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Pillar Property (PLL)

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Monday 23 May, 2005

Pillar Property

Final Results

Pillar Property PLC
23 May 2005


23 May 2005


                              PILLAR PROPERTY PLC
                                  ('Pillar')

              Preliminary Results for the Year Ended 31 March 2005

Pillar is one of Europe's leading asset managers of retail parks and the UK's
largest retail park operator, with 6.8 million sq. ft. on 30 retail parks under
management.

The company has today announced a recommended offer by the British 
Land Company PLC for Pillar Property PLC. Details of this offer are set 
out in a separate announcement.

Financial Highlights

                                  Year to 31.3.05     Year to 31.3.04

Profit before tax                          £21.7m              £20.9m
Rental Income                              £58.0m              £66.5m
(including share of joint
ventures)
Earnings per share                          18.8p               19.1p
Net asset value per share                    801p                603p
Funds under management                  £3,293.8m           £2,882.4m
(investment properties in HUT/
CLOUT/HIF/PREF)

   • 32.8% increase in net asset value per share in the year
   • Hercules Unit Trust ('HUT') delivered a record performance, producing
    its best ever trust return of 36.9%, with over £118m of units traded during
    the year
   • Hercules Income Fund ('HIF') formed during the year to invest in small
    retail parks comprising solus units and clusters, valued up to £20m.
    Portfolio already at £119m and new co-investors including BAE, BT and Royal
    Mail pension funds have joined the fund
   • Pillar Retail Europark Fund ('PREF') grown to 1.24m sq ft retail space
    on four parks in its first year of trading - strong pipeline of further
    acquisitions being progressed
   • City of London Unit Trust ('CLOUT') pre-let and sale of One Coleman
    Street and Basinghall Street in the year


Raymond Mould, Chairman of Pillar, commented:

'During the year Pillar has focused on active management of the assets in our
funds, as well as developing our two new funds PREF and HIF. HUT has delivered
its best ever performance, as well as a substantial increase in its valuation
and the level of secondary trading in its units. Whilst in the wider retail
sector there have been reports of a slowdown, HUT continues to experience strong
demand from retailers for out of town space.

'The value placed on Pillar by today's offer recognises the successful asset
management business model that has been created over the past few years.'

Enquiries:

Pillar Property Plc                  Tel: 0207 915 8000
Raymond Mould, Chairman
Patrick Vaughan, Chief Executive
Martin McGann, Finance Director

Further information can be found at www.pillarproperty.com

Gavin Anderson & Company             Tel: 0207 554 1400
Richard Constant / Charlotte Stone


CHAIRMAN'S STATEMENT

Our concentration on the core businesses of retail parks and City of London
offices has delivered another strong performance. Hercules Unit Trust ('HUT')
produced its best ever trust return in 2004; a new trust, the Hercules Income
Fund ('HIF') has been established; the Pillar Retail Europark Fund ('PREF') now
has four parks with a further two under contract and both development properties
in the City of London Office Unit Trust ('CLOUT') have been prelet and sold. In
addition, Pillar's development programme contributed a substantial surplus.

Profits

Profits before tax for the year to 31 March 2005 were £21.7 million compared
with £20.9 million for the previous year, an increase of 3.9%. These profits
would have been markedly higher if we had earned a performance fee from HUT.
However, in spite of HUT's exceptional performance, no fee accrued to Pillar.
Although HUT produced a trust return of 36.9%, at the ungeared level the total
return was 23.1% which was identical to the sector benchmark. This has to be
exceeded by 1% for Pillar to receive a performance fee. New fee arrangements
have recently been put to the unitholders of HUT which would, if approved,
provide an increase in base management fees and a revised HUT performance 
fee for the future.

Dividend

In view of the offer from Watchman announced today, the Directors have
determined that it would not be appropriate at the present time to recommend
payment of a final dividend.

Net Assets - Valuation

Net assets per share were 801p, compared with 603p last year, an increase of
32.8% or 31.5% excluding dividends in both years. Most of this increase has come
from the continuing strong performance of HUT and from Pillar's development
programme. Net asset value as diluted by options under the management incentive
plan ('MIP') is 780p per share. Net asset value reduced by unprovided deferred
taxation and FRS13 fair value adjustments (commonly referred to as NNNAV) is 
700p per share and 684p as diluted by the MIP.

Retail Parks - HUT
(Pillar 34.4%)

HUT has had its best performance since its formation with a total return for the
year to 31 December 2004 of 36.9% and for the second year running it has
produced the best performance of UK pooled funds. The three year annualised
return is now 29.9% per annum.

One of the key factors in achieving this performance is the strong and effective
management applied to the portfolio. During the year to 31 March, aggregate
sales of £503 million were achieved, the most significant being that of Fosse
Park and Newport Retail Park. Parkgate Shopping Park, Rotherham, Malvern Retail
Park and a 50% interest in Banbury Cross Retail Park were acquired for £329
million.

Although the total number of retail parks has reduced to 22 over the twelve
months to 31 March, the average size of the parks has increased from 224,000 sq
ft to 246,000 sq ft and the proportion of the portfolio with Open A1 increased
to 77%. We believe that we will achieve better long term growth from these
larger shopping parks with full Open A1 planning consent and have focused the
portfolio accordingly.

There have been many recent reports of a slowing down in the retail sector but
we remain confident that HUT's focus towards a high quality Open A1 portfolio
will continue to prove more attractive to retailers who remain committed to the
migration to the out of town market. The portfolio continues to be reversionary
- the current rental income in HUT of £97.6 million is expected to increase to
£137.6 million when reviewed to current levels, ignoring any future growth.

Liquidity in HUT continues to improve. During the year to 31 March, units with a
total value of £118 million were traded and HUT now has 107 unitholders, an
increase of 28 over March 2004. No Pillar units have been sold since May 2004.

