Interim Results - Part 2
Land Securities Group Plc
20 November 2002
LAND SECURITIES GROUP
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 30 September 2002 Six months Six months Six months Six months
to 30.9.02 to 30.9.02 to 30.9.02 to 30.9.01
(restated)
Group Interest in Total Total
joint venture
Notes £m £m £m £m
------------- ------------- ------------- -------------
GROSS PROPERTY INCOME 2 492.1 89.7 581.8 435.2
======= ======= ======= =======
OPERATING PROFIT 2 230.4 47.0 277.4 239.0
Profit on sales of properties 10.7 8.9 19.6 3.5
------------- ------------- ------------- -------------
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND
TAXATION 2 241.1 55.9 297.0 242.5
Interest receivable and similar income 3 7.7 1.3 9.0 2.4
======= ======= ======= =======
Interest payable and similar charges - gross 3 (95.3) (42.3) (137.6) (82.9)
- deficit on purchase and redemption of convertible bonds 3 (28.2) - (28.2) -
- interest capitalised 3 16.9 - 16.9 9.1
======= ======= ======= =======
(106.6) (42.3) (148.9) (73.8)
------------- ------------- ------------- -------------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 142.2 14.9 157.1 171.1
======= =======
Taxation 4 (44.0) (49.4)
------------- -------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 113.1 121.7
Dividends 5 (45.7) (47.6)
------------- -------------
RETAINED PROFIT FOR THE FINANCIAL PERIOD 16 67.4 74.1
======= =======
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 142.2 14.9 157.1 171.1
Profit on disposals of investment properties (10.7) (8.9) (19.6) (3.5)
Bid costs 0.7 1.8 2.5 6.7
Exceptional items:
Deficit on purchase and redemption of convertible bonds 28.2 - 28.2 -
Group reorganisation costs 6.3 - 6.3 -
------------- ------------- ------------- -------------
Revenue profit before taxation 166.7 7.8 174.5 174.3
======= ======= ======= =======
Year Year Year
to 31.3.02 to 31.3.02 to 31.3.02
(audited) (audited) (audited)
Group Interest in Total
joint
venture
Notes £m £m £m
------------- ------------- -------------
GROSS PROPERTY INCOME 2 977.1 48.5 1,025.6
======= ======= =======
OPERATING PROFIT 2 497.5 19.3 516.8
Profit on sales of properties 13.4 - 13.4
------------- ------------- -------------
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND
TAXATION 2 510.9 19.3 530.2
Interest receivable and similar income 3 4.2 0.8 5.0
======= ======= =======
Interest payable and similar charges - gross 3 (168.2) (24.6) (192.8)
- deficit on purchase and redemption of convertible bonds 3 - - -
- interest capitalised 3 21.1 - 21.1
======= ======= =======
(147.1) (24.6) (171.7)
------------- ------------- -------------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 368.0 (4.5) 363.5
======= =======
Taxation 4 (99.9)
-------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 263.6
Dividends 5 (178.4)
-------------
RETAINED PROFIT FOR THE FINANCIAL PERIOD 16 85.2
=======
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 368.0 (4.5) 363.5
Profit on disposals of investment properties (13.4) - (13.4)
Bid costs 6.7 8.0 14.7
Exceptional items:
Deficit on purchase and redemption of convertible bonds - - -
Group reorganisation costs - - -
------------- ------------- -------------
Revenue profit before taxation 361.3 (3.5) 364.8
======= ======= =======
Six months Six months Six months Six months Year Year to
to 30.9.02 to 30.9.02 to 30.9.01 to 30.9.01 to 31.3.02 31.3.02
(restated) (restated) (audited) (audited)
Basic Diluted Basic Diluted Basic Diluted
------------- ------------- ------------- ------------- ------------- -------------
EARNINGS 6 21.69p 21.67p 23.22p 22.96p 50.27p 49.54p
PER
SHARE
ADJUSTED 6 24.31p 24.21p 24.07p 23.77p 51.61p 50.81p
EARNINGS
PER
SHARE
======= ======= ======= ======= ======= =======
All income was derived from within the United Kingdom from continuing
operations. No operations were discontinued during the year.
The comparative figures for the six months ended 30 September 2001 have been
restated to reflect the changes in accounting policies and the introduction of
the new holding company as described in Note 1.
The interest in the joint venture was acquired on 13 December 2001. Results for
the year ended 31 March 2002 therefore include three and a half months trading
for that business.
LAND SECURITIES GROUP
UNAUDITED CONSOLIDATED BALANCE SHEET
as at 30 September 2002
30.9.02 30.9.01 31.3.02
(restated) audited
(restated)
Notes £m £m £m
FIXED ASSETS ---------- ---------- ----------
Intangible assets
Goodwill 37.8 39.9 38.9
Tangible assets
======= ======= =======
Investment properties 8 7,729.1 7,894.3 7,800.0
Operating properties 8 478.2 361.8 428.9
======= ======= =======
Properties 8 8,207.3 8,256.1 8,228.9
Other tangible assets 45.9 37.2 45.3
Investment in joint venture
======= =======
Share of gross assets of joint venture 18 1,169.3 1,297.8
Share of gross liabilities of joint venture 18 (1,037.6) (1,109.0)
======= =======
131.7 - 188.8
8,422.7 8,333.2 8,501.9
CURRENT ASSETS ---------- ---------- ----------
Trading properties 40.6 45.9 36.9
Debtors 10 364.1 220.1 260.3
Investments: short term deposits 39.4 24.6 60.9
Cash at bank and in hand 29.8 84.5 7.5
---------- ---------- ----------
473.9 375.1 365.6
CREDITORS falling due within one year 11 (512.2) (516.9) (690.9)
---------- ---------- ----------
NET CURRENT LIABILITIES (38.3) (141.8) (325.3)
---------- ---------- ----------
TOTAL ASSETS LESS CURRENT LIABILITIES 8,384.4 8,191.4 8,176.6
CREDITORS falling due after more than one year
Borrowings 12 (2,580.5) (1,972.9) (1,987.3)
Other creditors 13 (23.0) (29.9) (22.8)
PROVISIONS FOR LIABILITIES AND CHARGES 14 (134.7) (137.3) (129.9)
---------- ---------- ----------
5,646.2 6,051.3 6,036.6
======= ======= =======
CAPITAL AND RESERVES
Called up share capital 15 76.8 524.2 524.3
Share premium account 16 - - -
Capital redemption reserve 16 - - -
Revaluation reserve 16 3,155.3 3,556.2 3,376.9
Other reserves 16 - 748.2 901.3
Profit and loss account 16 2,414.1 1,222.7 1,234.1
---------- ---------- ----------
SHAREHOLDERS' FUNDS 16 5,646.2 6,051.3 6,036.6
======= ======= =======
Equity shareholders' funds 5,615.8 6,051.3 6,036.6
Non-equity shareholders' funds 30.4 - -
---------- ---------- ----------
5,646.2 6,051.3 6,036.6
======= ======= =======
NET ASSETS PER SHARE 7 1209p 1154p 1151p
DILUTED NET ASSETS PER SHARE 7 1209p 1134p 1132p
ADJUSTED NET ASSETS PER SHARE 7 1235p 1177p 1176p
ADJUSTED DILUTED NET ASSETS PER SHARE 7 1235p 1156p 1155p
LAND SECURITIES GROUP
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT Six months Six months Year
for the six months ended 30 September 2002 to 30.9.02 to 30.9.01 to 31.3.02
(restated) audited
Notes £m £m £m
-------------- -------------- --------------
NET CASH INFLOW FROM OPERATING ACTIVITIES (a) 244.5 109.1 406.2
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
========= ========= =========
Interest received 2.8 2.6 4.2
Interest paid (170.4) (96.6) (166.5)
========= ========= =========
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (167.6) (94.0) (162.3)
TAXATION - Corporation tax paid (37.9) (25.7) (111.3)
-------------- -------------- --------------
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES
AND INVESTMENTS AFTER FINANCE CHARGES AND TAXATION 39.0 (10.6) 132.6
