Interim Results
Great Portland Estates PLC
22 November 2005
INTERIM RESULTS
22 November 2005
The Directors of Great Portland Estates plc announce the results for the six
months ended 30 September 2005.
Highlights:
• Adjusted* net asset value per share up 7.7% to 363p
• Basic net asset value per share up 6.9% to 339p
• Valuation of wholly owned properties up 6% on a like-for-like basis to £805
million
• Basic EPS up 71% to 21.4p
• Adjusted+ EPS 4.4p (2004: 5.4p)
• Interim dividend up 2.5% to 3.67p per share (2004: 3.58p)
• Total property return of 8.8% (18.7% over the last 12 months)
• Second joint venture set up with Liverpool Victoria Friendly Society with
£65 million of assets
• £82 million of acquisitions contracted since 31 March 2005
• Met Building now 92% let or under offer
• 10 near-term projects in the development pipeline
*excluding deferred tax on capital allowances and property revaluations on a
diluted basis (see note 6)
+ excluding non-recurring items, profits or losses on sales of investment
properties and deferred tax on capital allowances and property revaluations
on an undiluted basis (see note 6)
Toby Courtauld, Chief Executive, said:
'The Group has made good progress across the business during the first half. We
have capitalised on the strength in the investment market making profitable
sales, recycling the capital into a number of new acquisitions which, we
believe, possess greater growth prospects. Our development business has, again,
moved up a gear delivering a valuation gain of 17% during the period. The six
remaining projects in our ten scheme near-term programme are now all primed to
start in the next 12 months and are set to increase the Group's rent roll by
over 40% over the next few years.
Occupational markets in central London are well positioned; selective rental
growth has returned to the West End and we expect it to accelerate during 2006
as the shortage of good quality office space takes hold. Recent high letting
activity in the City suggests that rental growth should re-emerge next year as
the oversupply of Grade A office space is eroded. With yield compression likely
to abate over the next twelve months, we expect this rental growth to become the
main driver to property returns.
We remain confident that a combination of our financial flexibility, our
expanding development programme and the continued active management of our
investment portfolio will continue to generate attractive returns for our
shareholders.'
Enquiries etc:
Great Portland Estates plc 020 7580 3040
Toby Courtauld, Chief Executive
Timon Drakesmith, Finance Director
Finsbury Group 020 7251 3801
Edward Orlebar
Gordon Simpson
FINANCIAL SUMMARY
The Group has made positive progress during the first half. These Group's
results have been prepared, for the first time, using International Financial
Reporting Standards (IFRS). The change of accounting basis has no effect on the
underlying business performance or strategy.
Adjusted net asset value per share grew to 363p at 30 September 2005, a rise of
8% compared to 31 March 2005. Our property portfolio rose in value by 6% on a
like-for-like basis.
Adjusted earnings per share for the first half were 4.4p, around 19% lower than
the interim period last year. The reduction was mainly caused by a fall in
rental income as the Group sold properties into a strong investment market to
generate attractive gains. Basic earnings per share (which include the benefit
of revaluation gains and profit on sale of investment properties) were 21.4p, an
increase of 71% over the first half of 2004/05.
With gearing of around 40% and distributable reserves of around £160 million the
Group is in a sound financial condition and the Board has declared an interim
dividend of 3.67p per share, a rise of 2.5% over last year's interim dividend.
Valuation
The Group's directly owned portfolio was valued by CB Richard Ellis at £805
million as at 30 September 2005, representing an increase of £45 million, or
6.0% on a like-for-like comparison with March 2005.
Including properties held in our two joint ventures with Liverpool Victoria
Friendly Society, the Group had £1,009 million of assets under management as at
30 September 2005.
Valuations were up across the portfolio with the exception of properties
approaching development. Here, values fell by 2.8% as income eroded and we
gained vacant possession in order to commence redevelopment. The strongest
performance came from our properties under development which rose in value by
17.5% or £21.8 million, dominated by a 32% rise in the value of Met Building, 22
Percy Street, W1. Completed in May, the building is now 92% let or under offer
by rental value.
In the investment portfolio, values were up in every sub-sector for the six
months as both growth in Estimated Rental Values (ERV's) and a slight downward
move in capitalisation rates combined to push the valuation higher by 4.6%.
Overall, existing leases are now 3.2% reversionary or £1.4 million following a
rise in ERV's of 3.8% during the first half. In the City (including Southwark),
a like-for-like valuation increase of 9.9% was primarily the result of yield
compression and letting activity, whilst ERV growth of 1.6% contributed the
balance. By contrast, in both our West End markets (North of Oxford Street and
rest of the West End), ERV growth provided most of the return, with yields
moving in only marginally. The North of Oxford Street portfolio increased in
value by 2.1% with ERV's growing by 4.2% while in the rest of the West End,
values were up by 5.3% and ERV's grew by 7.5%.
At 30 September, the Group had two 50/50 joint ventures (GVP 1 and 2) with the
Liverpool Victoria Friendly Society owning properties worth £203.6 million. Of
the six properties in these joint ventures at their inception, in January and
April this year, two have been sold at 3% over their total initial cost and the
remaining four have risen in value by 11% since purchase, due largely to our
asset management activities.
Of the Group's £228 million exposure to retail property, 32% is in two
properties, both held in joint venture. At Mount Royal on Oxford Street, GVP1
owns a well let investment in an area of the street that stands to benefit from
significant investment by adjacent owners, while at 208/222 Regent Street, we
have taken back the Liberty store and space from Barclays Bank giving us the
opportunity to create two prime stores in one of the capital's strongest retail
locations.
OPERATING REVIEW
The Operating Review is accompanied by graphics (see Appendix 1). Copy and
paste the link below into your web browser to view the graphics.
http://www.rns-pdf.londonstockexchange.com/rns/4666u_1-2005-11-22.pdf
Great Portland Estates has a clear strategy focusing on:
• investment, development and asset management activities within central
London's commercial property markets;
• recycling our capital from mature assets into situations with greater growth
prospects;
• an increased bias towards development and refurbishment; and
• the maintenance of an efficient capital structure to help drive returns whilst
providing us with sufficient flexibility to exploit new opportunities.
Our recent activity in pursuing this strategy has provided a significant boost
to both our absolute and relative portfolio returns. For the twelve months to
September 2005 our total property return was 18.7%, beating the central London
component of the industry benchmark IPD Index by 20 basis points (see chart in
Appendix 1).
Our Markets
Office occupational markets in both the West End and City continue to show signs
of recovery with total take-up for the year projected to be marginally ahead of
its long-term average. Combined with a reducing supply of newly completed
development properties and falling vacancy rates, the supply and demand balance
is beginning to tilt away from the tenant and towards the landlord. In the West
End, vacancy rates are down to 8% today from 10.4% this time last year and real
evidence of rental growth is now visible. We continue to believe that
constrained supply rather than rapidly growing tenant demand will be the key
driver behind West End rental growth and our development programme (of which 80%
by value is in this market) is timed to replenish this shrinking supply line.
In the City, recent vibrant leasing activity is set to produce a strong outturn
for the year, estimated at more than 5 million sq ft and ahead of the long-term
average of 4.5 million sq ft. However, the vacancy rate, whilst falling, remains
higher than the West End at 11.7% and, with a less restrictive planning regime,
the prospect of a supply response to increasing demand will ensure that we
maintain a more cautious stance towards this market than the West End.
