)

50.0%

London Portfolio

31 March

Canada Pension Plan Investment Board

Metro Shopping Fund Limited Partnership

50.0%

Retail Portfolio

31 March

Delancey Real Estate Partners Limited

St. David's Limited Partnership

50.0%

Retail Portfolio

31 December

Intu Properties plc

Westgate Oxford Alliance Limited Partnership

50.0%

Retail Portfolio

31 March

The Crown Estate Commissioners

The Oriana Limited Partnership

50.0%

London Portfolio

31 March

Frogmore Real Estate Partners Limited Partnership

Harvest(3) (4)

50.0%

Retail Portfolio

31 March

J Sainsbury plc

The Ebbsfleet Limited Partnership(4)

50.0%

London Portfolio

31 March

Lafarge Cement UK PLC

Millshaw Property Co. Limited(4) (5)

50.0%

Retail Portfolio

31 March

Evans Property Group Limited

Countryside Land Securities (Springhead) Limited(4)

50.0%

London Portfolio

30 September

Countryside Properties PLC

West India Quay Unit Trust(4) (6)

50.0%

Retail Portfolio

31 December

Schroder Exempt Property Unit Trust






Joint operations

Ownership interest

Business
segment


Joint operation partners

Bluewater, Kent

30.0%

Retail Portfolio


M&G Real Estate and GIC

Lend Lease Retail Partnership

Hermes and Aberdeen Asset Management






 

The following joint arrangements were disposed of or transferred to investments in subsidiaries in the year ended 31 March 2015:

 

 

 

 

 

Joint ventures

Buchanan Partnership(4)

50.0%

Retail Portfolio


The Henderson UK Shopping Centre Fund

Bristol Alliance Limited Partnership(4)

50.0%

Retail Portfolio


Hammerson plc

The Martineau Galleries Limited Partnership(4)

33.3%

Retail Portfolio


Hammerson plc

Pearl Group Limited






Joint operations

Princesshay, Exeter

50.0%

Retail Portfolio


The Crown Estate Commissioners

Thomas More Square, E1

50.0%

London Portfolio


The Cadillac Fairview Corporation Limited






1.    The year end date shown is the accounting reference date of the joint venture. In all cases the Group's accounting is performed using financial information for the Group's own reporting period and reporting date.

2.    Nova, Victoria includes the Victoria Circle Limited Partnership and Nova Residential Limited Partnership.

3.    Harvest includes The Harvest Limited Partnership and Harvest Two Limited Partnership. The Harvest Partnership disposed of its property interests in Lincoln in the period.

4.    Included within Other in subsequent tables.

5.    On 22 July 2015, Millshaw Property Co. Limited disposed of the Millshaw Park Industrial Estate, Leeds, its only property interest.

6.    West India Quay Unit Trust is held in the X-Leisure Unit Trust (X-Leisure) in which the Group holds a 95% share.

 

All of the Group's joint arrangements have their principal place of business in the United Kingdom. All of the Group's joint arrangements own and operate investment property with the exception of The Ebbsfleet Limited Partnership and Countryside Land Securities (Springhead) Limited, which hold development land as trading properties, and Millshaw Property Co. Limited which disposed of its only property interest during the period. The Westgate Oxford Alliance Limited Partnership, Nova, Victoria and The Oriana Limited Partnership are also engaged in the development of investment properties, with the latter two also developing trading properties. The activities of all the Group's joint arrangements are therefore strategically important to the business activities of the Group.

 

All joint ventures are registered in England and Wales with the exception of the Metro Shopping Fund Limited Partnership and West India Quay Unit Trust which are registered in Jersey.

 


Six months ended 30 September 2015

Joint ventures

20 Fenchurch Street Limited Partnership

Nova, Victoria

Metro Shopping Fund Limited Partnership

St. David's Limited Partnership

Westgate Oxford Alliance Partnership

The Oriana Limited Partnership

Individually material JVs at
LS's share

Other

Total

Income statement

100%

100%

100%

100%

100%

100%

50%

LS share

LS share

£m

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

Revenue(1)

21.4

-

9.0

21.2

1.6

1.4

27.3

2.0

29.3

 

 

 

 

 

 

 

 

 

 

Gross rental income (after rents payable)

17.4

-

7.2

17.6

1.2

1.2

22.3

1.8

24.1

 

 

 

 

 

 

 

 

 

 

Net rental income/(expense)

16.4

(0.6)

6.8

14.0

0.8

1.2

19.3

1.8

21.1

 

 

 

 

 

 

 

 

 

 

Segment profit/(loss) before interest

16.0

(0.8)

6.8

13.4

0.6

1.2

18.6

1.7

20.3

Net interest (expense)/income

(15.8)

-

(3.2)

-

(0.2)

0.6

(9.3)

0.1

(9.2)

Revenue profit

0.2

(0.8)

3.6

13.4

0.4

1.8

9.3

1.8

11.1

 

 

 

 

 

 

 

 

 

 

Capital and other items

 

 

 

 

 

 

 

 

 

Impairment of long-term development contracts

-

-

-

-

-

-

-

(0.1)

(0.1)

Profit on disposal of investment properties

1.2

-

-

-

-

4.4

2.8

1.2

4.0

Movement in impairment of trading properties

-

-

-

-

-

-

-

4.4

4.4

Net surplus on revaluation of investment properties

89.4

16.2

52.2

62.2

10.0

18.2

124.1

1.6

125.7

Profit before tax

90.8

15.4

55.8

75.6

10.4

24.4

136.2

8.9

145.1

Income tax

-

-

-

-

-

-

-

(0.2)

(0.2)

Post-tax profit

90.8

15.4

55.8

75.6

10.4

24.4

136.2

8.7

144.9

Other comprehensive income

-

-

0.6

-

-

-

0.3

-

0.3

Total comprehensive income

90.8

15.4

56.4

75.6

10.4

24.4

136.5

8.7

145.2

 

50%

50%

50%

50%

50%

50%

 

 

 

Land Securities' share of total comprehensive income

45.4

7.7

28.2

37.8

5.2

12.2

136.5

8.7

145.2

 


Six months ended 30 September 2014

Joint ventures

20 Fenchurch Street Limited Partnership

Nova,
Victoria

Metro Shopping Fund Limited Partnership

St. David's Limited Partnership

Westgate Oxford Alliance Partnership

The Oriana Limited Partnership

Individually material
JVs at
LS's share

Other

Total

Income statement

100%

100%

100%

100%

100%

100%

50%

LS share

LS share

£m

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

Revenue(1)

16.4

-

8.8

21.4

2.0

6.4

27.5

20.2

47.7

 

 

 

 

 

 

 

 

 

 

Gross rental income (after rents payable)

14.2

-

6.8

16.4

1.4

6.2

22.5

17.0

39.5

 

 

 

 

 