========= ========= =========
CAPITAL EXPENDITURE
Development expenditure (145.6) (60.0) (256.4)
Acquisitions and associated capital expenditure (131.7) (212.3) (306.1)
-------------- -------------- --------------
Additions to properties (277.3) (272.3) (562.5)
Disposals of properties 221.0 243.4 549.2
-------------- -------------- --------------
Investing in properties (56.3) (28.9) (13.3)
Increase in other tangible assets (6.0) (7.5) (19.6)
========= ========= =========
NET CASH OUTFLOW ON CAPITAL EXPENDITURE (62.3) (36.4) (32.9)
ACQUISITIONS
Investment in joint venture - - (146.4)
Part repayment of loan capital by joint venture 49.7 - -
EQUITY DIVIDENDS PAID (132.4) (125.0) (172.5)
-------------- -------------- --------------
CASH OUTFLOW BEFORE USE OF LIQUID RESOURCES AND (106.0) (172.0) (219.2)
FINANCING
MANAGEMENT OF LIQUID RESOURCES 21.5 (2.6) (38.9)
FINANCING
========= ========= =========
Issues of shares 0.8 0.5 1.1
Repayment of B shares (511.1) - -
Increase in debt 638.9 249.9 239.6
========= ========= =========
NET CASH INFLOW FROM FINANCING 128.6 250.4 240.7
-------------- -------------- --------------
INCREASE/(DECREASE) IN CASH IN PERIOD 44.1 75.8 (17.4)
========= ========= =========
RECONCILIATION OF NET CASH FLOW TO MOVEMENTS IN NET
DEBT
Increase/(decrease) in cash in period 44.1 75.8 (17.4)
Cash (inflow)/outflow from decrease/increase in (21.5) 2.6 38.9
liquid resources
Cash inflow from increase in debt (638.9) (249.9) (239.6)
-------------- -------------- --------------
Change in net debt resulting from cash flow (b) (616.3) (171.5) (218.1)
Non-cash changes in debt (b) 45.8 3.5 3.8
-------------- -------------- --------------
Movement in net debt in year (570.5) (168.0) (214.3)
Net debt brought forward (1,942.1) (1,727.8) (1,727.8)
-------------- -------------- --------------
Net debt carried forward (b) (2,512.6) (1,895.8) (1,942.1)
========= ========= =========
LAND SECURITIES GROUP
UNAUDITED OTHER PRIMARY STATEMENTS Six months Six months Year
for the six months ended 30 September 2002 to 30.9.02 to 30.9.01 to 31.3.02
(restated) audited
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Notes £m £m £m
Profit on ordinary activities after taxation 113.1 121.7 263.6
Unrealised surplus/(deficit) on revaluation of 16 21.9 (35.5) (105.5)
investment properties
Share of unrealised surplus on revaluation of - - 46.8
investment properties held in joint venture
Taxation on revaluation surpluses realised on 16 (17.5) - (12.0)
disposals of investment properties
---------------- ---------------- ----------------
Total gains and losses relating to the 117.5 86.2 192.9
financial period
========= ========= =========
Six months Six months Year
to 30.9.02 to 30.9.01 to 31.3.02
(restated) audited
NOTE OF HISTORICAL COST GAINS AND LOSSES Notes £m £m £m
Profit on ordinary activities before taxation 157.1 171.1 363.5
Revaluation surplus arising in previous years
now realised on disposals
of investment properties 16 243.5 72.8 237.8
Taxation on revaluation surpluses realised on (17.5) - (12.0)
disposals of investment properties
---------------- ---------------- ----------------
Historical cost profit on ordinary activities 383.1 243.9 589.3
before taxation
Taxation 4 (44.0) (49.4) (99.9)
---------------- ---------------- ----------------
Historical cost profit on ordinary activities 339.1 194.5 489.4
after taxation
Dividends 5 (45.7) (47.6) (178.4)
---------------- ---------------- ----------------
Retained historical cost profit for the period 293.4 146.9 311.0
========= ========= =========
Six months Six months Year
to 30.9.02 to 30.9.01 to 31.3.02
(restated) audited
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' Notes £m £m £m
FUNDS
Profit on ordinary activities after taxation 113.1 121.7 263.6
Dividends 5 (45.7) (47.6) (178.4)
---------------- ---------------- ----------------
Retained profit for the financial year 67.4 74.1 85.2
Unrealised surplus/(deficit) on revaluation of 16 21.9 (45.4) (105.5)
investment properties
Share of unrealised surplus on revaluation of 16 - - 46.8
investment properties held in joint venture
Taxation on revaluation surpluses realised on 16 (17.5) - (12.0)
disposals of investment properties
Issues of shares 6.6 0.6 0.7
Premium arising on issues of shares 42.3 3.2 3.6
Repayment of B shares 16 (511.1) - -
---------------- ---------------- ----------------
Net change in shareholders' funds (390.4) 32.5 18.8
Opening shareholders' funds 6,036.6 6,017.8 6,017.8
---------------- ---------------- ----------------
Closing shareholders' funds 16 5,646.2 6,050.3 6,036.6
========= ========= =========
LAND SECURITIES GROUP
NOTES TO THE CASH FLOW Six months Six months
STATEMENT to 30.9.02 to 30.9.01 Year
for the six months ended unaudited unaudited to 31.3.02
30 September 2002 (restated) audited
(a) Reconciliation of £m £m £m
Operating Profit to Net
Cash Inflow from
Operating activities ------------- ------------- -------------
Operating profit (group) 230.4 245.6 497.5
Depreciation and 11.2 9.1 18.3
amortisation
Increase in trading (3.7) (45.7) (36.9)
properties
Increase in debtors (14.6) (99.6) (107.9)
Increase/(decrease) in 21.2 (0.3) 35.2
creditors
------------- ------------- -------------
Net cash inflow from 244.5 109.1 406.2
operating activities
======== ======== ========
Movements Movements
during six during six
months months
unaudited unaudited
1.4.02 Cash Flow Non-Cash 30.9.02 unaudited 30.9.01 unaudited
audited
(b) Analysis of Net Debt £m £m £m £m £m
------------- ------------- ------------- ------------- -------------
Net bank (14.3) 44.1 - 29.8 78.9
balance/(overdraft)
Liquid resources 60.9 (21.5) - 39.4 24.6
Debt due within one year (1.4) 0.1 - (1.3) (26.4)
Debt due after one year (1,987.3) (639.0) 45.8 (2,580.5) (1,972.9)
------------- ------------- ------------- ------------- -------------
Net debt (1,942.1) (616.3) 45.8 (2,512.6) (1,895.8)
======== ======== ======== ======== ========
Non-cash movements relate mainly to the conversions of convertible bonds
referred to in Note 12.
LAND SECURITIES GROUP
NOTES TO THE INTERIM RESULTS
for the six months ended 30 September 2002
1. INTERIM RESULTS
The Accounting Standards Board (ASB) has issued a non-mandatory statement
'Interim Reports', which seeks to codify best practice in the presentation of
interim results. These Interim Results, which incorporate a revaluation of
investment properties as at 30 September 2002, have been prepared having regard
to the guidance in the ASB statement and on the basis of the accounting policies
set out in the group's audited financial statements for the year ended 31 March
2002, except as stated in Note 19. The comparative figures for 30 September 2001
have been restated for the effects of adopting the ASB's Urgent Issues Task
Force Abstract 34 'Pre-contract Costs' and the change in the group's accounting
policy to capitalise interest on properties under development, both of which
were implemented after the results for the six months ended on that date were
published. The effect of these changes was to increase the profit before and
after taxation for the six months ended 30 September 2001 by £2.5m and £0.2m
respectively and to reduce the net assets at that date by £18.3m.