Whilst the retail trading environment remains challenging, less than 20% of our
directly owned portfolio is invested in this market. The majority of our
holdings are situated in good locations on Bond Street, Regent Street and Oxford
Street, and we remain confident that we will deliver satisfactory returns from
this sector.
Investment activity in the Capital has continued at record levels over the past
six months and it is anticipated that turnover for 2005 will hit an all time
high at well in excess £10 billion. Property yields are still falling, driven in
part by a weight of money attracted to the positive margin over borrowing rates.
At some point during the next twelve months however, we expect yield compression
to moderate with rental growth becoming the main contributor to property
returns.
Development
We have continued to make progress on our development programme since March.
We had ten schemes in our near-term development programme, up from eight twelve
months previously,with an estimated area on completion of some 670,000 sq ft, an
increase of almost 70% over their existing area. Once completed, these schemes
will account for more than one third of the Group's properties by floor area.
We are in the construction and letting phase on four schemes, have planning
permission on a further five, where we expect to start work within the next
twelve months, and we are in the design phase on the remaining one. On a
forecast total cost of some £314 million, we expect these ten projects to
produce a healthy development profit and rental income of approximately £24
million.
We took practical completion of Met Building, the renamed Metropolis House,
Percy Street, W1 in May. The occupational market has reacted well to the high
quality of the space available and lettings have been secured at rents well
ahead of our initial estimates. 46% of the building by area is leased, up from
17% at practical completion and a further 46% is under offer. With only 9,000 sq
ft still to be marketed (of the 111,000 sq ft total), the project is showing a
projected surplus on total development cost of more than 70%.
Work is proceeding satisfactorily at our three schemes currently on site; the
99,000 sq ft redevelopment of 190 Great Portland Street, W1, where we expect to
complete in early 2007; the 18,000 sq ft refurbishment of the office premises at
Bond Street House on New Bond Street, W1; and at 16/21 Sackville St, W1, where
we are creating 21,000 sq ft of new office premises.
By the end of the current financial year, we expect to have commenced demolition
works at Knighton House, Mortimer Street, W1, where our 90,000 sq ft scheme
received a resolution to grant planning permission earlier this year. We also
obtained a resolution to grant planning consent at Tooley Street, SE1, during
November for a 200,000 sq ft office and retail scheme and work is expected to
start here during next summer.
Acquisitions and Disposals
An integral part of our strategy is the recycling of capital from mature
properties into projects with good growth potential. Since March this year we
have bought six properties for £82.2 million (including our share of joint
venture properties), two of which were in a second joint venture with Liverpool
Victoria. We sold seven properties (including two held by the joint ventures)
for a total price of £82.8 million.
Since September we have bought a 0.4 acre site immediately to the south of
Blackfriars Bridge on Blackfriars Road, SE1, for £11 million. The majority of
the site is let until December 2008, providing the Group with a decent income
return, and thereafter, the potential for a major office redevelopment of some
130,000 sq ft.
The seven sales since March generated a net profit on their March 2005 book
values of £5.4 million or 7.1%. We continually review the anticipated
performance of each of our properties compared to the price they might achieve
in the market and, if yields continue to fall driven by the weight of capital
seeking investments to buy, further sales can be anticipated.
Asset Management
The Group's asset management was focused on three main activities during the
period; the maintenance of high occupancy rates in the investment portfolio;
delivering vacant possession at a number of properties to enable redevelopment;
and the execution of numerous asset strategies throughout the portfolio.
• The investment void rate increased from 2.6% as at March to 7% as at September,
due primarily to the completion of Met Building in May. Since then, a number of
further lettings has completed and, assuming space currently under offer
completes, the void rate would fall to 2%. We continue to maintain a high
level of tenant retention with 28 of the 53 tenants with break clauses or lease
expiries during the period remaining with the Group. Of those that vacated, a
significant proportion was at buildings we expect to redevelop in the near
future. A further 26 lettings added £3.4 million resulting in a small net
decrease in rent roll of £1.2 million following tenant rotation.
• Since March, negotiations with existing occupiers at both Knighton House and
Titchmor have been concluded to secure vacant possession over the coming twelve
months, thereby enabling redevelopment.
• Each property in the portfolio has a clearly defined asset strategy and a
recent example was the successful letting of 68,000 sq ft out of 95,000 sq ft at
12/20 Camomile Street, EC2, following the previous tenant's lease
expiry in June this year. The remaining three floors and the entrance hall will
now be refurbished and re-let over the next six to twelve months.
FINANCIAL REVIEW
The Financial Review is accompanied by graphics (see Appendix 2). Copy and
paste the link below into your web browser to view the graphics.
http://www.rns-pdf.londonstockexchange.com/rns/4666u_2-2005-11-22.pdf
A reconciliation between IFRS and UK GAAP in force at 31 March 2005 is shown in
note 20 to the interim financial statements.
Valuation Growth
Our key shareholder valuation measure, adjusted NAV per share, grew 8% from 31
March 2005 to 363p. The main drivers of this increase were valuation rises of
12p from properties under development and 13p from the investment portfolio,
whilst valuation gains from the Liverpool Victoria joint ventures and profits on
sale of 55 Drury Lane, WC2, 90 Fetter Lane, EC4, and 50/52 Paul Street, EC2,
added a further 4p. Adjusted earnings for the period added 4p to adjusted net
asset value per share and the payment of last financial year's final dividend
reduced the adjusted NAV by 7p (see chart in Appendix 2).
UK GAAP adjusted net asset value per share at 30 September 2005, at 362p, was
only 1p lower than the IFRS equivalent due to the accrual for the interim
dividend being offset by the pension deficit.
Net asset value per share after deduction of deferred tax on revaluation gains
was 336p at 30 September, a rise of 20p or 6% over the comparable figure at 31
March 2005. The deferred tax provision has increased in line with the valuation
gains described above.
The mark to market of the Group's financial debt at 30 September 2005
represented an 18p deduction, greater than 9p at 31 March 2005 because of lower
gilt yields and corporate bond spreads. Adjusted triple net asset value per
share (after the mark to market of debt and deferred tax items) at 30 September
2005 was 318p, up 4% from the last balance sheet date.
Income Statement and Earnings per Share
Rental income during the period was £22.8million, a fall of £3.7million or 14%
compared to the first half of 2004/05. This reduction was caused by the impact
of disposals at 55 Drury Lane, 90 Fetter Lane and 50/52 Paul Street and lease
surrenders in part linked to planned development and refurbishment schemes. The
movement on the amortisation of capitalised lease incentives also reduced rental
income. However, the Group benefited from rent reviews, lease renewals and new
lettings which added £2.3 million to rental income during the period.
Adjusted earnings per share in the half year were 4.4p, a 19% reduction compared
to the equivalent period last financial year (the key trends in adjusted
earnings per share are set out in the chart in Appendix 2).
The reduction in rental income described above had the biggest single impact of
2.3p, with positive effects from the profits generated in the Liverpool Victoria
joint ventures of 1.2p and a lower underlying tax charge of 0.5p per share. The
adjusted finance charge for the interim period was higher than last year, due to
the increase in net debt following the return of capital in 2004.
The accelerating development programme and the disposal of selected properties
where attractive prices are available from a buoyant market are expected to
continue to affect the Group's earnings per share over the near-term before new
rents from the developments come through.
Calculated under UK GAAP, adjusted earnings per share for the period were
slightly higher at 4.6p as a result of the amortisation of the equity portion of
the convertible bond being added back.
