Information  X 
Enter a valid email address

Land Sec. Group Plc (LAND)

  Print      Mail a friend       Annual reports

Wednesday 18 November, 2009

Land Sec. Group Plc

Half Yearly Report

RNS Number : 6691C
Land Securities Group Plc
18 November 2009
 





Half-yearly financial results for the six months to 30 September 2009

"We enter the recovery phase of the cycle with a strong balance sheet and good access to finance. We have the capacity and the confidence in our expertise to invest in the right acquisitions and new developments to create out-performance."



Results Summary



30 September 2009

31 March 2009

Change

Valuation deficit (1)

£(117.8)m

N/A

Down 1.4%

Basic NAV per share

622p

639p

Down 2.7%

Adjusted diluted NAV per share (2)

565p

593p

Down 4.7%

Adjusted Gearing (1)

102.0%

105.9%

N/A


Six months ended 30 September 2009

Six months ended 30 September 2008

Change

Loss before tax (3)

£(4.6)m

£(1,621.2)m

Up 99.7%

Revenue profit (3) 

£128.4m

£151.8m

Down 15.4%

Basic EPS (3)(4)

1.58p

(314.39)p

N/A

Adjusted diluted EPS (3)(4)

16.89p

29.51p

Down 42.8%

Dividend (4)

14.00p

29.80p

Down 53.0%

(1) Including share of joint venture

(2) Our key valuation measure

(3) Continuing activities

(4) 30 September 2008 comparatives restated for the Rights Issue


Financial Highlights:


  • Valuation deficit of 1.4% or £117.8m since March 2009

    • London Portfolio valuation increased by 0.5%

    • Retail Portfolio valuation down by 3.6%

  • Outperformed IPD Quarterly Universe by 1.1 %

  • Voids across the like-for-like portfolio stable at 5.0% (4.8% at 31 March 2009)

    • Proportion of units in administration reduced to 2.1% (3.5% at 31 March 2009)  

  • Achieved £29.9m of income through lettings 

  • Completed disposals totalling £765.5m at an average of 0.3% below March 2009 valuations, against 2.5% market fall

  • Group LTV ratio reduced to 50.8% (52.0% at 31 March 2009)

    • Net debt reduced 12.6% to £3,428.6m (March 2009: £3,923.6m) 

    • Average debt maturities extended from 9.7 years in March 2009 to 11.9 years 

    • £1.8bn of debt repaid

    • AA credit rating maintained

    • Cash and undrawn credit facilities of £2.7bn


Key Themes:

  • High level of lettings secured across portfolio

The Group has adopted a flexible approach to lettings to secure income, but not to the detriment of the quality of key assets. This has been effective with £29.9m of income secured across the portfolio in the first half. Highlights have included the successful letting at Thomas More Square, London E1 to News International, which is the largest letting of second-hand space in London since 2003.


  • Balance sheet well positioned

A focus on asset sales and treasury management has preserved an AA credit rating and leaves the Group well placed with the financial capacity to take advantage of new investment and development opportunities as the market cycle turns. With a Group LTV of 50.8%, the business has the flexibility to make investment acquisitions, but also the current market exposure to allow it to be patient and wait for the right opportunities. 


  • Business positioned in short term to exploit medium-term opportunities

With a belief that West End offices will deliver strong rental growth in the recovery phase, construction tender returns have been sought on 60,000 sq m of office, retail and residential development opportunities in the West End. The schemes at Park House, W1, Selborne House, SW1, and Wellington House, SW1, can be started in 2010 for delivery into improving occupier markets in 2012 and 2013.  


  • Well placed for longer-term opportunities

The Group is confident in its ability to deliver long term outperformance as it shapes itself for the next five years. There will be a focus on exploiting its competitive cost of finance and aligning its strong development capability with a liquid portfolio to allow capital rotation. The strength and appeal of its portfolio and its expertise in both offices and retail will continue to offer organic opportunities for growth as well as new business opportunities.


Commenting, Chief Executive Francis Salway said:


"We are pleased that our portfolio has outperformed the market index, and that we have delivered our plans for balance sheet management through treasury activity and asset disposals


"We are confident that from the low point in July 2009 property values will rise over the next five years with the profile characterised by ripples rather than pure straight-line growth as residual risks and imbalances in financial markets play out.


"We are prepared to be patient for the best opportunities and we will not rush our investment programme, as we expect a broader range of opportunities to emerge once banks begin to take action on their property loan portfolios.


"In the short term, we will continue to focus on the key qualities and capabilities that have guided our actions since March 2009: a strong balance sheet and good access to finance; a high quality team showing leadership in planning, development and asset management; and a portfolio with exciting development opportunities. We believe these powerful tools for long-term value creation will become the hallmarks of success in our market."


For further media information, please contact:


Francis Salway / Donal McCabe


John Sunnucks / David Allchurch

Land Securities Group PLC


Tulchan Communications

T +44 (0)20 7413 9000


T +44 (0)20 7353 4200





Land Securities will be holding a results presentation today at 9.00am (GMT) and a live web-cast will be available at www.landsecurities.com/interims2009


Please note that there will be an interactive question & answer facility on the webcast. There will also be an audio conference call line to access the meeting, it is recommended that you dial-in to the call 10-15 minutes before the start of the presentation due to the large volume of callers expected. Dial-in details are as follows:


Dial-in number: +44 (0) 1452 568 405

Call title: Land Securities Half-Yearly Results

Call ID number: 36400596


An interview with Francis Salway, Group Chief Executive, and Martin Greenslade, Group Finance Director, is available at www.landsecurities.com/interims2009



Chief Executive's Statement

"We enter the recovery phase of the cycle with our balance sheet positioned as we planned in terms of gearing ratios. We have the capacity and confidence in our expertise to invest in the right acquisitions and new developments to create outperformance."


Francis Salway

Chief Executive


 Balance sheet well positioned

• High level of lettings secured across the portfolio

• Development opportunities progressed ready for start on key sites in 2010

• Outperformance against IPD Quarterly Universe


Overview

A deteriorating UK commercial property market found its floor during the first six months of our financial year. The market's peak to trough fall in values was in line with our expectations at the time of the 2009 Rights Issue, and this reinforces our confidence in the actions we have taken. The timing of the turning point was slightly earlier than generally expected - in July 2009 - and by the end of our Half Year we had seen the first signs of recovery.


We are now entering a key phase for commercial property companies, with the decisions taken today likely to prove instrumental in terms of value creation tomorrow.  As the market makes the transition from rapid deterioration to nascent recovery, it will be the combination of decisiveness, patience and flexibility that determines the long-term winners in our sector.


Since March 2009, we have placed particular emphasis on three key areas of activity. First, we have increased our financial flexibility by completing a programme of sales to position our balance sheet appropriately. Second, we have implemented a flexible lettings strategy to secure income, but not to the detriment of the quality of key assets. Third, we have continued planning for the medium term by preparing sites for redevelopment, whether through obtaining and improving planning consents or seeking construction tender returns.


Our combined portfolio showed a small valuation deficit of 1.4% or £117.8m, which contributed to our reported pre-tax loss of £4.6m. Our adjusted diluted net assets per share stood at 565p at 30 September 2009, down 4.7% over the period. The change was largely attributable to the valuation deficit and also to a £74.5cash payment to terminate interest-rate swaps.  As expected, our property sales in the period impacted underlying revenue profit, which was £128.4m, down 15.4% compared with the first six months of the previous financial year. Our adjusted diluted earnings per share decreased to greater degree, down 42.8%, as a result of the dilutive effect on earnings of our Rights Issue.  We have confirmed the second quarter's dividend at the same level as the first quarter's at 7.0p per share.


In terms of the relative performance of our property assets, our combined portfolio delivered an ungeared total property return of 2.1%, outperforming the IPD Quarterly Universe which delivered a 1.0% total return.


Financial flexibility

In accordance with the plans we outlined at the time of our Rights Issue announcement in February 2009, we have continued with our programme of investment property disposals and sold £765.5m across the London and Retail portfolios in the six months.  Asset sale values were, on average, 0.3% below their March 2009 valuations, while values in the market as a whole fell by 2.5% over this period.  This provides a helpful validation of the pricing of the assets in our portfolio.  In managing our sales programme, we have been careful to ensure that the sales have not materially impacted the quality or appeal of our portfolio from the perspective of our major customers. 


Our balance sheet gearing is attractively positioned at the turning point in the cycle with a Group Loan to Value (LTV) ratio of 50.8%.  This ensures an attractive multiplier on the conversion of future increases in property value into growth in shareholders' net assets.


In September 2009, we paid down drawn debt facilities of £1.8bn to restore our debt structure to a normal operating environment.  The result is a strong balance sheet that will serve to protect the company's credit rating, while the proceeds of asset sales and our Rights Issue give us the financial firepower needed to start speculative developments and take advantage of acquisition opportunities.  Managing our balance sheet to maintain an AA rating will help lower the cost of finance in the medium term, giving us competitive advantage as we move into the next cycle.


We have continued to develop and implement effective approaches to funding outside the Security Group, our principal debt structure For example, in July 2009, we closed a £360.3m bond linked to our commercial lease with the UK Government over Queen Anne's Gate, London SW1.  This is the first bond of its type issued by a property company for some time.  In September 2009, the St David's Limited Partnership - a 50:50 joint venture with Capital Shopping Centres - agreed a facility of £290.0m against the St David's shopping centre development in Cardiff. The cash raised from these two transactions further increases our financial flexibility.


Leasing activity

The leasing markets remain difficult, but our pragmatic approach to leasing is proving effective.  With some assets we are taking a tactical approach, securing short-term lettings that reflect current market dynamics.  With others, particularly higher quality assets, our priority is to secure maximum value through long-term agreements with occupiers who enhance the tenant mix, as at our mixed office and retail development at One New Change, London EC4.


We are particularly pleased that News International made the decision to move into 3 Thomas More SquareLondon E1.  This is the largest letting of second-hand office space in London since 2003, and it sees News International take on 17,820 sq m of office accommodation.


Our people and capability

In June 2009, Mike Hussey left the company by mutual agreement, and I would like to thank Mike for his substantial contribution to the company over the past seven years, which included five years as a member of the Board. 


In September 2009, we announced the appointment of Robert Noel to the Board and to the executive position of Managing Director of the London Portfolio.  This appointment will take effect from 1 January 2010.  As Property Director of Great Portland Estates PLC, Robert has created an outstanding track record on transactions and investment performance in the London property market.  His experience and expertise will be a great addition to the strength and depth of the current London team.


In August 2009, Chris Bartram joined the Board as a non-executive director. Chris has had a successful and broad-ranging career in the property industry.  He is currently Chairman of Orchard Street Investment Management LLP, a leading UK commercial property investment management firm, and he is a non-executive director of The Crown Estate.


These Board-level appointments add significant weight to what is already a very experienced and effective Board and senior management team.  It is critical that our capability is in tune with a changing market, and I am delighted that our people continue to devise and implement truly innovative industry initiatives.  For example, in April 2009, we helped lead the development of a 'Ten Point Plan' for service charge cost management for retailers. We are also making good progress on our Brand Empire initiative to help bring new international retailers into the UK.


Planning and development opportunities

In keeping with our belief that rental growth will return first in London's West End, we have obtained construction tender prices for three proposed development projects: Park House, London W1 (offices, retail and residential); Selborne House, London SW1 (predominantly offices); and, Wellington House, London SW1 (residential being delivered in conjunction with the offices at Selborne House), with the aim of commencing construction in 2010. Completions are scheduled for late 2012 and early 2013, when we expect to see stronger occupational demand and rising rents.


We are also making good progress towards securing an appropriate level of pre-lettings to enable us to start the 92,900 sq m Trinity Quarter shopping centre scheme in Leeds.  