In July 2002, Land Securities PLC announced proposals for the return of £541m to
shareholders by way of a capital reorganisation, incorporating a Scheme of
Arrangement. Following approval by shareholders in August 2002, and subsequent
ratification by the Court in September, shareholders have exchanged their
shareholdings in Land Securities PLC for a combination of shares in a newly
formed company, Land Securities Group PLC ('the company'). This exchange, which
was made on the basis of seven ordinary shares and eight B shares in the company
for every eight ordinary shares in Land Securities PLC had the effect of
introducing the company as the new holding company of Land Securities PLC and
its subsidiaries. Holders of B shares have the right to have their shares
redeemed for 102p each in cash, although shareholders were given the choice of
electing for an immediate redemption of these shares in September. Approximately
94% of shareholders elected for such immediate repayment with the remaining
shareholders retaining their B shares for later redemption in accordance with
their terms.
The repayment of the B shares was effected by reducing the capital of the
company. This was achieved by cancelling and repaying the B shares held by those
shareholders who had elected for immediate cash repayment and, in addition, the
share capital of the company was reduced by decreasing the nominal amount of
each ordinary share issued pursuant to the scheme from 683p to 10p. This second
reduction of capital has created distributable reserves of approximately £3.1bn
which will be available to facilitate the repayment of the B shares held by
shareholders who have elected for deferred repayment. The balance of the
reserves will give the company additional financial flexibility.
The company was incorporated on 7 February 2002 as Hackplimco (no. 104) plc and
changed its name to Land Securities Group PLC on 25 June 2002. On 6 September
2002 the company acquired 100% of the issued share capital of Land Securities
PLC, following the implementation of the Scheme of Arrangement under section 425
of the Companies Act 1985, described above. In these results, the company has
accounted for its acquisition of Land Securities PLC using merger rather than
acquisition accounting principles. Schedule 4A to the Companies Act 1985 and FRS
6 'Acquisitions and Mergers' requires acquisition accounting to be adopted where
all the conditions laid down for merger accounting are not satisfied. Under the
Scheme of Arrangement, not all of the conditions were satisfied because the fair
value of the non-equity share element of the consideration (the redeemable B
shares) issued by the company for the shares in Land Securities PLC exceeded 10%
of the nominal value of the equity share element of the consideration.
However, in the opinion of the directors, the Scheme of Arrangement is a group
reconstruction rather than an acquisition, since the shareholders of the company
are the same as the former shareholders in Land Securities PLC and the rights of
each shareholder, relative to the others, are unchanged and no minority interest
in the net assets of the group is altered. Therefore, the directors consider
that to record the Scheme of Arrangement as an acquisition by the company,
requiring the attribution of fair values to the assets and liabilities of the
group and reflecting only the post Scheme of Arrangement results within these
financial statements would fail to give a true and fair view of the group's
results and financial position.
Accordingly, having regard to the overriding requirement under section 227(6) of
the Companies Act 1985 for the financial statements to give a true and fair view
of the group's results and financial position, the directors have adopted merger
accounting principles in drawing up these financial statements. The directors
consider that it is not practicable to quantify the effect of this departure
from the Companies Act 1985 requirements.
The financial information for the year to 31 March 2002 has been extracted from
the Land Securities PLC group financial statements to that date, which received
an unqualified auditors' report, and did not contain a statement under Section
237(2) or (3) of the Companies Act 1985 and have been filed with the Registrar
of Companies. The financial information for the year ended 31 March 2002 and
the six months ended 30 September 2001 have been restated for the effects of the
Scheme of Arrangement. The combined reserves as at 31 March 2002 have been
restated to reflect the introduction of the new holding company, as required
under merger accounting rules. The impact of the reduction and return of
capital is shown as movements in reserves in the current period when the Scheme
of Arrangement was effected. However, as Land Securities Group PLC did not
trade prior to the Scheme of Arrangement and had no material assets, the
restatement only affected consolidated reserves.
The Interim Results for the six months ended 30 September 2002 were approved by
the Directors on 20 November 2002.
Six months Six months Six months Six months Six months Six months
to 30.9.02 to 30.9.02 to 30.9.02 to 30.9.02 to 30.9.02 to 30.9.02
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Total
Property Property Property Joint
Investment Outsourcing Trading Group Venture Total
2. SEGMENTAL £m £m £m £m £m £m
INFORMATION
(i) PROFIT (Note (a)) (Note (b)) (Note (b))
AND LOSS
ACCOUNT
------------- ------------- ------------- ------------- ------------- -------------
Rental income (c ) 258.5 258.5 258.5
Service 25.0 25.0 25.0
charges and
other
recoveries
Property 206.7 206.7 84.5 291.2
services
income (d)
Proceeds of 1.9 1.9 5.2 7.1
sales of
trading
properties
------------- ------------- ------------- ------------- ------------- -------------
GROSS 283.5 206.7 1.9 492.1 89.7 581.8
PROPERTY
INCOME
Rents payable (9.4) (48.6) (58.0) (26.6) (84.6)
======== ======== ======== ======== ======== ========
Other direct (30.3) (128.0) (158.3) (158.3)
property or
contract
expenditure (e)
Indirect (18.4) (2.1) (0.7) (21.2) (5.7) (26.9)
property or
contract
expenditure (f)
Bid costs (0.7) (0.7) (1.8) (2.5)
======== ======== ======== ======== ======== ========
(48.7) (130.8) (0.7) (180.2) (7.5) (187.7)
Costs of (0.8) (0.8) (2.1) (2.9)
sales of
trading
properties
------------- ------------- ------------- ------------- ------------- -------------
225.4 27.3 0.4 253.1 53.5 306.6
Depreciation (1.9) (7.4) (9.3) (6.5) (15.8)
Amortisation - (1.1) (1.1) (1.1)
of goodwill
------------- ------------- ------------- ------------- ------------- -------------
223.5 18.8 0.4 242.7 47.0 289.7
Profit on 10.6 0.1 10.7 8.9 19.6
disposals of
properties
------------- ------------- ------------- ------------- ------------- -------------
SEGMENT 234.1 18.9 0.4 253.4 55.9 309.3
PROFIT
======== ======== ======== ======== ========
Common costs (g) (6.0)
Group (6.3)
reorganisation
costs
-------------
========
OPERATING 277.4
PROFIT
Profit on 19.6
disposals of
properties
========
PROFIT ON 297.0
ORDINARY
ACTIVITIES
BEFORE
INTEREST AND
TAXATION
========
Six months Six months Six months
to 30.9.01 to 30.9.01 to 30.9.01
(unaudited/ (audited/ (audited/
restated) restated) restated)
Total
Property Property
Investment Outsourcing Total
£m £m £m
(i) PROFIT AND LOSS ACCOUNT (Note (a)) (Note (b))
------------- ------------- -------------
Rental income (c) 262.0 262.0
Service charges and other recoveries 25.9 25.9
Property services income (d) 147.3 147.3