Reported profit before tax of £44.1 million was 69% higher than the first half
of 2004/05 as the Group benefited from greater IFRS revaluation gains, profit on
sale of assets and lower unadjusted finance costs. Basic EPS for the period was
21.4p, up 71% on the comparable period.
Potential for Growth in Rental Income and Development Gains
The Group plans to invest significant resources in the near-term development and
refurbishment schemes over the next five years. In an environment of stable to
declining investment yields and selective rental growth, these schemes are
forecast to generate attractive returns for shareholders in the medium-term. A
further £155 million of project costs, in addition to the £37 million already
spent, is planned in the period to March 2010 on schemes such as 190 Great
Portland Street, 56 Mortimer Street, Titchmor and Tooley Street. During the
period the Group spent £11 million on project costs developing our near-term
schemes.
By 2010, the Group's near-term schemes are expected to generate a total of £24
million of estimated rental income at September 2005 rental values, equating to
an increase over their existing rent of £19 million or 43% of the Group's
current rent roll.
Financial Resources and Dividend
Cash generated from operations was £48.7 million, up 46% on the comparative
period largely due to the Group making net property sales. Consequently, net
debt reduced to £238 million, down from £266 million at 31 March 2005 and
gearing fell to around 40% at 30 September 2005 from 48% at last year end.
Interest cover at 2.2 times for the interim period was slightly lower than the
comparative period last year. The current borrowing level and debt maturity
profile of the Group provides flexibility to expand and to finance a wide range
of projects.
The Board has declared an interim dividend of 3.67p per share, a rise of 2.5%
compared to the same time last year which will be paid on 4 January 2006.
Outlook
Occupational markets in central London are well positioned; selective rental
growth has returned to the West End and we expect it to accelerate during 2006
as the shortage of good quality office space takes hold. Recent high letting
activity in the City suggests that rental growth should re-emerge next year as
the oversupply of Grade A office space is eroded. With yield compression likely
to abate over the next twelve months, we expect this rental growth to become the
main driver to property returns.
We remain confident that a combination of our financial flexibility, our
expanding development programme and the continued active management of our
investment portfolio will continue to generate attractive returns for our
shareholders.
Portfolio Statistics
Rental Income
At 30 September 2005
---------------------------------------------------------------------------------------------------
Five Reversionary
Five Year Year Potential Total
Rent Reversionary Rental Beyond Five Rental
Roll Potential Values Years Values
£m £m £m £m £m
---------------------------------------------------------------------------------------------------
London North of Oxford Street Office 19.0 0.6 19.6 0.7 20.3
Retail 4.2 0.5 4.7 - 4.7
Rest of West End Office 6.8 0.1 6.9 - 6.9
Retail 4.3 0.3 4.6 - 4.6
---------------------------------------------------------------------------------------------------
Total West End 34.3 1.5 35.8 0.7 36.5
City Office 9.3 0.1 9.4 (1.4) 8.0
Retail 0.3 - 0.3 0.5 0.8
---------------------------------------------------------------------------------------------------
Total Let Portfolio 43.9 1.6 45.5 (0.2) 45.3
-----------------------------------------------------------------------------------------
Voids 3.8
Premises under refurbishment
and development 7.3
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Total Portfolio 56.4
---------------------------------------------------------------------------------------------------
Joint venture rental income
Let Portfolio Office 4.9 - 4.9 (0.3) 4.6
Retail 8.3 0.6 8.9 0.9 9.8
---------------------------------------------------------------------------------------------------
Total Portfolio 13.2 0.6 13.8 0.6 14.4
---------------------------------------------------------------------------------------------------
GPE's Share 6.6 0.3 6.9 0.3 7.2
---------------------------------------------------------------------------------------------------
Rent roll security, lease length and voids Rent
Roll
Secure Weighted
For Average
Five Lease
Years Length Voids
% Years %
-------------------------------------------------------------------------------------------
London North of Oxford Street Office 24.1 3.9 12.3
Retail 53.5 8.7 6.5
Rest of West End Office 44.5 5.9 -
Retail 69.2 12.7 -
Total West End 38.0 6.0 8.2
City Office 72.6 5.1 0.5
Retail 36.9 9.3 25.4
Total Let Portfolio 45.4 5.9 7.0
Joint Venture 70.3 9.7 -
-------------------------------------------------------------------------------------------
Rental values and yields
True
Average Average Initial Equivalent
Rent ERV Yield Yield
£psf £psf % %
-------------------------------------------------------------------------------------
London North of Oxford Street Office 29 32 5.7 6.2
Retail 24 26 7.3 6.2
Rest of West End Office 33 37 5.0 5.8
Retail 75 81 5.8 5.7
Total West End 32 44 5.7 6.1
City Office 31 24 3.7 6.5
Retail 10 24 3.7 6.7
Total Let Portfolio 31 32 5.2 6.2
Joint Venture 47 51 5.4 5.4
-------------------------------------------------------------------------------------
Property Portfolio
Proportion
Valuation of Portfolio Movement
£m % %
--------------------------------------------------------------------------------
London North of Oxford Street Office 266.5 33.1 2.3
Retail 37.7 4.7 1.0
Rest of West End Office 107.2 13.3 5.2
Retail 43.2 5.4 5.6
--------------------------------------------------------------------------------
Total West End 454.6 56.5 3.2
City Office 121.1 15.0 10.6
Retail 8.1 1.0 1.6
--------------------------------------------------------------------------------
Total investment portfolio 583.8 72.5 4.6
Properties approaching development 74.6 9.3 (2.8)
Properties under development * 146.9 18.2 17.4
--------------------------------------------------------------------------------
Total property portfolio 805.3 100.0 6.0
--------------------------------------------------------------------------------
* The difference between the values of the properties under development of £146.9
million and the £178.1 million book value of development property as disclosed
in notes 7 and 8 to the accounts, relates to categorisation of Tooley Street as
a development property in the notes under IAS 16 and the value of head leases
under IAS 17.