 

 

 

 

 

Net rental income/(expense)

13.8

(2.0)

6.6

14.0

1.2

6.0

19.8

14.6

34.4

 

 

 

 

 

 

 

 

 

 

Segment profit/(loss) before interest

13.2

(2.2)

6.2

13.4

1.0

5.8

18.7

14.1

32.8

Net interest expense

(13.2)

(0.2)

(3.4)

(3.6)

-

(3.4)

(11.9)

(2.0)

(13.9)

Revenue profit

-

(2.4)

2.8

9.8

1.0

2.4

6.8

12.1

18.9

 

 

 

 

 

 

 

 

 

 

Capital and other items

 

 

 

 

 

 

 

 

 

Profit on disposal of trading properties

-

-

-

0.4

-

-

0.2

-

0.2

Profit on disposal of investment properties

-

-

-

-

-

-

-

1.4

1.4

Movement in impairment of trading properties

-

-

-

(0.4)

-

-

(0.2)

(0.2)

(0.4)

Net surplus/(deficit) on revaluation of investment properties

61.8

25.8

23.4

37.0

(3.4)

31.2

87.9

5.0

92.9

Fair value movement on interest-rate swaps

-

-

-

0.6

-

(0.4)

0.1

-

0.1

Adjustment for non-wholly owned
subsidiary(2)

-

-

-

-

-

-

-

0.3

0.3

Profit before tax

61.8

23.4

26.2

47.4

(2.4)

33.2

94.8

18.6

113.4

Income tax

-

-

-

-

-

-

-

-

-

Post-tax profit

61.8

23.4

26.2

47.4

(2.4)

33.2

94.8

18.6

113.4

Other comprehensive income

-

-

(0.4)

-

-

-

(0.2)

-

(0.2)

Total comprehensive income

61.8

23.4

25.8

47.4

(2.4)

33.2

94.6

18.6

113.2

 

50%

50%

50%

50%

50%

50%

 

 

 

Land Securities' share of total comprehensive income

30.9

11.7

12.9

23.7

(1.2)

16.6

94.6

18.6

113.2

 

1.    Revenue includes gross rental income (before rents payable), service charge income, other property related income, trading properties disposal proceeds and income from long-term development contracts.

2.    The adjustment represents the non-owned element of a Group subsidiary's investment in a joint venture which is excluded from revenue profit and the 'Net surplus/(deficit) on revaluation of investment properties' shown in this note.

 


30 September 2015

Joint ventures

20 Fenchurch Street Limited Partnership

Nova, Victoria

Metro Shopping Fund Limited Partnership

St. David's Limited Partnership

Westgate Oxford Alliance Partnership

The Oriana Limited Partnership

Individually material
JVs at
LS's share

Other

Total


Balance sheet

100%

100%

100%

100%

100%

100%

50%

LS share

LS share

£m

£m

£m

£m

£m

£m

£m

£m

£m

Investment properties(1)

1,010.8

534.0

373.0

704.4

141.6

154.8

1,459.3

36.1

1,495.4

Non-current assets

1,010.8

534.0

373.0

704.4

141.6

154.8

1,459.3

36.1

1,495.4

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

12.8

24.6

7.0

7.4

9.2

33.6

47.3

7.2

54.5

Other current assets

53.6

228.8

7.8

24.8

1.8

31.8

174.3

40.3

214.6

Current assets

66.4

253.4

14.8

32.2

11.0

65.4

221.6

47.5

269.1

Total assets

1,077.2

787.4

387.8

736.6

152.6

220.2

1,680.9

83.6

1,764.5

 

 

 

 

 

 

 

 

 

 

Trade and other payables and provisions

(92.8)

(112.2)

(11.4)

(16.0)

(6.0)

(30.8)

(134.6)

(6.0)

(140.6)

Current liabilities

(92.8)

(112.2)

(11.4)

(16.0)

(6.0)

(30.8)

(134.6)

(6.0)

(140.6)

 

 

 

 

 

 

 

 

 

 

Non-current financial liabilities

-

-

(146.4)

-

-

-

(73.2)

-

(73.2)

Non-current liabilities

-

-

(146.4)

-

-

-

(73.2)

-

(73.2)

Total liabilities

(92.8)

(112.2)

(157.8)

(16.0)

(6.0)

(30.8)

(207.8)

(6.0)

(213.8)

 

 

 

 

 

 

 

 

 

 

Net assets

984.4

675.2

230.0

720.6

146.6

189.4

1,473.1

77.6

1,550.7

 

 

 

 

 

 

 

 


 

Market value of investment properties(1)

1,060.0

534.0

375.2

721.2

141.5

154.8

1,493.4

36.1

1,529.5

Net (debt)/cash

12.8

24.6

(139.4)

7.4

9.2

33.6

(25.9)

7.2

(18.7)

 


 

 

 

 

 

 

 

31 March 2015

Joint ventures

20 Fenchurch Street Limited Partnership

Nova, Victoria

Metro Shopping Fund Limited Partnership

St. David's Limited Partnership

Westgate Oxford Alliance Partnership

The Oriana Limited Partnership

Individually material
JVs at
LS's share

Other

Total


100%

100%

100%

100%

100%

100%

50%

LS share

LS share

Balance sheet

£m

£m

£m

£m

£m

£m

£m

£m

£m

Investment properties(1)

916.4

453.2

308.6

641.6

100.0

242.4

1,331.1

71.9

1,403.0

Non-current assets

916.4

453.2

308.6

641.6

100.0

242.4

1,331.1

71.9

1,403.0

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

6.6

4.0

10.2

6.2

8.6

62.2

48.9

9.3

58.2

Other current assets

35.0

184.8

6.0

23.2

1.0

28.2

139.1

32.5

171.6

Current assets

41.6

188.8

16.2

29.4

9.6

90.4

188.0

41.8

229.8

Total assets

958.0

642.0

324.8

671.0

109.6

332.8

1,519.1

113.7

1,632.8

 

 

 

 

 

 

 

 

 

 

Trade and other payables and provisions

(66.0)

(97.0)

(5.9)

(13.2)

(2.6)

(41.4)

(113.0)

(4.8)

(117.8)

Current liabilities

(66.0)

(97.0)

(5.9)

(13.2)

(2.6)

(41.4)

(113.0)

(4.8)

(117.8)

 

 

 

 

 

 

 

 

 

 

Non-current financial liabilities

-

-

(147.0)

-

-

-

(73.5)

(8.0)

(81.5)

Non-current liabilities

-

-

(147.0)

-

-

-

(73.5)

(8.0)

(81.5)

Total liabilities

(66.0)

(97.0)

(152.9)

(13.2)

(2.6)

(41.4)

(186.5)

(12.8)

(199.3)

 

 

 

 

 

 

 

 

 

 

Net assets

892.0

545.0

171.9

657.8

107.0

291.4

1,332.6

100.9

1,433.5

 

 

 

 

 

 

 

 

 

 

Market value of investment properties(1)

948.2

453.2

310.6

660.0

100.0

242.6

1,357.3

72.2

1,429.5

Net (debt)/cash

6.6

4.0

(136.8)

6.2

8.6

62.2

(24.6)

1.3

(23.3)

 

1.    The difference between the book value and the market value is the amount included in Other current assets in respect of lease incentives, head leases capitalised and properties treated as finance leases.

