Final Results - Part 2
Great Portland Estates PLC
5 June 2001
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 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.
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.
2001 2000
2. Turnover and Segmental Analysis £m £m
------------- ------------
Rent receivable by location:
West End - North of Oxford Street 20.3 18.2
Other West End and Covent Garden 20.7 19.9
City and Holborn 18.0 16.8
South East Offices 11.3 13.1
Shopping Centres 23.0 18.9
Rest of United Kingdom 13.5 32.9
-------------- -------------
106.8 119.8
-------------- -------------
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.
2001 2000
3. Administration Expenses £m £m
------------ ------------
Administration Expenses
Other 5.2 4.5
Exceptional item
Capital reduction 1.9 -
------------ ------------
7.1 4.5
------------ ------------
Included within administration expenses are audit fees of £0.1 million (2000:
£0.1 million) and other fees charged by the auditors of £0.4 million (2000:
£0.2 million), of which £0.2 million (2000: £nil) related to the capital
reduction.
4. Employee Information
The average number of employees of the Group, including directors, was:
2001 2000
Number Number
------------- --------------
Head office and administration 54 59
On-site property management 23 23
------------- -------------
77 82
Included within administration expenses are staff costs, including those of
directors, comprising:
2001 2000
£m £m
------------- -------------
Wages and salaries 3.8 3.6
Social security costs 0.4 0.4
Other pension costs 0.8 1.1
5.0 5.1
Less: recovered through service charges (0.7) (0.6)
-------------- --------------
4.3 4.5
-------------- --------------
The directors received fees of £202,000 (2000: £88,000) and other emoluments
of £1,184,000 (2000: £1,324,000), and pension contributions have been made
for directors of £129,000 (2000: £373,000).
2001 2000
5. Interest Receivable £m £m
Short-term deposits 2.3 2.5
Other 0.5 0.5
-------------- ------------
2.8 3.0
-------------- ------------
2001 2000
6. Interest Payable £m £m
-------------- -------------
Interest Payable
Bank loans and overdrafts 12.2 10.5
Other 43.4 47.5
-------------- -------------
Exceptional Item
Premium on early redemption of loan 5.0 -
stock -------------- -------------
60.6 58.0
-------------- -------------
2001 2000
7. Tax on Profit on Ordinary Activities £m £m
-------------- ------------
Corporation tax on profit for the year 9.2 14.4
-------------- -------------
The difference between the standard rate of tax and the effective rate
principally reflects the loss (2000: profit) on sale of investment properties
on which no relief (2000: no charge) arises, and the benefit of capital
allowances available on plant and equipment in respect of properties
purchased and developed.
Taxation on capital gains of approximately £53.0 million would have arisen if
the Group's investment properties had been sold for their book value at the
balance sheet date. No provision for this contingent liability has been made
as it is not expected that any liability will arise in the foreseeable future.
2001 2000
8. Dividends £m £m
------------- -----------
Interim at 3.25p on 213,985,048 shares
(2000: 3.125p on 377,470,536 shares) 7.0 11.8
Proposed final at 6.5p on 214,249,114
shares
(2000: 6.375p on 356,830,258 shares) 13.9 22.7
-------------- ------------
20.9 34.5
-------------- ------------
The final dividend will be payable on 20th July 2001 to shareholders on the
register at 15th June 2001.
9. Earnings per Share
Earnings per share are based on income attributable to ordinary shareholders
of £15.2 million (2000: £46.1 million) and on the weighted average of
277,831,412 shares in issue (2000: 374,725,746 shares). There is no impact on
earnings per share of conversion of the convertible unsecured loan stock, or
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:
2001 2001 2000 2000
Profit Earnings Profit Earnings
After Tax per Share After Tax Per Share
£m Pence £m Pence
------------ ------------ ------------ ------------
Basic 15.2 5.5 46.1 12.3
Exceptional 4.8 1.7 - -
items
Loss/(profit) on 12.8 4.6 (4.7) (1.2)
sale of ------------ ------------ ------------ ------------
investment
properties
Adjusted 32.8 11.8 41.4 11.1
------------ ------------ ------------ ------------
Freehold/ Leasehold Leasehold Total
Feuhold over 900 50-250 Years
Years
10. Investment £m £m £m £m
Properties ------------- ------------- ------------- ------------
At 1st 1,391.7 170.8 282.5 1,845.0
April 2000
Additions 17.9 - 14.2 32.1
at cost
Disposals (322.5) (56.8) (23.4) (402.7)
1,087.1 114.0 273.3 1,474.4
Surplus on 14.8 12.2 1.2 28.2
revaluation
------------- ------------ ------------- ------------
At 31st 1,101.9 126.2 274.5 1,502.6
March 2001 ------------ ------------ ------------- ------------
The freehold and leasehold investment properties were valued on the basis of
Open Market Value by CB Hillier Parker as at 31st March 2001 in accordance
with the Appraisal and Valuation Manual of The Royal Institution of Chartered
Surveyors.