Analysis of Five Year Rental Values Lease Expiries
£m %
Rent roll, rent reviews and lease renewals 45.3 Less than 5 years 54.6
Under refurbishment 7.3 5 to 10 years 32.2
Voids 3.8 10 to 15 years 4.8
Over 15 years 8.4
------- -------
56.4 100.0
------- -------
Occupier %
Media & Marketing 26.2
Retailers 22.5
Professional 18.8
Banking and Finance 16.9
Corporates 7.5
IT & Telecoms 4.2
Government 3.9
-------
100.0
-------
Group Income Statement
For the six months ended 30 September 2005
*Year to Six months to *Six months to
31 March 30 September 30 September
2005 2005 2004
Audited Unaudited Unaudited
£m Notes £m £m
----------------------------------------------------------------------------------------------
51.6 Rental income 2 22.8 26.5
5.8 Service charge income 3.1 3.1
(6.7) Service charge expenses (3.8) (3.5)
(0.9) (0.7) (0.4)
(1.6) Other property expenses (0.5) (0.8)
---------------------------------------------------------------------------------------------
49.1 Net rental and related income 21.6 25.3
10.1 Profit/(loss) on disposal of
investment property 4.7 (0.1)
48.4 Net valuation gain on property portfolio 7 28.5 20.1
9.3 Share of profit on joint ventures 9 3.3 -
(10.7) Administration expenses (5.0) (5.2)
---------------------------------------------------------------------------------------------
106.2 Operating profit before financing costs 53.1 40.1
2.2 Finance income 3 0.3 1.9
(25.8) Finance costs 4 (9.3) (15.9)
---------------------------------------------------------------------------------------------
82.6 Profit before tax 44.1 26.1
(14.0) Tax 5 (9.4) (2.4)
---------------------------------------------------------------------------------------------
68.6 Profit for the period 16 34.7 23.7
---------------------------------------------------------------------------------------------
39.1p Basic earnings per share 6 21.4p 12.5p
---------------------------------------------------------------------------------------------
37.3p Diluted earnings per share 6 20.1p 12.2p
---------------------------------------------------------------------------------------------
*Restated under IFRS (see note 20)
Group Balance Sheet
At 30 September 2005
*31 March 30 September 30 September
2005 2005 2004
Audited Unaudited Unaudited
£m Notes £m £m
----------------------------------------------------------------------------------------------
Non-current assets
720.2 Investment property 7 699.7 790.3
93.3 Property, plant and equipment 8 114.7 74.2
42.6 Investment in joint ventures 9 59.8 -
----------------------------------------------------------------------------------------------
856.1 874.2 864.5
----------------------------------------------------------------------------------------------
Current assets
5.3 Trade and other receivables 10 5.6 7.4
31.9 Cash and cash equivalents 24.9 13.4
----------------------------------------------------------------------------------------------
37.2 30.5 20.8
----------------------------------------------------------------------------------------------
893.3 Total assets 904.7 885.3
----------------------------------------------------------------------------------------------
Current liabilities
25.3 Trade and other payables 11 23.0 25.5
1.6 Income tax payable 4.0 1.4
- Interest-bearing loans and borrowings 12 1.0 0.8
----------------------------------------------------------------------------------------------
26.9 28.0 27.7
----------------------------------------------------------------------------------------------
Non-current liabilities
297.6 Interest-bearing loans and borrowings 12 262.2 342.0
9.1 Obligations under finance leases 9.1 12.7
41.6 Deferred tax 13 53.3 27.8
2.1 Pension liability 1.8 2.7
----------------------------------------------------------------------------------------------
350.4 326.4 385.2
----------------------------------------------------------------------------------------------
377.3 Total liabilities 354.4 412.9
----------------------------------------------------------------------------------------------
516.0 Net assets 550.3 472.4
----------------------------------------------------------------------------------------------
Equity
20.3 Share capital 14 20.3 20.3
13.0 Share premium account 15 13.0 13.0
9.6 Equity reserve 16 9.5 9.8
16.4 Capital redemption reserve 16 16.4 16.4
12.6 Revaluation reserve 16 23.5 8.8
446.3 Retained earnings 16 469.6 406.4
(2.2) Investment in own shares 17 (2.0) (2.3)
----------------------------------------------------------------------------------------------
516.0 Equity shareholders'funds 550.3 472.4
----------------------------------------------------------------------------------------------
*Restated under IFRS (see note 20)
Group Statement of Cash Flows
For the six months ended 30 September 2005
* Year to Six months to *Six months to
31 March 30 September 30 September
2005 2005 2004
Audited Unaudited Unaudited
£m Notes £m £m
--------------------------------------------------------------------------------------------------
Operating activities
106.2 Net operating profit before financing costs 53.1 40.1
(69.7) Adjustments for non-cash items 18 (35.8) (21.6)
0.1 (Increase)/decrease in receivables (0.3) (2.7)
0.3 (Decrease)/increase in payables (3.8) (0.1)
(93.7) Purchase and development of property (11.9) (77.6)
119.8 Sale of properties 63.0 28.5
(5.9) Purchase of interests in joint ventures (15.6) -
--------------------------------------------------------------------------------------------------
57.1 Cash generated from operations 48.7 (33.4)
2.9 Interest received 0.3 2.6
(22.4) Interest paid (9.4) (11.9)
(0.2) Tax paid - -
--------------------------------------------------------------------------------------------------
37.4 Cash flows from operating activities 39.6 (42.7)
--------------------------------------------------------------------------------------------------
Financing activities
(101.5) Capital reduction - (101.5)
0.8 Receipts from capital reduction of own shares - 0.8
(44.2) Redemption of loans - (32.9)
55.0 Borrowings drawn - 90.0
(25.0) Borrowings repaid (35.0) (25.0)
(9.5) Loan to joint venture - -
(19.9) Equity dividends paid (11.6) (14.1)
--------------------------------------------------------------------------------------------------
(144.3) Cash flow from financing activities (46.6) (82.7)
--------------------------------------------------------------------------------------------------
(106.9) Net decrease in cash and cash equivalents (7.0) (125.4)
--------------------------------------------------------------------------------------------------
138.8 Cash and cash equivalents at 1 April 31.9 138.8
--------------------------------------------------------------------------------------------------
31.9 Cash and cash equivalents at balance sheet date 24.9 13.4
--------------------------------------------------------------------------------------------------
* Restated under IFRS
Group Statement of Recognised Income and Expense
For the six months ended 30 September 2005
*Year to Six months to *Six months to
31 March 30 September 30 September
2005 2005 2004
Audited Unaudited Unaudited
£m Notes £m £m
---------------------------------------------------------------------------------------------
17.2 Revaluation of development properties 15.5 10.7
(6.0) Deferred tax on development properties recognised
directly in equity (4.6) (3.4)
1.4 Actuarial gains on defined benefit schemes 0.2 0.7
---------------------------------------------------------------------------------------------
12.6 Net gain recognised directly in equity 11.1 8.0
68.6 Profit for the period 34.7 23.7
---------------------------------------------------------------------------------------------
81.2 Total recognised income and expense for the period 45.8 31.7
---------------------------------------------------------------------------------------------
Group Reconciliation of Other Movements in Equity
For the six months ended 30 September 2005
*Year to Six months to *Six months to
31 March 30 September 30 September
2005 2005 2004
Audited Unaudited Unaudited
£m £m £m
---------------------------------------------------------------------------------------------
Opening equity shareholders' funds:
561.2 As previously reported 516.0 561.2
(5.8) Effect of adopting IFRS (see note 20) - (5.8)
---------------------------------------------------------------------------------------------
555.4 Opening equity shareholders' funds restated 516.0 555.4
81.2 Total recognised income and expense for the period 45.8 31.7
(101.5) Capital reduction - (101.5)
0.8 Receipt from capital reduction in own shares - 0.8
(0.3) Deferred tax on convertible bonds (0.1) (0.1)
0.3 Employee long-term incentive plan 0.2 0.2
(19.9) Dividends (11.6) (14.1)
---------------------------------------------------------------------------------------------
516.0 Closing equity shareholders' funds 550.3 472.4
---------------------------------------------------------------------------------------------
*Restated under IFRS (see note 20)
NOTES FORMING PART OF THE INTERIM STATEMENT
1 Basis of Preparation of Interim Financial Information
For the year ended 31 March 2006 the Group will be required to prepare
consolidated financial statements under 'International Financial Reporting
Standards' (IFRS) as adopted by the European Commission. These will be those
International Accounting Standards, International Financial Reporting Standards
and related Interpretations (SIC-IFRIC interpretations), subsequent amendments
to those standards and related interpretations, future standards and related
interpretations issued or adopted by the International Accounting Standards
Board (IASB) that have been endorsed by the European Commission. This process is
ongoing and the Commission has yet to endorse certain standards issued by the
IASB.