Outlook and priorities

Looking ahead, we are confident that from the low point in July 2009, property values will rise over the next five years with the profile characterised by ripples rather than pure straight-line growth, as residual risks and imbalances in the financial markets play out.


Our priority is to maintain a clear view on the strategies that will define success in this market, and to act decisively on these. We are prepared to be patient for the best opportunities and we will not rush our investment programme, as we expect a broader range of opportunities to emerge once banks begin to take action on their property loan portfolios. 


In the short term, we will continue to focus on the key qualities and capabilities that have guided our actions since March 2009: a strong balance sheet and good access to finance; a high quality team showing leadership in planning, development and asset management; and a portfolio with exciting development opportunities. We believe these powerful tools for long-term value creation will become the hallmarks of success in our market.



Francis Salway

Chief Executive


London Portfolio

Performance overview

The demand for commercial property investments in London has gathered momentum over the Half Year, fuelled by strong buying interest from overseas investors. A combination of the substantial fall in values from the peak, currency movements and the transparency of the market have made London one of the preferred locations for global investors. Occupier markets have encountered continued downward pressure on rental values, although we have seen an encouraging improvement in levels of take up of offices in the City market since the middle of the summer.


The revaluation of our London Portfolio resulted in a positive valuation surplus of 0.5% for the six-month period overall, with West End offices up 2.3%, City offices down 2.0% and Central London retail down 1.7%.  Over the same period, rental values in our like-for-like portfolio increased by 2.0% for Central London retail, but decreased by 9.5% for City offices and 7.7% for West End offices.


As expected, pre-development sites continued to show greater volatility in valuation movements than investment properties, but overall the valuation change on our pre-development sites at Park House, W1, Selborne House, SW1,  Wellington House, SW1, Arundel Great Court, WC2  and 20 Fenchurch Street, EC3, was positive over the six-month period at 6.5%.  


On the basis of ungeared total property returns, our London Portfolio outperformed the IPD Quarterly Universe by 3.3%, with London offices ahead by 4.1% over the six months and our London retail underperforming b2.9%.


Voids across our London Portfolio decreased from 7.2% in Marc2009 to 5.1% in September 2009, with the decrease primarily attributable to properties being prepared for development. It continues to be the case that the high quality of our tenant base in London has ensured that units in administration are at an extremely low level at 0.3% (31 March 2009: 1.1%).  


Rental income

Gross rental income of the London Portfolio declined by £12.0m as set out in the table below.


Table 1Gross rental income - London Portfolio







30 September 2009

£m

30 September 2008

£m

Change


£m

Like-for-like investment properties



127.4

130.5

(3.1)

Proposed development properties



3.4

5.3

(1.9)

Completed developments



23.7

19.7

4.0

Purchases since 1 April 2008



4.4

1.0

3.4

Sales since 1 April 2008



6.5

20.7

(14.2)

Ongoing developments



0.3

0.5

(0.2)

Gross rental income(1)



165.7

177.7

(12.0)

(1)  Includes properties treated as finance leases. The income of these properties for the six months to 30 September 2009 was £1.9m (30 September 2008: £2.9m)


The decline in gross rental income compared to the same period last year is mainly attributable to our sales programme, which resulted in a decline in rental income of £14.2m. In addition, our gross rental income on like-for-like properties reduced by £3.1m mainly due to voids following lease expiries at Eastbourne Terrace, W2, and Portland House, SW1 These reductions were partially offset by acquisitions, and by a £4.0m increase in rental income as a result of completed developments, in particular New Street Square, EC4, and Queen Anne's Gate, SW1.


Sales

During the Half Year, we successfully completed our planned programme of asset sales. Sales totalled £296.3m and, on average, were at 2.1% below the 31 March 2009 valuation (before disposal costs) and showed an average income yield of 8.1%.  


All of the properties were acquired by overseas investors, with the largest transaction being Portman House in Oxford Street, W1, which was sold for £155.0m. Portman House provides approximately 4,200 sq m of retail and just under 9,500 sq m of offices, with the offices being let on leases with between three and seven years to expiry and with passing rents in the range of £533 to £861 per sq m (£49 to £80 per sq ft).  Other asset disposals were 22 Kingsway, WC2, 98 Theobald's Road, WC1, 40/50 Eastbourne Terrace, W2 and Sardinia House, WC2.


Lettings

In line with the long-term planning of our development programme, we have had very little completed space coming onto the market during the period. During the Half Year, development completions totalled just 4,470 sq m and related entirely to our development at 30 Eastbourne Terrace in Paddington, which was completed in May 2009.


Successful leasing activity during the period included:


• Dashwood House, EC2

This 14,820 sq m office refurbishment was completed in October 2008.  We have made good progress on leasing and the building is now 52% let or in solicitors hands (31 March 2009: 9%)


• 30 Eastbourne Terrace, W2

This 4,470 sq m office refurbishment was completed in May 2009, and we have agreed terms to let 27% of the space in two separate transactions.  


• New Street Square, EC4

In the Half Year we completed 2,780 sq m of new lettings, which takes the retail element of this scheme near to full occupancy and leaves just 2,170 sq m of offices still to let.  


As we have relatively little development floorspace available to let, it is an investment property which generated our largest letting over the period. In August 2009, together with The Cadillac Fairview Corporation Limited, co-owners of Thomas More Square, E1, we completed a letting of 17,820 sq m of office and supporting space to News International for a term of a minimum of five years and at a rent of £4.2m per annum. This is the largest letting of second-hand space secured in the London office market since 2003.  


Development and planning

Our next major development completion is One New Change, EC4, which lies adjacent to St Paul's Cathedral in the City. Here we pre-let approximately one third of the offices in September 2007 and have now let or agreed terms on 52% of the retail space Confirmed tenants include H&M, Hobbs, Links of London, Marks & Spencer, Reiss, Topshop and Wasabi.  In July of this year we made a decision to push forward quickly with retail lettings while taking a more measured approach on office lettings. We believe the exceptional quality and unique location of this development will attract strong interest from office occupiers as we near completion and as the momentum of the London offices market rebuilds.


Looking to the future, we expect positive rental growth to emerge first in the West End office market, and we plan to be one of the first to start large-scale development in this marketWe have obtained construction tender prices for three West End developments, where we are likely to commence construction in 2010:


• Park House, Oxford Street, W1 

This site covers an entire city block of almost half a hectare on a prime Oxford Street location near Marble Arch. It will provide exceptional retail, office and residential space.


• Selborne HouseVictoria Street, SW1

The current Selborne House is an outdated 1960s office building. This will be replaced by a high-quality building that will create premium office accommodation, together with street-level shops and restaurants.


• Wellington House, Buckingham Gate, SW1

The new Wellington House will be a residential development providing 59 flats, and is intended to complement the traditional London red-brick mansion blocks of Victoria


Our expected completion date for these developments is late 2012 or early 2013.


We have continued to identify opportunities to create value through our planning expertise, and one example of this is City Forum, N1. Here, Islington Council has granted planning consent for a residential-led scheme of 100,000 sq m, which will establish a mixed-use development on a 1.9 hectare site in Islington. 


We have also obtained planning consent on appeal for our mixed office, hotel and residential development of 61,890 sq m at Arundel Great Court, Aldwych, WC2. We have secured income from the existing buildings on the site until late 2012 so that this is a potential medium-term development opportunity.


At Ebbsfleet Valley in Kent, we have very little residential development currently under way. All 104 completed units have now been sold and, on the small phase of 58 units currently under construction, we have already exchanged contracts for sale on 67% of the units. Further phases of flats and houses to be delivered in the short term at Springhead Park will likewise be sized to meet levels of demand.


Looking ahead

As a leading global financial centre, London continues to be a magnet for international businesses, and this is reflected in the number of major office lettings concluded in recent months. We do not expect further material increases in vacancy rates in the short term and, with limited new developments being started, vacancy levels will begin to reduce as the economy recovers. Against this backdrop, a high proportion of the new capital we invest in London is likely to be allocated to development projects; these can be commenced now for delivery, in some three years' time, into improved occupier markets with the prospect of rising rents.


We outline our development pipeline in Table 2.


Table 2London development pipeline at 30 September 2009





Property

Description of use

Ownership interest %

Size

sq m

Planning status

Letting status %

Net income/ ERV

£m

Estimated/ actual completion date

Total development costs to date

£m

Forecast total development cost

 £m

Developments, let and transferred or sold










New Street Square, EC4  

Office

100

62,340


96

32

May 2008

378

378

Retail


2,980


86















Developments completed










Dashwood House, EC2

Office

100

14,110


25

7

Oct 2008

113

113


Retail


710


100





30 Eastbourne Terrace, W2

Office

100

4,470


-

2

May 2009

30

33











Developments approved and in progress










One New Change, EC4

Office

100

30,840


41

27

Sept 2010

336

541

Retail


19,900


27















Proposed developments










Park House, W1

Office

100

15,430

PR

n/a

n/a

2012

n/a

n/a


Retail


8,140








Residential


5,380







Wellington House, SW1

Retail

100

250

PR

n/a

n/a

2013

n/a

n/a


Residential


5,650







Selborne House, SW1

Office

100

23,950

PR

n/a

n/a

2013

n/a

n/a


Retail


1,540







20 Fenchurch Street, EC3

Office

100

61,660

PR

n/a

n/a

2014

n/a

n/a


Retail


2,130







Arundel Great Court & Howard Hotel, WC2

Office

100

36,750

PA*

n/a

n/a

2016

n/a

n/a

Retail


2,470







Residential


22,670








Floor areas shown above represent the full scheme whereas the cost represents our share of costs. Letting % is measured by ERV and shows letting status at 30 September 2009. Trading property development schemes are excluded from the development pipeline. Cost figures for proposed schemes are not given as these could still be subject to material change prior to final approval.


Planning status for proposed developments

PR - Planning Received

PA - Planning Appeal 

Total development cost (£m)

Total development cost refers to the book value of the land at the commencement of the project, the estimated capital expenditure required to develop the scheme from the start of the financial year in which the property is added to our development programme, together with finance charges less residential costs (£nil across all categories of development).  

Net income/ERV

Net income/ERV represents headline annual rent payable on let units plus ERV at 30 September 2009 on unlet units.


*Planning consent granted on appeal since 30 September 2009


Retail Portfolio

Performance overview

During the first few months of our Half Year, retail property values continued to weaken before we then began to see an improvement in investor demand for shopping centres and, particularly, for retail warehouses. Although retail leasing conditions continue to reflect pressures in the wider economic environment, we have benefited from a clear strategy on leasing and from our deep relationships with retailers. As a result, our response to these conditions has proved effective in securing new lettings.


The revaluation of our Retail Portfolio resulted in a valuation deficit for the six-month period of 3.6% overall, with shopping centres and shops down 5.9% and retail warehouses and food stores down 0.1%.  Decreases in rental values on our like-for-like portfolio over the six months were 6.0% for our shopping centres and shops and 4.5% for our retail warehouses and food stores.


On the basis of ungeared total property returns, our Retail Portfolio outperformed the IPD Quarterly Universe by 1.7%, with shopping centres ahead by 2.3% over the six months and our retail warehouses underperforming slightly by 0.5%.


Voids across our like-for-like Retail Portfolio remained static at September 2009 at 4.8% compared to March 2009 despite units previously in administration being transferred to void status. Within the 4.8% of void space, 1.3% is subject to temporary lettings, and on a further 1.0% terms have been agreed for re-letting.  We have reduced the proportion of units in administration from 5.6% in March 2009 to 3.7% in September 2009, as a result of good leasing progress which we attribute to our excellent relationships with a wide range of retailers.  Our response to the MFI insolvency illustrates the benefits of our scale together with the quality of our relationships with retailers. We were left with eight MFI stores but by the end of the Half Year we had let or agreed to let four, one has been sold, and we are planning to develop another. That leaves just two stores outstanding. 


Rental income

Gross rental income of the Retail Portfolio declined by £12.6m as set out in the table below.