HIF
(Pillar 67.3%)

During the year, a new Jersey property unit trust, HIF, has been formed with the
purpose of investing in small retail parks comprising solus units and clusters,
this being a key sub-sector of the UK retail warehouse market. The lot sizes are
£5 to £20 million, the parks have long unexpired lease terms with good security
of income. We have recently been joined by the BT, Royal Mail and BAe Pension
Funds, as co-investors. The portfolio is currently standing at £119 million on
11 parks with further parks to be acquired shortly. At 31 March 2005 the group
owned 67.3% of the units in HIF. . It is At formation it was the group's 
intention to reduce its holding in HIF to less than 50% within a year. As part
of this strategy, s Since the year end the group's share has been reduced to 
25% through additional subscription of units. In accordance with FRS2, the 
group is treating its holding in HIF as an interest held exclusively with a 
view to subsequent resale and, accordingly, has equity accounted the investment
as a joint venture. Pillar's  interest will be reduced as new parks are acquired
for units and further discussions are in hand with another UK institution to 
inject a further property. HIF is ungeared at present but a prudent level of 
gearing would permit a significant increase in the portfolio, without dilution
of equity interests.

Pillar Developments

During the year we sold our remaining 50% interest in the Gallions Reach
Shopping Park at Beckton, the other 50% being held by HUT. We also sold
Manchester Fort Shopping Park, a 320,000 sq ft park near the City centre, for
£167 million at a net initial yield of 4.5%. The Crown Point North Shopping
Park, a 213,000 sq ft park at Denton, east of Manchester, will be offered to HUT
in due course. The remaining development site for a new retail park is at
Orpington where construction has commenced to create 130,000 sq ft of retail
space.

We also sold our 50% interest in the joint venture concerning the Cricklewood
development site. This was sold to Multiplex for £18.6 million and was the final
remaining non-core asset in our portfolio. We retain a carried interest in this
£3 billion development which could begin in 2007.

Retail Parks - Europe
(Pillar 36.4%)

Our European fund, PREF, based in Luxembourg, has completed its first year's
trading. It now has four parks aggregating to 1.24million sq ft, in Italy,
Spain, Portugal and Belgium and has contracted to acquire a further two, when
complete, in France and in Italy. Due diligence has commenced on the acquisition
of a further 4 parks in Italy and other acquisition possibilities are under
investigation. When all of these acquisitions are complete in 2009, the PREF
portfolio will comprise 10 parks with a value in excess of some €530 million.
The process of identifying and securing retail park investments continues to be
slower than we would like but we believe that the opportunity for capital growth
of retail parks in the Eurozone remains strong. It has recently become apparent
that there is increasing investor interest in the sector with a consequent
hardening of investment yields. We consider the most effective way of capturing
future capital growth is by forward funding new developments, which whilst
delaying income flow, does allow us to influence the design and specification
from the outset.

City Offices - CLOUT
(Pillar 35.9%)

There has been an improvement in our City of London activities in CLOUT. The
development of 180,000 sq ft of offices known as One Coleman Street has been
forward funded by a German institution with a major part pre-let to Legal &
General. The second development, in Basinghall Street, was sold to Standard
Chartered Bank as a Turn-Key building developed by CLOUT. These two transactions
will make a sizeable contribution to Pillar's profits and cash over the next two
years. Of CLOUT's remaining two investment properties, CityPoint, comprising
707,000 sq ft, is now fully let following the recent letting of the top floors
to Macquarie Bank Group.

Management and staff

The good performance of Pillar and its related funds is due to a considerable
degree to the hard work and commitment of the whole Pillar team. I would like to
thank them all for their valuable contribution.

H R Mould
Chairman
23 May 2005


Consolidated profit and loss account

                                                Joint                      Joint
                                     Group   ventures   Total   Group   ventures   Total
Year ended 31 March 2005      Note      £m         £m      £m      £m         £m      £m
----------------------         ----- -------    ------- -------  ------    -------  ------
Turnover                         2    15.0       55.5    70.5    32.2       51.9    84.1
Cost of sales                    3    (8.9)      (5.4)  (14.3)   (1.7)     (10.3)  (12.0)
----------------------         ----- -------    ------- -------  ------    -------  ------
Gross profit                           6.1       50.1    56.2    30.5       41.6    72.1
----------------------         ----- -------    ------- -------  ------    -------  ------
Administrative
expenses                             (16.5)      (1.5)  (18.0)  (19.2)      (0.7)  (19.9)
----------------------         ----- -------    ------- -------  ------    -------  ------
Operating
profit/(loss)                    
- Group                          4   (10.4)                      11.3
- Joint ventures                                 48.6                       40.9
----------------------         ----- -------    ------- -------  ------    -------  ------
Total operating
profit/(loss): Group
and share of joint
ventures                             (10.4)      48.6    38.2    11.3       40.9    52.2
Profit on disposal of
investment properties
and units                        5    23.1        4.2    27.3     3.2       18.4    21.6
Net interest payable
and similar charges                   (9.4)     (34.4)  (43.8)  (21.7)     (31.2)  (52.9)
----------------------         ----- -------    ------- -------  ------    -------  ------
Profit/(loss) on
ordinary activities
before taxation                        3.3       18.4    21.7    (7.2)      28.1    20.9
----------------------         ----- -------    ------- -------  ------    -------  ------
Taxation (charge) on
profit on ordinary
activities                       6                       (3.4)                      (0.2)
----------------------         ----- -------    ------- -------  ------    -------  ------
Profit attributable to
ordinary shareholders                                    18.3                       20.7
----------------------         ----- -------    ------- -------  ------    -------  ------
Dividends paid and
proposed                         7                       (2.3)                      (9.1)
----------------------         ----- -------    ------- -------  ------    -------  ------
Retained profit for
the year                        15                       16.0                       11.6
----------------------         ----- -------    ------- -------  ------    -------  ------
Earnings per share -
basic                            8                       18.8p                      19.1p
----------------------         ----- -------    ------- -------  ------    -------  ------
Earnings per share -
diluted                          8                       18.3p                      18.8p
----------------------         ----- -------    ------- -------  ------    -------  ------
Dividends per share              7                        2.6p                       8.5p
----------------------         ----- -------    ------- -------  ------    -------  ------

All items in the current and previous year derive from continuing activities.