The preliminary opening balance sheet and IFRS comparatives and the
reconciliation between UK GAAP and IFRS have been prepared by management using
its best knowledge of the expected standards and interpretations of the IASB,
facts and circumstances, and accounting policies that will be applied when the
company prepares its first complete set of IFRS financial statements as at
31 March 2006. Therefore, until such time, the possibility cannot be excluded that
the preliminary opening balance sheet may require adjustment before constituting
the final opening balance sheet. The Group's transition date for the adoption of
IFRS is 1 April 2004. The provisions of IFRS 2 'Share based payments' have been
applied in respect of grants of equity instruments after 7 November 2002.
IFRS 3 'Business Combinations' has been applied prospectively from 1 April 2004.
The financial statements are prepared under the historical cost convention as
modified by the revaluation of investment and development properties. The
financial information contained in this report does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985. The full
financial statements for the year ended 31 March 2005 were prepared under UK GAAP,
did not contain a statement under section 237 (2) or (3) of the Companies Act 1985
and together with an unqualified audit report have been delivered to the Registrar
of Companies.
Basis of Consolidation
The Group financial statements consolidate the financial statements of the
Company and all its subsidiary undertakings for the six months ended 30 September 2005.
Rent Receivable
This comprises rental income and premiums on lease surrenders on investment
properties for the year, exclusive of service charges receivable.
Lease Incentives
Lease incentives including rent-free periods and payments to tenants, are
allocated to the income statement over the lease term. The value of resulting
accrued rental income is included within the respective property.
Other Property Expenses
Irrecoverable running costs directly attributable to specic properties within
the Group's portfolio are charged to the income statement as other 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
income statement as incurred.
Administration Expenses
Costs not directly attributable to individual properties are treated as
administration expenses.
Share-based Payment
The cost of granting share-based payments to employees and directors is
recognised within administration expenses in the income statement. The Group has
used the Stochastic model to value the grants and the resulting fair value is
amortised through the income statement over the vesting period. The charge is
reversed if it is likely that any non-market based criteria will not be met.
Investment Properties
Investment properties, including those under development, are professionally
valued each year, on a Market Value basis, and any surpluses or decits arising
are taken to the income statement. Disposals of properties are recognised where
contracts have been unconditionally exchanged during the accounting period and
the significant risks and rewards of ownership of the property have been
transferred to the purchaser.
Depreciation
In accordance with IAS 40 'Investment Property', 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 financial statements 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.
Development Properties
Development properties are carried in property, plant and equipment and are
professionally valued each year, on a Market Value basis, and any surpluses
arising are taken to the revaluation reserve with any deficits below cost taken
to the income statement. A development property is one purchased for the
purposes of development, redevelopment or substantial refurbishment with
relatively little, or short-term, income whether planning permission exists or
is still to be granted. Once development is concluded, the property is
transferred to investment property. Any accumulative revaluation reserve in
respect of that property is transferred to retained earnings.
Joint Ventures
Joint ventures are accounted for under the equity method: the Group balance
sheet contains the Group's share of the net assets of its joint ventures.
Long-term loans owed to the Group by joint ventures are included within
investments. The Group's share of joint ventures' profit is included in a single
line of the Group income statement.
Deferred Taxation
Deferred tax is provided in full on temporary differences between the tax base
of an asset or liability and its carrying amount in the balance sheet. The Group
recognises deferred tax in respect of property revaluations on the basis that
their book value is realised through the sale of individual properties giving
rise to capital gains. Such capital gains are mitigated by the availability of
indexation and it has been assumed that capital allowances claimed by the Group
to date will be retained on sale. The directors consider this to be the most
appropriate basis for the calculation. Deferred tax assets are recognised when
it is probable that taxable profits will be available against which the deferred
tax asset can be utilised.
Defined Benefit Costs
The Group contributes to a dened benet pension plan which is funded with assets
held separately from those of the Group. The full value of the net assets or
liabilities of the pension fund is brought on to the balance sheet at each
balance sheet date. Actuarial gains and losses are taken to the Statement of
Recognised Income and Expense, all other movements are taken to the income
statement.
Capitalisation of Interest
Interest associated with direct expenditure on investment properties under
development and development properties is capitalised. Direct expenditure
includes the purchase cost of a site or property for development properties, but
does not include the original book cost of investment property under development.
Interest is capitalised from the start of the development work until the date of
practical completion. The rate used is the Group's pre-tax weighted average cost
of borrowings or, if appropriate, the rate on specific associated borrowings.
Financial Instruments
The Group's derivatives are measured at fair value in the balance sheet. To the
extent that a derivative provides an effective cash flow hedge against the
Group's underlying exposure the movements in the fair value of the hedge are
taken to equity. To the extent that the derivative does not effectively hedge
the underlying exposure the movement in the fair value of the hedge is taken to
the income statement.
Convertible Bonds
Convertible Bonds are partly carried as debt, based on the net present value of
future cash flows and prevailing interest rates at the time of issue, and the
balance carried as equity within an equity reserve. Over the term of the loan,
the debt is increased to its nominal value by charges to the income statement.
Head Leases
The present value of future ground rents is added to the carrying value of a
leasehold investment property and to long-term liabilities. On payment of a
ground rent virtually all of the cost is charged to the income statement,
principally as interest payable, and the balance reduces the liability; an equal
reduction to the asset's valuation is charged to the income statement.
Segmental Analysis
The Group's operations solely relate to investing in property in central London
which is considered to be a single segment; accordingly no segmental analysis is
presented.
2 Rental Income
Year to Six months to Six months to
31 March 30 September 30 September
2005 2005 2004
£m £m £m
------------------------------------------------------------------------------------------
49.9 Gross rental income 22.2 25.0
2.0 Amortisation of capitalised lease incentives 0.7 1.6
(0.3) Ground rents payable (0.1) (0.1)
------------------------------------------------------------------------------------------
51.6 22.8 26.5
------------------------------------------------------------------------------------------
3 Finance Income
Year to Six months to Six months to
31 March 30 September 30 September
2005 2005 2004
£m £m £m
------------------------------------------------------------------------------------------
1.9 Interest on short-term deposits 0.3 1.7
0.3 Other - 0.2
------------------------------------------------------------------------------------------
2.2 Finance income 0.3 1.9
------------------------------------------------------------------------------------------
4 Finance Costs
Year to Six months to Six months to
31 March 30 September 30 September
2005 2005 2004
£m £m £m
------------------------------------------------------------------------------------------
4.4 Interest on bank overdrafts and loans 1.4 2.2
12.8 Interest on debentures 6.2 6.6
4.2 Interest on convertible bonds 2.1 2.1
0.2 Interest on loan notes 0.1 0.1
0.8 Interest on obligations under finance leases 0.4 0.4
6.9 Premium on redemption of debenture - 6.2
------------------------------------------------------------------------------------------
29.3 Total borrowing costs 10.2 17.6
(2.0) Less: capitalised interest (0.9) (0.7)
------------------------------------------------------------------------------------------
27.3 9.3 16.9
(1.5) Fair value gain on interest rate swaps - (1.0)
------------------------------------------------------------------------------------------
25.8 Finance costs 9.3 15.9
------------------------------------------------------------------------------------------
5 Tax
Year to Six months to Six months to
31 March 30 September 30 September
2005 2005 2004
£m £m £m
------------------------------------------------------------------------------------------
Current tax
- UK corporation tax 2.4 (0.4)
------------------------------------------------------------------------------------------
- Total current tax 2.4 (0.4)
14.0 Deferred tax 7.0 2.8
------------------------------------------------------------------------------------------
14.0 Tax charge 9.4 2.4
------------------------------------------------------------------------------------------
The difference between the standard rate of tax and the effective rate of tax
arises from the items set out below:
Year to Six months to Six months to
31 March 30 September 30 September
2005 2005 2004
£m £m £m
------------------------------------------------------------------------------------------
82.6 Profit before tax 44.1 26.1
------------------------------------------------------------------------------------------
24.8 Tax on profit at standard rate of 30% 13.2 7.8
0.6 Expenses not deductible for tax purposes 0.2 0.4
(3.5) Capital allowances (0.1) (0.3)
(0.3) Receipts taxable as chargeable gains partially
covered by capital losses (0.3) (0.1)
(3.0) Sale of investment properties covered by capital losses - -
(0.1) Long-term incentive plan (0.1) -
- Capitalised receipts taxable as income 0.3 -
- Chargeable gains on sales of investment properties (0.7) -
0.3 Pension liabilities 0.1 0.2
(4.0) Property revaluations (3.2) (4.7)
(0.8) Accounting profits arising in the period not taxable - (1.0)
- Other - 0.1
------------------------------------------------------------------------------------------
14.0 Tax charge for the period 9.4 2.4
------------------------------------------------------------------------------------------
During the period, £4.6 million (2004: £3.4 million) of tax was charged directly
to equity. This charge solely related to deferred tax in respect of revaluations
of property, plant and equipment.