Table 3Gross rental income - Retail Portfolio







30 September 2009

£m

30 September 2008

£m

Change

£m

Like-for-like investment properties



141.7

152.9

(11.2)

Proposed development properties



3.5

3.6

(0.1)

Purchases since 1 April 2008



1.1

0.6

0.5

Sales since 1 April 2008



13.1

25.2

(12.1)

Ongoing developments



11.2

0.9

10.3

Gross rental income(1)



170.6

183.2

(12.6)

(1)    Includes properties treated as finance leases. The income of these properties for the six months to 30 September 2009 was £1.4m (30 September 2008£1.6m)


The decline in gross rental income from like-for-like investment properties, compared to the same period last year, is attributable to the failure of a number of retailers in the second half of our last financial year.  In addition, our sales programme resulted in a decline in gross rental income of £12.1m compared to the prior period, although this was substantially offset by increased income from our developments in Bristol and Livingston, which opened in September and October 2008 respectively.


Asset sales

In line with our plans, we continued to make asset disposals. The assets we chose to sell were those that provided us with fewer opportunities to create value through development and active management, whereas the funds generated have increased our flexibility to exploit future opportunities. Asset sales from the Retail Portfolio totalled £469.2m. On average, the sales were at 0.9above the 31 March 2009 valuation (before disposal costs) and showed an average income yield of 8.0%. 


The largest disposal related to our one third ownership in the BullringBirmingham, which was sold to the Future Fund of Australia for £209.8m in September 2009. The sale price reflected a net yield of 6.9% after settlement of outstanding rent reviews. The centre has performed well for us but it was an unusual asset within our portfolio because of our lack of management control and the constraints on raising debt against the asset as a result of the partnership structure. Other asset disposals were retail warehouse parks and foodstores in Bury, Melton Mowbray, PlymouthLiverpool, EdmontonSwansea and Chester together with a shopping centre in Maidstone.


Development and asset management initiatives

On 22 October 2009, we opened the St David's Shopping Centre in Cardiff with our partners, Capital Shopping Centres PLC. The centre is anchored by a new John Lewis department store, the first in Wales and the largest outside London. The centre also benefits from linking into the existing Debenhams and Marks & Spencer stores, which have been refitted to coincide with the opening of the new scheme. The centre is now 63% let or in solicitors' hands by income, and has brought 25 new retailers to Wales. 


In May 2009, John Lewis confirmed that our Commerce Centre in Poole, Dorset, would be the first location for its new 'John Lewis at home' format. In trusting us to deliver this new format, John Lewis has underlined the strength of our relationship. The new unit sells the retailer's home and electrical goods along with additional features, including customer collection, a gift-list service and a customer café, providing a total floor area of 5,110 sq m. 


During the six months we also confirmed a series of new lettings for our Livingston and Dundee retail parks, achieving rental levels of between £215 and £248 per sq m (£20 and £23 per sq ft). At Almondvale retail park in Livingston, Currys will open a 1,860 sq m PCWorld/Currys concept store, double the size of its current unit and the first of its kind in Scotland. Dreams, the leading national bed specialist, has signed two lettings, one for the existing 930sq m Currys unit at Almondvale and another for a 930 sq m store at Kingsway West retail park in Dundee. Meanwhile, at the Bon Accord shopping centre in Aberdeen, Next has opened a new 5,010 sq m store and we have seen new openings from Topshop Topman, River Island, Kurt Geiger, Phase 8, Coast and other fashion retailers.


Early in 2009 we worked with others in our industry to develop a 'Ten Point Plan', an initiative to help landlords and occupiers develop new ways to reduce service charges and other costs. We created a combined task force of both our own and retailers' employees to look at potential savings within our own portfolio, which visited a number of our shopping centres during the Half Year. Retailers have seen material benefits as a result of this initiative. 


We continue to have constructive discussions with retailers around other key issues such as monthly rents and the structure of leases. We have developed our new 'Clearlet' leases in conjunction with retailers, and we intend to introduce more of these on new lettings to help speed up and simplify the leasing process.  Clearlet leases are straightforward contracts offering monthly rents and deemed approvals for assignment, sub-letting and alterations if responses are not provided within fixed timescales.  This is part of a wider set of initiatives to become more aligned with our retailers and includes the sharing of turnover information, which will help us to manage shopping centres to their maximum potential.   


During the Half Year, we also developed our innovative Brand Empire initiative, which sets out to attract overseas retailers to our UK shopping centres.  This is an example of our teams engaging with brands and retailers at all levels to find new ways to enhance the vibrancy of retail environments despite tough market conditions.  We are in active discussions with several potential entrants to the UK market.  


Development and planning

In December 2008, we obtained planning consent to provide 54,000 sq m of new retail space at our Trinity Leeds shopping centre development; this will be integrated into our existing shopping centre of 38,900 sq m, which will also undergo refurbishment. We have made good progress in discussions with retailers to take us towards our target for pre-lettings before starting the development.


We have obtained consent for 8,360 sq m Sainsbury's store at Almondvale South retail park, Livingston. The proposed Sainsbury's store would take over the units currently occupied by Homebase and Argos, with Argos relocating to new premises at Almondvale retail park previously occupied by Land of Leather. 


During the year we also achieved planning permission for food store at the Greyhound retail park, Chesterand a 6,500 sq m application was recently submitted for a food store at our Northampton retail park. We have submitted further applications for food stores in our retail warehouse portfolio and related to our Harvest Limited Partnership joint venture with J Sainsbury. These applications reflect the relative buoyancy of the food sector and underline our ability to identify sites with excellent development potential despite an adverse economic environment. 


Looking ahead

We expect to see a continued strengthening of buying interest for retail investment property despite the backdrop of some further downward pressure on rents. It is also realistic to assume that there will be more insolvencies in the sector, but we expect the level of units in administration in our portfolio to remain stable or to reduce slightly as new lettings offset further insolvencies. Over the next 24 months, the outlook for rental recovery will become polarised across UK towns and cities according to the level of vacancies and the attraction of individual assets.


In response, we intend to deploy our capital to acquire retail assets requiring intensive management. We will also invest, selectively, in the development of shopping centres in the strongest regional cities. And, we will look to deploy capital in smaller out-of-town developments where we can capitalise on our strong relationship with retailers to secure key pre-lettings. 


We outline our development pipeline in Table 4.


Table 4: Retail development pipeline at 30 September 2009





Property

Description of use

Ownership interest %

Size

sq m

Planning status

Letting status %

Net income/ ERV

£m

Estimated/ actual completion date

Total development costs to date

£m

Forecast total development cost

 £m

SHOPPING CENTRES AND SHOPS









Developments completed










Willow PlaceCorby

Retail

100

16,260


83

2

Oct 2007

42

42

Cabot Circus, Bristol - The Bristol Alliance - a limited partnership with Hammerson PLC

Retail

50

83,610


90

17

Sept 2008

257

257

Leisure


9,000







Residential


18,740







The Elements, Livingston  

Retail

100

32,000


78

8

Oct 2008

166

166

Leisure


5,670

















Developments approved and those in progress










  

St David's, Cardiff  - St David's Partnership - a limited partnership with Capital Shopping Centres PLC

Retail/leisure

50

89,900


50

15

Oct 2009

292

337

Residential


16,500

















Proposed developments










Trinity Quarter, Leeds

Retail 

75

92,900

PR

n/a

n/a

2012

n/a

n/a


Floor areas shown above represent the full scheme whereas the cost represents our share of costs. Letting % is measured by ERV and shows letting status at 30 September 2009. Trading property development schemes are excluded from the development pipeline. Cost figures for proposed schemes are not given as these could still be subject to material change prior to final approval.


Planning status for proposed developments

PR - Planning Received

Total development cost (£m)

Total development cost refers to the book value of the land at the commencement of the project, the estimated capital expenditure required to develop the scheme from the start of the financial year in which the property is added to our development programme, together with finance charges, less residential costs (totalling £32m across all categories of development).

Net income/ERV

Net income/ERV represents headline annual rent payable on let units plus ERV at 30 September 2009 on unlet units.


Financial review

Headline results

The Group's loss before tax was £4.6m, compared to a loss of £1,621.2m for the six months ended 30 September 2008.  Revenue profit, our measure of underlying profit before tax, reduced by 15.4% from £151.8m to £128.4m, mainly as a result of lower rental income due to the sale of properties.  


Basic earnings per share was 1.58p compared to a loss per share of 314.39p last year, restated for the Rights Issue and the reclassification of Trillium to discontinued operations. Adjusted diluted earnings per share was 16.89p (2008: 29.51p), down 42.8% on the comparable period.


The combined investment portfolio (including joint ventures) decreased in value from £9,407.0m to £8,700.8m on the back of sales of £765.5m and a valuation deficit of £117.8m or 1.4%. Net assets per share decreased by 17p from 639p at the end of March 2009 to 622p in September 2009, with adjusted diluted net assets per share decreasing by 4.7% over the same period from 593p to 565p.

 

Valuation deficit

The main reason behind the reduction in the Group's loss before tax to £4.6m (six months ended 30 September 2008: loss of £1,621.2m) was significantly lower valuation deficit on the investment portfolio.  The valuation deficit of £117.8m represented a 1.4% reduction in market values over the six months, compared with a 12.5% reduction for the comparable period last year.  


Revenue profit

Revenue profit is our measure of the underlying pre-tax profit of the Group, which we use internally to assess our performance. It includes the pre-tax results of our joint ventures but excludes capital and other one-off items.  

Table 5 shows the composition of our revenue profit including the contributions from London and Retail.


Table 5Revenue profit




Retail Portfolio

£m

London Portfolio

£m

30 September 2009

£m

Retail

Portfolio 

£m

London Portfolio

£m

30 September 2008

£m

Gross rental income (1)

170.6

165.7

336.3

183.2

177.7

360.9

Direct property related income

4.6

10.9

15.5

4.5

12.0

16.5

Rents payable

(7.0)

(3.7)

(10.7)

(6.1)

(2.3)

(8.4)

Rental income

168.2

172.9

341.1

181.6

187.4

369.0

Net service charge expense

(2.7)

(3.0)

(5.7)

(3.2)

(0.5)

(3.7)

Direct property expenditure

(16.5)

(24.3)

(40.8)

(16.8)

(20.5)

(37.3)

Indirect costs

(18.7)

(17.7)

(36.4)

(20.4)

(20.2)

(40.6)

Underlying segment operating profit

130.3

127.9

258.2

141.2

146.2

287.4

Unallocated expenses



(6.1)



(8.0)

Net interest - Group



(107.7)



(116.2)

 - joint ventures



(16.0)



(11.4)

Revenue profit



128.4



151.8

(1) Includes finance lease interest.


Revenue profit declined to £128.4m for the six months to 30 September 2009 compared to £151.8m for the prior period, mainly due to a £24.6m reduction in gross rental income. Sales of investment properties accounted for £26.3m of this decline in income, partly offset by increased income of £14.1m from developments. Gross rental income was also affected by the failure of a number of retailers in late 2008 and early 2009, which led to a decline in income on our like-for-like investment portfolio of £14.3m.  


Net service charge expense and direct property expenditure increased by £2.0m and £3.5m respectivelydriven by increased levels of voids compared with the same period last year. These increases were partly offset by lower indirect costs because of reduced headcount and lower professional fees.


Net interest was £3.9m lower than last year, reflecting lower interest rates, partly offset by a reduction in capitalised interest, following the completion of our schemes in Bristol and Livingston.


Earnings per share

Basic earnings per share was 1.58p compared to a loss per share from continuing operations of 314.39p in the prior period. The improvement was predominantly due to the significantly lower valuation deficit on the investment property portfolio together with an income tax credit of £17.8m this period, compared to a £2.7m credit in the first six months last year. 