Balance sheets
                                               Group     Group   Company   Company
                                                2005      2004      2005      2004
31 March 2005                         Note        £m        £m        £m        £m
--------------------------             -----  --------   -------  --------  --------
Fixed assets

Investment properties                    9     141.3     161.9         -      89.8
Other tangible assets                            0.3       0.4         -         -
Investment in subsidiaries                         -         -     776.7     669.4
Investment in joint ventures:
                                              --------   -------  --------  --------
- Share of gross assets                      1,368.1   1,309.7         -         -
- Share of gross liabilities                  (713.6)   (691.3)        -         -
                                              --------   -------  --------  --------
                                        10     654.5     618.4         -         -
--------------------------             -----  --------   -------  --------  --------
                                               796.1     780.7     776.7     759.2
--------------------------             -----  --------   -------  --------  --------

Current assets

Development properties                             -      12.2         -         -
Debtors:
                                              --------   -------  --------  --------
- amounts falling due within one
year                                           253.9      51.5     172.3       4.5
- amounts falling due in more than
one year                                         2.5       5.4         -         -
                                              --------   -------  --------  --------
                                        11     256.4      56.9     172.3       4.5
Cash at bank and in hand                        23.6      27.3         -         -
--------------------------             -----  --------   -------  --------  --------
                                               280.0      96.4     172.3       4.5
--------------------------             -----  --------   -------  --------  --------
Creditors: Amounts falling due
within one year                         12    (298.6)   (124.1)   (228.1)    (63.5)
--------------------------             -----  --------   -------  --------  --------

Net current (liabilities)                      (18.6)    (27.7)    (55.8)    (59.0)
--------------------------             -----  --------   -------  --------  --------
Total assets less current
liabilities                                    777.5     753.0     720.9     700.2
Creditors: Amounts falling due
after one year                          13     (56.6)    (97.4)        -     (44.6)
--------------------------             -----  --------   -------  --------  --------
Net assets                                     720.9     655.6     720.9     655.6
--------------------------             -----  --------   -------  --------  --------

Capital and reserves

Called up share capital                 15       9.0      10.9       9.0      10.9
Share premium account                   15       3.3       0.3       3.3       0.3
Revaluation reserve                     15     389.5     273.6     172.3      85.2
Merger reserve                          15      60.0      60.0         -         -
Profit and loss account                 15     259.1     310.8     536.3     559.2
--------------------------             -----  --------   -------  --------  --------
Equity shareholders' funds                     720.9     655.6     720.9     655.6
--------------------------             -----  --------   -------  --------  --------

Net assets per share                             801p      603p      801p      603p
--------------------------             -----  --------   -------  --------  --------

The financial statements were approved by the Board of Directors on 22 May 2005
and were signed on its behalf by:

MF McGann Director

Consolidated cash flow statement

                                                     2005            2004
Year ended 31 March 2005                       £m      £m      £m      £m
-----------------------------               ------- ------- -------  ------
Net cash (outflow)/inflow from operating             (3.1)           14.7
activities
Distributions received from joint ventures           67.5            35.8
Returns on investments and servicing of
finance
Interest received                             1.3             9.1
Interest paid                               (10.8)          (26.8)
-----------------------------               ------- ------- -------  ------
                                                     (9.5)          (17.7)

Taxation                                              1.3            (4.1)

Capital expenditure
Purchase of investment properties and
development expenditure                    (133.9)         (186.1)
Sale of investment properties                13.1           381.1
Purchase of tangible fixed assets            (0.1)           (0.1)
-----------------------------               ------- ------- -------  ------
                                                   (120.9)          194.9

Acquisitions and disposals

Purchase of subsidiaries                     (4.1)              -
Purchase of joint ventures                  (19.7)           (2.6)
Sale of joint ventures                       91.9            63.1
-----------------------------               ------- ------- -------  ------
                                                     68.1            60.5
Equity dividends paid                                (8.9)           (8.7)
-----------------------------               ------- ------- -------  ------

Net cash (outflow)/inflow before financing           (5.5)          275.4
-----------------------------               ------- ------- -------  ------
Financing
Issue of ordinary share capital               3.1             0.2
Return of capital                          (109.7)              -

Increase/(decrease) in bank loans           108.4          (265.8)
-----------------------------               ------- ------- -------  ------
                                                      1.8          (265.6)
-----------------------------               ------- ------- -------  ------
(Decrease)/increase in cash in the year              (3.7)            9.8
-----------------------------               ------- ------- -------  ------


Other primary statements
                                                               2005     2004
Year ended 31 March 2005                                         £m       £m
---------------------------------------                       -------  -------

Consolidated statement of total recognised gains and
losses
Profit attributable to ordinary shareholders                   18.3     20.7
Unrealised surplus on revaluation of properties - group        17.8     15.4
Unrealised surplus on revaluation of properties - joint       138.6     64.3
ventures
Unrealised surplus arising on sale of properties to unit       (0.5)     0.5
trusts
Net exchange differences on retranslation of net investments
and related borrowings                                            -     (0.9)
---------------------------------------                       -------  -------
Total recognised gains and losses relating to the year        174.2    100.0
---------------------------------------                       -------  -------

                                                               2005     2004
Year ended 31 March 2005                                         £m       £m
---------------------------------------                       -------  -------

Consolidated historical cost profits and losses

Reported profit on ordinary activities before taxation         21.7     20.9
Realisation of property revaluation gains of previous years    40.0     39.9
---------------------------------------                       -------  -------
Historical cost profit on ordinary activities before           61.7     60.8
taxation                                                      -------  -------
---------------------------------------

Historical cost profit on ordinary activities after taxation
and dividends                                                  56.0     51.5
---------------------------------------                       -------  -------