6 Earnings and Net Assets per Share
The directors believe that earnings per share before net valuation gains on the
property portfolio net of deferred tax, deferred tax arising on capital
allowances exceeding depreciation, non-recurring items and profits or losses on
sales of investment properties provide a more meaningful measure of the Group's
performance. Basic and adjusted earnings per share are calculated as follows:
Weighted average number of ordinary shares
Year to Six months to Six months to
31 March 30 September 30 September
2005 2005 2004
No. of shares No. of shares No. of shares
-----------------------------------------------------------------------------------------------
203,093,515 Issued ordinary share capital at 1 April 162,474,812 203,093,515
(27,264,609) Effect of capital reduction - (13,983,488)
-----------------------------------------------------------------------------------------------
175,828,906 Weighted average number of ordinary shares 162,474,812 189,110,027
16,197,967 Effect of conversion of convertible bond 18,709,677 17,421,470
-----------------------------------------------------------------------------------------------
192,026,873 Diluted weighted average number of ordinary shares 181,184,489 206,531,497
-----------------------------------------------------------------------------------------------
Diluted earnings per share
Six months to Six months to Six months to Six months to
Year to 30 September 30 September 30 September 30 September
31 March 2005 2005 2005 2004 2004
Earnings Profit Earnings Profit Earnings
per share after tax per share after tax per share
pence £m Pence £m pence
-------------------------------------------------------------------------------------------------------------
39.1 Basic 34.7 21.4 23.7 12.5
(1.8) Effect of interest on convertible
bonds after tax 1.7 (1.3) 1.5 (0.3)
-------------------------------------------------------------------------------------------------------------
37.3 Diluted 36.4 20.1 25.2 12.2
-------------------------------------------------------------------------------------------------------------
Basic and adjusted earnings per share
Six months to Six months to Six months to Six months to
Year to 30 September 30 September 30 September 30 September
31 March 2005 2005 2005 2004 2004
Earnings Profit Earnings Profit Earnings
per share after tax per share after tax per share
pence £m Pence £m pence
-------------------------------------------------------------------------------------------------------------
39.1 Basic 34.7 21.4 23.7 12.5
- Deferred tax on accelerated
capital allowances 1.0 0.6 1.2 0.7
2.7 Non-recurring items - - 4.2 2.2
(5.7) Profit on sale of investment properties (4.0) (2.5) 0.1 -
(25.4) Net valuation gain on property portfolio
net of deferred tax (24.6) (15.1) (18.8) (10.0)
10.7 Adjusted 7.1 4.4 10.4 5.4
-------------------------------------------------------------------------------------------------------------
Non-recurring items in the period to 30 September 2004 comprise £0.8 million of
administration expenses and a £6.2 million premium on the redemption of
debentures, less tax relief of £2.8 million.
Net assets per share
31 March 30 September 30 September 30 September 30 September 30 September 30 September
2005 2005 2005 2005 2004 2004 2004
Net assets Net No. of Net assets Net No. of Net assets
per share Assets shares per share assets shares per share
pence £m million pence £m million pence
----------------------------------------------------------------------------------------------------------------------
317 Basic 550.3 162.5 339 472.4 162.5 291
2 Deferred tax on
capital allowances 4.3 162.5 2 4.5 162.5 2
24 Deferred tax on
revaluation gains 48.8 162.5 30 23.9 162.5 15
----------------------------------------------------------------------------------------------------------------------
343 Undiluted adjusted 603.4 162.5 371 500.8 162.5 308
----------------------------------------------------------------------------------------------------------------------
(6) Effect of convertible
loan notes 54.9 18.7 (8) 53.7 18.7 (2)
337 Adjusted 658.3 181.2 363 554.5 181.2 306
----------------------------------------------------------------------------------------------------------------------
7 Investment Property
Investment property:
Freehold Leasehold Total
£m £m £m
--------------------------------------------------------------------------------
Book value at 1 April 2005 517.4 148.9 666.3
Costs capitalised 3.5 0.5 4.0
Disposals (58.3) - (58.3)
Net valuation gain on investment property 18.6 5.7 24.3
--------------------------------------------------------------------------------
Book value at 30 September 2005 481.2 155.1 636.3
--------------------------------------------------------------------------------
Investment property under development:
Freehold Leasehold Total
£m £m £m
--------------------------------------------------------------------------------
Book value at 1 April 2005 15.5 38.4 53.9
Costs capitalised 5.3 0.2 5.5
Interest capitalised 0.1 - 0.1
Net valuation gain on investment property 3.1 0.8 3.9
--------------------------------------------------------------------------------
Book value at 30 September 2005 24.0 39.4 63.4
--------------------------------------------------------------------------------
Total investment property 505.2 194.5 699.7
--------------------------------------------------------------------------------
Net valuation gain on investment property 28.2
Add: net valuation gain reversing previous
deficits below cost taken to income statement (note 8) 0.3
--------------------------------------------------------------------------------
Net valuation gain on property portfolio 28.5
--------------------------------------------------------------------------------
The investment and development properties (note 8) were valued on the basis of
Market Value by CB Richard Ellis, as at 30 September 2005 in accordance with the
RICS Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors.
The book value of investment properties includes £9.1 million in respect of the present
value of future ground rents.
At 30 September 2005, properties with carrying value of £382.7 million (2004:£355.4 million)
were secured under first mortgage debenture stock (see note 12).
8 Property, Plant and Equipment
Development
property
£m
--------------------------------------------------------------------------------
At 1 April 2005 93.3
Costs capitalised 4.8
Interest capitalised 0.8
Net valuation gain taken to equity 15.5
Net valuation gain reversing previous deficits below cost taken to
income statement (note 7) 0.3
--------------------------------------------------------------------------------
At 30 September 2005 114.7
--------------------------------------------------------------------------------
The historical cost of development properties at 30 September 2005 was £81.0
million (2004: £63.2 million). The cumulative interest capitalised in
development properties was £3.4 million (2004: £1.2 million).