 

 


Joint ventures

20 Fenchurch Street Limited Partnership

Nova, Victoria

Metro Shopping Fund Limited Partnership

St. David's Limited Partnership

Westgate Oxford Alliance Partnership

The Oriana Limited Partnership

Individually material JVs at
LS's share

Other

Total

Net investment

50%

50%

50%

50%

50%

50%

50%

LS share

LS share

£m

£m

£m

£m

£m

£m

£m

£m

£m

At 1 April 2013

330.4

181.3

49.7

195.3

30.7

118.5

905.9

537.4

1,443.3

Total comprehensive income

30.9

11.7

12.9

23.7

(1.2)

16.6

94.6

18.6

113.2

Cash contributed

-

-

-

-

4.6

-

4.6

1.1

5.7

Cash distributions

-

-

-

-

-

-

-

(10.4)

(10.4)

Loan advances

12.3

20.5

-

78.3

-

-

111.1

0.2

111.3

Loan repayments

-

-

-

(7.8)

-

-

(7.8)

-

(7.8)

Transfer to non-current assets held for sale

-

-

-

-

-

-

-

(264.3)

(264.3)

At 30 September 2014

373.6

213.5

62.6

289.5

34.1

135.1

1,108.4

282.6

1,391.0

Total comprehensive income

62.6

26.5

19.3

47.2

13.3

35.6

204.5

6.4

210.9

Cash contributed

-

-

4.9

-

6.1

-

11.0

-

11.0

Property and other contributions

0.1

-

-

-

-

-

0.1

0.1

0.2

Cash distributions

-

-

(0.9)

-

-

(15.3)

(16.2)

(33.1)

(49.3)

Loan advances

9.7

32.6

-

-

-

-

42.3

0.3

42.6

Loan repayments

-

-

-

(7.8)

-

(9.7)

(17.5)

(11.7)

(29.2)

Disposals

-

-

-

-

-

-

-

(143.7)

(143.7)

At 31 March 2015

446.0

272.6

85.9

328.9

53.5

145.7

1,332.6

100.9

1,433.5

Total comprehensive income

45.4

7.7

28.2

37.8

5.2

12.2

136.5

8.7

145.2

Cash contributed

-

-

-

-

14.6

-

14.6

-

14.6

Property and other distributions

-

-

-

-

-

(55.7)

(55.7)

-

(55.7)

Cash distributions

-

-

-

-

-

(7.5)

(7.5)

(36.1)

(43.6)

Loan advances

0.8

57.3

0.9

-

-

-

59.0

4.1

63.1

Loan repayments

-

-

-

(6.4)

-

-

(6.4)

-

(6.4)

At 30 September 2015

492.2

337.6

115.0

360.3

73.3

94.7

1,473.1

77.6

1,550.7

 

13. Trading properties and long-term development contracts


 

Development land and infrastructure

Residential

Total
trading properties

Long-term development contracts

Total

 

£m

£m

£m

£m

£m

At 1 April 2014

96.1

86.1

182.2

10.7

192.9

Capital expenditure

2.8

19.9

22.7

-

22.7

Capitalised interest

0.5

1.2

1.7

-

1.7

Movement in impairment

(0.6)

-

(0.6)

-

(0.6)

Contract costs deferred

-

-

-

0.4

0.4

At 30 September 2014

98.8

107.2

206.0

11.1

217.1

Capital expenditure

3.7

28.3

32.0

0.6

32.6

Capitalised interest

-

1.9

1.9

-

1.9

Disposals

(20.1)

-

(20.1)

-

(20.1)

Movement in impairment

2.5

-

2.5

-

2.5

Contract costs impaired

-

-

-

(11.7)

(11.7)

At 31 March 2015

84.9

137.4

222.3

-

222.3

Capital expenditure

4.6

10.3

14.9

0.1

15.0

Capitalised interest

-

2.3

2.3

-

2.3

Disposals

(5.1)

-

(5.1)

-

(5.1)

Movement in impairment

1.2

-

1.2

(0.1)

1.1

At 30 September 2015

85.6

150.0

235.6

-

235.6

 

The cumulative impairment provision at 30 September 2015 in respect of Development land and infrastructure was £90.1m (31 March 2015: £91.3m); and in respect of Residential was £nil (31 March 2015: £nil).

 

14. Capital structure

30 September 2015

31 March 2015

 

Group

Joint ventures

Adjustment for non-wholly owned subsidiaries(1)

Combined

Group

Joint
 ventures

Adjustment for non-wholly owned subsidiaries(1)

Combined


£m

£m

£m

£m

£m

£m

£m

£m

Property portfolio








Market value of investment properties

13,085.7

1,529.5

(33.7)

12,634.9

1,429.5

(33.0)

14,031.4

Trading properties and long-term contracts

235.6

142.7

-

222.3

115.1

-

337.4

Non-current assets held for sale

154.3

-

-

283.4

-

-

283.4

Total property portfolio (a)

13,475.6

1,672.2

(33.7)

15,114.1

13,140.6

1,544.6

(33.0)

14,652.2









Net debt








Borrowings

3,635.3

 71.5

(0.2)

3,783.7

79.4

(0.2)

3,862.9

Monies held in restricted accounts and deposits

(7.4)

-

-

(10.4)

-

-

(10.4)

Cash and cash equivalents

(16.7)

  (54.5)

-

(14.3)

(58.2)

-

(72.5)

Fair value of interest-rate swaps

30.1

1.7

-

37.7

2.1

-

39.8

Fair value of foreign exchange swaps

(6.5)

-

-

(6.5)

3.8

-

-

3.8

Net debt (b)

3,634.8

 18.7

(0.2)

3,800.5

23.3

(0.2)

3,823.6

Less: Fair value of interest-rate swaps

(30.1)

 (1.7)

-

(37.7)

(2.1)

-

(39.8)

Less: Fair value of foreign exchange swaps

6.5

-

-

(3.8)

-

-

(3.8)

Reverse bond exchange de-recognition (note 15)

380.3

-

-

380.3

391.7

-

-

391.7

Adjusted net debt (c)

3,991.5

 17.0

(0.2)

4,008.3

4,150.7

21.2

(0.2)

4,171.7









Adjusted total equity








Total equity (d)