The historical cost of investment properties at 31st March 2001 was £931.7
million (2000: £1,242.2 million).
Unlisted
11. Investments £m
-------------
At 1st April 2000 14.9
Disposals (14.9)
-------------
At 31st March 2001 -
-------------
The historical cost of the unlisted investments at 31st March 2000 was £10.4
million.
2001 2000
12. Debtors £m £m
------------- --------------
Rental debtors 6.0 6.8
Corporation tax 7.6 9.2
Other debtors 11.0 13.7
Prepayments 0.3 1.1
-------------- --------------
24.9 30.8
-------------- --------------
2001 2000
13. Creditors: Amounts Falling Due £m £m
Within One Year
-------------- -------------
Overdraft - 1.5
Unsecured loan notes 2007 0.4 -
Accruals and rents in advance 44.0 42.6
Corporation tax 5.7 11.6
Other taxes and social security 3.1 4.1
costs
Other creditors 5.1 5.8
Proposed dividend 13.9 22.7
-------------- --------------
72.2 88.3
-------------- --------------
2001 2000
14. Debenture Loans £m £m
-------------- ------------
First mortgage debenture stock
£24 million 11.1875 per cent. 27.4 27.6
debenture stock 2009/14
£100 million 9.5 per cent. 100.0 100.0
debenture stock 2016
£130 million 10.75 per cent. 130.0 130.0
debenture stock 2021
£100 million 7.25 per cent. 97.7 97.6
debenture stock 2027
£100 million 5.625 per cent. 98.9 98.9
debenture stock 2029 -------------- --------------
454.0 454.1
-------------- --------------
Certain of the freehold and leasehold properties are charged to secure the
first mortgage debenture stock.
2001 2000
15. Convertible Loans £m £m
-------------- -------------
5 1/4 per cent convertible bonds 58.0 58.0
2008
Costs of issue (1.2) (1.4)
-------------- -------------
56.8 56.6
-------------- --------------
9 1/2 per cent. convertible - 52.4
unsecured loan stock 2002
Premium thereon - 0.6
-------------- --------------
- 53.0
-------------- --------------
56.8 109.6
-------------- --------------
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.
2001 2000
16. Bank and Other Loans £m £m
------------ ------------
Bank loans 175.0 190.0
Unsecured loan notes 2007 7.7 7.7
------------ ------------
182.7 197.7
Falling due within one year (0.4) -
------------ ------------
Falling due after one year 182.3 197.7
------------ ------------
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 6.7 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 until 2007, and by the Company in
2007.
17. 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 2001 was as follows:
2001 2000
£m £m
------------ ------------
Fixed rate financial liabilities 685.8 753.7
Floating rate financial liabilities 7.7 9.2
------------ ------------
693.5 762.9
------------ ------------
All financial liabilities were in sterling. The fixed rate financial
liabilities carried a weighted average interest rate of 7.8 per cent. (2000:
8.3 per cent.), and the weighted average period for which the rate was fixed
was 15.9 years (2000: 15.6 years). The floating rate financial liabilities
comprised unsecured loan notes, details of which are given in note 16.
Interest rate profile of financial assets
The Group held the following financial assets as at 31st March 2001:
2001 2000
£m £m
------------ ------------
Sterling cash deposits 96.0 85.4
------------ ------------
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 and cash. The weighted average interest
rate on the deposits was 5.9 per cent. (2000: 6.0 per cent.).