                                              Group   Group   Company   Company
                                               2005    2004      2005      2004
Year ended 31 March 2005                         £m      £m        £m        £m
------------------------------                ------- -------  --------  --------

Reconciliations of movements in shareholders'
funds
Profit for the financial year                  18.3    20.7      65.9     119.4
Dividends paid and proposed                    (2.3)   (9.1)     (2.3)     (9.1)
------------------------------                ------- -------  --------  --------
Retained profit for the year                   16.0    11.6      63.6     110.3
Unrealised surplus on revaluation of
investment properties - group and share
of joint ventures                             156.4    79.7       1.8      11.9
Unrealised surplus/(deficit) on
revaluation of investment in subsidiaries         -       -     107.3     (31.3)
Unrealised surplus arising on sale of
properties to unit trusts                      (0.5)    0.5         -         -
Net exchange differences on retranslation
of net investments and related borrowings         -    (0.9)     (0.8)        -
Return of capital                             (109.7)     -    (109.7)        -

On issue of ordinary share capital              3.1     0.2       3.1       0.2
------------------------------                ------- -------  --------  --------
Net increase/(decrease) in shareholders'
funds during the year                          65.3    91.1      65.3      91.1
------------------------------                ------- -------  --------  --------
Opening shareholders' funds                   655.6   564.5     655.6     564.5
------------------------------                ------- -------  --------  --------
Closing shareholders' funds                   720.9   655.6     720.9     655.6
------------------------------                ------- -------  --------  --------



NOTES TO THE ACCOUNTS


1 Segmental and geographical information


                                        Group       Group   Profit   Profit    Group    Group
                 Group      Group   Operating   Operating   before   before      Net      Net
              Turnover   Turnover      profit      profit      tax      tax   assets   assets
                  2005       2004        2005        2004     2005     2004     2005     2004
                    £m         £m          £m          £m       £m       £m       £m       £m
-------------    -------    -------     -------    --------   ------   ------   ------  -------
Business
segments:
Fund
management         4.0       16.8        (3.1)        8.2     (3.1)     8.2      8.0     12.8
Investment
and               
development       66.5       67.3        46.4        48.4     34.3     24.4    822.4    684.1
Corporate            -          -        (5.1)       (4.4)    (9.5)   (11.7)  (109.5)   (41.3)
-------------    -------    -------     -------    --------   ------   ------   ------  -------
                  70.5       84.1        38.2        52.2     21.7     20.9    720.9    655.6
-------------    -------    -------     -------    --------   ------   ------   ------  -------
Geographical
segments:
United            
Kingdom           65.4       78.3        34.5        47.9     21.2     19.5    692.4    628.9
Europe             5.1        5.8         3.7         4.3      0.5      1.4     28.5     26.7
-------------    -------    -------     -------    --------   ------   ------   ------  -------
                  70.5       84.1        38.2        52.2     21.7     20.9    720.9    655.6
-------------    -------    -------     -------    --------   ------   ------   ------  -------

Share of turnover, operating profit and profit before tax of joint ventures
relate entirely to investment and development, wholly within the United Kingdom.
Of the share of net assets of joint ventures £28.5 million (2004 - £26.7
million) relate to investments in Europe and the remainder within the United
Kingdom.

2 Turnover

                                     Joint    2005              Joint    2004
                          Group   ventures   Total   Group   ventures   Total
                             £m         £m      £m      £m         £m      £m
------------------       -------    ------- ------- -------   -------- -------
Rental income               2.7       55.3    58.0    14.6       51.9    66.5
Sales of development
properties                  8.0        0.2     8.2     0.5          -     0.5
Management and
performance fees            3.9          -     3.9    16.7          -    16.7
Commission earned           0.4          -     0.4     0.4          -     0.4
------------------        -------    ------- ------- -------   -------- -------
Total turnover             15.0       55.5    70.5    32.2       51.9    84.1
------------------        -------    ------- ------- -------   -------- -------

3 Cost of sales

                                     Joint    2005              Joint    2004
                          Group   ventures   Total   Group   ventures   Total
                             £m         £m      £m      £m         £m      £m
------------------      -------    ------- ------- -------   -------- -------
Direct property costs       1.4        2.2     3.6     1.2        2.9     4.1
Costs of development
properties sold             7.3        0.2     7.5       -          -       -
Management and
performance fees              -        3.0     3.0       -        7.4     7.4
Commission paid             0.2          -     0.2     0.5          -     0.5
------------------        -------    ------- ------- -------   -------- -------
Total cost of sales         8.9        5.4    14.3     1.7       10.3    12.0
------------------        -------    ------- ------- -------   -------- -------

4 Operating profit

                                                 2005     2004
                                                   £m       £m
-------------------------------                 -------  -------
The operating profit is stated after charging:

Directors' and staff remuneration including the   8.4     12.2
CRISP and STARs
Social security costs of directors and staff      1.6      1.3
Pension costs of directors and staff              0.6      0.4
Operating lease payments                          0.9      0.9
Depreciation of owned assets                      0.2      0.1
-------------------------------                 -------  -------

Audit fees for the group were £102,500 (2004 - £90,000) and for the company were
£nil (2004 - £nil). Other fees paid to the auditors and its associates were
£1,088,000 (2004 - £1,210,000).

KPMG LLP has been appointed as the group's tax adviser and agent as this is
considered to be the most cost-efficient means to access the specialist tax
advice which Pillar requires, given the size and complexity of the transactions
which the group undertakes; such advice necessarily requires a detailed
knowledge of the group's structure and corporate history. The Audit Committee
has reviewed the level of the fees paid to the auditors and its affiliates, to
ensure that the auditors' independence is not compromised.

