Final Results - Part 2
Great Portland Estates PLC
6 June 2000
PART 2
NOTES FORMING PART OF THE ACCOUNTS
1 ACCOUNTING POLICIES
A) ACCOUNTING CONVENTION The accounts are prepared under the
historical cost convention as modified by the revaluation of tangible
fixed assets and investments in subsidiary undertakings. They are
prepared in accordance with applicable accounting standards and
therefore certain fixed assets are not depreciated in accordance with
the Companies Act 1985, as explained in note 1G.
B) BASIS OF CONSOLIDATION The Group accounts consolidate the accounts
of the Company and all its subsidiary undertakings for the year ended
31st March.
C) RENT RECEIVABLE This comprises rental income on investment and
trading properties for the year, exclusive of service charges
receivable. Service charges are credited against relevant expenditure.
D) PROPERTY AND REFURBISHMENT COSTS
Irrecoverable running costs directly attributable to specific
properties within the Group's portfolio are charged to the profit and
loss account as property expenses. Costs incurred in the improvement of
the portfolio which, in the opinion of the directors, are not of a
capital nature are written off to the profit and loss account as
incurred.
E) ADMINISTRATION EXPENSES All costs not directly attributable to
individual properties are treated as administration expenses.
F) PROPERTIES Trading properties are included at the lower of cost and
net realisable value. Investment properties, including those in the
course of development, are professionally valued each year, on an open
market basis, and any surpluses or deficits arising are taken to
revaluation reserve. Disposals of investment and trading properties
are recognised where contracts have been exchanged during the
accounting period and completion has taken place before or shortly
after the year end.
G) DEPRECIATION In accordance with Statement of Standard Accounting
Practice No. 19, no depreciation is provided in respect of freehold
investment properties and leasehold investment properties with over 20
years to run. Although the Companies Act 1985 would normally require
the systematic annual depreciation of fixed assets, the directors
believe that this policy of not providing depreciation is necessary in
order for the accounts to give a true and fair view, since the current
value of investment properties, and changes in that current value, are
of prime importance rather than a calculation of systematic annual
depreciation. Depreciation is only one of the many factors reflected in
the annual valuation, and the amount which might otherwise have been
shown cannot be separately identified or quantified.
H) DEFERRED TAXATION No provision is made for tax liabilities which
would arise if investment properties owned by the Group were to be
realised at the amounts at which they are stated in the accounts.
Provision is only made for deferred tax if the directors expect
liabilities to arise in the foreseeable future.
I) PENSIONS The Company contributes to a defined benefit pension plan
which is funded with assets held separately from those of the Company.
Contributions are charged to the profit and loss account so as to
spread the cost of pensions over the employees working lives with the
Company. The regular cost is attributed to individual years using the
projected unit method. Variations in pension cost, which are identified
as a result of actuarial valuations, are amortised over the average
expected remaining working lives of employees in proportion to their
expected payroll costs. Differences between the amounts funded and the
amounts charged to the profit and loss account are treated as either
provisions or prepayments in the balance sheet.
J) INTEREST Interest attributable to properties in the course of
development is written off to the profit and loss account as incurred,
except in the special circumstances where developments have been
pre-let.
K) FINANCIAL INSTRUMENTS An interest rate swap is accounted for as a
hedge when it alters the risk profile of an existing underlying
exposure, typically a floating rate bank loan.
2000 1999
2 TURNOVER AND SEGMENTAL ANALYSIS £m £m
-------------------------------------------------------------------------
Rent and service charges receivable 133.3 127.8
Less service charges receivable (13.5) (12.5)
-------- --------
Rent receivable 119.8 115.3
-------- --------
Rent receivable by location
West End - North of Oxford Street 18.2 16.7
Other West End and Covent Garden 19.9 18.7
City and Holborn 16.8 17.4
South East of England 22.7 22.5
Rest of United Kingdom 42.2 40.0
-------- --------
119.8 115.3
-------- --------
Rent receivable is stated exclusive of value added tax, and arose wholly
from continuing operations in the United Kingdom. No operations were
discontinued during the year. Service charges receivable have been credited
against relevant expenditure.