9 Investment in Joint Ventures
The Group has the following investments in joint ventures:
Equity Loans Total
£m £m £m
--------------------------------------------------------------------------------
At 1 April 2005 33.1 9.5 42.6
Acquisitions 15.6 - 15.6
Share of profits of joint venture 3.3 - 3.3
Distributions (1.7) - (1.7)
--------------------------------------------------------------------------------
At 30 September 2005 50.3 9.5 59.8
--------------------------------------------------------------------------------
On 19 April 2005 Great Portland Estates plc and Liverpool Victoria Friendly
Society formed a second joint venture, called the Great Victoria Partnership
(No. 2), to own and invest in central London. Great Portland Estates owns a 50%
share in the partnership through a wholly-owned subsidiary. On 19 April 2005 the
Group contributed to the partnership equity of £15.6 million.
The investments in joint ventures comprise the following:
31 March 30 September 30 September
2005 Country 2005 2004
---------------------------------------------------------------------------------------------------
50% The Great Victoria Partnership United Kingdom 50% -
- The Great Victoria Partnership (No. 2) United Kingdom 50% -
Included in the financial statements are the following items that represent the
Group's share in the assets and liabilities, revenues and expenses for the Great
Victoria Partnerships.
31 March 30 September 30 September
2005 2005 2004
£m £m £m
----------------------------------------------------------------------------
78.4 Non-current assets 101.8 -
1.6 Current assets 14.4 -
(35.7) Non-current liabilities (53.4) -
(11.2) Current liabilities (12.5) -
----------------------------------------------------------------------------
33.1 Net assets 50.3 -
----------------------------------------------------------------------------
10.2 Income 5.1 -
----------------------------------------------------------------------------
(0.9) Expenses (1.8) -
----------------------------------------------------------------------------
9.3 3.3 -
----------------------------------------------------------------------------
During the period the Group received a management fee of £0.7 million from the
joint ventures which has been recognised in administrative expenses.
10 Trade and Other Receivables
31 March 30 September 30 September
2005 2005 2004
£m £m £m
------------------------------------------------------------------------------
1.7 Rent receivables 1.4 3.5
0.9 Prepayments and accrued income 1.6 1.4
2.7 Other trade receivables 2.6 2.5
------------------------------------------------------------------------------
5.3 5.6 7.4
------------------------------------------------------------------------------
11 Trade and Other Payables
31 March 30 September September
2005 2005 2004
£m £m £m
------------------------------------------------------------------------------
12.2 Other trade payables 10.0 14.8
13.1 Non-trade payables and accrued expenses 13.0 10.7
------------------------------------------------------------------------------
25.3 23.0 25.5
------------------------------------------------------------------------------
12 Interest-bearing Loans and Borrowings
31 March 30 September 30 September
2005 2005 2004
£m £m £m
------------------------------------------------------------------------------------
Non-current liabilities
92.4 £94.5 million 71/4 per cent. debenture stock 2027 92.4 95.3
91.9 £92.9 million 55/8 per cent. debenture stock 2029 91.9 99.0
54.3 51/4 per cent. convertible bonds 2008 54.9 53.7
55.0 Bank loans 20.0 90.0
4.0 Unsecured loan notes 2007 3.0 4.0
------------------------------------------------------------------------------------
297.6 262.2 342.0
------------------------------------------------------------------------------------
Current liabilities
- Current portion of unsecured loan notes 1.0 0.4
- Interest rate swaps - 0.4
------------------------------------------------------------------------------------
- 1.0 0.8
------------------------------------------------------------------------------------
297.6 263.2 342.8
------------------------------------------------------------------------------------
Certain of the freehold and leasehold properties are charged to secure the first
mortgage debenture stock (see note 7). The bank loans are unsecured, attract a
floating rate of 0.7 per cent. above LIBOR and expire in 2009. 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. The bonds, which are
unsecured, are convertible by the bondholder at a price of £3.10 per share, and
redeemable by the Company at par, at any time until 2008. The amount of the
convertible bonds classified as an equity reserve of £9.5 million is net of
attributable transaction costs of £0.2 million.
At 30 September 2005 the Group had available £202 million (2004: £145 million)
of undrawn committed bank facilities.
Maturity of financial liabilities
The maturity profile of the financial liabilities of the Group at 30 September
2005 was as follows:
31 March 30 September 30 September
2005 2005 2004
£m £m £m
------------------------------------------------------------------------------------
- In one year or less, or on demand 1.0 0.8
- In more than one year but not more than two years 3.0 -
58.3 In more than two years but not more than 54.9 4.0
- In more than three years but not more than four years 20.0 53.7
55.0 In more than four years but not more than five years - 90.0
184.3 In more than five years 184.3 194.3
------------------------------------------------------------------------------------
297.6 263.2 342.8
------------------------------------------------------------------------------------
Fair value of financial liabilities
31 March 31 March 30 September 30 September 30 September 30 September
2005 2005 2005 2005 2004 2004
Book Value Fair Value Book Value Fair Value Book Value Fair Value
£m £m £m £m £m £m
-------------------------------------------------------------------------------------------------------
- - Current liabilities 1.0 1.0 0.4 0.4
297.6 325.2 Non-current liabilities 262.2 310.2 342.0 358.2
- - Interest rate swaps - - 0.4 0.4
-------------------------------------------------------------------------------------------------------
297.6 325.2 263.2 311.2 342.8 359.0
-------------------------------------------------------------------------------------------------------
The fair values of the Group's cash and short-term deposits are not materially
different from those at which they are carried in the financial statements.
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 market values of all other items have been calculated by
discounting the expected future cash flows at prevailing interest rates.
13 Deferred tax
At Recognised At
31 March Recognised directly in 30 September
2005 in income equity 2005
£m £m £m £m
-------------------------------------------------------------------------------------
Deferred tax liabilities
Accelerated capital allowances 3.3 1.0 - 4.3
Capitalised interest 0.7 0.3 - 1.0
Property revaluations 38.3 5.9 4.6 48.8
Deferred tax assets
Long-term incentive plan (0.1) (0.1) - (0.2)
Pension liabilities (0.6) - - (0.6)
-------------------------------------------------------------------------------------
Net deferred tax provision 41.6 7.1 4.6 53.3
-------------------------------------------------------------------------------------
Included within the deferred tax liability relating to property revaluations of
£48.8 million is £2.9 million (2004: £nil) in respect of the Group's deferred
tax liability on properties it holds in joint ventures. Deferred taxation
associated with development property revaluations in respect of property, plant
and equipment is reflected directly in reserves where the underlying property
revaluations are also recognised. The Group recognises deferred tax assets based
on forecast taxable profits.
14 Share Capital
Year to Year to Six months to Six months to Six months to Six months to
31 March 31 March 30 September 30 September 30 September 30 September
2005 2005 2005 2005 2004 2004
Number £m Number £m Number £m
-----------------------------------------------------------------------------------------------------------------------
Ordinary shares of 12 1/2 p each
Allotted, called Up and fully paid
203,093,515 101.5 At the beginning of the period 162,474,812 20.3 203,093,515 101.5
(40,618,703) (81.2) Capital reduction - - (40,618,703) (81.2)
-----------------------------------------------------------------------------------------------------------------------
162,474,812 20.3 At the end of the period 162,474,812 20.3 162,474,812 20.3
-----------------------------------------------------------------------------------------------------------------------
On 30 July 2004, as part of a Court-confirmed capital reduction, the ordinary
shares of the Company were consolidated on the basis of four new shares for
every five existing ones, and their nominal value was reduced from 50p to 121/2
p per share.