Maturity of financial liabilities
The maturity profile of the Group's financial liabilities at 31st March 2001
was as follows:
2001 2000
£m £m
------------ -----------
In one year or less, or on demand 0.4 1.5
In more than two years but not more than five 175.0 243.0
years
In more than five years 518.1 518.4
------------ -----------
693.5 762.9
------------ -----------
Borrowing Facilities
Undrawn committed borrowing facilities available to the Group at 31st March
2001 were as follows:
2001 2000
£m £m
Expiring in one year or less 15.0 30.0
Expiring in more than two years 45.0 10.0
------------ ------------
60.0 40.0
------------ ------------
Fair values of financial assets and financial liabilities
2001 2001 2000 2000
Book Value Fair Value Book Value Fair Value
£m £m £m £m
------------ ------------- ------------- ------------
Short-term 0.4 0.4 1.5 1.5
borrowings
Long-term 693.1 785.5 761.4 876.3
borrowings
Interest rate - 6.3 - (0.6)
swaps
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 listed long-term
borrowings, and interest rate swaps have been valued by reference to market
rates of interest. The fair values of all other items have been calculated by
discounting the expected future cash flows at prevailing interest rates.
The cumulative aggregate losses on financial instruments for which hedge
accounting has been used that are unrecognised at the balance sheet date are
£6.3 million (2000: gains of £0.6 million). Changes in the fair value of
hedging instruments are not recognised in the accounts until the hedged
position matures. The movement in these unrecognised gains and losses is as
follows:
Net (gains)/losses
£m
----------------
Unrecognised gains on hedging instruments at 1st April (0.6)
2000
Losses recognized in the year (3.6)
Losses arising that were not recognised in the year 10.5
----------------
Unrecognised losses on hedging instruments at 31st 6.3
March 2001
----------------
Of which:
Losses expected to be recognised in the year to 31st 1.4
March 2002
Losses expected to be recognised in the year to 31st 4.9
March 2003 or later
2001 2001 2000 2000
18. Share Capital Number £m Number £m
-------------- ----------- -------------- ----------
Authorised 300,000,000 150.0 500,000,000 250.0
ordinary -------------- ----------- --------------- ----------
shares of
50p each
Allotted
called up
and fully
paid
At 1st April 356,830,258 178.4 377,453,001 188.7
2000
Capital (142,732,104) (71.3) - -
reduction
Exercise of 300,960 0.1 12,707 -
share options
Issued for - - 4,828 -
non-cash
consideration
Purchased (150,000) (0.1) (20,640,278) (10.3)
--------------- ----------- --------------- ----------
At 31st 214,249,114 107.1 356,830,258 178.4
March 2001 --------------- ----------- --------------- ----------
In August 1999, £13,181 of convertible loan stock were converted into 4,828
shares.
On 11th September 2000, as part of a Court confirmed capital reduction, the
ordinary shares of the Company were consolidated on the basis of three new
shares for every five existing ones, and the authorised share capital was
reduced pro rata.
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 At
Exercise 1st April Exercised 31st March
Date Price 2000 Adjustment in Year 2001
Originally ---------- ----------- -------------- ----------- -----------
Granted
20th 197.61p 26,227 361 (26,588) -
November
1990
21st 172.84p 52,455 723 (53,178) -
November
1991
17th 209.58p 116,525 1,607 (118,132) -
November
1993
23rd 164.95p 152,490 2,103 (103,062) 51,531
June 1995
----------- ------------- ----------- -----------
347,697 4,794 (300,960) 51,531
----------- ------------- ----------- -----------
Existing options have been adjusted to reflect the capital reduction and
share consolidation, and their exercise prices have been restated accordingly.
2001 2000
19. Share Premium Account £m £m
At 1st April 2000 238.4 238.4
Capital reduction (214.1) -
Premium on exercise of share options 0.5 -
-------------- -------------
24.8 238.4
-------------- -------------
Other Reserves
---------------------------------------------
Capital Profit
and
Redemption Acquis Revalua Loss
ition tion
Reserve Reserve Total Reserve Account
20. Reserves £m £m £m £m £m
-------------- ------ ---- ------- ----
As 10.7 8.6 19.3 607.3 84.4
at 1st April 2000
Realised - - - (60.1) 60.1
on disposal of properties
Realised - - - (4.5) 4.5
on disposal of investments
Purchase 0.1 - 0.1 - (0.4)
of shares
Surplus - - - 28.2 -
of revaluation
Retained - - - - (5.7)
loss for the year ------------- ------ ---- ------- ------
At 10.8 8.6 19.4 570.9 142.9
31st March 2001 ------------- ------ ---- ------- ------
2001 2000
21. Reconciliation of Movements in £m £m
Shareholders' Funds -------------- ------------
Profit for the financial year 15.2 46.1
Dividends (20.9) (34.5)
(5.7) 11.6
Capital reduction (285.4) -
New share capital issued 0.6 -
Purchase of shares (0.4) (38.4)
Other recognised gains and losses 28.2 85.7
relating to the year (net) -------------- -------------
Net (decrease)/increase in (262.7) 58.9
shareholders' funds
Opening shareholders' funds 1,127.8 1,068.9
-------------- -------------
Closing shareholders' funds 865.1 1,127.8
-------------- -------------
22. Capital Commitments
At 31st March 2001 there were outstanding contracts of Group undertakings for
capital expenditure amounting to £10.0 million (2000: £35.0 million).