2000 1999
3 PROPERTY AND REFURBISHMENT COSTS £m £m
-------------------------------------------------------------------------
Property and refurbishment costs 15.7 15.4
Less recovered through service charges (12.2) (11.4)
-------- --------
3.5 4.0
-------- --------
4 ADMINISTRATION EXPENSES
Included within administration expenses of £4.5 million (1999: £4.0
million) are audit fees of £100,000 (1999: £100,000) and other fees charged
by the auditors of £175,000 (1999: £184,000). The auditors also received
£nil (1999: £24,000), not charged to the profit and loss account, in
respect of debenture and bond issues.
5 EMPLOYEE INFORMATION
The average number of employees of the Group, including directors, was:
2000 1999
NUMBER NUMBER
-------------------------------------------------------------------------
Head office and administration 59 58
On-site property management 23 23
-------- --------
82 81
-------- --------
Included within administration expenses are staff costs, including those of
directors, comprising:
2000 1999
£m £m
-------------------------------------------------------------------------
Wages and salaries 3.6 3.3
Social security costs 0.4 0.3
Other pension costs 1.1 0.7
-------- --------
5.1 4.3
Less recovered through service charges (0.6) (0.6)
-------- --------
4.5 3.7
-------- --------
The directors received fees of £88,000 (1999: £84,000) and other emoluments
of £1,324,000 (1999: £1,096,000), and pension contributions have been made
for directors of £373,000 (1999: £150,000).
2000 1999
6 INTEREST RECEIVABLE £m £m
-------------------------------------------------------------------------
Short-term deposits 2.5 3.7
Other 0.5 0.6
-------- --------
3.0 4.3
-------- --------
2000 1999
7 INTEREST PAYABLE £m £m
-------------------------------------------------------------------------
Bank loans and overdrafts 10.5 12.7
Other 47.5 43.3
-------- --------
58.0 56.0
-------- --------
2000 1999
8 TAX ON PROFIT ON ORDINARY ACTIVITIES £m £m
-------------------------------------------------------------------------
Corporation tax on profit for the year 14.4 14.5
-------- --------
The difference between the standard rate of tax and the effective rate
principally reflects the benefit of capital allowances available on plant
and equipment in respect of properties purchased and developed.
2000 1999
9 DIVIDENDS £m £m
-------------------------------------------------------------------------
Interim at 3.125p on 377,470,536 shares
(1999: 3.0p on 377,056,351 shares) 11.8 11.3
Proposed final at 6.375p on 356,830,258 shares
(1999: 6.25p on 377,453,001 shares) 22.7 23.6
-------- --------
34.5 34.9
-------- --------
The final dividend will be payable on 21st July 2000 to shareholders on the
register at 16th June 2000.
10 EARNINGS PER SHARE
Earnings per share are based on income attributable to ordinary
shareholders of £46.1 million (1999: £42.8 million) and on the weighted
average of 374,725,746 shares in issue (1999: 377,445,257 shares). There is
no impact on earnings per share of conversion of the convertible bonds, or
share options.