5 Profit on disposal of investment properties and units

                                                 2005     2004
                                                Total    Total
                                                   £m       £m
-------------------------------                 -------  -------
Initial cost of acquisition                     114.7    242.1
Additional capital expenditure                   49.6    296.5
-------------------------------                 -------  -------
Total cost                                      164.3    538.6
Revaluation surplus                              40.0     28.0
-------------------------------                 -------  -------
Book value                                      204.3    566.6
-------------------------------                 -------  -------
Net sales proceeds                              227.4    569.8
Historical cost profit                           63.1     31.2
-------------------------------                 -------  -------
Profit on sale of investment properties - group  23.1      3.2
Profit on sale of investment properties - share
of joint ventures                                 4.2     18.4
-------------------------------                 -------  -------
                                                 27.3     21.6
-------------------------------                 -------  -------

In 2004 £13.1 million on disposal of investment properties to joint ventures was
deferred in that year.

6 Taxation

                                                 2005     2004
                                                   £m       £m
-------------------------------                 -------  -------
UK corporation tax charge on profit for the       3.4      1.6
year
Adjustments in respect of previous periods          -     (0.1)
Deferred taxation released                          -     (1.3)
-------------------------------                 -------  -------
Taxation charge                                   3.4      0.2
-------------------------------                 -------  -------


The tax assessed for the year is lower than the standard rate for corporation
tax in the UK (30%). The differences are explained below.

                                                     2005     2004
                                                       £m       £m
---------------------------------                   -------  -------
Profit on ordinary activities before tax             21.7     20.9
---------------------------------                   -------  -------
Profit on ordinary activities at the standard rate
of corporation tax 30% (2004 - 30%)                   6.5      6.2
Effects of:
Utilisation of tax losses                            (1.5)       -
Current year taxable loss                            (1.0)     1.9
Permanent disallowable expenditure                      -      0.2
Accounting profit less than/(in excess of) capital    1.5     (3.3)
gain
Land remediation relief                              (1.8)    (4.5)
Capital allowances in excess of depreciation         (0.3)    (0.5)
Payments to purchase capital losses                     -      1.6
---------------------------------                   -------  -------
Actual current tax charge                             3.4      1.6
---------------------------------                   -------  -------

The group allocates the tax charge arising on the sale of investment properties
on a pro rata basis between the gain previously recognised in the revaluation
reserve and the further gain or loss arising on the sale in the profit and loss
account.

The full potential deferred taxation liability provided, and the amounts not
provided, in the financial statements are as follows:

                           Amount     Amount      Amount     Amount
                                                     not        not
                         provided   provided    provided   provided
                             2005       2004        2005       2004
                               £m         £m          £m         £m
-----------------        --------   --------   ---------   --------
Group
Arising on revaluation
of investment properties        -          -         5.7        7.0
Arising on revaluation
of holding                      
in unit trusts                  -          -        81.7       42.1
-----------------          --------   --------   ---------   --------
                                -          -        87.4       49.1
-----------------          --------   --------   ---------   --------

7 Dividends paid and proposed

                                                                  2005    2004
                                                                    £m      £m
-----------------------------                                    ------- -------
Interim dividend paid of 2.6p (2004 - 2.4p) per share              2.3     2.5
Final dividend proposed of nil (2004 - 6.1p) per share               -     6.6
----------------------------                                     ------- -------
Total dividend paid and proposed of 2.6p (2004 - 8.5p) per share   2.3     9.1
-----------------------------                                    ------- -------

8 Earnings per share

The calculation of earnings per ordinary share is based on the profit
attributable to ordinary shareholders of £18.3 million (2004 - profit £20.7
million) and on a weighted average number of ordinary shares in issue during the
year ended 31 March 2005 of 97,377,718 (2004 - 108,570,186). On a diluted basis,
the weighted average number of ordinary shares was 100,084,479 (2004 -
109,932,190). The difference between weighted average number of shares on a
basic and diluted basis is due to the effect of unexercised share options.

9 Investment properties
                                                 Group     Company
                                              Freehold    Freehold
                                              land and    land and
                                             buildings   buildings
                                                    £m          £m
--------------------------                -------------   ---------
At 31 March 2004 at valuation                    161.9        89.8
Additions                                        146.7        23.9
Disposals                                       (166.3)     (115.5)
Disposals to joint ventures                      (18.8)          -
Surplus on revaluation of investment              17.8         1.8
properties              
------------------------                  -------------   ---------
At 31 March 2005 at valuation                    141.3           -
------------------------                  -------------   ---------

As at 31 March 2005, the group's investment portfolio was externally valued on
the basis of open market value by Savills Commercial Limited, Chartered
Surveyors at £45.0 million (2004 - £37.0 million). The directors have valued
certain properties, which are undergoing significant development which were not
completed at the year end at £96.3 million (2004: £124.9 million), based on
formal external assessments of gross development value (prior to adjustment for
UITF28) given to the directors by the group's valuers. Included within
investment properties is interest capitalised of £0.6 million (2004 - £3.0
million).

All of the above valuations were carried out in accordance with the Royal
Institution of Chartered Surveyors Statements of Asset Valuation Practice and
Guidance Notes. The historical cost of investment properties was £119.1 million
(2004 - £134.0 million).

10 Joint ventures
                                                       Shares of
                                                           joint
                                                        ventures
                                                              £m
----------------------------------                      ---------
Group
At 31 March 2004 at valuation                              618.4
Net equity disposals                                      (120.9)
Exchange difference on retranslation of investments          0.8
Surplus on revaluation of investment properties            137.8
Share of profit for the year                                18.4
----------------------------------                       ---------
At 31 March 2005 at valuation                              654.5
----------------------------------                       ---------

The group has the following interests in property investment partnerships all of
which operate in the United Kingdom with the exception of Hercules Unit Trust,
City of London Office Unit Trust, Austral House Unit Trust, Basinghall Street
Unit Trust and Hercules Income Fund which operate in Jersey, Channel Islands,
and Pillar Retail Europark Fund which operates in Luxembourg.