Proceeds of sales of trading properties -
------------- ------------- -------------
GROSS PROPERTY INCOME 287.9 147.3 435.2
Rents payable (8.4) (46.4) (54.8)
======== ======== ========
Other direct property or contract expenditure (e) (30.4) (66.0) (96.4)
Indirect property or contract expenditure (f) (14.1) (9.0) (23.1)
Bid costs (6.7) (6.7)
======== ======== ========
(44.5) (81.7) (126.2)
Costs of sales of trading properties
------------- ------------- -------------
235.0 19.2 254.2
Depreciation (2.0) (5.2) (7.2)
Amortisation of goodwill - (1.3) (1.3)
------------- ------------- -------------
233.0 12.7 245.7
Profit on disposals of properties 3.5 - 3.5
------------- ------------- -------------
SEGMENT PROFIT 236.5 12.7 249.2
======== ========
Common costs (g) (6.7)
Group reorganisation costs -
-------------
========
OPERATING PROFIT 239.0
Profit on sales of properties 3.5
========
PROFIT ON ORDINARY ACTIVITIES BEFORE
INTEREST AND TAXATION 242.5
========
Year to Year to Year to Year to Year to Year to
31.3.02 31.3.02 31.3.02 31.3.02 31.3.02 31.3.02
(audited) (audited) (audited) (audited) (audited) (audited)
Total
Property Property Property Joint
Investment Outsourcing Trading Group Venture Total
£m £m £m £m £m £m
(i) PROFIT (Note (a)) (Note (b)) (Note (b))
AND LOSS
ACCOUNT
------------- ------------- ------------- ------------- ------------- -------------
Rental income (c) 525.9 525.9 525.9
Service 53.1 53.1 53.1
charges and
other
recoveries
Property 357.7 357.7 48.5 406.2
services
income (d)
Proceeds of 40.4 40.4 40.4
sales of
trading
properties
------------- ------------- ------------- ------------- ------------- -------------
GROSS 579.0 357.7 40.4 977.1 48.5 1,025.6
PROPERTY
INCOME
Rents payable (17.4) (92.7) - (110.1) (14.4) (124.5)
======== ======== ======== ======== ======== ========
Other direct (62.0) (187.9) - (249.9) - (249.9)
property or
contract
expenditure (e)
Indirect (29.4) (16.7) (1.5) (47.6) (3.0) (50.6)
property or
contract
expenditure (f)
Bid costs - (6.7) - (6.7) (8.0) (14.7)
======== ======== ======== ======== ======== ========
(91.4) (211.3) (1.5) (304.2) (11.0) (315.2)
Costs of (34.6) (34.6) (34.6)
sales of
trading
properties
------------- ------------- ------------- ------------- ------------- -------------
470.2 53.7 4.3 528.2 23.1 551.3
Depreciation (4.0) (10.9) - (14.9) (3.8) (18.7)
Amortisation - (2.3) - (2.3) - (2.3)
of goodwill
------------- ------------- ------------- ------------- ------------- -------------
466.2 40.5 4.3 511.0 19.3 530.3
------------- ------------- ------------- ------------- ------------- -------------
Profit on 10.1 3.3 - 13.4 - 13.4
disposals of
properties
------------- ------------- ------------- ------------- ------------- -------------
SEGMENT 476.3 43.8 4.3 524.4 19.3 543.7
PROFIT
======== ======== ======== ======== ========
Common costs (g) (13.5)
Group
reorganisation
costs
-------------
========
OPERATING 516.8
PROFIT
Profit on 13.4
disposals of
properties
========
PROFIT ON
ORDINARY
ACTIVITIES
BEFORE
INTEREST AND 530.2
TAXATION
========
30.9.02 30.9.02 30.9.02 30.9.02
(unaudited) (unaudited) (unaudited) (unaudited)
Total
Property Property Property
Investment Outsourcing Trading Total
(ii) NET ASSETS £m £m £m £m
------------- ------------- ------------- -------------
Properties in development programme 885.6 - - 885.6
Other investment properties 6,843.5 - - 6,843.5
Operating properties - 478.2 - 478.2
Other fixed assets 17.8 65.9 - 83.7
------------- ------------- ------------- -------------
FIXED ASSETS 7,746.9 544.1 - 8,291.0
INVESTMENT IN JOINT VENTURE - 131.7 - 131.7
NET CURRENT (LIABILITIES)/ASSETS
(excluding financing and dividends) (45.3) (25.4) 38.4 (32.3)
------------- ------------- ------------- -------------
7,701.6 650.4 38.4 8,390.4
======== ======= ========
FINANCING AND DIVIDENDS (2,586.5)
LONG TERM LIABILITIES AND PROVISIONS (157.7)
-------------
NET ASSETS 5,646.2
========
30.9.01 30.9.01 30.9.01 30.9.01
(unaudited/ (unaudited/ (unaudited/ (unaudited/
restated) restated) restated) restated)
Total
Property Property
Investment Outsourcing Trading Total
(ii) NET ASSETS £m £m £m £m
------------- ------------- ------------- -------------
Properties in development programme 1,033.9 - - 1,033.9
Other investment properties 6,860.4 - - 6,860.4
Operating properties 361.8 - 361.8
Other fixed assets 16.0 61.1 - 77.1
------------- ------------- ------------- -------------
FIXED ASSETS 7,910.3 422.9 - 8,333.2
INVESTMENT IN JOINT VENTURE - - - -
NET CURRENT (LIABILITIES)/ASSETS
(excluding financing and dividends) (33.6) (104.5) 45.6 (92.5)
------------- ------------- ------------- -------------
7,876.7 318.4 45.6 8,240.7
========= ======== ========
FINANCING AND DIVIDENDS (2,022.2)
LONG TERM LIABILITIES AND PROVISIONS (167.2)
-------------
NET ASSETS 6,051.3
========
31.3.02 31.3.02 31.3.02 31.3.02
(audited) (audited) (audited) (audited)
Total
Property Property Property
Investment Outsourcing Trading Total
(ii) NET ASSETS £m £m £m £m
------------- ------------- ------------- -------------
Properties in development programme 1,050.1 - - 1,050.1
Other investment properties 6,749.9 - - 6,749.9
Operating properties - 428.9 - 428.9
Other fixed assets 17.7 66.5 - 84.2
------------- ------------- ------------- -------------
FIXED ASSETS 7,817.7 495.4 - 8,313.1
INVESTMENT IN JOINT VENTURE - 188.8 - 188.8
NET CURRENT (LIABILITIES)/ASSETS
(excluding financing and dividends) (275.5) (22.2) 43.7 (254.0)
------------- ------------- ------------- -------------
7,542.2 662.0 43.7 8,247.9
========= ======== ========
FINANCING AND DIVIDENDS (2,058.6)
LONG TERM LIABILITIES AND PROVISIONS (152.7)
-------------
NET ASSETS 6,036.6
========
NOTES
(a) Includes the results of investment properties under development and the
group's share of the results of its development partnerships (Note 20).
(b) No 30 September 2001 comparatives exist for the joint venture and
property trading segments, as the activities of the joint venture commenced
after that date and the results of property trading were not significantly
material to be included in the above analysis.
(c) As a consequence of adopting UITF28, rental income includes £2.2m (30
September 2001 £1.9m; 31 March 2002 £3.5m) of rent receivable allocated to rent
free periods falling in the respective financial periods.
(d) Property services income represents unitary charges and the recovery of
other direct property or contract expenditure reimbursable by customers.
(e) Other direct property or contract expenditure are costs incurred in the
direct maintenance and upkeep of properties and in providing services in
compliance with outsourcing contracts, together with additional costs incurred
at the request of customers and reimbursable by them. Void costs, which include
those relating to empty properties pending redevelopment and refurbishment
costs, and costs of investigating potential development schemes which are not
proceeded with are also included.
(f) Indirect property or contract expenditure are indirect costs of
managing the portfolio. It includes the costs of staff involved in development
projects, together with the costs of rent reviews and renewals, relettings of
properties and all office administration and operating costs other than common
costs.
(g) Common costs comprise all costs associated with central group management
including company secretarial and non-executive directors, their premises costs
and non-segment related depreciation costs.