11,188.2

-

-

10,606.3

-

-

10,606.3

Fair value of interest-rate swaps

30.1

1.7

-

37.7

2.1

-

39.8

Fair value of foreign exchange swaps

(6.5)

-

-

3.8

-

-

3.8

Reverse bond exchange de-recognition (note 15)

(380.3)

-

-

(380.3)

(391.7)

-

-

(391.7)

Adjusted total equity (e)

10,831.5

1.7

-

10,833.2

10,256.1

2.1

-

10,258.2









Gearing (b/d)

32.5%



35.8%



36.1%

Adjusted gearing (c/e)

36.9%



40.5%



40.7%

Group LTV (c/a)

29.6%



31.6%



28.5%

Security Group LTV

28.6%



31.5%




Weighted average cost of debt

4.6%



4.6%

4.5%



4.5%

 

1.    This represents the interest in X-Leisure which we do not own, but which is consolidated in the Group numbers.

 

15. Borrowings










30 September 2015

31 March 2015

 

Secured/
unsecured

Fixed/
floating

Effective
interest rate

%

Nominal/ notional value

£m

Fair
value

£m

Book value

£m

Nominal/ notional value

£m

Fair
value

£m

Book value

£m

Current borrowings

 

 

 

 

 

 

 

 

 

Sterling

 

 

 

 

 

 

 

 

 

5.253% QAG Bond

Secured

Fixed

5.3

15.4

18.2

15.4

14.6

17.5

14.6

Bilateral facilities

Secured

Floating

LIBOR + margin

450.0

450.0

450.0

-

-

-

Commercial paper

 

 

 

 

 

 

 

 

 

Sterling

Unsecured

Floating

LIBOR + margin

9.0

9.0

9.0

30.1

30.1

30.1

Euro

Unsecured

Floating

LIBOR + margin

202.4

202.4

202.4

146.0

146.0

146.0

Swiss Francs

Unsecured

Floating

LIBOR + margin

27.1

27.1

27.1

-

-

-

US Dollar

Unsecured

Floating

LIBOR + margin

89.3

89.3

89.3

-

-

-

Total current borrowings

 

 

 

793.2

796.0

793.2

190.7

193.6

190.7

 

 

 

 

 

 

 

 

 

 

Non-current borrowings

 

 

 

 

 

 

 

 

 

Sterling

 

 

 

 

 

 

 

 

 

4.875% MTN due 2019

Secured

Fixed

5.0

400.0

426.6

398.9

400.0

436.0

398.7

5.425% MTN due 2022

Secured

Fixed

5.5

255.3

289.9

254.9

255.3

298.3

254.9

4.875% MTN due 2025

Secured

Fixed

4.9

300.0

345.7

298.1

300.0

357.2

298.0

5.391% MTN due 2026

Secured

Fixed

5.4

210.7

250.7

210.1

210.7

260.1

210.1

5.391% MTN due 2027

Secured

Fixed

5.4

608.3

738.8

606.4

608.3

767.1

606.2

5.376% MTN due 2029

Secured

Fixed

5.4

317.5

392.5

316.3

317.6

410.1

316.2

5.396% MTN due 2032

Secured

Fixed

5.4

322.6

403.8

321.0

322.6

426.5

321.0

5.125% MTN due 2036

Secured

Fixed

5.1

500.0

614.0

498.7

500.0

653.5

498.7

Bond exchange de-recognition adjustment

 

 

 

 

 

(380.3)

 

 

(391.7)

 

 

 

 

2,914.4

3,462.0

2,524.1

2,914.5

3,608.8

2,512.1

 

 

 

 

 

 

 

 

 

 

5.253% QAG Bond

Secured

Fixed

5.3

281.5

332.4

281.5

289.4

347.0

289.4

Syndicated bank debt

Secured

Floating

LIBOR + margin

20.0

20.0

20.0

180.0

180.0

180.0

Bilateral facilities

Secured

Floating

LIBOR + margin

-

-

-

595.0

595.0

595.0

Amounts payable under finance leases

Unsecured

Fixed

7.2

16.5

22.8

16.5

16.5

20.7

16.5

Total non-current borrowings

 

 

 

3,232.4

3,837.2

2,842.1

3,995.4

4,751.5

3,593.0

 

 

 

 

 

 

 

 

 

 

Total borrowings

 

 

 

4,025.6

4,633.2

3,635.3

4,186.1

4,945.1

3,783.7

 

Reconciliation of the movement in borrowings

Six months ended

Year ended


30 September 2015

31 March 2015


£m

£m

At the beginning of the period

3,783.7

3,362.2

Repayment of loans

(312.1)

(13.6)

Proceeds from new loans

142.1

431.0

Foreign exchange on commercial paper

9.5

(4.9)

Amortisation of finance fees

0.7

1.1

Amortisation of bond exchange de-recognition adjustment

11.4

21.5

Net movement in finance lease obligations

-

(13.6)

At the end of the period

3,635.3

3,783.7

Syndicated and bilateral bank debt

The terms of the Security Group funding arrangements require undrawn facilities to be reserved where syndicated and bilateral facilities mature within one year, or where commercial paper has been issued. Accordingly, the Group's available facilities at 30 September 2015 were £1,317.2m (31 March 2015: £1,288.9m), compared with undrawn facilities of £1,895.0m (31 March 2015: £1,465.0m).

 

All syndicated and bilateral facilities are committed and secured on the assets of the Security Group. In the six months ended 30 September 2015, the amounts drawn under the Group's bilateral facilities and syndicated bank debt decreased by £305.0m, primarily due to investment property disposals and the issue of commercial paper.

 

In the six months ended 30 September 2015, the £1.255bn authorised credit facility was increased to £1.380bn through the addition of a further £125.0m lending commitment. The facility was £20.0m drawn at 30 September 2015. The Group incurred finance fees of £0.8m in connection with the increased size of the facility. This facility is committed and is secured on the assets of the Security Group.

Bond exchange de-recognition

On 3 November 2004, a debt refinancing was completed resulting in the Group exchanging all of its outstanding bond and debenture debt for new MTNs with higher nominal values. The new MTNs did not meet the IAS 39 requirement to be substantially different from the debt that they replaced. Consequently the book value of the new debt is reduced to the book value of the original debt by the 'bond exchange de-recognition' adjustment which is then amortised to zero over the life of the new MTNs. The amortisation is included in interest expense in the income statement.

Fair values

The fair values of any floating rate financial liabilities are assumed to be equal to their nominal value, but adjusted for the effect of exit fees payable on redemption. The fair values of the MTNs and the QAG Bond fall within Level 1, the syndicated, bilateral facilities, commercial paper, interest rate swaps and foreign exchange swaps fall within Level 2, and the amounts payable under finance leases fall within Level 3, as defined by IFRS 13.