15 Share Premium
Year to Six months to Six months to
31 March 30 September 30 September
2005 2005 2004
£m £m £m
-------------------------------------------------------------------------------
24.8 At the beginning of the period 13.0 24.8
(11.8) Capital reduction - (11.8)
-------------------------------------------------------------------------------
13.0 At the end of the period 13.0 13.0
-------------------------------------------------------------------------------
16 Reserves
Capital
Equity Redemption Revaluation Retained
Reserve Reserve Reserve Earnings
£m £m £m £m
------------------------------------------------------------------------------------------
At 1 April 2005 9.6 16.4 12.6 446.3
Profit for the period - - - 34.7
Actuarial gains on defined benefit schemes - - - 0.2
Net valuation gain taken to equity - - 15.5 -
Deferred tax on net valuation gain taken
to equity - - (4.6) -
Deferred tax recognised on convertible bonds (0.1) - - -
Dividends to shareholders - - - (11.6)
------------------------------------------------------------------------------------------
At 30 September 2005 9.5 16.4 23.5 469.6
------------------------------------------------------------------------------------------
17 investment in Own Shares
Year to Six months to Six months to
31 March 30 September 30 September
2005 2005 2004
£m £m £m
-------------------------------------------------------------------------------
2.5 At the beginning of the period 2.2 2.5
(0.3) Employee long-term incentive plan charge (0.2) (0.2)
2.2 At the end of the period 2.0 2.3
-------------------------------------------------------------------------------
The investment in the Company's own shares is held at cost and comprise
1,115,628 shares held by the Great Portland Estates P.L.C. LTIP Employee Share
Trust which will vest in certain senior employees of the Group if performance
conditions are met.
18 Adjustment for non-cash movements in the Cash Flow Statement
Year to Six months to Six months to
31 March 30 September 30 September
2005 2005 2004
£m £m £m
--------------------------------------------------------------------------------------
(48.4) Net valuation gain on property portfolio (28.5) (20.1)
(10.1) (Profit)/Loss on disposal of investment properties (4.7) 0.1
0.3 Employee long-term incentive plan charge 0.2 0.2
(2.2) Amortisation of lease incentives (1.2) (1.8)
(9.3) Share of profit on joint ventures (1.6) -
--------------------------------------------------------------------------------------
(69.7) Adjustment for non-cash items (35.8) (21.6)
--------------------------------------------------------------------------------------
19 Dividends
The proposed interim dividend of 3.67 pence per share (2004: 3.58 pence per
share) was approved by the Board on 21 November 2005 and is payable on 4 January
2006 to shareholders on the register on 2 December 2005. The dividend is not
recognised as a liability in the interim accounts. The 2005 final dividend of
£11.6 million was paid on 12 July 2005 and is included within the Group
Reconciliation of Other Movements in Equity.
20 Explanation of the transition to IFRS
This is the first year that the Group has presented its financial statements
under IFRS. The last financial statements presented under UK GAAP were for the
year ended 31 March 2005. As IFRS comparative figures must be prepared for the
year ended 31 March 2005, the date of transition to IFRS was 1 April 2004. The
reconciliations below are presented to enable a comparison of the 2005 published
interim figures with those published in the corresponding period of the previous
financial year and those published for the year ended 31 March 2005.
IFRS 1 'First-Time Adoption of International Financial Reporting Standards'
requires an explanation of major adjustments to cash flows under IFRS. Whilst
the format of the cash flow statement is different from UK GAAP, there are no
material changes to Group cash flows.
Reconciliation of equity reported under UK GAAP to equity under IFRS
1 April 31 March 30 September 30 September
2004 2005 2005 2004
£m £m Notes £m £m
-----------------------------------------------------------------------------------------------
561.2 543.3 Equity shareholders' funds under UK GAAP 594.2 491.2
IFRS adjustments:
(12.7) (9.1) Obligations under finance leases a (9.1) (12.7)
12.7 9.1 Leasehold property interests a 9.1 12.7
14.1 11.5 Exclusion of dividend b 5.9 5.8
(4.6) (3.8) Recognition of pension deficit c (3.6) (4.1)
(19.1) (38.2) Deferred tax on property revaluations d (48.8) (23.9)
4.2 3.2 Convertible bond e 2.6 3.7
(0.4) - Fair value of interest rate swaps f - (0.3)
-----------------------------------------------------------------------------------------------
(5.8) (27.3) Net IFRS adjustments (43.9) (18.8)
-----------------------------------------------------------------------------------------------
555.4 516.0 Equity shareholders' funds under IFRS 550.3 472.4
-----------------------------------------------------------------------------------------------
Reconciliation of profit reported under UK GAAP to profit under IFRS
Year to Six months to Six months to
31 March 30 September 30 September
2005 2005 2004
£m Notes £m £m
----------------------------------------------------------------------------------------------
25.2 Profit for the period under UK GAAP 10.5 5.3
IFRS adjustments:
48.4 Revaluation gains on investment properties g 28.5 20.1
9.3 Revaluation gains on joint ventures g 2.0 -
(13.2) Deferred tax on property revaluations d (5.9) (1.5)
(0.2) Employee long-term incentive plan charge i (0.1) (0.1)
- Spreading of lease incentives h 0.1 0.3
(0.7) Convertible bond e (0.4) (0.3)
0.3 Change in fair value of interest rate swaps f - 0.1
(0.5) Movement in pension deficit c - (0.2)
----------------------------------------------------------------------------------------------
43.4 Net IFRS adjustments 24.2 18.4
----------------------------------------------------------------------------------------------
68.6 Profit for the period under IFRS 34.7 23.7
----------------------------------------------------------------------------------------------
UK GAAP referred to in the above tables refers to UK GAAP in force at 31 March 2005.
a The present value of future ground rents is added to the carrying value of a
leasehold investment property and to long-term liabilities. On payment of a
ground rent virtually all of the cost is charged to the income statement,
principally as interest payable, and the balance reduces the liability; an equal
reduction to the asset's valuation is charged to the income statement.
b A proposed dividend is not accrued, but is accounted for only when approved.
Dividends are not shown on the face of the income statement.
c The net liabilities of the pension fund and their associated deferred tax are
brought onto the Group balance sheet, and any movements therein are shown as a
cost or income in the income statement, save for actuarial gains or losses,
which are taken directly to retained earnings.
d Contingent capital gains tax on investment property, based on the tax which
may arise on the sale of the property, is included in the balance sheet as a
deferred tax provision, and any movement from year to year is charged to the
income statement within the tax charge.
e A convertible bond is partly carried as debt, based on the net present value
of future cash flows and prevailing interest rates at the time of issue, and the
balance carried as equity within an equity reserve. Over the term of the loan,
the liability is increased to the nominal value of its debt by charges to the
income statement.
f The fair value of all derivatives is recorded in the balance sheet. The
movement in the fair value is taken to reserves if the hedge is effective, or
otherwise to the income statement.
g Revaluation surpluses or deficits of investment property and investment
property under development are taken to the income statement. Revaluation gains
and losses on development properties are taken to the revaluation reserve,
unless the valuation falls below cost, in which case they are charged to the
income statement; any reversal of this loss will be credited to the income
statement.
h Rent free periods are amortised over the lease term. The associated debtor is
added to the cost of investment property rather than being carried separately,
but as it does not add to the value of the property, it reduces the valuation
surplus taken through the income statement.
i Under IFRS the estimated fair value of the share awards needs to be assessed
at grant and charged to the income statement with any associated deferred tax
over the performance period, as adjusted by changes in the number of shares
expected to vest at the end of the vesting period.
This information is provided by RNS
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