In the same way that we adjust profit before tax to remove capital and one-off items to give revenue profit, we also report an adjusted earnings per share figure.  Adjusted diluted earnings per share from continuing operations reduced from 29.51p per share for the six months ended 30 September 2008 to 16.89p per share for the current period This reduction waattributable to lower revenue profit for the reasons described above as well as an increase in the average number of issued shares following our Rights Issue in March 2009. 


During the period under review, the Rights Issue proceeds of £756m were held as cash while we waited for property markets to stabilise. As a result of very low prevailing interest rates, on average 0.8%, the interest received on the Rights Issue proceeds was low, leading to a dilution in earnings per share.


Total dividend

We will be paying a second quarterly dividend of 7.0p per share on 15 January 2010 to shareholders on the Register at 11 December 2009. Taken together with the first quarterly dividend of 7.0p, paid on 23 October 2009, this makes a first half dividend of 14.0p per share (2008: 29.8p). This is in line with guidance given at the time of our Rights Issue and in our 2009 Annual Report. For our second interim dividend of 7.0p, it is our intention to offer shareholders the opportunity to receive this in the form of Land Securities shares as opposed to cash (a scrip dividend alternative). Further information relating to the scrip dividend will be sent to shareholders shortly. If the scrip dividend alternative is approved by shareholders, we will suspend the current Dividend Re-investment Plan (DRIP). 


Net assets

At 30 September 2009, net assets per share were 622p, a decrease of 17or 2.7% compared with the year ended 31 March 2009. This reduction was primarily due to the valuation deficit. 


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 our debt. Under IFRS we do not show our debt at its nominal value, although we believe it would be more appropriate to do so, and we therefore adjust our net assets accordingly. At 30 September 2009, adjusted diluted net assets per share were 565p per share, a decrease of 28p or 4.7% from 31 March 2009


This decline was greater than the reduction in our net assets over the period due to the termination of interest-rate swaps. Adjusted net assets ignores the fair value movement on interest-rate swaps, only recognising the impact of realised gains or losses on these instruments. As explained in more detail below, during the period we terminated a number of interest-rate swaps, resulting in a cash payment of £74.5m. This realised loss is reflected in the reduction in adjusted net assets during the period.


Table 6 summarises the main differences between net assets and our adjusted measure together with the key movements over the period.


Table 6: Net assets attributable to owners of the Parent



Six months ended 30 September 2009

£m

Year ended 31 March 2009

£m

Net assets at the beginning of the period


4,823.5

9,582.9

Adjusted earnings


127.6

325.0

Valuation deficits on investment properties 


(117.8)

(4,743.7)

Impairment of development land and infrastructure


(12.2)

(104.3)

Losses on disposals of investment properties 


(10.3)

(127.9)

Other


24.6

(119.5)

Profit/(loss) after tax attributable to owners of the Parent


11.9

(4,770.4)

Loss on discontinued operations


-

(420.9)

Dividends paid


(129.8)

(302.4)

Rights Issue


-

755.7

Other reserve movements


(3.2)

(21.4)

Net assets at the end of the period


4,702.4

4,823.5

Mark-to-market on interest-rate swaps


60.9

150.2

Debt adjusted to nominal value


(493.4)

(499.8)

Adjusted net assets at the end of the period


4,269.9

4,473.9


Net pension deficit

The Group operates a defined benefit pension scheme which is closed to new members. At 30 September 2009 the scheme was in a net deficit position of £7.5m compared to a net surplus of £3.0m at 31 March 2009.  Although the scheme's assets performed strongly over the period, a significant reduction in corporate bond yields reduced the discount rate from 7.0% to 5.5%, which in turn increased the scheme's liabilities and resulted in the £10.5m change in the position since the beginning of the financial year


Cash flow, net debt and gearing

Our net debt at 30 September 2009 was £3,428.6m, £495.0m lower than the position at 31 March 2009. This reduction was primarily due to proceeds received from the disposal of investment properties 511.6m) and the sale of our joint venture interest in the BullringBirmingham (£209.8m) Capital expenditure during the period totalled £112.1m, of which £45.3m was spent on our development at One New Change, London EC4. We also invested a net £38.1m in our joint ventures, consisting mainly of capital expenditure of £66.6m on our major developments in Cardiff and Bristol, offset by drawings of £30.5m on a new stand-alone facility within our Cardiff joint venture.


Our interest cover, excluding our share of joint ventures, is virtually unchanged from 1.89 times for the year ended 31 March 2009 to 1.88 times for the six months ended 30 September 2009. Under the rules of the REIT regime, we need to maintain an interest cover in the exempt business of at least 1.25 times to avoid paying tax. As calculated under the REIT regulations, our interest cover of the exempt business for the six months ended 30 September 2009 was 1.82 times. 


Table 7: Cash flow and net debt



Six months ended 30 September 2009

£m

Year ended 31 March 2009

£m

Operating cash inflow after interest and tax


83.4

367.2

Dividends paid


(129.8)

(302.4)

Non-current assets:




  Acquisitions 


(34.2)

(86.1)

  Disposals


511.6

823.0

  Divestment of joint ventures 


209.8

-

  Capital expenditure


(112.1)

(429.8)



575.1

307.1

Trillium disposal:




  Gross proceeds


-

444.0

  Net debt divested


-

48.6



-

492.6

Loans advanced to third parties


-

(50.0)

Receipts from the disposal group (part of Trillium's PPP activities)


-

113.5

Joint ventures and associates


(38.1)

(117.0)

Proceeds from the Rights Issue


-

755.7

Fair value movement on interest-rate swaps


10.9

(105.6)

Other movements


(6.5)

(0.2)

Decrease in net debt


495.0

1,460.9

Net debt at the beginning of the period


(3,923.6)

(5,384.5)

Net debt at the end of the period


(3,428.6)

(3,923.6)


The reduction in net debt has contributed to the fall in gearing from 81.4% at 31 March 2009 to 72.9% at 30 September 2009. Details of the Group's gearing are set out in Table 8, which also shows the impact of joint venture debt, although the lenders to our joint ventures have no recourse to the Group for repayment.


Adjusted gearing, which recognises the nominal value of our debt, reduced from 96.4% at 31 March 2009 to 91.3% at 30 September 2009. Adjusted gearing including our share of joint ventures also reduced, declining from 105.9% to 102.0% over the same period. In common with other property companies, we also show our Group LTV ratio.


Table 8: Gearing


30 September 2009

%

31 March

2009

%

Gearing

72.9

81.4

Adjusted gearing* 

91.3

96.4

Adjusted gearing* - as above plus notional share of joint venture debt  

102.0

105.9

Security Group LTV

54.9

76.7

Group LTV - including notional share of joint venture debt

50.8

52.0

* Book value of balance sheet debt increased to recognise nominal value of debt on refinancing in 2004 divided by adjusted net asset value. 

Financing and capital

Our financing strategy and the structure of our main funding vehicle, the Security Group, are described in detail on page 22 of our 2009 Annual Report. As a result of our decision in January 2009 to draw down £1.1bn of available credit facilities, the Security Group entered a more restrictive operating environment (Tier 3) following formal submission of our valuation report as at 31 March 2009. The priority for the period under review was to focus on cash flows, extending existing facilities and raising new finance. In this regard, we have had considerable success.  


We raised £360.3m of long-term debt against a government lease on Queen Anne's Gate, London SW1 and secured £290.0of five year joint venture finance for the St David's Centre, Cardiff. Since the end of September 2009, we have extended £650.0m of bank bilateral facilities were anticipated to be repaid in 2010 to the financial year ending March 2015. We are also well advanced in discussions with other banks about entering into new agreements.


As a result of these achievements and the cash raised from investment property sales, we have repaid £1.8bn of bank facilities and the Security Group has returned to a normal operating environment.  In addition, our debt structure has had its AA credit rating reaffirmed allowing us to raise finance at a competitive rate. 


The Group still had £637.9m of cash investments (including restricted cash of £119.0m) at the end of September£360.0m of which has subsequently been used to repay outstanding short-term bank debt. 


The weighted average life of the Group's debt is 11.9 years (31 March 2009: 9.7 yearswith a weighted average cost of debt of 5.0% at 30 September 2009, although this has subsequently risen to around 5.3following the further repayment of £360.0m of short-term borrowings in November 2009.


Hedging

We use derivative products to manage our interest-rate exposure, and have a hedging policy which requires at least 80% of our existing debt plus our net committed capital expenditure to be at fixed interest rates for the coming five years. Specific hedges are also used in geared developments or joint ventures to fix the interest exposure on limited-recourse debt.


At 31 March 2009 the Group was slightly over-hedged at 107% principally due to the Rights Issue proceeds which were received in late March 2009. During the period, this over-hedging increased as a result of our investment property sales and funding initiatives. Corrective action to eliminate the over-hedged position was taken during September 2009 when £2.2bn of interest-rate swaps were closed out resulting in a £74.5m cash payment.  As a result, Group debt is now 97.8fixed. 


Taxation 

As a consequence of the Group's conversion to REIT status, income and capital gains from our qualifying property rental business are now exempt from UK corporation tax. The tax credit for the period of £17.8m (2008: £2.7m credit) comprises a prior year corporation tax credit of £20.0m following resolution of a number of prior year issues, and a net deferred tax charge of £2.2m, including the write off of deferred tax assets no longer considered recoverable. The tax credit for the period has not been recognised as part of our adjusted earnings as it is non-recurring and relates to the period before we became a REIT.  


Principal risks and uncertainties

The principal risks facing the Group for the remaining months of the financial year are broadly consistent with those outlined on pages 30 to 32 of the 2009 Annual Report. The risks include property investment risks (falling property values, illiquidity of assets and tenant failure) and financial risks (including liquidity risk due to unavailability of credit facilities). 


While these risks remain relevant for the rest of this financial year and beyondour new and extended bank facilities, as well as our return to a normal operating environment under our Security Group debt structure, have helped to mitigate liquidity risk. The financial and property risks, which are closely tied to property values and property market liquidityhave also reduced since 31 March 2009 as the overall trend in property values since 31 March 2009 has stabilised.


Statement of Directors' responsibilities

The Directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the Half-yearly Report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:


  • an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

  • material related party transactions in the first six months and any material changes in the related-party transactions described in the 2009 Annual Report.



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


The Board of Directors


Alison Carnwath*, Chairman

Francis Salway, Chief Executive

David Rough*

Martin Greenslade

Bo Lerenius*

Sir Stuart Rose*

Richard Akers

Sir Christopher Bland*

Kevin O'Byrne*

Chris Bartram*

*Non-executive Directors




By order of the Board



Peter Dudgeon

Secretary

17 November 2009



Independent review report to Land Securities Group PLC

Introduction

We have been engaged by the Company to review the condensed set of consolidated interim financial information in the Half-yearly Report for the six months ended 30 September 2009, which comprises the unaudited consolidated income statement, unaudited consolidated statement of comprehensive income, unaudited consolidated balance sheet, unaudited consolidated statement of changes in equity, unaudited consolidated statement of cash flows and related notes. We have read the other information contained in the Half-yearly Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of consolidated interim financial information.


Directors' responsibilities

The Half-yearly Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half-yearly Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.


As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of consolidated interim financial information included in the Half-yearly 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 consolidated interim financial information in the Half-yearly Report based on our review. This report, including the conclusion, has been prepared for and only for the Company's members as a Body for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.


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 opinion.


Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated interim financial information in the Half-yearly Report for the six months ended 30 September 2009 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 Services Authority.


PricewaterhouseCoopers LLP

Chartered Accountants
London

17 November 2009


Notes:

1.    The maintenance and integrity of the Land Securities Group PLC website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Half-yearly Report since it was initially presented on the website. 

2.    Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.