 

16. Related party transactions


 

As disclosed in note 12, the Group has investments in a number of joint arrangements. During the period, the Group has made further loan advances to Nova, Victoria of £57.3m, 20 Fenchurch Street Limited Partnership of £0.8m, The Harvest Limited Partnership of £4.1m and Metro Shopping Fund Limited of £0.9m.

 

During the period, the Group recognised interest income of £7.9m from 20 Fenchurch Street Limited Partnership, £6.4m from Nova, Victoria and £1.2m from Westgate Oxford Alliance Partnership, and an interest expense of £0.2m to Millshaw Property Co. Limited.

 

There have been no other significant related party transactions during the period that require disclosure under Section 4.2.8 (R) of the Disclosure and Transparency Rules or under IAS 34 Interim Financial Reporting.

 

17. Events after the reporting period


 

On 22 October 2015, the Group exchanged contracts for the sale of three retail parks for consideration of £273.6m, in line with the September 2015 valuation. The transaction will complete in December 2015.

 

18. Non-current assets held for sale


 

On 25 August 2015, the Group exchanged contracts for the sale of Haymarket House, SW1 for consideration of £155.2m. The risks and returns of ownership had not fully transferred to the buyer as at 30 September 2015. As a result the property was classified as a Non-current asset held for sale with a carrying value of £154.3m.

 

On 23 March 2015, the Group exchanged contracts for the sale of Times Square, EC4 for consideration of £284.6m. The risks and returns of ownership had not fully transferred to the buyer as at 31 March 2015. As a result the property was classified as a Non-current asset held for sale with a carrying value of £283.4m. The sale completed in the six months ended 30 September 2015.

 

 


 

Business analysis

Table 7: EPRA performance measures

 

 

 

30 September 2015

 

 

Definition for EPRA measure

Notes

Land Securities

measure

EPRA

measure

 

 

 

 

 

Adjusted earnings

Recurring earnings from core operational activity(1)

8

£184.2m

£172.6m

Adjusted earnings per share

Adjusted earnings per weighted number of ordinary shares(1)

8

23.3p

21.9p

Adjusted diluted earnings per share

Adjusted diluted earnings per weighted number of ordinary
shares(1)

8

23.2p

21.8p

Adjusted net assets

Net asset value adjusted to exclude fair value movements on interest-rate swaps (2)

7

£10,839.7m

£11,220.0m

Adjusted diluted net assets per share

Adjusted diluted net assets per share(2)

7

1,367p

1,415p

Triple net assets

Adjusted net assets amended to include the fair value of financial instruments and debt

7

£10,184.7m

£10,184.7m

Diluted triple net assets per share

Diluted triple net assets per share

7

1,284p

1,284p

Net initial yield (NIY)

Annualised rental income less non-recoverable costs as a % of market value plus assumed purchasers' costs(3)

 

4.0%

4.3%

Topped-up NIY

NIY adjusted for rent free periods(3)

 

4.4%

4.5%

Voids/vacancy rate

ERV of vacant space as a % of ERV of Combined Portfolio excluding the development programme(4)

 

2.8%

3.3%

Cost ratio

Total costs as a percentage of gross rental income (including direct vacancy costs)(5)

 

17.6%

17.9%

 

Total costs as a percentage of gross rental income (excluding direct vacancy costs)(5)

 

n/a

15.3%

Refer to notes 7 and 8 to the financial statements for further analysis.

 

1.    EPRA adjusted earnings and EPRA adjusted earnings per share include the effect of bond exchange de-recognition charges of £11.4m.

2.    EPRA adjusted net assets and adjusted diluted net assets per share include the bond exchange de-recognition adjustment of £380.3m.

3.    Our NIY and Topped-up NIY relate to the Combined Portfolio, excluding properties in the development programme that have not yet reached practical completion, and are calculated by our external valuers. EPRA NIY and EPRA Topped-up NIY calculations are consistent with ours, but exclude the full development programme.

4.    Our measure reflects voids in our like-for-like portfolio only. The EPRA measure reflects voids in the Combined Portfolio excluding only the development programme.

5.    The EPRA cost ratio is calculated based on gross rental income after rents payable, whereas our measure is based on gross rental income before rents payable. We do not calculate a cost ratio excluding direct vacancy costs as we do not consider this to be helpful.

 

Table 8: Top 12 occupiers at 30 September 2015


% of Group rent(1)

Accor

5.0

Central Government (including Queen Anne's Gate, SW1)(2)

4.7

Deloitte

2.6

Mizuho Bank Limited

1.7

Boots

1.5

Taylor Wessing

1.3

Cineworld

1.2

K&L Gates

1.1

M&S

1.1

Next

1.1

Sainsbury's

1.0

EDF Energy

1.0

 

23.3

 

1.    On a proportionate basis.

2.    Rent from Central Government excluding Queen Anne's Gate, SW1 is 0.1%.

 

Table 9: Development pipeline and trading property development schemes at 30 September 2015

 

Development pipeline

Property

Description
of use

Ownership
interest
%

Size

 sq ft

Letting
status
%

Market value
£m

Net income/ ERV

£m

Estimated/ actual completion
date

Total development costs to date

£m

Forecast total development cost

 £m

 

 

 

 

 

 

 

 

 

 

Developments after practical completion

 

 

 

 

 

 

 

 

 

1 & 2 New Ludgate, EC4

Office

100

354,800

91

500

23.7

Apr 2015

248

248

Retail

 

26,800

100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Developments approved or in progress

 

 

 

 

 

 

 

 

 

The Zig Zag Building, SW1(1)

Office

100

191,800

32

319

16.2

Nov 2015

172

179

Retail

 

41,800

78

 

 

 

 

 

20 Eastbourne Terrace, W2

Office

100

92,700

-

76

5.3

Apr 2016

54

66

1 New Street Square, EC4

Office

100

274,800

100

221

15.5

Jul 2016

99

179

Nova, Victoria, SW1 - Phase I

Office

50

480,300

 12

255

20.1

Sept 2016

170

247

Retail

 

79,900

44

 

 

 

 

 

Oriana, W1 - Phase II

Retail

50

72,500

91

77

3.3

Nov 2016

29

37

Westgate, Oxford

Retail

50

804,500

33

71

13.9

Oct 2017

54

220

Residential

 

37,000

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proposed developments

 

 

 

 

 

 

 

 

 

Buchanan Galleries, Glasgow(2)

Retail

100

1,170,000

n/a

n/a

n/a

2019

n/a

n/a

 

 

 

 

 

 

 

 

 

 

Developments let and transferred or sold

 

 

 

 

 

 

 

 

 

62 Buckingham Gate, SW1

Office

100

259,700

96

n/a(3)

18.8

May 2013

178

178

Retail

 

15,600

100

 

 

 

 

 

20 Fenchurch Street, EC3

Office

50

673,700

98

n/a(3)

22.0

Dec 2014

238

238

Retail

 

14,200

100

 

 

 

 

 

 

1.    Includes retail within Kings Gate, SW1.

2.    Figures provided are for the scheme as a whole (development and existing scheme).

3.    Once properties are transferred from the development pipeline, we do not report on their individual value.

 

Where the property is not 100% owned, floor areas and letting status shown above represent the full scheme whereas all other figures represent our proportionate share. Letting % is measured by ERV and shows letting status at 30 September 2015. Trading property development schemes are excluded from the development pipeline.