Hercules Unit Trust                                            34.4% interest
Hercules Limited Partnership                                40.7% partnership
                                                                     interest
City of London Office Unit Trust                               35.9% interest
Austral House Unit Trust                                       35.9% interest
Basinghall Street Unit Trust                                   35.9% interest
Hercules Income Fund*                                          67.3% interest
Pillar Retail Europark Fund                                    36.4% interest
The Auchinlea Partnership (a partnership with Capital &       50% partnership
Regional plc)                                                        interest
Capability Green Development Joint Venture (a partnership     50% partnership
with Haslemere Estates)                                              interest
PillarCaisse Partnership (a partnership with Caisse de
Depot et Placement du Quebec)
PillarCaisse Management Limited                              50% of ordinary
                                                                      shares
The PillarCaisse (Banbury) Partnership                       50% partnership
                                                                    interest
Champneys CityPoint Limited                                  50% of ordinary
                                                                      shares

*Hercules Income Fund (HIF) was established during the year. As shown above, at
31 March 2005 the group owned 67.3% of the units in HIF. At formation it was 
the group's intention to reduce its holding in HIF to less than 50% within a 
year. Since the year end the group's share has been reduced to 25%
through additional subscription of units and, accordingly, has equity accounted
the investment as a joint venture.

Summarised aggregated financial statements

                                      City of     Pillar
                                       London     Retail
                          Hercules     Office   Europark   Hercules
                              Unit       Unit      Fund      Income
                             Trust      Trust                  Fund
                                £m         £m         £m         £m
------------------          --------   --------   --------  ---------
Profit and loss account

Turnover                      95.9       38.0       12.2        0.6
------------------          --------   --------   --------  ---------
Operating profit              89.8       33.0        9.0        0.4
Profit/(loss) on disposal
of investment properties      (9.4)         -          -          -
Net interest payable         (57.3)     (30.3)      (5.5)         -
------------------          --------   --------   --------  ---------
Profit before and after       23.1        2.7        3.5        0.4
tax                         --------   --------   --------  ---------
------------------
Balance sheet

Investment properties      2,306.3      581.5      160.1       42.5
Other assets                 585.3       20.7       18.5        3.8
Current liabilities         (206.1)     (13.0)     (11.8)      (1.2)
Borrowings due in more
than one year             (1,158.0)    (433.0)     (88.5)         -
------------------          --------   --------   --------  ---------
Net assets                 1,527.5      156.2       78.3       45.1
------------------          --------   --------   --------  ---------
Group share

Percentage interest at        34.4%      35.9%      36.4%      67.3%
year end
                                £m         £m         £m         £m
------------------          --------   --------   --------  ---------
Group share of
------------------          --------   --------   --------  ---------
Turnover                      33.1       13.6        5.0        0.6
Management and
performance fees              (1.3)      (1.1)      (0.4)      (0.1)
Other costs                   (0.8)      (0.7)      (0.9)      (0.1)
------------------          --------   --------   --------  ---------
Operating profit              31.0       11.8        3.7        0.4
Profit/(loss) on disposal
of investment properties      (3.3)         -          -          -
Net interest payable         (19.7)     (10.8)      (2.2)         -
------------------          --------   --------   --------  ---------
Profit before and after        8.0        1.0        1.5        0.4
tax                         --------   --------   --------  ---------
------------------
Revaluation surplus
For the year                 133.9        2.5       (0.1)       0.7
------------------          --------   --------   --------  ---------
Joint venture
investment properties        793.8      209.0       58.2       28.6
------------------          --------   --------   --------  ---------
Joint venture gross          995.2      216.4       65.0       31.2
assets                      --------   --------   --------  ---------
------------------
Joint venture gross         (469.5)    (160.3)     (36.5)      (0.8)
liabilities                 --------   --------   --------  ---------
------------------
Joint venture net assets     525.7       56.1       28.5       30.4
------------------          --------   --------   --------  ---------

Summarised aggregated financial statements, contd.

                                 Austral   Basinghall
                                   House       Street              Total     Total
                     Auchinlea      Unit   Unit Trust   Others      2005      2004
                                   Trust
                            £m        £m           £m       £m        £m        £m
----------------       -------  --------     --------  -------   -------   -------
Profit and loss
account

Turnover                   1.7         -            -      4.3     152.7     135.3
----------------         -------  --------     --------  -------   -------   -------
Operating profit           0.8         -            -      2.5     135.5     107.3
Profit/(loss) on
disposal of
Investment
properties                11.6       4.7            -        -       6.9      37.7
Net interest
payable                   (3.0)        -            -        -     (96.1)    (81.9)
----------------         -------  --------     --------  -------   -------   -------
Profit before and
after tax                  9.4       4.7            -      2.5      46.3      63.1
----------------         -------  --------     --------  -------   -------   -------
Balance sheet

Investment
properties                   -         -            -        -   3,090.4   3,033.0
Other assets              17.5       8.1        123.0      9.2     786.1     461.8
Current
liabilities              (11.2)        -        (81.2)    (6.4)   (330.9)   (349.5)
Borrowings due in
more than one year           -         -        (21.8)    (1.4) (1,702.7) (1,511.4)
----------------         -------  --------     --------  -------   -------   -------
                                                                   
Net assets                 6.3       8.1         20.0      1.4   1,842.9   1,633.9
----------------         -------  --------     --------  -------   -------   -------
Group share
                                                                   Total     Total
Percentage
interest at year end       50%     35.9%        35.9%               2005      2004
                            £m        £m           £m       £m        £m        £m
----------------        -------  --------     --------  -------   -------   -------
Group share of
----------------         -------  --------     --------  -------   -------   -------