The directors believe that earnings per share before exceptional items and
profits or losses on sales of investments and investment properties provide
a more meaningful measure of the Group's performance. Accordingly, earnings
per share on that adjusted basis have been disclosed on the face of the
profit and loss account and calculated as follows:
2000 2000 1999 1999
PROFIT EARNINGS PROFIT EARNINGS
AFTER TAX PER SHARE AFTER TAX PER SHARE
£m PENCE £m PENCE
------------------------------------------------------------------------------
Basic 46.1 12.3 42.8 11.3
Profit on sale of
investment properties (4.7) (1.2) (2.2) (0.5)
---------------------------------------------
Adjusted 41.4 11.1 40.6 10.8
---------------------------------------------
FREEHOLD/ LEASEHOLD LEASEHOLD TOTAL
FEUHOLD OVER 900 50-250
YEARS YEARS
11 INVESTMENT PROPERTIES £m £m £m £m
------------------------------------------------------------------------------
At 1st April 1999 1,337.3 124.1 252.2 1,713.6
Additions at cost 80.9 39.3 23.4 143.6
Disposals (91.7) - (3.5) (95.2)
---------------------------------------------
1,326.5 163.4 272.1 1,762.0
Surplus on revaluation 65.2 7.4 10.4 83.0
---------------------------------------------
At 31st March 2000 1,391.7 170.8 282.5 1,845.0
---------------------------------------------
The freehold/feuhold and leasehold investment properties were valued on the
basis of Open Market Value by CB Hillier Parker as at 31st March 2000 in
accordance with the Appraisal and Valuation Manual of The Royal Institution
of Chartered Surveyors.
If the investment properties were to be sold at the amounts at which they
have been valued in the accounts, no liability to taxation on capital gains
would arise (1999: £nil).
The historical cost of investment properties at 31st March 2000 was
£1,242.2 million (1999: £1,159.3 million).
12 CAPITAL COMMITMENTS
At 31st March 2000 there were outstanding contracts of Group undertakings
for capital expenditure amounting to £35.0 million (1999: £10.0 million).
UNLISTED
13 INVESTMENTS £m
------------------------------------------------------------------------------
At 1st April 1999 11.7
Additions at cost 0.5
Surplus on revaluation 2.7
---------
At 31st March 2000 14.9
---------
The unlisted investments were valued at 31st March 2000 by the directors.
The historical cost of the unlisted investments at 31st March 2000 was
£10.4 million (1999: £9.9 million).
2000 1999
14 DEBTORS £m £m
------------------------------------------------------------------------------
Rental debtors 6.8 7.4
Other debtors 13.7 1.4
Prepayments 1.1 0.8
--------- ---------
21.6 9.6
--------- ---------
2000 1999
15 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR £m £m
------------------------------------------------------------------------------
Overdraft 1.5 -
Unsecured loan notes 2007 - 0.1
Accruals and rents in advance 42.6 41.8
Corporation tax 2.4 1.0
Other taxes and social security costs 4.1 4.2
Other creditors 5.8 8.3
Proposed dividend 22.7 23.6
--------- ---------
79.1 79.0
--------- ---------
2000 1999
16 DEBENTURE LOANS £m £m
------------------------------------------------------------------------------
First mortgage debenture stock
£24 million 11 3/16 per cent. debenture stock 2009/14 27.6 27.7
£100 million 91/2 per cent. debenture stock 2016 100.0 100.0
£1.75 million 6 per cent. debenture stock 2019 - 1.8
£130 million 103/4 per cent. debenture stock 2021 130.0 130.0
£100 million 71/4 per cent. debenture stock 2027 97.6 97.6
£100 million 55/8 per cent. debenture stock 2029 98.9 98.9
--------- ---------
454.1 456.0
--------- ---------
Certain of the freehold and leasehold properties are charged to secure the
first mortgage debenture stock.
2000 1999
17 CONVERTIBLE LOANS £m £m
------------------------------------------------------------------------------
91/2 per cent. convertible unsecured loan stock 2002 52.4 53.6
Premium thereon 0.6 0.8
--------- ---------
53.0 54.4
--------- ---------
51/4 per cent. convertible bonds 2008 58.0 58.0
Costs of issue (1.4) (1.5)
--------- ---------
56.6 56.5
--------- ---------
109.6 110.9
--------- ---------
The loan stock was convertible by the stockholder in August of any year
between 1992 and 2002 at a price of £2.73 per share. The bonds, which are
unsecured, are convertible by the bondholder at any time until 2008 at a
price of £3.10 per share, and redeemable by the Company in 2008 at par.