23. 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 2000, using the following main assumptions:
* rate of return on investments - 5.5 per cent. to 7.0 per cent. per annum;
* rate of salary increases - 7 per cent. per annum; and
* rate of pension increases - 2.75 per cent. per annum.
The valuation showed that the market value of the Plan's assets at 1st April
2000 amounted to £8.0 million and the actuarial value of the accumulated fund
was sufficient to cover 77% 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 (2000: £0.8 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, and to eliminate the deficit within ten years.
24. Directors' Interests
Throughout the year, Paul Gittens was a trustee and member 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.
Portfolio Statistics
Investment property Offices Retail Total
portfolio as at 31 March
2001
£m £m £m
------------- ------------- -------------
London West End
and Covent
Garden
- North of 375.3 61.2 436.5
Oxford
Street
- Other 231.6 124.6 356.2
- Total 606.9 185.8 792.7
- City and 259.0 - 259.0
Holborn
London - Total 865.9 185.8 1,051.7
South East 108.7 - 108.7
Offices
Shopping - 301.2 301.2
Centres
Other 27.0 14.0 41.0
------------- -------------- -------------
Total 1,001.6 501.0 1,502.6
------------- -------------- -------------
Five Year Rent Roll
Reversionary Secure for
Rent Roll Potential Five Years
Rental income as at £m £m %
31st March 2001 --------------- --------------- -------------
London West End
and
Covent
Garden
- North 20.7 8.4 59.8
of Oxford
Street
- Other 20.4 4.4 70.6
--------------- ---------------
- Total 41.1 12.8 65.1
- City 17.2 4.8 68.5
and
Holborn
London 58.3 17.6 66.1
- Total
South East 8.8 0.1 63.2
Offices
Shopping 22.4 2.4 82.4
Centres
Other 2.1 - 100.0
Total -------------- --------------- -------------
91.6 20.1 70.5
-------------- --------------- ------------
At 31st March 2001
-------------------------
Valuation Total Total
Proportion Movement Return Return
Valuation of 2001 12 24
portfolio months months
Portfolio £m % % % %
Performance ----------- --------- ---------- ------ ------
London West
End
and
Covent
Garden
- North
of
Oxford
Street 436.5 29.1 12.5 17.7 51.7
- Other 356.2 23.7 2.8 8.6 21.5
----------- ---------
- Total 792.7 52.8 7.9 13.4 36.2
- City
and
Holborn 259.0 17.2 10.0 17.2 19.2
----------- ---------
London 1,051.7 70.0 8.4 14.4 30.9
- Total
South 108.7 7.2 (0.6) 8.2 18.2
East
Offices
Shopping 301.2 20.1 (12.8) (6.4) 3.8
Centres
Other 41.0 2.7 (17.3) (1.4) 7.4
----------- ---------
Total 1,502.6 100.0 1.9 6.8 19.4
----------- --------- ---------- ------ ------
At 31st March 2001
-------------------------
Valuation
Proportion Movement Total Total
of Return Return
Valuation portfolio 2001 12 months 24 months
By £m % % % %
user ------------- ---------- ---------- ---------- ----------
Offices 1,001.6 66.7 8.1 13.3 28.5
Retail 501.0 33.3 (8.5) (1.7) 9.1
------------ ----------
1,502.6 100.0 1.9 6.8 19.4
------------ ---------- ---------- ---------- ----------
At 31st March 2001
-----------------------------
Valuation
Proporti Movement Total Total
on of Return Return
Valuation portfolio 2001 12 24 months
months
Sub-divisions £m % % % %
------------ -------- -------- -------- ----------
North 375.3 25.0 12.6 17.8 51.9
of
Oxford
Street
Offices
Other 231.6 15.4 6.1 11.9 28.2
West
End
Offices
London 185.8 12.4 1.6 7.8 22.0
Retail ------------ -------- -------- -------- ----------
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