Turnover                   0.9         -            -      2.3      55.5      51.9
Management and
performance fees             -         -            -     (0.1)     (3.0)     (7.4)
Other costs               (0.4)        -            -     (1.0)     (3.9)     (3.6)
----------------         -------  --------     --------  -------   -------   -------
Operating profit           0.5         -            -      1.2      48.6      40.9
Profit/(loss) on
disposal of
Investment
properties                 5.8       1.7            -        -       4.2      18.4
Net interest
payable                   (1.6)        -            -     (0.1)    (34.4)    (31.2)
----------------         -------  --------     --------  -------   -------   -------
Profit before and
after tax                  4.7       1.7            -      1.1      18.4      28.1
----------------         -------  --------     --------  -------   -------   -------
Revaluation
surplus
for the year                 -         -            -        -     137.0      64.3
----------------         -------  --------     --------  -------   -------   -------
Joint venture
investment
Properties                   -         -            -        -   1,089.6   1,112.1
----------------         -------  --------     --------  -------   -------   -------
Joint venture
gross assets               8.7       2.9         44.2      4.5   1,368.1   1,309.7
----------------         -------  --------     --------  -------   -------   -------
Joint venture
gross liabilities         (5.6)        -        (37.0)    (3.9)   (713.6)   (691.3)
----------------         -------  --------     --------  -------   -------   -------
Joint venture net
assets                     3.1       2.9          7.2      0.6     654.5     618.4
----------------         -------  --------     --------  -------   -------   -------

As at 31 March 2005, the joint venture investment properties were externally
valued at an aggregate value of £3,090.4 million (2004 - £3,033.0 million) by CB
Richard Ellis Limited and Savills Commercial Limited, Chartered Surveyors. The
historical cost of investment properties was £2,376.3 million (2004 - £2,600.2
million).

HUT's other assets include its share of investment properties held in joint
ventures amounting to £203.4m.  Pillar's share of these properties is £70.0m.

In the year to 31 March 2005, the group received management fees of £8.9 million
(2004 - £7.4 million) and performance related fees of £nil (2004 - £9.2 million)
from various joint ventures.

At 31 March 2005 the group was owed £8.7 million (2004 - £15.8 million) by joint
ventures.

11 Debtors
                                   Group   Group   Company   Company
                                    2005    2004      2005      2004
                                      £m      £m        £m        £m
-----------------------          ------- -------  --------   -------
Amounts receivable within one
year:
Trade debtors                        4.7     0.9       2.3         -
Amounts owed by subsidiary             -       -       2.7       2.7
undertakings
Amounts receivable on completion
of property sales                  233.5    34.2     167.3         -
Deferred taxation                    4.1       -         -         -
Other debtors                       11.3    15.4         -       1.8
Prepayments and accrued income       0.3     1.0         -         -
-----------------------            ------- -------  --------   -------
                                   253.9    51.5     172.3       4.5
-----------------------            ------- -------  --------   -------
Amounts receivable after one year:

Other debtors                        2.5     5.4         -         -
-----------------------            ------- -------  --------   -------
                                   256.4    56.9     172.3       4.5
-----------------------            ------- -------  --------   -------

12 Creditors: Amounts falling due within one year

                                   Group   Group   Company   Company
                                    2005    2004      2005      2004
                                      £m      £m        £m        £m
------------------------         -------  ------   -------   -------
Bank loans and overdrafts -
secured (note 13)                  206.1    56.9     162.3      13.0
Trade creditors                      1.0     1.7         -         -
Amounts owed to subsidiary             -       -      34.4      43.9
undertakings
Amount due on completion of
property                            
acquisitions                        78.6    34.8      31.0         -
Proposed dividend                      -     6.6         -       6.6
Corporation tax                      9.6     4.9         -         -
Other taxation and social security   0.1    14.9         -         -
Accruals and deferred income         3.2     4.3       0.4         -
------------------------           -------  ------   -------   -------
                                   298.6   124.1     228.1      63.5
------------------------           -------  ------   -------   -------

13 Creditors: Amounts falling due after one year

                              Group   Group   Company   Company
                               2005    2004      2005      2004
                                 £m      £m        £m        £m
--------------------         ------- -------   -------   -------
Bank loans                     51.7    82.1         -      44.6
Loan notes                      4.9    15.3         -         -
--------------------          ------- -------   -------   -------
                               56.6    97.4         -      44.6
--------------------          ------- -------   -------   -------

Security is provided on bank loans and loan notes by way of fixed charges over
property, units in HUT and CLOUT and floating charges over the assets of certain
subsidiary undertakings.

14 Financial instruments

The group's strategy in respect of the use of financial instruments to manage
risk is detailed in the Operating and Financial Review.

The group has taken advantage of the exemption under FRS13, that short term
debtors and creditors be excluded from the following disclosures.

The disclosures include the group's share of financial liabilities of its joint
venture partnerships and the associated financial instruments used to manage the
interest rate exposures arising therefrom.

Financial assets The group's only financial assets are short term debtors (note
11) and cash at bank and in hand.

Liquidity risk - profile The maturity profile of the group's financial
liabilities is set out below:

                                                           Share              Share
                                                        of joint           of joint
                                                Group   ventures   Group   ventures
                                                 2005       2005    2004       2004
                                                   £m         £m      £m         £m
--------------------------------              -------    ------- -------   --------
In one year or less or on demand                206.1       51.6    56.9        0.9
In more than one year but not more than
two years                                        50.1          -    77.3          -
In more than two years but not more than
five years                                        1.6      370.4    15.2       32.8
In more than five years                           4.9      224.8     4.9      523.6
--------------------------------                -------    ------- -------   --------
                                        Total   262.7      646.8   154.3      557.3
--------------------------------                -------    ------- -------   --------

The group has undrawn loan facilities which expire as set out below:

                                                           Share              Share
                                                        of joint           of joint
                                                Group   ventures   Group   ventures
                                                 2005       2005    2004       2004
                                                   £m         £m      £m         £m
--------------------------------               -------    ------- -------   --------
In one year or less                              82.3          -    43.3          -
In more than one year but not more than
two years                                        19.8          -    17.9          -
In more than two years but not more than
five years                                          -       40.9    56.5       12.1
In more than five years                             -        7.6       -      101.2
--------------------------------                -------    ------- -------   --------
                                        Total   102.1       48.5   117.7      113.3
--------------------------------                -------    ------- -------   --------