2000 1999
18 BANK AND OTHER LOANS £m £m
------------------------------------------------------------------------------
Bank loans 190.0 190.0
Unsecured loan notes 2007 7.7 8.2
--------- ---------
197.7 198.2
Falling due within one year - (0.1)
--------- ---------
Falling due after one year 197.7 198.1
--------- ---------
The bank loans are unsecured and expire between 2002 and 2005. The Company
has entered into swap arrangements to fix the rate of interest on the bank
loans, which has resulted in a weighted average rate of 8.6 per cent.
The unsecured loan notes, which together with an associated guarantee
attract a floating rate of interest of 0.275 per cent. in aggregate above
LIBOR, are redeemable at the option of the noteholder between 1998 and
2007, and by the Company in 2007.
19 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
An explanation of the Group's objectives, policies and strategies for the
role of derivatives and other financial instruments in creating and
changing the risks of the Group in its activities can be found in the
Financial Review. The disclosures below exclude short-term debtors and
creditors.
Interest rate profile of financial liabilities
The interest rate profile of the financial liabilities of the Group as at
31st March 2000 was as follows
2000 1999
£m £m
------------------------------------------------------------------------------
Fixed rate financial liabilities 753.7 756.9
Floating rate financial liabilities 9.2 8.2
--------- ---------
762.9 765.1
--------- ---------
All financial liabilities were in sterling.
The fixed rate financial liabilities carried a weighted average interest
rate of 8.3 per cent. (1999: 8.3 per cent.), and the weighted average
period for which the rate was fixed was 15.6 years (1999: 16.6 years).
The floating rate financial liabilities comprised unsecured loan notes,
details of which are given in note 18.
Interest rate profile of financial assets
The Group held the following financial assets as at 31st March 2000:
2000 1999
£m £m
------------------------------------------------------------------------------
Sterling cash deposits 85.4 172.8
--------- ---------
The sterling cash deposits were all held as part of the financing
arrangements of the Group, and comprised deposits placed on money markets
for up to three months at fixed rates. The weighted average interest rate
on these deposits was 6.0 per cent. (1999: 5.6 per cent.).
Maturity of financial liabilities
The maturity profile of the Group's financial liabilities at 31st March
2000 was as follows:
2000 1999
£m £m
------------------------------------------------------------------------------
In one year or less, or on demand 1.5 0.1
In more than two years but not more than five years 243.0 69.4
In more than five years 518.4 695.6
--------- ---------
762.9 765.1
--------- ---------
Borrowing facilities
Undrawn committed borrowing facilities available to the Group at 31st March
2000 were as follows:
2000 1999
£m £m
------------------------------------------------------------------------------
Expiring in one year or less 30.0 30.0
Expiring in more than two years 10.0 10.0
--------- ---------
40.0 40.0
--------- ---------
19 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)
Fair values of financial assets and financial liabilities
2000 2000 1999 1999
BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE
£m £m £m £m
Short-term borrowings 1.5 1.5 0.1 0.1
Long-term borrowings 761.4 876.3 765.0 914.1
Interest rate swaps - (0.6) - 16.9
----------------------------------------------
The fair values of the Group's fixed asset investments and cash and short-
term deposits are not materially different from those at which they are
carried in the accounts.
Market values have been used to determine the fair value of interest rate
swaps and listed long-term borrowings. The fair values of all other items
have been calculated by discounting the expected future cash flows at
prevailing interest rates.
The cumulative aggregate gains on financial instruments for which hedge
accounting has been used that are unrecognised at the balance sheet date
are £0.6 million (1999: £16.9 million losses). If the interest rates
current at 31st March 2000 were to prevail throughout the year to 31st
March 2001, the loss to the Group for that year from the interest rate
swaps taken out at that date would be £3.7 million.