Financial statements

Unaudited consolidated income statement for the six months ended 30 September 2009






Six months ended 

30 September

Year to 

31 March






2009

2008 

2009







Restated(1)  






Notes

£m

£m

£m

Continuing operations








Group revenue (2)




4

418.7

405.4

821.2

Costs





(200.3)

(164.6)

(326.4)






218.4

240.8

494.8

Loss on disposal of investment properties





(18.6)

(0.7)

(130.8)

Net deficit on revaluation of investment properties





(89.8)

(1,551.3)

(4,113.4)

Impairment of trading properties





(9.3)

-

(92.3)

Operating profit/(loss)




3

100.7

(1,311.2)

(3,841.7)

Interest expense




5

(134.2)

(139.0)

(262.9)

Interest income




5

19.8 

16.3

32.5

Fair value movement on interest-rate swaps




5

10.9 

4.7

(102.1)






(2.8) 

(1,429.2)

(4,174.2)

Share of the loss of joint ventures (post-tax)




10

(1.8)

(192.0)

(599.0)

Loss before tax





(4.6)

(1,621.2)

(4,773.2)

Income tax





17.8

2.7

(0.5)

Profit/(loss) for the period from continuing operations





13.2

(1,618.5)

(4,773.7)

Discontinued operations





-

(106.9)

(420.9)

Profit/(loss) for the period





13.2

(1,725.4)

(5,194.6)























Attributable to:











Owners of the Parent








11.9

(1,725.4)

(5,191.3)

Minority interests








1.3

-

(3.3)

Profit/(loss) for the period








13.2

(1,725.4)

(5,194.6)


















Earnings/(loss) per share attributable to the owners of the Parent (pence)(3)(4)





Basic earnings/(loss) per share







7

1.58

(335.16)

(999.04)

of which from: continuing operations






7

1.58

(314.39)

(918.04)

of which from: discontinued operations






7

-

(20.77)

(81.00)

Diluted earnings/(loss) per share






7

1.58

(335.16)

(999.04)

of which from: continuing operations






7

1.58

(314.39)

(918.04)

of which from: discontinued operations






7

-

(20.77)

(81.00)


(1)      Restated to reclassify the results of Trillium from continuing operations to discontinued operations.

(2)     Group revenue excludes the share of joint ventures' income of £56.0m (30 September 2008: £39.5m, 31 March 2009: £104.8m).

(3)     Adjusted earnings per share from continuing operations is given in note 7.

(4)     The earnings per share figures for the six months ended 30 September 2008 have been restated to reflect the bonus element inherent in the Rights Issue that was approved on 9 March 2009.



Unaudited consolidated statement of comprehensive income for the six months ended 30 September 2009



Six months ended     30 September

Year to 31 March



2009

2008

2009



£m

£m

£m

Profit/(loss) for the period


13.2

(1,725.4)

(5,194.6)

Other comprehensive income





Actuarial losses on defined benefit pension schemes


(11.7)

(10.2)

(11.1)

Deferred tax credit on actuarial losses on defined benefit pension schemes


1.9

-

0.6

Fair value movement on cash flow hedges taken to equity - Group


-

(1.9)

(0.2)

  - joint ventures


2.7

1.4  

(21.3)

Other comprehensive income for the period 


(7.1)

(10.7)

(32.0)

Total comprehensive income for the period


6.1

(1,736.1)

(5,226.6)











Attributable to:





Owners of the Parent


4.8

(1,736.1)

(5,223.3)

Minority interests


1.3

-

(3.3)

Total comprehensive income for the period


6.1

(1,736.1)

(5,226.6)


  Unaudited consolidated balance sheet at 30 September 2009



30 September

31 March



2009

2009


Notes

£m

£m

Non-current assets





Investment properties


9

7,380.2

7,929.4

Other property, plant and equipment



12.8

14.3

Net investment in finance leases



115.8

116.3

Loans to third parties 



50.0

50.0

Investments in joint ventures


10

763.4

930.8

Pension surplus



-

3.0

Deferred tax assets



-

1.9

Total non-current assets



8,322.2

9,045.7

Current assets





Trading properties and long-term development contracts


11

88.8

94.9

Derivative financial instruments


14

1.2

-

Trade and other receivables



473.2

392.1

Monies held in restricted accounts and deposits


12

119.0

29.9

Cash and cash equivalents


13

518.9

1,609.1

Total current assets



1,201.1

2,126.0

Total assets



9,523.3

11,171.7

Current liabilities





Short-term borrowings and overdrafts


15

(7.8)

(1.1)

Derivative financial instruments


14

(27.8)

(112.0)

Trade and other payables



(629.6)

(625.8)

Current tax liabilities



(118.5)

(161.5)

Total current liabilities



(783.7)

(900.4)

Non-current liabilities





Borrowings 


15

(4,032.1)

(5,449.5)

Pension deficit



(7.5)

-

Deferred tax liabilities



-

(1.6)

Total non-current liabilities



(4,039.6)

(5,451.1)

Total liabilities



(4,823.3)

(6,351.5)

Net assets



4,700.0

4,820.2

Equity





Capital and reserves attributable to the owners of the Parent





Ordinary shares



76.2

76.2

Share premium



785.2

785.2

Capital redemption reserve



30.5

30.5

Share-based payments



4.2

8.1

Retained earnings



3,814.5

3,935.9

Own shares



(8.2)

(12.4)

Equity attributable to the owners of the Parent



4,702.4

4,823.5

Minority interest



(2.4)

(3.3)

Total equity



4,700.0

4,820.2


Unaudited consolidated statement of changes in equity at 30 September 2009


Attributable to the owners of the Parent





Ordinary shares

Share premium 

Capital redemption reserve

Share-based payments

Retained earnings

Own shares

Total

Minority interest

Total 

equity


£m

£m

£m

£m

£m

£m

£m

£m

£m

At 1 April 2008

47.1

56.6

30.5

11.3

9,459.7

(22.3)

9,582.9

-

9,582.9

Loss for the financial period

-

-

-

-

(1,725.4)

-

(1,725.4)

-

(1,725.4)

Other comprehensive income:










Actuarial loss on pension scheme

-

-

-

-

(10.2)

-

(10.2)

-

(10.2)

Fair value movement on cash flow hedges taken to equity

-

-

-

-

(0.5)

-

(0.5)

-

(0.5)

Total comprehensive income for the period ended 30 September 2008

-

-

-

-

(1,736.1)

-

(1,736.1)

-

(1,736.1)

Transactions with owners:










Exercise of options

-

1.7

-

-

-

-

1.7

-

1.7

Fair value of share-based payments 

-

-

-

4.4

-

-

4.4

-

4.4

Release on exercise/forfeiture of share options

-

-

-

(4.3)

4.3

-

-

-

-

Dividends paid to owners of the company

-

-

-

-

(148.8)

-

(148.8)

-

(148.8)

Transfer of shares to employees on exercise of share schemes

-

-

-

-

(4.3)

4.3

-

-

-

Total transactions with owners

-

1.7

-

0.1

(148.8)

4.3

(142.7)

-

(142.7)

At 30 September 2008

47.1

58.3

30.5

11.4

7,574.8

(18.0)

7,704.1

-

7,704.1

Loss for the financial period

-

-

-

-

(3,465.9)

-

(3,465.9)

(3.3)

(3,469.2)

Other comprehensive income:










Actuarial loss on pension scheme

-

-

-

-

(0.3)

-

(0.3)

-

(0.3)

Fair value movement on cash flow hedges taken to equity

-

-

-

-

(21.0)

-

(21.0)

-

(21.0)

Total comprehensive income for the period ended 31 March 2009

-

-

-

-

(3,487.2)

-

(3,487.2)

(3.3)

(3,490.5)

Transactions with owners:










Rights Issue

29.1

726.6

-

-

-

-

755.7

-

755.7

Exercise of options

-

0.3

-

-

-

-

0.3

-

0.3

Fair value of share-based payments 

-

-

-

4.2

-

-

4.2

-

4.2

Release on exercise/forfeiture of share options

-

-

-

(7.5)

7.5

-

-

-

-

Dividends paid to owners of the company

-

-

-

-

(153.6)

-

(153.6)

-

(153.6)

Transfer of shares to employees on exercise of share schemes

-

-

-

-

(5.6)

5.6

-

-

-

Total transactions with owners

29.1

726.9

-

(3.3)

(151.7)

5.6

606.6

-

606.6

At 31 March 2009

76.2

785.2

30.5

8.1

3,935.9

(12.4)

4,823.5

(3.3)

4,820.2

Profit for the financial period

-

-

-

-

11.9

-

11.9

1.3

13.2

Other comprehensive income:










Actuarial loss on pension scheme

-

-

-

-

(9.8)

-

(9.8)

-

(9.8)

Fair value movement on cash flow hedges taken to equity

-

-

-

-

2.7

-

2.7

-

2.7

Total comprehensive income for the period ended 30 September 2009

-

-

-

-

4.8

-

4.8

1.3

6.1

Transactions with owners:










Fair value of share-based payments 

-

-

-

3.9

-

-

3.9

-

3.9

Release on exercise/forfeiture of share options

-

-

-

(7.8)

7.8

-

-

-

-

Dividends paid to owners of the company

-

-

-

-

(129.8)

-

(129.8)

-

(129.8)

Distributions paid to minority interests

-

-

-

-

-

-

-

(0.4)

(0.4)

Transfer of shares to employees on exercise of share schemes

-

-

-

-

(4.2)

4.2

-

-

-

Total transactions with owners

-

-

-

(3.9)

(126.2)

4.2

(125.9)

(0.4)

(126.3)

At 30 September 2009

76.2

785.2

30.5

4.2

3,814.5

(8.2)

4,702.4

(2.4)

4,700.0


Unaudited consolidated statement of cash flows for the six months ended 30 September 2009

Statement of cash flows



Six months ended     30 September

Year to 31 March




2009

2008 (2)

2009 (2)



Notes

£m

£m

£m

Net cash generated from operations







Cash generated from operations



16

217.2

247.8

651.3

Interest paid




(131.7)

(150.3)

(283.6)

Interest received




11.2

4.8

10.4

Employer contributions to pension scheme




(2.0)

(3.0)

(4.2)

Corporation tax paid




(11.3)

(3.3)

(6.7)

Net cash inflow from operations




83.4

96.0

367.2








Cash flows from investing activities







Investment property development expenditure




(111.3)

(126.9)

(208.6)

Acquisition of investment properties




(34.2)

(32.4)

(85.3)

Other investment property related expenditure




-

(67.4)

(174.1)

Acquisition of properties by Trillium




-

(0.8)

(0.8)

Capital expenditure by Trillium




-

(17.9)

(46.5)

Capital expenditure on properties




(145.5)

(245.4)

(515.3)

Disposal of investment properties




511.6

212.5

792.7

Disposal of operating properties




-

30.5

30.3

Net proceeds/(expenditure) on properties




366.1

(2.4)

307.7

Net expenditure on other fixed assets




(0.8)

(4.7)

(0.6)

Net cash inflow/(outflow) from capital expenditure




365.3

(7.1)

307.1

Receivable finance leases acquired




-

(20.7)

-

Receipts in respect of receivable finance leases




3.5

1.2

11.7

Receipts from the disposal of discontinued operations




-

103.0

-

Loans advanced to third parties




-

-

(50.0)

Investment in joint ventures




(1.9)

-

(21.1)

Divestment of joint ventures




209.8

-

-

Net loans (to)/from joint ventures and cash contributed




(39.1)

149.5

(117.5)

Distributions from joint ventures




2.9

13.7

21.6

Net cash received from disposal group




-

1.4

113.5

Cash proceeds from disposal of Trillium (net of cash divested)




-

-

392.7

Net cash received from investing activities




540.5

241.0

658.0








Cash flows from financing activities







Proceeds from Rights Issue




-

-

755.7

Issue of shares arising from exercise of share options




-

1.7

2.0

Proceeds from new loans (net of finance fees)




363.0

403.4

1,732.6

Repayment of loans




(1,780.1)

(603.8)

(1,612.0)

Termination of interest-rate swaps




(74.5)

-

-

Increase in monies held in restricted accounts and deposits




(89.1)

-

(29.9)

Decrease in finance leases payable




(2.9)

(1.1)

(9.4)

Dividends paid to owners of the company




(129.8)

(148.8)

(302.4)

Distributions paid to minority interests




(0.4)

-

-

Net cash (outflow)/inflow from financing activities




(1,713.8)

(348.6)

536.6








(Decrease)/increase in cash and cash equivalents for the period(1)




(1,089.9)

(11.6)

1,561.8

Cash and cash equivalents at the beginning of the period(1) 




1,608.8

47.0

47.0

Cash and cash equivalents at the end of the period(1)




518.9

35.4

1,608.8

(1)    Cash and cash equivalents for the purposes of the cash flow statement includes overdrafts.