Interest rate risk - profile

              Fixed rate   Capped rate      Floating            Fixed rate      Floating
                                                rate                                rate
             liabilities   liabilities   liabilities   Total   liabilities   liabilities   Total
                    2005          2005          2005    2005          2004          2004    2004
                      £m            £m            £m      £m            £m            £m      £m
------------      --------      --------      -------- -------      --------     --------- -------
Group                9.2             -         253.5   262.7           9.5         144.8   154.3
Group share
of joint ventures  413.4          28.2         205.2   646.8         475.6          81.7   557.3
------------      --------      --------      -------- -------      --------     --------- -------
     Total         422.6          28.2         458.7   909.5         485.1         226.5   711.6
------------      --------      --------      -------- -------      --------     --------- -------

Hedge profile - type of protection
                  Fixed      Fixed     Capped     Capped      Fixed      Fixed
                   rate       rate       rate       rate       rate       rate
               Weighted   Weighted   Weighted   Weighted   Weighted   Weighted
                average    average    average    average    average    average
                   rate     period       rate     period       rate     period
                   2005       2005       2005       2005       2004       2004
                      %          %          %      Years          %      Years
------------     --------   --------   --------   --------   --------   --------
Group               5.2        0.3          -          -        5.2        0.1
Group share of
joint ventures      5.2        4.8        5.4        5.6        5.2        4.0
------------     --------   --------   --------   --------   --------   --------


Hedge profile - maturity of protection

                                           Share of           Share of
                                              Joint              Joint
                                   Group   ventures   Group   ventures
                                    2005       2005    2004       2004
                                      £m         £m      £m         £m
-----------------------          -------   -------- -------   --------
In one year or less                  9.2          -     9.5        8.8
In more than one year but not more
than two years                         -       35.9       -       89.6
In more than two years but not
more than five years                   -       46.7       -      203.7
In more than five years                -      359.0       -      173.5
-----------------------            -------   -------- -------   --------
                                     9.2      441.6     9.5      475.6
-----------------------            -------   -------- -------   --------

Fair values The fair values of the group's financial liabilities, including its
share of financial liabilities in joint ventures are set out below:

                              Notional    Fair    Fair value    Fair value
                             principal   value   adjustments   adjustments
                                  2005    2005          2005          2004
                                    £m      £m            £m            £m
-----------------------         -------  ------      --------      --------
Derivative financial
instruments held to manage      
the group's interest rate
exposure
-----------------------          -------  ------      --------      --------
Interest rate swaps              422.6     3.7          (3.7)         (4.5)
-----------------------          -------  ------      --------      --------
Interest rate caps                28.2    (0.3)          0.3             -
-----------------------          -------  ------      --------      --------
Fair value adjustment            450.8                  (3.4)         (4.5)
-----------------------          -------  ------      --------      --------

The fair values as at 31 March 2005 were calculated by JC Rathbone Associates
Limited and reflect the replacement values of the financial instruments used to
manage the group's exposure to adverse interest rate movements.

All gains and losses arising from hedging instruments crystallised during the
year have been recognised in the profit and loss account.

Foreign exchange - profile
                                         Group        Group
                                          2005         2004
                                            £m           £m
---------------------------             -------    ---------
Cash at bank and in hand
Denominated in Sterling                   23.6         27.3
---------------------------              -------    ---------
                                          23.6         27.3
---------------------------              -------    ---------
Bank loans and loan notes
Denominated in Sterling                  235.2        154.3
Denominated in Euros                      27.5            -
---------------------------              -------    ---------
                                         262.7        154.3
---------------------------              -------    ---------


15 Reserves
                             Share
                   Share   premium   Revaluation    Merger    Profit
                 capital   account       reserve   reserve  and loss 
                                                             account   Total
                      £m        £m            £m        £m        £m      £m
--------------   -------  --------      --------   -------  -------- -------
Group
At 31 March 2004    10.9       0.3         273.6      60.0     310.8   655.6
Issue of shares
on exercise of
share options        0.1       3.0             -         -         -     3.1
Return of capital   (2.0)        -             -         -    (107.7) (109.7)
Retained profit
for the year           -         -             -         -      16.0    16.0
Transfer on
disposal of
properties             -         -         (40.0)        -      40.0       -
Surplus arising
on revaluation
of investment
properties
- group                -         -          17.8         -         -    17.8
Surplus arising
on revaluation
of investment
properties
- joint
ventures               -         -         138.6         -         -   138.6
Surplus arising
on sale of
properties to
unit trusts            -         -          (0.5)        -         -    (0.5)
--------------     -------  --------      --------   -------  -------- -------
At 31 March
2005                 9.0       3.3         389.5      60.0     259.1   720.9
--------------     -------  --------      --------   -------  -------- -------

                    Share     Share Revaluation    Merger    Profit   Total
                  capital   premium     Reserve   Reserve  and loss
                            account                         account
                       £m        £m          £m        £m        £m      £m
   --------------   -------   -------   ---------   -------  -------- -------
Company
At 31 March
2004                 10.9       0.3        85.2         -     559.2   655.6
Issue of
shares on
exercise of
share options         0.1       3.0           -         -         -     3.1
Return of
capital              (2.0)        -           -         -    (107.7) (109.7)

Surplus
arising on
revaluation of
investment
properties              -         -         1.8         -               1.8
Transfer on
disposal of
properties              -         -       (21.2)        -      21.2       -
Surplus
arising on
revaluation of
investment in
subsidiaries            -         -       107.3         -             107.3
Exchange
differences on
retranslation
of borrowings           -         -        (0.8)        -              (0.8)
Retained
profit for the
year                    -         -                     -      63.6    63.6
--------------      -------   -------   ---------   -------  -------- -------
                      9.0       3.3       172.3         -     536.3   720.9
--------------      -------   -------   ---------   -------  -------- -------






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