 

Total development cost

Refer to glossary for definition. Of the properties in the development pipeline at 30 September 2015, the only properties on which interest was capitalised on the land cost were Westgate, Oxford and Nova, Victoria, SW1 - Phase I. The figures for total development costs include expenditure on the residential elements of Westgate, Oxford (£10.9m).

 

Net income/ERV

Net income/ERV represents headline annual rent on let units plus ERV at 30 September 2015 on unlet units, both after rents payable.

 

Trading property development schemes

Property

Description
of use

Ownership
interest
%

Size

 sq ft

Number
of units

Sales exchanged
by unit
%

Estimated/ actual completion
date

Total development costs to date

£m

Forecast total development cost

 £m

Kings Gate, SW1

Residential

100

108,700

100

85

Oct 2015

150

163

Nova, Victoria, SW1 - Phase I

Residential

50

166,400

170

78

Sept 2016

114

144

Oriana, W1 - Phase II

Residential

50

20,200

18

28

Nov 2016

10

16

 

Table 10: Combined Portfolio value by location at 30 September 2015


Shopping centres and shops

Retail warehouses

Offices

Hotels, leisure, residential
& other

Total


%

%

%

%

%

Central, inner and outer London

13.9

0.2

45.9

3.3

63.3

South East and East

9.1

3.9

-

0.7

13.7

Midlands

-

0.9

-

0.8

1.7

Wales and South West

2.6

0.5

-

4.2

7.3

North, North West, Yorkshire and Humberside

7.0

2.1

0.1

1.1

10.3

Scotland and Northern Ireland

2.7

0.8

-

0.2

3.7

Total

35.3

8.4

46.0

10.3

100.0

% figures calculated by reference to the Combined Portfolio value of £14.6bn.

 

Table 11: Performance relative to IPD

Total property returns - period to 30 September 2015


Land Securities


IPD(1)


%


%

Retail - Shopping centres

4.1


4.6

          - Retail warehouses

2.9

 (2)

3.3

Central London shops

8.6


11.4

Central London offices

7.1


10.3

Total portfolio

5.9

 (3)

6.8

 

1.    IPD Quarterly Universe

2.    Includes food stores

3.    Includes leisure, hotel portfolio and other

 

Table 12: Combined Portfolio analysis

Like-for-like segmental analysis

 

Market value(1)

Valuation
movement(2)

Rental income(3)

Annualised rental income(4)

Annualised net

rent(5)

Net estimated rental value(6)

 

30 September 2015

31
 March 2015

Surplus/ (deficit)

Surplus/ (deficit)

30 September 2015

30 September 2014

30 September 2015

30 September 2015

31
 March 2015

30 September 2015

31
March 2015

 

£m

£m

£m

%

£m

£m

£m

£m

£m

£m

£m

Retail Portfolio

 

 

 

 

 

 

 

 

 

 

 

Shopping centres and shops

2,673.1

2,581.4

66.7

2.6%

72.2

71.0

135.3

133.8

130.1

140.2

137.6

Retail warehouses and food stores

1,159.4

1,150.3

(1.3)

(0.1%)

35.6

33.1

68.9

68.9

67.7

66.8

67.9

Leisure and hotels

1,475.5

1,440.3

39.8

2.8%

47.1

44.9

92.2

89.7

90.2

92.4

88.9

Other

22.6

22.8

(0.3)

(1.3%)

0.7

0.7

1.5

1.4

1.0

2.8

2.2

Total Retail

5,330.6

5,194.8

104.9

2.0%

155.6

149.7

297.9

293.8

289.0

302.2

296.6

London Portfolio

 

 

 

 

 

 

 

 

 

 

 

West End

2,016.9

1,985.8

27.5

1.4%

44.1

44.4

87.4

89.0

86.1

94.7

91.9

City

702.7

692.3

12.4

1.9%

13.9

12.5

27.2

29.3

29.8

36.5

32.5

Mid-town

1,137.5

1,101.4

49.9

5.1%

20.6

20.9

42.7

44.9

43.9

54.9

51.8

Inner London

442.2

388.6

25.5

9.3%

11.0

10.1

18.9

13.6

18.3

26.1

23.9

Total London offices

4,299.3

4,168.1

115.3

3.0%

89.6

87.9

176.2

176.8

178.1

212.2

200.1

Central London Shops

1,174.8

1,083.6

81.0

7.4%

21.6

21.6

45.3

46.2

42.0

55.6

52.2

Other

46.1

45.7

0.5

1.1%

1.0

1.0

0.6

0.6

0.7

0.7

0.7

Total London

5,520.2

5,297.4

196.8

4.0%

112.2

110.5

222.1

223.6

220.8

268.5

253.0

Like-for-like portfolio(10)

10,850.8

10,492.2

301.7

3.0%

267.8

260.2

520.0

517.4

509.8

570.7

549.6

Proposed developments(3)

285.0

290.0

(23.9)

(7.7%)

8.6

4.4

16.6

16.6

16.7

16.6

17.2

Completed developments(3)

1,010.4

895.8

94.0

10.7%

16.1

12.6

33.6

9.8

8.8

46.1

43.2

Acquisitions(11)

916.8

778.7

46.0

5.3%

19.7

7.8

37.0

35.2

34.8

43.8

40.2

Sales and restructured interests(12)

-

124.8

-

-

1.2

33.0

-

-

4.1

-

5.5

Development programme(13)

1,518.5

1,300.9

96.2

6.8%

8.8

0.9

18.6

0.9

1.6

100.6

87.5

Combined Portfolio

14,581.5

13,882.4

514.0

3.8%

322.2

318.9

625.8

579.9

575.8

777.8

743.2

Non-current asset held for sale(14)

n/a

149.0

5.3

3.6%

6.8

9.1

 

 

 

 

 

Properties treated as finance leases

 

 

 

 

(5.2)

(5.3)

 

 

 

 

 

Combined Portfolio

14,581.5

14,031.4

519.3

3.8%

323.8

322.7

 

 

 

 

 

 

Total portfolio analysis

 

Market value(1)

Valuation
movement(2)

Rental income(3)

Annualised rental income(4)

Annualised net

rent(5)

Net estimated rental value(6)

 

30 September 2015

31
 March 2015

Surplus/ (deficit)

Surplus/ (deficit)