(2)    The Group cash flow statements for the six months ended 30 September 2008 and the year ended 31 March 2009 include the cash flows relating to the Trillium discontinued operations.  







Six months ended     30 September

Year to 

31 March




2009

2008

2009



Notes

£m

£m

£m

Cash and cash equivalents (cash flow statement)




518.9

35.4

1,608.8

Overdrafts



15

-

-

0.3

Cash and cash equivalents (balance sheet)




518.9

35.4

1,609.1



Notes to the financial statements


1. Basis of preparation


This condensed consolidated interim financial information for the six months ended 30 September 2009 has been prepared on a going concern basis and in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim financial reporting' as adopted by the European Union. 


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 2009 were approved by the Board of Directors on 12 May 2009 and delivered to the Registrar of Companies. The report of the auditors 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 annual financial statements for the year ended 31 March 2009, which have been prepared in accordance with IFRSs as adopted by the European Union. 


As a result of the disposal of Trillium on 12 January 2009, and in compliance with IFRS 5 'Non-current assets held for sale and discontinued operations', the 2008 comparatives, where relevant, have been restated to classify the disposed Trillium operations as 'Discontinued Operations'. In addition, the Accor hotel portfolio, which was previously reported as part of the Trillium business segment and has been retained by the Group, has been classified as 'Retail Portfolio' and the 2008 segmental comparatives have been restated to reflect this classification.


This condensed consolidated interim financial information was approved for issue on 17 November 2009.


2. 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 notes 2 and 3 of the Group's Annual Report for the year ended 31 March 2009.


  • Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

  • The following amendment is mandatory for the first time for the financial year beginning 1 April 2009:

    IAS (revised) 'Presentation of financial statements'. The revised standard requires 'non-owner changes in equity' to be presented separately from 'owner changes in equity'. All 'non-owner changes in equity' are required to be shown in a performance statement.

    Entities can choose whether to present one performance statement (the statement of total comprehensive income) or two statements (the income statement and the statement of comprehensive income). The Group has elected to present two statements: income statement and a statement of comprehensive income. The interim financial statements have been prepared under the revised presentation requirements.


The following Accounting Standards or interpretations are effective for the financial year beginning 1 April 2009 but do not have material impact on the Group:

  • IAS 40 (revised) 'Investment Property'.

  • IFRS 1 'First time Adoption of IFRS' and IAS 27 'Consolidated and Separate Financial Statements'.

  • IFRS 2 'Share-based Payments'.

  • IAS 39 'Financial Instruments: Recognition and Measurement'.

  • IAS 16 'Property, Plant and Equipment'.

  • IAS 23 (revised) 'Borrowing Costs'.

  • IFRS 3 (revised), 'Business Combinations'.

  • IFRS 7 'Financial Instruments: Disclosures'.

  • IAS 27 (revised), 'Consolidated and Separate Financial Statements'.

  • IAS 32 amendment 'Financial Instruments: Presentation', and IAS 1.

  • IFRS 8 'Operating Segments' 

  • IFRIC 13 'Customer Loyalty Programmes'

  • IFRIC 15 'Agreements for the Construction of Real Estate'. 

  • IFRIC 16 'Hedges of a Net Investment in a Foreign Operation'. 


The following Accounting Standards or Interpretations are not yet effective and have not been early adopted by the Group:

 

  • IFRS 9 'Financial Instruments'

  • IFRIC 9 'Reassessment of Embedded Derivatives' and IAS 39, 'Financial Instruments: Recognition and Measurement - Embedded Derivatives (Amendments)'. 

  • IFRIC 17 'Distribution of Non-cash Assets to Owners'.

  • IFRIC 18 'Transfers of Assets from Customers'.


     

    3. Segmental information



    Six months ended 30 September

    Year ended 31 March





    2009



    2008



    2009








    restated(1)




    Income statements


    Retail Portfolio 

    £m

    London Portfolio

    £m

    Total

    £m

    Retail Portfolio 

    £m

    London Portfolio

    £m

    Total

    £m

    Retail Portfolio 

    £m

    London Portfolio

    £m

    Total

    £m

    Rental income

    132.6

    158.6

    291.2

    151.3

    171.8

    323.1

    302.8

    338.9

    641.7

    Finance lease interest 

    1.2

    1.9

    3.1

    1.4

    2.9

    4.3

    2.7

    5.3

    8.0

    Rents payable

    (6.7)

    (3.7)

    (10.4)

    (5.9)

    (2.3)

    (8.2)

    (11.6)

    (4.6)

    (16.2)


    127.1

    156.8

    283.9

    146.8

    172.4

    319.2

    293.9

    339.6

    633.5

    Service charge income

    16.2

    15.9

    32.1

    16.9

    17.6

    34.5

    37.3

    35.6

    72.9

    Service charge expense

    (17.8)

    (18.9)

    (36.7)

    (19.1)

    (18.1)

    (37.2)

    (43.2)

    (39.5)

    (82.7)

    Net service charge expense

    (1.6)

    (3.0)

    (4.6)

    (2.2)

    (0.5)

    (2.7)

    (5.9)

    (3.9)

    (9.8)

    Other property related income

    4.6

    10.9

    15.5

    4.5

    12.0

    16.5

    11.4

    29.1

    40.5

    Direct property expenditure

    (11.8)

    (23.9)

    (35.7)

    (12.9)

    (20.4)

    (33.3)

    (36.8)

    (43.6)

    (80.4)

    Net rental income

    118.3

    140.8

    259.1

    136.2

    163.5

    299.7

    262.6

    321.2

    583.8

    Trading properties sale proceeds

    6.2

    1.2

    7.4

    6.9

    -

    6.9

    8.8

    0.4

    9.2

    Costs of sales of trading properties

    (5.0)

    (5.2)

    (10.2)

    (6.1)

    (0.3)

    (6.4)

    (6.6)

    (0.1)

    (6.7)

    Profit/(loss) on disposal of trading properties

    1.2

    (4.0)

    (2.8)

    0.8

    (0.3)

    0.5

    2.2

    0.3

    2.5

    Long-term development contract income

    -

    69.4

    69.4

    -

    20.1

    20.1

    -

    48.9

    48.9

    Long-term development contract expenditure

    -

    (66.5)

    (66.5)

    -

    (18.4)

    (18.4)

    -

    (45.1)

    (45.1)

    Profit on long-term development contracts

    -

    2.9

    2.9

    -

    1.7

    1.7

    -

    3.8

    3.8

    Indirect property expenditure

    (16.3)

    (15.8)

    (32.1)

    (18.0)

    (16.7)

    (34.7)

    (33.8)

    (30.4)

    (64.2)

    Depreciation

    (0.8)

    (1.8)

    (2.6)

    (1.1)

    (3.0)

    (4.1)

    (1.9)

    (4.8)

    (6.7)

    Underlying segment operating profit

    102.4

    122.1

    224.5

    117.9

    145.2

    263.1

        229.1

    290.1

    519.2

    Investment property disposal proceeds

    255.3

    292.4

    547.7

    20.9

    256.9

    277.8

    164.5

    434.7

    599.2

    Carrying value of investment property disposals (including lease incentives)

    (263.5)

    (302.8)

    (566.3)

    (19.7)

    (258.8)

    (278.5)

    (219.3)

    (510.7)

    (730.0)

    (Loss)/profit on disposal of investment properties

    (8.2)

    (10.4)

    (18.6)

    1.2

    (1.9)

    (0.7)

    (54.8)

    (76.0)

    (130.8)

    Net (deficit)/surplus on revaluation of investment properties

    (104.6)

    14.8

    (89.8)

    (762.3)

    (789.0)

    (1,551.3)

    (1,923.1)

    (2,190.3)

    (4,113.4)

    Impairment of trading properties 

    -

    (9.3)

    (9.3)

    -

    -

    -

    -

    (92.3)

    (92.3)

    Segment result

    (10.4)

    117.2

    106.8

    (643.2)

    (645.7)

    (1,288.9)

    (1,748.8)

    (2,068.5)

    (3,817.3)

    Demerger costs



    -



    (14.3)



    (10.2)

    Unallocated expenses



    (6.1)



    (8.0)



    (14.2)

    Operating profit/(loss)



    100.7



    (1,311.2)



    (3,841.7)

    Net interest expense



    (103.5)



    (118.0)



    (332.5)




    (2.8)



    (1,429.2)



    (4,174.2)

    Share of the post-tax (loss)/profit of joint ventures










    - Retail Portfolio



    (11.4)



    (181.8)



    (554.7)

    London Portfolio



    9.6



    (10.2)



    (44.3)




    (1.8)



    (192.0)



    (599.0)

    Loss before tax from continuing operations



    (4.6)



    (1,621.2)



    (4,773.2)

(1)     In compliance with IFRS 5, the 2008 comparatives have been restated as the Trillium discontinued operations have been removed from continuing operations and the operations of the Accor hotels contract has been included within Retail Portfolio. 


Included within rents payable is finance lease interest payable of £1.1m (30 September 2008: £1.3m, 31 March 2009: £2.5m) and £0.8m (30 September 2008: £1.2m, 31 March 2009: £1.8m) respectively for Retail Portfolio and London Portfolio.






At 30 September 2009

At 31 March 2009

Balance sheets 




Retail Portfolio 

£m

London Portfolio

£m

Total

£m

Retail Portfolio 

£m

London Portfolio

£m

Total

£m

Investment properties


2,870.3

4,509.9

7,380.2

3,205.4

4,724.0

7,929.4

Other property, plant and equipment


4.1

8.7

12.8

4.7

9.6

14.3

Net investment in finance leases


48.3

67.5

115.8

48.5

67.8

116.3

Investments in joint ventures 


729.4

34.0

763.4

906.9

23.9

930.8

Trading properties and long-term development contracts

5.0

83.8

88.8

10.0

84.9

94.9

Trade and other receivables


201.8

271.4

473.2

201.4

190.7

392.1

Segment assets


3,858.9

4,975.3

8,834.2

4,376.9

5,100.9

9,477.8

Unallocated assets




689.1



1,693.9 

Total assets




9,523.3



11,171.7









Trade and other payables


(384.9)

(244.7)

(629.6)

(335.9)

(241.3)

(577.2)

Segment liabilities


(384.9)

(244.7)

(629.6)

(335.9)

(241.3)

(577.2)

Unallocated liabilities




(4,193.7)



(5,774.3)

Total liabilities




(4,823.3)



(6,351.5)









All the Group's operations are in the UK and are organised into two main business segments against which the Group reports its primary segment information, being Retail Portfolio and London Portfolio.  


The Group's financial performance does not suffer from seasonal fluctuations.


4. Group revenue

Six months ended 30 September

Year to 31 March



2009

2008(1)

2009



£m

£m

£m

Rental income


291.2

323.1

641.7

Service charge income


32.1

34.5

72.9

Other property related income


15.5

16.5

40.5

Trading property sales proceeds


7.4

6.9

9.2

Long-term development contract income


69.4

20.1

48.9

Finance lease interest


3.1

4.3

8.0



418.7

405.4

821.2

(1)     In compliance with IFRS 5, the 2008 comparatives have been restated to remove the revenue in relation to the Trillium discontinued operations.