2000 2000 1999 1999
20 SHARE CAPITAL NUMBER £m NUMBER £m
-----------------------------------------------------------------------------
Authorised ordinary shares
of 50p each 500,000,000 250.0 500,000,000 250.0
----------------------------------------------
Allotted, called up and
fully paid
At 1st April 1999 377,453,001 188.7 377,434,405 188.7
Exercise of share options 12,707 - - -
Issued for non-cash
consideration 4,828 - 18,596 -
Purchased (20,640,278) (10.3) - -
----------------------------------------------
At 31st March 2000 356,830,258 178.4 377,453,001 188.7
----------------------------------------------
In August 1999, £13,181 of convertible loan stock were converted into 4,828
shares.
Options to subscribe for shares in the Company under the 1988 Executive
Share Option Scheme are held by directors and employees and are exercisable
between three years and ten years from the date of grant. Existing options
have been granted as follows:
AT
EXERCISE 1ST APRIL EXERCISED LAPSED 31ST MARCH
DATE ORIGINALLY GRANTED PRICE 1999 IN YEAR IN YEAR 2000
------------------------------------------------------------------------------
22nd November 1989 281.19p 60,847 - (60,847) -
20th November 1990 200.34p 26,227 - - 26,227
21st November 1991 175.22p 52,455 - - 52,455
17th November 1993 212.47p 137,365 (12,707) (8,133) 116,525
23rd June 1995 167.23p 152,490 - - 152,490
------------------------------------------
429,384 (12,707) (68,980) 347,697
------------------------------------------
2000 1999
21 SHARE PREMIUM ACCOUNT £m £m
------------------------------------------------------------------------------
At 1st April 1999 and at 31st March 2000 238.4 238.4
---------------------
OTHER RESERVES
CAPITAL TOTAL PROFIT AND
REDEMPTION ACQUISITION CAPITAL OTHER REVALUATION LOSS
RESERVE RESERVE RESERVE RESERVES RESERVE ACCOUNT
22 RESERVES £m £m £m £m £m £m
------------------------------------------------------------------------------
At 1st April 1999 0.4 8.6 52.7 61.7 556.1 24.0
Realised on
disposal of
properties - - - - (34.5) 34.5
Transfer - - (52.7) (52.7) - 52.7
Purchase of
shares 10.3 - - 10.3 - (38.4)
Surplus on
revaluation - - - - 85.7 -
Retained profit
for the year - - - - - 11.6
-----------------------------------------------------------
At 31st
March 2000 10.7 8.6 - 19.3 607.3 84.4
-----------------------------------------------------------
The capital reserve represents past revaluation surpluses realised on the
disposal of investment properties and, being distributable, has been
transferred to profit and loss account.
2000 1999
23 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS £m £m
------------------------------------------------------------------------------
Profit for the financial year 46.1 42.8
Dividends (34.5) (34.9)
--------- ---------
11.6 7.9
Other recognised gains and losses relating
to the year (net) 85.7 73.7
Purchase of shares (38.4) -
--------- ---------
Net increase in shareholders' funds 58.9 81.6
Opening shareholders' funds 1,068.9 987.3
--------- ---------
Closing shareholders' funds 1,127.8 1,068.9
--------- ---------
24 PENSION COMMITMENTS
The Group contributes to a defined benefit pension plan. The contributions
relating to the Plan are determined with the advice of an independent
qualified actuary on the basis of triennial valuations using the projected
unit method. The most recent valuation of the Plan was conducted as at 1st
April 1997, using the following main assumptions:
* rate of return on investments - 9 per cent. per annum;
* rate of salary increases - 7 per cent. per annum; and
* rate of dividend increases - 4.5 per cent. per annum.
The valuation showed that the market value of the Plan's assets at 1st
April 1997 amounted to £9.5 million and the actuarial value of the
accumulated fund was sufficient to cover 107% of the benefits which had
accrued to the members of the Plan at that date, allowing for expected
future increases in earnings.