30 September 2015

30 September 2014

30 September 2015

30 September 2015

31
 March 2015

30 September 2015

31
March 2015

 

£m

£m

£m

%

£m

£m

£m

£m

£m

£m

£m

Retail Portfolio

 

 

 

 

 

 

 

 

 

 

 

Shopping centres and shops

3,695.2

3,564.8

64.5

1.8%

96.8

109.4

182.1

180.0

177.7

203.1

188.6

Retail warehouses and food stores

1,211.7

1,230.8

(1.6)

(0.1%)

37.8

35.6

71.7

70.5

70.8

69.5

72.2

Leisure and hotels

1,475.5

1,440.3

39.8

2.8%

47.1

44.9

92.2

89.7

90.2

92.4

88.9

Other

22.6

32.3

(0.3)

(1.5%)

0.9

1.4

1.5

1.4

1.6

2.8

3.1

Total Retail

6,405.0

6,268.2

102.4

1.6%

182.6

191.3

347.5

341.6

340.3

367.8

352.8

London Portfolio

 

 

 

 

 

 

 

 

 

 

 

West End

2,996.1

2,845.0

94.9

3.4%

50.6

49.6

99.1

96.5

93.4

151.0

148.0

City

1,751.1

1,649.3

102.5

6.5%

29.1

21.4

61.9

29.3

30.9

82.7

78.3

Mid-town

1,355.9

1,276.6

67.1

5.7%

20.6

20.9

42.7

44.7

43.7

71.5

68.4

Inner London

578.0

483.3

54.3

14.4%

15.0

10.1

24.9

18.3

23.5

36.4

32.3

Total London offices

6,681.1

6,254.2

318.8

5.4%

115.3

102.0

228.6

188.8

191.5

341.6

327.0

Central London Shops

1,449.3

1,289.6

92.4

6.8%

23.3

24.6

49.0

48.7

43.1

67.5

62.5

Other

46.1

70.4

0.4

0.9%

1.0

1.0

0.7

0.8

0.9

0.9

0.9

Total London

8,176.5

7,614.2

411.6

5.6%

139.6

127.6

278.3

238.3

235.5

410.0

390.4

Combined Portfolio

14,581.5

13,882.4

514.0

3.8%

322.2

318.9

625.8

579.9

575.8

777.8

743.2

Non-current asset held for sale(14)

n/a

149.0

5.3

3.6%

6.8

9.1

 

 

 

 

 

Properties treated as finance leases

 

 

 

 

(5.2)

(5.3)

 

 

 

 

 

Combined Portfolio

14,581.5

14,031.4

519.3

3.8%

323.8

322.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Represented by:

 

 

 

 

 

 

 

 

 

 

 

Investment portfolio

13,053.6

12,603.5

393.6

3.2%

299.2

282.4

580.3

553.0

544.2

685.8

662.4

Share of joint ventures

1,527.9

1,427.9

125.7

9.2%

24.6

40.3

45.5

26.9

31.6

92.0

80.8

Combined Portfolio

14,581.5

14,031.4

519.3

3.8%

323.8

322.7

625.8

579.9

575.8

777.8

743.2

 

Table 12: Combined Portfolio analysis continued

Like-for-like segmental analysis

 

 

Gross estimated
rental value(7)

Net initial yield(8)

Equivalent yield(9)

Voids (by ERV)(3)

 

30 September 2015

 31
 March 2015

30 September 2015

 31
 March 2015

30 September 2015

 31
 March 2015

30 September 2015

 31
 March 2015

 

£m

£m

%

%

%

%

%

%

Retail Portfolio


 


 


 


 

Shopping centres and shops

147.5

146.2

4.5%

4.5%

4.8%

4.8%

2.5%

2.9%

Retail warehouses and food stores

67.4

68.5

5.5%

5.4%

5.5%

5.5%

1.5%

2.3%

Leisure and hotels

92.8

89.0

5.6%

5.6%

5.8%

5.9%

1.1%

0.9%

Other

2.8

2.2

3.6%

2.3%

8.3%

8.3%

25.0%

22.7%

Total Retail Portfolio

310.5

305.9

5.0%

5.0%

5.2%

5.3%

2.1%

2.4%

London Portfolio


 

 

 

 

 

 

 

West End

94.7

92.0

4.2%

4.1%

4.5%

4.5%

1.4%

3.3%

City

37.5

33.3

3.9%

4.0%

4.6%

4.3%

-

-

Mid-town

56.1

53.0

3.7%

3.7%

4.4%

4.3%

6.1%

7.2%

Inner London

26.1

23.9

2.6%

4.0%

5.3%

5.3%

6.9%

7.1%

Total London offices

214.4

202.2

3.9%

4.0%

4.6%

4.5%

3.0%

4.2%

Central London shops

56.0

52.6

3.5%

3.6%

4.1%

4.4%

5.2%

4.8%

Other

0.7

0.7

1.2%

1.1%

1.4%

1.2%

57.1%

-

Total London Portfolio

271.1

255.5

3.8%

3.9%

4.5%

4.4%

3.6%

4.3%

Like-for-like portfolio(10)

581.6

561.4

4.4%

4.4%

4.8%

4.8%

2.8%

3.2%

Proposed developments(3)

16.6

17.2

4.9%

4.7%

n/a

n/a

n/a

n/a

Completed developments(3)

46.1

43.2

0.9%

0.6%

4.1%

4.3%

n/a

n/a

Acquisitions(11)

43.8

40.2

3.3%

3.6%

4.5%

n/a

n/a

n/a

Sales and restructured interests(12)

-

5.6

-

3.2%

n/a

n/a

n/a

n/a

Development programme(13)

101.9

87.6

(0.1%)

0.0%

4.3%

4.4%

n/a

n/a

Combined Portfolio

790.0

755.2

3.6%

3.7%

4.7%

n/a

n/a

n/a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total portfolio analysis                                                                       Notes:

 

Gross estimated
rental value(7)

Net initial yield(8)

 

30 September 2015

 31
 March 2015

30 September 2015

 31
 March 2015

 

£m

£m

%

%

Retail Portfolio

 

 

 

 

Shopping centres and shops

211.7

197.2

4.3%

4.4%

Retail warehouses and food stores

70.1

72.9

5.3%

5.3%

Leisure and hotels

92.8

89.0

5.6%

5.6%

Other

2.8

3.1

3.6%

3.4%

Total Retail Portfolio

377.4

362.2

4.8%

4.8%

London Portfolio

 

 

 

 

West End

151.0

148.1

3.0%

3.0%

City

83.7

79.2

1.5%

1.8%

Mid-town

72.7

69.7

3.1%

3.2%

Inner London

36.4

32.3

2.5%

3.9%

Total London offices

343.8

329.3

2.6%

2.8%

Central London shops

67.9

62.8

3.0%

3.1%

Other

0.9

0.9

1.2%

0.7%

Total London Portfolio

412.6

393.0

2.7%

2.8%

Combined Portfolio

790.0

755.2

3.6%

3.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Represented by:

 

 

 

 

Investment portfolio

696.5

673.4

3.8%

3.9%

Share of joint ventures

93.5

81.8

1.5%

1.8%

Combined Portfolio

790.0

755.2

3.6%

3.7%

1.  The market value figures are determined by the Group's external valuers.

2.  The valuation movement is stated after adjusting for the effect of SIC 15 under IFRS.

3.   Refer to glossary for definition.

4.   Annualised rental income is annual 'rental income' (as defined in the glossary) at the balance sheet date, except that car park and commercialisation income are included on a net basis (after deduction for operational outgoings). Annualised rental income includes temporary lettings.