5. Net interest expense

Six months ended 30 September

Year to 31 March



2009

2008(1)

2009



£m

£m

£m

Interest expense





Bond and debenture debt 


(97.4)

(97.7)

(191.1)

Bank borrowings 


(34.7)

(51.4)

(95.4)

Other interest payable 


(0.7)

(1.0)

(0.9)

Amortisation of bond exchange de-recognition


(6.4)

(5.9)

(11.7)

Interest on pension scheme liabilities


(3.6)

(4.2)

(7.5)



(142.8)

(160.2)

(306.6)

Interest capitalised in relation to properties under development


8.6

21.2

43.7

Total interest expense


(134.2)

(139.0)

(262.9)






Interest income





Short-term deposits


7.7

0.8

2.7

Long-term investment loans


1.5

-

0.7

Gain on disposal of foreign-exchange contract


-

-

2.7

Other interest receivable


0.2

0.6

1.5

Interest receivable from joint ventures


7.1

10.4

16.8

Expected return on pension scheme assets


3.3

4.5

8.1

Total interest income


19.8

16.3

32.5






Fair value movement on interest-rate swaps


10.9

4.7

(102.1)






Net interest expense


(103.5)

(118.0)

(332.5)

(1)     In compliance with IFRS 5, the 2008 comparatives have been restated to remove the net interest expense in relation to the Trillium discontinued operations.




6. Dividends


    Restated(1) 

    Actual

Six months ended 30 September

Year to 31 March



    Per share

    Per share

2009

2008

2009

Ordinary dividends paid

    Payment date

    pence

    pence

£m

£m

£m

For the year ended 31 March 2008: 







    Third quarter

    25 April 2008

14.4

16.0

-

74.4

74.4

    Final quarter

    28 July 2008

14.4

16.0

-

74.4

74.4








For the year ended 31 March 2009:







    First quarter

    24 October 2008

14.9

16.5

-

-

76.8

    Second quarter

    12 January 2009 

14.9

16.5

-

-

76.8

    Third quarter

    24 April 2009

14.9

16.5

76.8

-

-

    Final quarter

    24 July 2009

7.0

7.0

53.0

-

-





129.8

148.8

302.4

(1)     The restated dividend per share represents the theoretical dividend per share that would have been paid had the bonus shares inherent in the Rights Issue, which was completed in March 2009, been in existence at the relevant dividend dates.


The Board has proposed a second quarterly dividend of 7.0p per share or £52.9m (2008: 16.5p per share or £76.8m) in addition to the first quarterly dividend of 7.0p per share or £52.9m paid on 23 October 2009 (2008: 16.5p per share or £76.8m paid on 24 October 2008).  It will be paid on 15 January 2010 to shareholders who are on the Register of Members on 11 December 2009. All numbers relate to actual dividends as opposed to restated dividends.


7Earnings/(loss) per share

Six months ended   30 September 

Year to 31 March


2009

2008

2009



restated

(1)



£m

£m

£m

Profit/(loss) for the financial period attributable to the owners of the Parent

11.9

(1,725.4)

(5,191.3)

of which from: continuing operations attributable to the owners of the Parent

11.9

(1,618.5)

(4,770.4)

of which from: discontinued operations attributable to the owners of the Parent

-

(106.9)

(420.9)

(1)    In compliance with IFRS 5, the 2008 comparatives have been restated to reclassify the profit arising from the Trillium discontinued operations from continuing operations to discontinued operations.


Management has chosen to disclose adjusted earnings per share from continuing operations in order to provide an indication of the Group's underlying business performance. Accordingly, it excludes the effect of all exceptional items, debt and other restructuring charges, and other items of a capital nature (other than trading properties and long-term contract profits) as indicated above. An EPRA measure has been included to assist comparison between European property companies. 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

Year to  

31 March

2009

2008

2009



restated(2)



£m

£m

£m

Profit/(loss) for the financial period from continuing operations attributable to the owners of the Parent

11.9

(1,618.5)

(4,770.4)

Valuation deficits     - Group 

89.8

1,551.3

4,113.4

    - joint ventures

28.0

206.4

630.0

Loss/(profit) on investment property disposals after current and deferred tax - Group 

18.6

0.7

130.8

        - joint ventures

(8.3)

(1.9)

(2.9)

Impairment of development land and infrastructure(3)     - Group

9.3

-

92.0

        - joint ventures

2.9

-

12.3

Mark-to-market adjustment on interest-rate swaps    - Group

(10.9)

(4.7)

102.1

        - joint ventures

(1.4)

1.8

15.4

Adjustment due to net liabilities on joint ventures(4)

(0.9)

-

(17.7)

Non-revenue tax adjustment

(17.8)

-

-

Demerger costs (net of taxation)

-

11.4

7.2

EPRA adjusted earnings from continuing operations attributable to the owners of the Parent

121.2

146.5

312.5

Eliminate effect of debt restructuring charges (net of taxation)

-

(0.3)

0.8

Eliminate effect of bond exchange de-recognition

6.4

5.9

11.7

Adjusted earnings from continuing operations attributable to the owners of the Parent

127.6

152.1

325.0

(2    In compliance with IFRS 5, the 2008 comparatives have been restated to remove the elements arising from the Trillium discontinued operations from continuing operations.

(3)     The impairment in relation to the development land and infrastructure programmes within trading properties has been removed from both our and the EPRA's adjusted earnings due to the long-term nature of these programmes.

(4)     The adjustment to net liabilities on joint ventures is the result of valuation deficits and as such restricts the recognition of the full valuation deficit. Hence, this adjustment is required to reflect that the valuation deficit has not been recognised in full in the Group's income statement.  




Six months ended 

30 September

Year to  

31 March


2009

2008

2009



restated(5)



Number

million

Number

million

Number

million

Weighted average number of ordinary shares 

761.9

522.1

526.7

Effect of weighted average number of treasury shares

(5.9)

(5.9)

(5.9)

Effect of weighted average number of own shares

(0.7)

(1.4)

(1.2)

Weighted average number of ordinary shares for calculating basic earnings per share

755.3

514.8

519.6

Dilutive effect of share options for diluted earnings per share 

0.2

-

-

Weighted average number of ordinary shares for calculating diluted earnings per share

755.5

514.8

519.6

Dilutive effect of share options for adjusted diluted earnings per share

-

0.6

0.3

Weighted average number of ordinary shares for calculating adjusted diluted earnings per share

755.5

515.4

519.9

(5)     The weighted average number of ordinary shares for the six months ended 30 September 2008 has been adjusted for the bonus element inherent in the Rights Issue that was approved on March 2009 in compliance with IAS 33 'Earnings per Share'.


7Earnings/(loss) per share continued

Six months ended 

30 September

Year to 31 March


2009

2008

2009



restated(6)



Pence

Pence

Pence

Basic earnings/(loss) per share

1.58

(335.16)

(999.04)

of which from: continuing operations

1.58

(314.39)

(918.04)

of which from: discontinued operations

-

(20.77)

(81.00)





Diluted earnings/(loss) per share

1.58

(335.16)

(999.04)

of which from: continuing operations

1.58

(314.39)

(918.04)

of which from: discontinued operations

-

(20.77)

(81.00)





Adjusted earnings per share from continuing operations

16.89

29.55

62.60

Adjusted diluted earnings per share from continuing operations

16.89

29.51

62.57





EPRA adjusted earnings per share from continuing operations

16.05

28.46

60.20

(6)     The earnings per share for the six months ended 30 September 2008 has been adjusted for the bonus element inherent in the Rights Issue that was approved on 9 March 2009 and for the reclassification of the Trillium discontinued operations from continuing operations to discontinued operations.  


8. Net assets per share

30 September

31 March



2009

2009



£m

£m

Net assets attributable to the owners of the Parent


4,702.4

4,823.5

Cumulative mark-to-market adjustment on interest-rate swaps - Group


26.6

112.0

 - joint ventures


34.3

38.2

EPRA adjusted net assets


4,763.3

4,973.7

Reverse bond exchange de-recognition adjustment


(493.4)

(499.8)

Adjusted net assets attributable to the owners of the Parent


4,269.9

4,473.9

Reinstate bond exchange de-recognition adjustment 


493.4

499.8

Cumulative mark-to-market adjustment on interest-rate swaps - Group


(26.6)

(112.0)

 - joint ventures


(34.3)

(38.2)

Excess of fair value of debt over book value


(323.2)

(13.4)

EPRA triple net assets


4,379.2

4,810.1



30 September

31 March



2009

2009



Number

million

Number

million

Number of ordinary shares in issue


761.9

761.9

Number of treasury shares


(5.9)

(5.9)

Number of own shares


(0.5)

(0.9)

Number of ordinary shares used for calculating basic net assets per share


755.5

755.1

Dilutive effect of share options


0.5

-

Number of ordinary shares used for calculating diluted net assets per share


756.0

755.1

.  

  


30 September

31 March



2009

2009



Pence

Pence

Net assets per share


622

639

Diluted net assets per share


622

639





Adjusted net assets per share


565

593

Adjusted diluted net assets per share


565

593





EPRA measure - adjusted diluted net assets per share


630

659

EPRA measure - diluted triple net assets per share


579

637


Adjusted net assets per share excludes mark-to-market adjustments on financial instruments used for hedging purposes and the bond exchange de-recognition adjustment as management consider that 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 owners of the Parent is more indicative of underlying performance.



9. Investment properties






Portfolio management

£m

Development programme

£m

Trillium

£m

Total

£m

Net book value at 1 April 2008

10,338.3

1,396.0

562.4

12,296.7

Developments transferred from the development programme into portfolio management 

256.2

(256.2)

-

-

Accor hotel properties transferred from Trillium to portfolio management 

435.9

-

(435.9)

-

Property acquisitions

93.4

-

-

93.4

Capital expenditure

63.0

147.2

8.8

219.0

Capitalised interest

6.1

13.5

-

19.6

Disposals

(232.6)

-

(10.6)

(243.2)

Transfer from operating properties

-

-

13.9

13.9

Surrender premiums received

(0.4)

-

-

(0.4)

Depreciation

(1.6)

-

-

(1.6)

Deficit on revaluation     - continuing operations

(1,415.7)

(135.6)

-

(1,551.3)

        - discontinued operations

-

-

(11.4)

(11.4)

Net book value at 30 September 2008

9,542.6

1,164.9

127.2

10,834.7

Developments transferred from the development programme into portfolio management 

154.1

(154.1)

-

-

Property acquisitions

8.5

1.3

-

9.8

Capital expenditure

111.1

98.3

(2.8)

206.6

Capitalised interest

7.9

9.6

-

17.5

Disposals

(449.3)

(1.3)

(30.8)

(481.4)

Transfer to operating properties

-

-

(2.0)

(2.0)

Surrender premiums received

(1.6)

-

-

(1.6)

Depreciation

(0.5)

-

-

(0.5)

Deficit on revaluation     - continuing operations

(2,157.4)

(404.7)

-

(2,562.1)

        - discontinued operations

-

-

1.4

1.4

Disposals included as part of the disposal of Trillium

-

-

(93.0)

(93.0)

Net book value at 31 March 2009

7,215.4

714.0

-

7,929.4

Developments transferred from the development programme into portfolio management 

411.4

(411.4)

-

-

Property acquisitions

0.3

-

-

0.3

Capital expenditure

52.2

42.0

-

94.2

Capitalised interest

1.1

6.2

-

7.3

Disposals

(554.9)

-

-

(554.9)

Surrender premiums received

(8.7)

-

-

(8.7)

Depreciation

(0.9)

-

-

(0.9)

Transfers from trading properties

3.3

-

-

3.3

Deficit on revaluation     - continuing operations

(67.3)

(22.5)

-

(89.8)

Net book value at 30 September 2009

7,051.9

328.3

-

7,380.2


The following table reconciles the net book value of the investment properties to the market value. The components of the reconciliation are included within their relevant balance sheet headings.