Six months Six months Six months Six months Year to Year to Year to
to 30.9.02 to 30.9.02 to 30.9.02 to 30.9.01 31.3.02 31.3.02 31.3.02
(unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited) (audited)
(restated)
Group Joint Total Total Group Joint Venture Total
Venture
3. FINANCE £m £m £m £m £m £m £m
------------- ------------- ------------- ------------- ------------- -------------- --------------
INTEREST
RECEIVABLE
Short 0.3 - 0.3 2.0 3.3 0.8 4.1
term
deposits
Other 2.5 1.3 3.8 0.4 0.9 0.9
interest
receivable
Loan to 4.9 - 4.9 - -
joint
venture
------------- ------------- ------------- ------------- ------------- -------------- --------------
7.7 1.3 9.0 2.4 4.2 0.8 5.0
======== ======== ======== ======= ======== ======= =======
INTEREST
PAYABLE
Borrowings 66.7 16.2 82.9 74.6 132.6 20.0 152.6
not
wholly
repayable
within
five
years
Borrowings 27.1 19.4 46.5 7.0 32.6 3.7 36.3
wholly
repayable
within
five
years
Other 1.5 1.8 3.3 1.3 3.0 0.9 3.9
interest
payable
------------- ------------- ------------- ------------- ------------- -------------- --------------
95.3 37.4 132.7 82.9 168.2 24.6 192.8
Loans 4.9 4.9 - - -
from
joint
venture
partners
Deficit 28.2 28.2 - -
on
purchase
and
redemption of
convertible
bonds
Less: (16.9) - (16.9) (9.1) (21.1) - (21.1)
Capitalised
in
relation
to
properties
under
development
------------- ------------- ------------- ------------- ------------- -------------- --------------
106.6 42.3 148.9 73.8 147.1 24.6 171.7
======== ======== ======== ======= ======== ======= =======
Interest has been capitalised at the group's pre-tax weighted average borrowing
rate for non-specific borrowings for the period of 8.5% (2001 8.5%).
Non-specific borrowings exclude the bank debt which is specific to the PRIME
contract.
Interest payable on borrowings wholly repayable within five years includes £6.2m
of the arrangement fees of £8.4m, relating to £1.5bn of new committed bank
facilities (Note 12), written off in the current period with the remainder of
£2.2m being amortised over the remaining life of the facilities.
Six months Six months Year to
to 30.9.02 to 30.9.01 31.3.02
(unaudited) (unaudited) (audited)
(restated)
4. TAXATION £m £m £m
Current tax
Corporation tax on group profit for the period at 30% 31.0 45.3 92.8
(2002 30%)
Adjustments in respect of previous years 0.6 0.9 0.2
Share of joint venture's taxation 6.5 - -
--------------- --------------- ---------------
Current tax including current tax on property sales 38.1 46.2 93.0
Deferred tax - group (Note 14) 4.2 3.2 6.9
Deferred tax - joint venture 1.7 - -
--------------- --------------- ---------------
Tax charge for the period 44.0 49.4 99.9
======== ======= =======
Factors affecting the tax charge for the period
The tax assessed for the year is lower than the standard
rate of corporation tax in the UK of 30%
(2001 30%)
The differences are explained below:
Profit on ordinary activities before taxation 157.1 171.1 363.5
======== ======= =======
Profit on ordinary activities multiplied by the standard 47.1 51.3 109.1
rate of corporation tax at 30%
Expenses disallowed 3.0 6.0 2.9
Reduced tax on property disposals 0.5 - (2.3)
Deferred tax - principally capital allowances and (12.4) (10.2) (17.6)
capitalised interest
Deferred tax - joint venture (1.7) - -
Other items 1.6 (0.9) 0.9
--------------- --------------- ---------------
Current tax including current tax on property sales 38.1 46.2 93.0
======== ======= =======
The joint venture's taxation is after disallowing depreciation charges but
without the availability of capital allowances.
Included in the tax charge is a net credit of £2.0m (2001 charge £0.2m)
attributable to property sales, bid costs and the exceptional items analysed in
the profit and loss account.
Dividends Dividends Dividends Profit and loss Profit and loss Profit and loss
per share per share per share account account account
pence pence pence charge charge charge
Six months Six months Year to Six months Six months Year to
to 30.9.02 to 30.9.01 31.3.02 to 30.9.02 30.9.01 31.3.02
unaudited unaudited audited unaudited unaudited audited
5. DIVIDENDS £m £m £m
Interim - 9.50 9.05 9.05 44.1 47.5 47.5
ordinary
shares
- B shares - -
Final - 24.95 130.9
ordinary
shares
Cumulative - -
- redeemable
preference
shares
Additional 1.6 0.1 -
prior
period
dividends
------------- ------------- ------------- ------------- ------------- -------------
9.50 9.05 34.00 45.7 47.6 178.4
======== ======== ======== ======== ======== ========
Additional prior period dividends relate to increases in share capital arising
after the respective prior period ends but before their corresponding dividend
record dates.
6. EARNINGS Profit after Profit after Profit after Weighted Weighted Weighted
PER SHARE taxation and taxation and taxation and average average average
preference preference preference number of number of number of
dividends dividends dividends ordinary ordinary ordinary
shares shares shares
Six months Six months Year to Six months Six months Year to
to 30.9.02 to 30.9.01 31.3.02 to 30.9.02 to 30.9.01 31.3.02
unaudited unaudited audited unaudited unaudited audited
(restated)
EARNINGS PER £m £m £m m m m
SHARE
Earnings per 113.1 121.7 263.6 521.7 524.2 524.2
share
Effect of
dilutive
securities:
Convertible - 5.5 10.9 - 29.7 29.7
bonds
Share options 0.2 0.3 0.2
------------- ------------- ------------- ------------- ------------- -------------
Diluted 113.1 127.2 274.5 521.9 554.2 554.1
earnings per
share
======== ======== ======== ======== ======== ========
ADJUSTED
EARNINGS PER
SHARE
Earnings per 113.1 121.7 263.6 521.7 524.2 524.2
share
Effect of
results of
property
disposals,
bid costs and 15.3 3.9 1.2
exceptional
items after
taxation
Effect of
deferred tax
arising from
capital
allowances on (1.6) 0.6 5.9
investment
properties
------------- ------------- ------------- ------------- ------------- -------------
Adjusted 126.8 126.2 270.7 521.7 524.2 524.2
earnings per
share
======== ======== ======== ======== ======== ========
Diluted 113.1 127.2 274.5 521.9 554.2 554.1
earnings per
share
Effect of
results of
property
disposals,
bid costs and 15.3 3.9 1.2
exceptional
items after
taxation
Effect of
deferred tax
arising from
capital
allowances on (1.6) 0.6 5.9
investment
properties
------------- ------------- ------------- ------------- ------------- -------------
Adjusted 126.8 131.7 281.6 521.9 554.2 554.1
diluted
earnings per
share
======== ======== ======== ======== ======== ========
6. EARNINGS PER SHARE Earnings Earnings Earnings
per share per share per share
Six months Six months Year to
to 30.9.02 to 30.9.01 31.3.02
unaudited unaudited audited
(restated)
EARNINGS PER SHARE pence pence pence
Earnings per share 21.69 23.22 50.27
Effect of dilutive securities:
Convertible bonds
Share options
------------- ------------- -------------
Diluted earnings per share 21.67 22.96 49.54
======== ======== ========
ADJUSTED EARNINGS PER SHARE
Earnings per share 21.69 23.22 50.27
Effect of results of property disposals,
bid costs and exceptional items after taxation 2.93 0.74 0.24
Effect of deferred tax arising from capital
allowances on investment properties (0.31) 0.11 1.10
------------- ------------- -------------
Adjusted earnings per share 24.31 24.07 51.61
======== ======== ========
Diluted earnings per share 21.67 22.96 49.54
Effect of results of property disposals,
bid costs and exceptional items after taxation 2.93 0.70 0.23
Effect of deferred tax arising from capital
allowances on investment properties (0.31) 0.11 1.04
------------- ------------- -------------
Adjusted diluted earnings per share 24.29 23.77 50.81
======== ======== ========
As explained in Note 12, £196.8m of the nominal value of the group's convertible
bonds were purchased and redeemed during the period at a loss over book value of
£28.2m. FRS14 requires the post-tax effect of all changes in income or expense
that would arise from conversions into dilutive potential ordinary shares to be
taken into account in deriving earnings to be used in the calculation of diluted
earnings per share. For the six months ended 30 September 2002, the convertible
bonds have not been included in the calculation of diluted earnings per share as
adjusting earnings by the loss on redemption results in the convertible bonds
becoming anti-dilutive.