The total normal cost for the Group of £0.8 million (1999: £0.7 million),
including amounts payable to personal pensions, is included in
administration expenses. Contributions by the Group to the Plan are
calculated by the actuary to fund the pension liabilities in respect of
accruing service with the Group.
25 DIRECTORS' INTERESTS
Throughout the year, Richard Peskin and Paul Gittens were trustees and
members of the pension plan to which the Group contributes. There are no
other interests in contracts which are required to be disclosed under the
Companies Act 1985.
26 POST BALANCE SHEET EVENTS
On 18th April 2000, the Company announced a proposal to return 80p per
share (£285 million in aggregate) in cash to shareholders. This is to be
effected by way of a capital reduction and is conditional upon the approval
of shareholders, the redemption of the 9 1/2 per cent. Convertible
Unsecured Loan Stock 2002 ('CULS') and the confirmation of the Court.
The payment to shareholders will be financed primarily from the proceeds of
property disposals. On 26th May 2000, shareholders approved the proposal
and CULS holders approved the redemption of the CULS. On 1st June 2000, the
CULS were redeemed in full at a cost of £57.9 million.
This press release was approved by the Directors on 6 June 2000.
Investment Property Portfolio as at 31st March 2000
OFFICES RETAIL TOTAL
£m £m £m
------------------------------------------------------------------------------
London West End and Covent Garden
- North of Oxford Street 332.8 54.5 387.3
- Other 218.8 126.4 345.2
--------------------------------------
- Total 551.6 180.9 732.5
City and Holborn 247.2 - 247.2
--------------------------------------
London - Total 798.8 180.9 979.7
South East 110.5 123.5 234.0
Rest of UK 64.0 221.2 285.2
--------------------------------------
Total Core Portfolio 973.3 525.6 1,498.9
---------------------
Non-Core Portfolio 346.1
-----------------
1,845.0
By Location
AT 31ST MARCH 2000
PROPORTION VALUATION TOTAL RETURN
VALUATION OF PORTFOLIO MOVEMENT 2000 12 MONTHS
£m % % %
------------------------------------------------------------------------------
London West End and
Covent Garden
- North of
Oxford Street 387.3 21.0 23.4 29.6
- Other 345.2 18.7 7.2 12.9
------------------------
- Total 732.5 39.7 15.2 21.1
City and Holborn 247.2 13.4 (3.3) 2.9
------------------------
London - Total 979.7 53.1 9.9 15.9
South East 234.0 12.7 3.0 11.7
Rest of UK 285.2 15.5 5.1 10.4
------------------------
Total Core Portfolio 1,498.9 81.3 7.8 14.1
Non-Core Portfolio 346.1 18.7 (6.8) 1.8
------------------------
1,845.0 100.0 4.7 11.1
------------------------------------------------------------------------------
By User
AT 31ST MARCH 2000
PROPORTION VALUATION TOTAL RETURN
VALUATION OF PORTFOLIO MOVEMENT 2000 12 MONTHS
£m % % %
------------------------------------------------------------------------------
Offices 973.3 52.8 8.9 15.4
Retail 525.6 28.5 5.8 11.2
Non-Core 346.1 18.7 (6.8) 1.8
------------------------
1,845.0 100.0 4.7 11.1
------------------------------------------------------------------------------
Sub-Divisions
AT 31ST MARCH 2000
PROPORTION VALUATION TOTAL RETURN
VALUATION OF PORTFOLIO MOVEMENT 2000 12 MONTHS
£m % % %
------------------------------------------------------------------------------
West End and
Covent Garden Offices 551.6 29.9 17.5 23.6
City and Holborn Offices 247.2 13.4 (3.3) 2.9
Regional Offices 174.5 9.5 3.8 12.6
London Retail 180.9 9.8 8.7 14.0
Shopping Centres 344.7 18.7 4.3 9.8
Non-Core 346.1 18.7 (6.8) 1.8
------------------------
1,845.0 100.0 4.7 11.1
------------------------------------------------------------------------------
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