    Portfolio

management

£m

Development programme

 £m

Total investment properties

£m

Net book value at 31 March 2009


7,215.4

714.0

7,929.4

Plus: amount included in prepayments in respect of lease incentives 


148.8

40.5

189.3

Less: head leases capitalised 


(56.5)

(1.4)

(57.9)

Plus: properties treated as finance leases


104.7

-

104.7

Market value at 31 March 2009 - Group


7,412.4

753.1

8,165.5

 - plus: share of joint ventures


950.0

291.5

1,241.5

Market value at 31 March 2009 - Group and share of joint ventures


8,362.4

1,044.6

9,407.0











Net book value at 30 September 2009


7,051.9

328.3

7,380.2

Plus: amount included in prepayments in respect of lease incentives 


186.4

4.4

190.8

Less: head leases capitalised


(55.5)

(1.4)

(56.9)

Plus: properties treated as finance leases


111.7

-

111.7

Market value at 30 September 2009 - Group


7,294.5

331.3

7,625.8

  - plus: share of joint ventures 


744.2

330.8

1,075.0

Market value at 30 September 2009 - Group and share of joint ventures


8,038.7

662.1

8,700.8





9. Investment properties (continued)






Included in investment properties are leasehold properties with a net book value of £949.4m at 30 September 2009 (31 March 2009: £994.0m).


The fair value of the Group's investment properties at 30 September 2009 has been arrived at on the basis of a valuation carried out at that date by Knight Frank LLP, external valuers. The valuation by Knight Frank LLP, which conforms to Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors and with IVA 1 of the International Valuation Standards, was arrived at by reference to market evidence of transaction prices for similar properties.  Fixed asset properties include capitalised interest of £183.7m at 30 September 2009 (31 March 2009: £181.1m). The average rate of capitalisation is 4.1% (2008: 5.5%). The historical cost of investment properties is £7,135.1m at 30 September 2009 (31 March 2009: £7,721.8m).  


The current value of investment properties in respect of proposed developments is £563.3m (31 March 2009: £524.8m). Developments are transferred out of the development programme when physically complete and 95% let. The only scheme completed during the period was New Street Square, London EC4.


The Group has outstanding capital commitments of £118.4m at 30 September 2009 (31 March 2009: £280.5m).



10. Investments in joint ventures 


The Group's significant joint ventures are described below:


Name of joint venture

Percentage owned

Business segment 

Year end date 

Joint venture partners


The Scottish Retail Property Limited Partnership


50.0%


Retail Portfolio


31 March


The British Land Company PLC


Metro Shopping Fund Limited Partnership


50.0%


Retail Portfolio


31 March


Delancey Real Estate Partners Limited


Buchanan Partnership



50.0%


Retail Portfolio


31 December


The Henderson UK Shopping Centre Fund


St. David's Limited Partnership



50.0%


Retail Portfolio


31 December


Capital Shopping Centres PLC


Bristol Alliance Limited Partnership



50.0%


Retail Portfolio


31 December


Hammerson plc


The Harvest Limited Partnership



50.0%


Retail Portfolio


31 March


J Sainsbury plc


The Oriana Limited Partnership


50.0%


London Portfolio


31 March


Frogmore Real Estate Partners Limited Partnership


The Martineau Galleries Limited Partnership (1)


33.3%



Retail Portfolio


31 December


Hammerson plc

Pearl Group Limited


The Ebbsfleet Limited Partnership (1)



50.0%



London Portfolio


31 March


Lafarge Cement UK PLC


Millshaw Property Co. Limited (1)



50.0%



Retail Portfolio


31 March


Evans Property Group Limited


The Martineau Limited Partnership(1)



33.3%


Retail Portfolio


31 December


Hammerson plc

Pearl Group Limited


Hungate (York) Regeneration Limited(1)


33.3%


Retail Portfolio


30 June


Crosby Land Lease PLC

Evans Property Group Limited


Countryside Land Securities (Springhead) Limited(1)


50.0%


London Portfolio


30 September


Countryside Properties PLC


Fen Farm Developments Limited(1)



50.0%


Retail Portfolio



31 March


Economic Zones World


The Empress State Limited Partnership(1)



50.0%


London Portfolio


31 December


Liberty International PLC


HNJV Limited(1)



50.0%


London Portfolio


31 March


Places for People Group Limited

(1) Included within Other 


The Group disposed of its interest in the Bull Ring Limited Partnership on 18 September 2009.


10. Investments in joint ventures continued
 Financial information of Group’s share of joint ventures
 
Six months ended and as at 30 September 2009
 
The Scottish
Retail
Property
Limited Partnership 
£m
Metro
Shopping Fund Limited Partnership
£m
Buchanan Partnership
£m
St. David’s Limited Partnership
£m
The Bull Ring Limited Partnership
£m
Bristol Alliance
Limited Partnership
£m
The Harvest Limited Partnership
£m
The Oriana Limited Partnership
£m
Other
£m
Total
£m
Income statement
 
 
 
 
 
 
 
 
 
 
Rental income
3.7
6.3
4.3
2.8
7.1
9.1
2.5
1.8
4.2
41.8
Finance lease interest
-
0.1
-
-
-
0.1
-
-
-
0.2
Rents payable
-
-
-
-
-
(0.3)
-
-
-
(0.3)
 
3.7
6.4
4.3
2.8
7.1
8.9
2.5
1.8
4.2
41.7
Service charge income
0.7
1.2
0.3
0.3
1.4
1.6
0.1
0.2
-
5.8
Service charge expense
(1.0)
(1.5)
(0.3)
(0.5)
(1.5)
(1.7)
(0.1)
(0.2)
(0.2)
(7.0)
Net service charge expense
(0.3)
(0.3)
-
(0.2)
(0.1)
(0.1)
-
-
(0.2)
(1.2)
Direct property expenditure
(0.3)
(0.3)
(0.8)
(0.3)
(1.1)
(1.5)
-
(0.4)
(0.3)
(5.0)
Net rental income
3.1
5.8
3.5
2.3
5.9
7.3
2.5
1.4
3.7
35.5
Trading properties sale proceeds
-
-
-
-
-
-
-
-
8.2
8.2
Cost of sales of trading properties
-
-
-
-
-
-
-
-
(7.2)
(7.2)
Profit on disposal of trading properties
-
-
-
-
-
-
-
-
1.0
1.0
Indirect property expenditure
(0.2)
(0.5)
-
(0.1)
(0.1)
(0.2)
(0.3)
(0.1)
(0.2)
(1.7)
Underlying operating profit
2.9
5.3
3.5
2.2
5.8
7.1
2.2
1.3
4.5
34.8
Investment property disposal proceeds
0.1
-
-
-
212.9
0.8
-
-
-
213.8
Carrying value of investment property disposals
-
-
-
-
(205.0)
(0.5)
-
-
-
(205.5)
Profit on disposal of investment properties
0.1
-
-
-
7.9
0.3
-
-
-
8.3
Net (deficit)/surplus on revaluation of investment properties
(3.7)
-
(7.8)
(21.6)
-
(4.1)
2.5
6.0
0.7
(28.0)
Impairment of trading properties
-
-
-
-
-
-
-
-
(2.9)
(2.9)
Operating (loss)/profit
(0.7)
5.3
(4.3)
(19.4)
13.7
3.3
4.7
7.3
2.3
12.2
Net interest expense
(1.7)
(5.3)
(2.0)
(0.3)
-
-
(1.6)
(1.5)
(2.2)
(14.6)
(Loss)/profit before tax
(2.4)
-
(6.3)
(19.7)
13.7
3.3
3.1
5.8
0.1
(2.4)
Income tax
-
(0.2)
-
-
-
-
-
-
(0.1)
(0.3)
 
(2.4)
(0.2)
(6.3)
(19.7)
13.7
3.3
3.1
5.8
-
(2.7)
Net liabilities adjustment (2)
-
(1.1)
-
-
-
-
-
-
2.0
0.9
Share of (loss)/profit after tax
(2.4)
(1.3)
(6.3)
(19.7)
13.7
3.3
3.1
5.8
2.0
(1.8)
 
 
 
Net investment
 
 
 
 
 
 
 
 
 
 
At 1 April 2009
17.5 
-
114.4
240.6
202.8
244.2
65.9
7.1
38.3
930.8
Properties contributed
-
-
-
-
-
-
-
-
-
-
Cash contributed
1.0
-
0.5
-
-
-
-
-
0.4
1.9
Distributions
-
-
(1.5)
-
-
-
-
-
(1.4)
(2.9)
Fair value movement on cash flow hedges taken to equity
0.5
1.3
-
-
-
-
0.8
-
0.1
2.7
Disposals
-
-
-
-
(208.8)
-
-
-
-
(208.8)
Loan advances
-
-
-
43.9
-
8.6
-
-
-
52.5
Loan repayments
-
-
-
-
(7.7)
(3.3)
-
-
-
(11.0)
Share of (loss)/profit after tax
(2.4)
(1.3)
(6.3)
(19.7)
13.7
3.3
3.1
5.8
2.0
(1.8)
At 30 September 2009
16.6
-
107.1
264.8
-
252.8
69.8
12.9
39.4
763.4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance sheet
 
 
 
 
 
 
 
 
 
 
Investment properties (1)
82.6
171.8
105.0
182.5
-
236.2
74.3
90.3
110.7
1,053.4
Current assets
6.1
7.6
5.5
148.4
-
27.9
44.8
2.8
53.1
296.2
 
88.7
179.4
110.5
330.9
-
264.1
119.1
93.1
163.8
1,349.6
Current liabilities
(4.7)
(6.1)
(3.4)
(29.9)
-
(8.4)
(3.1)
(5.2)
(29.5)
(90.3)
Non-current liabilities
(67.4)
(188.7)
-
(36.2)
-
(2.9)
(46.2)
(75.0)
(98.1)
(514.5)
 
(72.1)
(194.8)
(3.4)
(66.1)
-
(11.3)
(49.3)
(80.2)
(127.6)
(604.8)
Net liabilities adjustment(2)
-
15.4
-
-
-
-
-
-
3.2
18.6
Net assets
16.6
-
107.1
264.8
-
252.8
69.8
12.9
39.4
763.4
 
 
 
 
 
 
 
 
 
 
 
Capital commitments
0.2
0.4
0.3
17.8
-
7.5
0.2
-
1.1
27.5
 
 
 
 
 
 
 
 
 
 
 
Market value of investment properties (1)
84.0
173.0
107.5
182.5
-
251.5
75.0
90.5
111.0
1,075.0
 
 
 
 
 
 
 
 
 
 
 
Net (debt)/cash
(64.7)
(184.1)
0.5
(33.9)
-
3.4
(45.3)
(74.0)
(93.6)
(491.7)


 

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

(2)      Joint ventures with net liabilities are carried at zero value in the balance sheet where there is no commitment to fund the deficit and any distributions are included in the consolidated income statement for the year.


 

10. Investments in joint ventures continued
 Financial information of Group’s share of joint ventures
 
Six months ended and as at 30 September 2008
 
The Scottish
Retail
Property
Limited Partnership 
£m
Metro
Shopping Fund Limited Partnership
£m
Buchanan Partnership
£m
St. David’s Limited Partnership
£m
The Bull Ring Limited Partnership
£m
Bristol Alliance
Limited Partnership
£m
The Harvest Limited Partnership
£m
The Oriana Limited Partnership
£m
Other
£m
Total
£m
Income statement
 
 
 
 
 
 
 
 
 
 
Rental income
4.7
6.0
4.2
2.5
8.0
1.9
1.9
2.2
1.9
33.3
Finance lease interest
-
-
0.1
-
-
0.1
-
-
-
0.2
Rents payable
(0.2)
-
-
-
-