In accordance with FRS14 'Earnings per share', the earnings per share for prior
periods have not been restated for the effects of the group's Scheme of
Arrangement referred to in Note 15.
Profits on the sales of properties, bid costs and exceptional items (comprising
the deficit arising on the purchase and redemption of convertible bonds and the
costs or reorganising the group) are excluded from adjusted earnings as these
are potentially non-recurring items.
The additional deferred tax arising from capital allowances on investment
properties is also excluded as the group's experience is that it is very unusual
for plant allowances to be claimed back through balancing charges on the
disposal of a property.
Adjusted earnings and adjusted diluted earnings per share have also been
disclosed, therefore, to show measures of earnings that better reflect the
principal operating activities of the group.
Equity Equity Equity
7. NET share- share- share- Number of Number of Number of
ASSETS holders' holders' holders' ordinary ordinary ordinary Net Net Net
PER SHARE assets assets assets
funds funds funds shares shares shares per share per share per share
30.9.02 30.9.01 31.3.02 30.9.02 30.9.01 31.3.02 30.9.02 30.9.01 31.3.02
unaudited unaudited audited unaudited unaudited audited unaudited unaudited audited
(restated) (restated)
£m £m £m m m m pence pence pence
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net 5,615.8 6,051.3 6,036.6 464.4 524.2 524.3 1209 1154 1151
assets
per
share
Effect 120.5 122.3 128.3 26 23 25
of
deferred
tax
arising
from
capital
allowances
on
investment
properties
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Adjusted 5,736.3 6,173.6 6,164.9 464.4 524.2 524.3 1235 1177 1176
net
assets
per
share
====== ====== ====== ====== ====== ====== ====== ====== ======
Net 5,615.8 6,051.3 6,036.6 464.4 524.2 524.3 1209 1154 1151
assets
per
share
Adjustments 243.1 243.3 - 29.7 29.7
for
convertible
bonds
Exercise 0.1 1.2 0.8
of
outstanding
share
options
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Diluted 5,615.8 6,294.4 6,279.9 464.5 555.1 554.8 1209 1134 1132
net
assets
per
share
====== ====== ====== ====== ====== ====== ====== ====== ======
Diluted 5,615.8 6,294.4 6,279.9 464.5 555.1 554.8 1209 1134 1132
net
assets
per
share
Effect 120.5 122.3 128.3 26 22 23
of
deferred
tax
arising
from
capital
allowances
on
investment
properties
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Adjusted 5,736.3 6,416.7 6,408.2 464.5 555.1 554.8 1235 1156 1155
diluted
net
assets
per
share
====== ====== ====== ====== ====== ====== ====== ====== ======
The additional deferred tax liability arising from capital allowances on
investment properties is also excluded from the calculations of the adjusted
values as the group's experience is that deferred tax on capital allowances in
relation to properties is unlikely to crystallise in practice.
Analysed Analysed
8. PROPERTIES Leasehold Leasehold between between
Freehold Over 50 years Under 50 years Total Investment Operating
to run to run Properties Properties
£m £m £m £m £m £m
-------------- --------------- --------------- --------------- --------------- ---------------
BOOK
AMOUNT/COST
At 1 April 6,056.9 2,066.2 114.9 8,238.0 7,801.1 436.9
2002
Additions 178.8 70.8 13.7 263.3 202.0 61.3
Reclassifications 2.4 (2.4)
Disposals (177.4) (123.0) (1.7) (302.1) (294.1) (8.0)
-------------- --------------- --------------- --------------- --------------- ---------------
6,060.7 2,014.0 124.5 8,199.2 7,709.0 490.2
Unrealised 26.7 (2.7) (2.1) 21.9 21.9 -
surplus/(deficit)
on
valuation
(Note 16)
-------------- --------------- --------------- --------------- --------------- ---------------
At 30 6,087.4 2,011.3 122.4 8,221.1 7,730.9 490.2
September 2002
========= ========= ========= ========= ========= =========
ACCUMULATED
DEPRECIATION
At 1 April (5.9) (1.1) (2.1) (9.1) (1.1) (8.0)
2002
Depreciation (2.5) (0.2) (2.0) (4.7) (0.7) (4.0)
for the period
-------------- --------------- --------------- --------------- --------------- ---------------
At 30 (8.4) (1.3) (4.1) (13.8) (1.8) (12.0)
September 2002
========= ========= ========= ========= ========= =========
NET BOOK
AMOUNT
At 30 6,079.0 2,010.0 118.3 8,207.3 7,729.1 478.2
September 2002
(unaudited)
========= ========= ========= ========= ========= =========
At 30 6,060.6 2,084.7 110.8 8,256.1 7,894.3 361.8
September 2001
(unaudited)
========= ========= ========= ========= ========= =========
At 31 March 6,051.0 2,065.1 112.8 8,228.9 7,800.0 428.9
2002 (audited)
========= ========= ========= ========= ========= =========
Investment properties are included at their valuations at 30 September 2002 of
£7,743.1m (30 September 2001: £7,904.1m; 31 March 2002: £7,810.9m) as determined
by the group's professional valuers, Knight Frank, less the amount of £14.0m (30
September 2001: £9.8m; 31 March 2002: £10.9m) included in prepayments and
accrued income under UITF28 in Note 10. Consequently, the valuation surplus of
£24.9m referred to under 'Valuation' exceeds the above surplus by the UITF28
movement of £3.1m during the period.
Operating properties are carried at depreciated cost and not revalued.
Freeholds include £382.3m (2001 £376.7m) of investment property leaseholds with
unexpired terms exceeding 900 years; leaseholds with under 50 years to run
include £13.0m (2001 £10.7m) with unexpired terms of 20 years or less.
The historical cost of investment properties is £4,366.0m (2001 £4,123.2m).
Certain of the assets acquired under the PRIME Agreement are subject to a first
charge granted to the DWP.
The amount of this charge at 30 September 2002 is £6.5m (2001 £19.5m) which
reduces to nil on a straight line basis after a further six months. The charge
secures amounts which would become payable to the DWP on early termination of
the PRIME Agreement in the relevant year.
At 30 September 2002, the cumulative capitalised interest in investment and
operating properties amounts to £57.5m (2001 £28.7m). The corresponding amount
for trading properties is £0.6m (2001 £0.2m).
9. DEVELOPMENT PROGRAMME
The movement on investment properties in respect of development programme which
forms part of the group's development pipeline, excluding the BBC developments
and trading properties, included above are as follows:
£m
----------------
At 1 April 2002: at open market value - as previously reported 1,050.1
Less: Prior year adjustment to adopt revised definition of development programme (259.3)
----------------
At 1 April 2002 restated 790.8
Properties transferred into the development pipeline during the six months
(at cost or at 1 April 2002 valuation) 3.2
Expenditure during the year including development property acquisitions 145.4
Capitalised interest 14.0
Deficit on valuation (29.9)
----------------
923.5
Developments completed, let and transferred out of development pipeline
during the six months (37.9)
----------------
At 30 September 2002: at open market value 885.6
=========
Developments are taken out of the development programme when physically
completed and 95% let. Schemes completed during the period comprise retail parks
at Cheetham Hill, Manchester, Phase I of Almondvale, Livingston and a new unit
at Markham Road, Chesterfield.
In addition to the above, investment properties include properties to the value
of £234.6m in respect of proposed developments.