5.   Annualised net rent is annual cash rent, after the deduction of ground rents, as at the balance sheet date. It is calculated with the same methodology as annualised rental income but is stated net of ground rent and before SIC15 adjustments.

6.   Net estimated rental value is gross estimated rental value, as defined in the glossary, after deducting expected ground rents.

7.   Gross estimated rental value (ERV) - refer to glossary for definition. The figure for proposed developments relates to the existing buildings and not the schemes proposed.

8.   Net initial yield - refer to glossary for definition. This calculation includes all properties including those sites with no income.

9.   Equivalent yield - refer to glossary for definition. Proposed developments are excluded from the calculation of equivalent yield on the Combined Portfolio.

10. The like-for-like portfolio - refer to glossary for definition. Capital expenditure on refurbishments, acquisitions of head leases and similar capital expenditure has been allocated to the like-for-like portfolio in preparing this table.

11. Includes all properties acquired since 1 April 2014.

12. Includes all properties sold since 1 April 2014.

13. The development programme - refer to glossary for definition. Net initial yield figures are only calculated for properties in the development programme that have reached practical completion.

14. As at 30 September 2015, the non-current asset held for sale has been excluded from the Combined Portfolio and shown separately on the balance sheet as a 'Non-current asset held for sale'.

 

Table 13: Lease lengths

 

Weighted average unexpired lease term at 30 September 2015

 

Like-for-like portfolio

Like-for-like portfolio, completed developments and acquisitions

 

Mean(1)

Mean(1)

 

years

Years

Retail Portfolio



Shopping centres and shops

7.9

7.8

Retail warehouses and food stores

8.3

8.5

Leisure and hotels

9.0

9.0

Other

3.2

3.2

Total Retail Portfolio

8.3

8.2

 



London Portfolio



West End

8.7

8.8

City

6.8

10.2

Mid-town

10.0

10.0

Inner London

13.6

11.8

Total London offices

9.2

9.7

Central London shops

5.8

6.0

Other

8.2

8.2

Total London Portfolio

8.5

9.0

 



Combined Portfolio

8.4

8.6

 

1.    Mean is the rent-weighted average remaining term on leases subject to lease expiry/break clauses.

 

 


Table 14: Development pipeline financial summary

 

Cumulative movements on the development programme to 30 September 2015

Total scheme details(1)

 

Market value at start of scheme

Capital expenditure incurred to date

Capitalised interest to date

Valuation surplus/(deficit)
 to date(2)

Disposals, SIC15 rent
and other adjustments

Market value at 30 September 2015

Estimated total capital expenditure(3)

Estimated total capitalised interest

Estimated total development cost(4)

Net Income/ ERV(6)

Valuation surplus/ (deficit) for the six months ended 30 September 2015(2)

 

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

Developments let and transferred or sold

 

 

 

 

 

 

 

 

 

 

 

Shopping centres and shops

-

-

-

-

-

-

-

-

-

-

-

Retail warehouses and food stores

-

-

-

-

-

-

-

-

-

-

-

London Portfolio

110.6

288.0

17.2

508.9

33.7

958.4

288.0

17.2

415.8

40.8

94.5

 

110.6

288.0

17.2

508.9

33.7

958.4

288.0

17.2

415.8

40.8

94.5

Developments after practical completion, approved or in progress

 

 

 

 

 

 

 

 

 

 

 

Shopping centres and shops

30.0

22.7

1.5

15.9

0.7

70.8

178.5

11.5

220.0

13.9

5.0

Retail warehouses and food stores

-

-

-

-

-

-

-

-

-

-

-

London Portfolio

348.7

499.9

40.8

659.9

(101.6)

1,447.7

555.5

52.2

956.4

84.1

91.2

 

378.7

522.6

42.3

675.8

(100.9)

1,518.5

734.0

63.7

1,176.4

98.0

96.2

 

 

 

 

 

 

 

 

Movement on proposed developments for the six months ended 30 September 2015

 

 

 

 

 

Proposed developments

 

 

 

 

 

 

 

 

 

 

 

Shopping centres and shops(6)

290.0

18.9

-

(23.9)

-

285.0

307.2

22.5

614.7

39.5

(23.9)

Retail warehouses and food stores

-

-

-

-

-

-

-

-

-

-

-

London Portfolio

-

-

-

-

-

-

-

-

-

-

-

 

290.0

18.9

-

(23.9)

-

285.0

307.2

22.5

614.7

39.5

(23.9)

Notes:

 

1.    Total scheme details exclude properties sold in the period.

2.    Includes profit realised on the disposal of investment properties and any surplus or deficit on investment properties transferred to trading.

3.    For proposed development properties the estimated total capital expenditure represents the outstanding costs required to complete the scheme as at 30 September 2015.

4.    Includes the property at its market value at the start of the financial year in which the property was added to the development programme together with estimated capitalised interest. For proposed development properties, the market value of the property at 30 September 2015 is included in the estimated total cost. Estimated total development cost includes the cost of residential properties in the development programme (£10.9m for the Retail Portfolio). Estimated costs for proposed schemes could still be subject to material change prior to final approval.

5.    Net headline annual rent on let units plus net ERV at 30 September 2015 on unlet units.

6.    Includes the Buchanan Galleries, Glasgow scheme as a whole (development and existing scheme).

 


Table 15: Reconciliation of segment reporting to statutory reporting

 

The table below reconciles the Group's income statement to the segment note (note 3 to the financial statements). The Group's income statement is prepared using the equity accounting method for joint ventures and includes 100% of the results of the Group's non-wholly owned subsidiaries. The segment note is prepared on a proportionately consolidated basis and excludes the non-wholly owned share of the Group's subsidiaries. This is consistent with the financial information reviewed by management.

 

 

<




Six months ended 30 September 2015


Group income statement

£m

Joint
ventures(1)

£m

Proportionate share of
earnings(2)

£m

Total

£m

 

Revenue
profit

£m

 

Capital and other items

£m

Rental income

300.6

24.6

(1.4)

323.8


323.8


-

Finance lease interest