10. DEBTORS 30.9.02 30.9.01 31.3.02
unaudited unaudited audited
(restated)
£m £m £m
------------ ------------ ------------
Trade debtors 107.3 116.5 96.1
Property sales debtors 115.9 3.2 27.9
Other debtors 51.7 47.7 55.1
Prepayments and accrued income 89.2 52.7 81.2
------------ ------------ ------------
364.1 220.1 260.3
======== ========== ========
Prepayments and accrued income include £14.0m (2001 £9.8m) in respect of UITF28
11. CREDITORS FALLING DUE WITHIN ONE YEAR 30.9.02 30.9.01 31.3.02
unaudited unaudited audited
(restated)
£m £m £m
------------ ------------ ------------
Debentures and loans 1.3 26.4 1.4
Overdraft - 5.6 21.8
Trade and other creditors 80.6 47.1 58.5
Taxation and Social Security 65.3 83.1 68.4
Proposed dividend 44.1 47.5 130.8
Capital creditors 74.2 50.0 108.3
Accruals and deferred income 246.7 257.2 301.7
------------ ------------ ------------
512.2 516.9 690.9
======== ======== ========
12. BORROWINGS FALLING DUE AFTER MORE THAN ONE YEAR 30.9.02 30.9.01 31.3.02
unaudited unaudited audited
£m £m £m
------------------ ------------------ ------------------
Debentures, bonds and loans 2,581.8 1,756.2 1,745.4
Falling due within one year (Note 11) (1.3) (26.4) (1.4)
------------------ ------------------ ------------------
2,580.5 1,729.8 1,744.0
Convertible bonds - 243.1 243.3
------------------ ------------------ ------------------
2,580.5 1,972.9 1,987.3
========== ========== ==========
Redemption notices were issued for both the 6 per cent Guaranteed Convertible
Bonds 2007 and the 7 per cent Convertible Bonds 2008 on 22 May 2002 informing
bondholders that all the bonds outstanding as at 27 June 2002 would be redeemed
at 100 per cent of the original issue price together with any accrued interest.
Bondholders were entitled to exercise their rights to convert the bonds up to
the close of business on 20 June 2002.
In the case of the 6 per cent Guaranteed Convertible Bonds 2007, bondholders
were entitled to convert their bonds into ordinary shares of Land Securities PLC
at the exchange price of 874p per ordinary share. In the period 1 April 2002 to
20 June 2002, bonds with a nominal value of £27.8m were converted into 3.2m
fully paid shares of £1 each. Bonds with a nominal value of £181.0m were
purchased by Land Securities PLC in the open market and cancelled. Bonds with a
nominal value of £1.3m were redeemed.
In the case of the 7 per cent Convertible Bonds 2008, bondholders were entitled
to convert their bonds into ordinary shares of Land Securities PLC at the
conversion price of 640p per ordinary share. In the period 1 April 2002 to 20
June 2002, bonds with a nominal value of £20.2m were converted into 3.2m fully
paid shares of £1 each. Bonds with a nominal value of £15.8m were purchased by
Land Securities PLC in the open market and cancelled.
As shown in Note 3, a deficit of £28.2m arose on the purchase and redemption of
the convertible bonds.
In May 2002, the group put in place £1.5bn of additional committed bank
facilities.
13. OTHER CREDITORS FALLING DUE AFTER MORE THAN 30.9.02 30.9.01 31.3.02
ONE YEAR unaudited unaudited audited
£m £m £m
------------------ ------------------ ------------------
Deferred income 17.3 19.3 16.7
Other creditors 5.7 10.6 6.1
------------------ ------------------ ------------------
23.0 29.9 22.8
========== ========== ==========
14. PROVISIONS FOR LIABILITIES AND CHARGES Dilapidations Deferred Total
Taxation
£m £m £m
------------------ ------------------ ------------------
At 1 April 2002 (audited) 5.3 124.6 129.9
Net charge for the period 0.6 13.5 14.1
Released in respect of property disposals during (9.3) (9.3)
the period
------------------ ------------------ ------------------
At 30 September 2002 (unaudited) 5.9 128.8 134.7
========== ========== ==========
The amount of tax on capital gains which would become payable in the event of
sales of the investment properties at the amounts at which they are stated in
Note 9 is in the region of £450m (2001 £523m).
The deferred taxation provision which would be released in such circumstances,
on the assumption that no balancing charge would be incurred, is £121.7m (2001
£122.3m).
15. CALLED UP
SHARE CAPITAL Authorised Authorised Authorised Allotted and Allotted and Allotted and
Fully Paid Fully Paid Fully Paid
30.9.02 30.9.01 31.3.02. 30.9.02 30.9.01 31.3.02
unaudited unaudited audited unaudited unaudited audited
No. No. No.
m m m £m £m £m
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
LAND
SECURITIES PLC
Ordinary 720.0 720.0 524.2 524.3
shares
of £1
each
LAND
SECURITIES
GROUP
PLC
Ordinary 600.0 46.4
shares
of 10p
each
Non-equity B 540.0 30.3
shares
of
£1.02
each
Redeemable 0.1 0.1
preference
shares
of £1
each
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
76.8 524.2 524.3
========= ========= ========= ========= ========= =========
The sequence of events relating to the changes in the share capitals of the
company and the predecessor company respectively, arising from the Scheme of
Arrangement described in Note 1 were as follows:
Land Securities Group PLC
7 February 2002 The company was incorporated with an authorised
share capital of 50,000 ordinary shares of £1 each
and two shares were issued.
3 July 2002 The authorised share capital was increased to
£100,000 by the creation of 50,000 redeemable
preference shares of £1 each which were all issued
at par.
14 July 2002 The authorised share capital was increased from
£100,000 to £4,648,850,000 by the creation of
409,795,000,000 additional ordinary shares of 1p
each and 540,000,000 B shares of 102p each
Each issued ordinary share of £1 each was
sub-divided into 100 ordinary shares of 1p each
and a further 1,166 ordinary shares were issued at
par.
All issued and unissued ordinary shares of 1p each
were consolidated into shares of £6.83 each
resulting in the issued share capital being
consolidated into two ordinary shares of £6.83
each.
6 September 2002 464,442,461 ordinary shares of £6.83 each and
530,791,384 B shares of £1.02p each with a total
nominal value of £3,713,549,221 were issued in
consideration for 100% of the issued ordinary
share capital of the predecessor company.
17 September 2002 Under a Court approved capital reduction:
a) the nominal value of the ordinary shares was
reduced from £6.83 each to 10p each
b) 501,057,544 of the B shares were cancelled and
£511,078,695 was returned to shareholders.
Land Securities PLC
The movements in its issued share capital during the six months ended 30
September 2002 were:
No of Shares
----------------
At 1 April 2002 524,345,045
Issued on the exercise of options under:
Savings related share option schemes 51,499
Executive share option scheme 62,750
On the conversion of:
6% Guaranteed Convertible Bonds due 2007 3,176,950
7% Convertible Bonds due 2008 3,155,128
Issued to facilitate the transfer of the shares to the company under the Scheme of Arrangement 12
----------------
At 30 September 2002 530,791,384
==========
On 6 September 2002 all of the 530,791,384 ordinary shares of £1 each in issue
were acquired by Land Securities Group PLC as part of the Scheme of Arrangement
in exchange for 464,442,461 ordinary shares of £6.83 each and 530,791,384 B
shares of £1.02 each of that company.
The holders of B shares are not entitled to received notification of any general
meeting of Land Securities Group PLC, or to attend, speak or vote at any such
meeting. B shares carry the right to a dividend of 70% of six month LIBOR paid
twice yearly. In the event of the winding up of Land Securities Group PLC, the
holders of B shares will be entitled to 102p in respect of each B share held
together with the relevant proportion of the dividend payable.
The holders of B shares may elect to have their shares redeemed at six monthly
intervals, the first redemption date being 17 April 2003. Land Securities Group
PLC may, on giving notice in writing to the holders of B shares, redeem for
£1.02 per share all, but not some, of the B shares in issue to that date.
16.SHAREHOLDERS Share Share Share
FUNDS Capital Capital Capital
Ordinary Non-equity Redeemable Share Capital Profit
Shares B preference premium redemption Revaluation Other and Loss Total
shares shares account reserve reserve reserves account
£m £m £m £m £m £m £m £m £m
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 1 524.3 - - 314.9 36.0 3,376.9 550.4 1,234.1 6,036.6
April
2002
(audited)
Proforma (314.9) (36.0) 350.9
restatement
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 1 524.3 - - - - 3,376.9 901.3 1,234.1 6,036.6
April
2002 as
restated
Shares
issued
prior
to
capital 6.5 0.1 42.3 48.9
restruct
ure
(Note 15)
Transfer (550.4) 550.4
to
profit
and
loss
account
Capital 2,641.3 541.4 (42.3) (350.9) (2,789.5)
restructure
Reduction of
capital
and
repayment (3,125.7) (511.1) 3,125.7 (511.1)
of B
shares
Unrealised
surplus
on
revaluation
of 21.9 21.9
investment
properties
(Note 8)
Realised
on
disposals of
investment (243.5) 243.5
properties
Taxation
on
revaluation
surpluses
realised
on
disposals of
investment (17.5) (17.5)
properties
Retained 67.4 67.4
profit
for the
period
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30 46.4 30.3 0.1 - - 3,155.3 - 2,414.1 5,646.2
September
2002
(unaudited)
======= ======= ======= ======= ======= ======= ====== ======= ======
Comprising:
Equity 46.4 - - 3,155.3 2,414.1 5,615.8
shareholders'
funds
Non-equity 30.3 0.1 30.4
shareholders'
funds
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
46.4 30.3 0.1 - - 3,155.3 - 2,414.1 5,646.2
====== ====== ====== ====== ====== ====== ====== ====== ======
The reserves at 1 April 2002 have been restated under merger accounting rules to
reflect the group reconstruction as explained in Note 1.
17. FINANCIAL ASSETS AND LIABILITIES Book Value Book Value Book Value Fair Value Fair Value Fair Value
30.9.02 30.9.01 31.3.02 30.9.02 30.9.01 31.3.02
unaudited unaudited audited unaudited unaudited audited
£m £m £m £m £m £m
---------- ---------- ---------- ---------- ---------- ----------
The group's financial assets and liabilities
and their fair values are:
FINANCIAL ASSETS
Short term investments and cash 71.1 112.9 72.3 71.1 112.9 72.3
FINANCIAL LIABILITIES
Debentures, bonds, other loans and overdraft (2,581.8) (1,761.8) (1,767.2) (3,148.2) (2,219.8) (2,205.6)
Convertible bonds - (243.1) (243.3) - (271.0) (274.9)
FINANCIAL INSTRUMENTS
Interest rate swaps - - - (78.9) (13.2) (4.9)
---------- ---------- ---------- ---------- ---------- ----------
(2,510.7) (1,892.0) (1,938.2) (3,156.0) (2,391.1) (2,413.1)
Excess of fair value over book value (645.3) (499.1) (474.9)
---------- ---------- ---------- ---------- ---------- ----------
(3,156.0) (2,391.1) (2,413.1) (3,156.0) (2,391.1) (2,413.1)
======== ======== ======== ======== ======== ========
Fair value has been calculated by taking the market value, where one is
available, or using a discounted cash flow approach for those financial assets
and liabilities that do not have a published market value. The difference
between book value and fair value will not result in any change to the cash
outflows of the group unless, at some stage in the future, borrowings are
purchased in the market, or repaid, at a price different to the nominal value.
The group has entered into a number of interest rate swaps. In each case the
group pays a fixed rate of interest and receives six-month LIBOR. The total
notional value of the interest rate swaps is £1.2bn of which £700m are currently
operational. The end dates of these swaps range from March 2012 to September
2030 and the interest rates range from 5.28% to 5.58%. In the case of four
swaps, which have a total notional value of £400m and end dates of June 2022 and
September 2030, the counterparties have the right to terminate the swaps mid-way
through the life of the swaps. Interest rate swaps with a notional value of
£500m were entered into during June 2002 with a start date of March 2003 and an
end date of March 2013 and interest rates ranging from 5.46% to 5.5%.
The weighted average cost of debt during the period was 8.3% (2001: 8.3%).
As the intention of these swaps is to fix the interest rates on existing and new
bank borrowings their values have not been incorporated into the financial
statements.
In addition there is a further swap which was taken out by Trillium to hedge the
secured bank loan which funds the PRIME contract. This swap has a maximum life
of 15.5 years and mirrors the repayment schedule for that bank loan. As part of
the fair value accounting for the acquisition of Trillium, this swap was marked
to market at a cost of £14.9m. The cost, which is included in the bank loan, is
being amortised over the life of the swap as a credit to interest payable.
The maturity and repayment profiles Financial Financial Financial Financial Financial Financial
of the group's financial assets and Assets Assets Assets Liabilities Liabilities Liabilities
liabilities and the expiry periods of its 30.9.02 30.9.01 31.3.02 30.9.02 30.9.01 31.3.02
undrawn committed borrowing facilities are: unaudited unaudited audited unaudited unaudited audited
£m £m £m £m £m £m
---------- ---------- ---------- ---------- ---------- ----------
One year or less, or on demand 71.1 112.9 72.3 1.3 32.0 23.2
More than one year, but no more than two years - - - 27.9 1.5 6.7
More than two years, but no more than five years - - - 1,345.8 321.5 537.6
More than five years - - - 1,206.8 1,649.9 1,443.0
---------- ---------- ---------- ---------- ---------- ----------
71.1 112.9 72.3 2,581.8 2,004.9 2,010.5
======== ======== ======== ======== ======== ========
Borrowing Borrowing Borrowing
The maturity and repayment profiles Facilities Facilities Facilities
of the group's financial assets and (undrawn) (undrawn) (undrawn)
liabilities and the expiry periods of its 30.9.02 30.9.01 31.3.02
undrawn committed borrowing facilities are: unaudited unaudited audited
£m £m £m
---------- ---------- ----------
One year or less, or on demand 700 - 250
More than one year, but no more than two years - - -
More than two years, but no more than five years 298 350 335
More than five years - - -
---------- ---------- ----------
998 350 585
===== ===== =====
The amount of debt that is repayable by instalments, where any of the
instalments fall due after more than five years, is not material.
18. JOINT VENTURE
The group has a 50% interest in the Telereal group of companies ('Telereal'),
which draws up accounts to 31 March. Telereal, a 50:50 joint venture between
Land Securities Trillium and The William Pears Group, acquired the majority of
the properties of British Telecommunications ('BT') on 13 December 2001.
Telereal is responsible for providing accommodation and estate management
services to BT in return for a total availability and service charge under a
30-year contract. Telereal was funded with £2.5bn to meet the consideration of
£2.4bn due to BT and other costs of £112m associated with bidding for and
mobilising the contract.
The funding was provided externally by way of securitisation of £1.8bn and bank
debt of £400m, both secured on Telereal's properties without any recourse to the
shareholders of Telereal, and an initial equity investment by the shareholders
of £292.8m shared equally. The property portfolio has been financed according to
the different occupational needs within the BT portfolio.
Six months Six months 13.12.01 13.12.01
to 30.09.02 to 30.09.02 to 31.03.02 to 31.03.02
Telereal Group's share Telereal Group's share
100% 50% 100% 50%
SUMMARY FINANCIAL INFORMATION OF TELEREAL £m £m £m £m
------------- ------------- ------------- -------------
Turnover 179.4 89.7 97.0 48.5
Operating profit 94.0 47.0 38.6 19.3
Depreciation (13.0) (6.5) (7.6) (3.8)
Profit on sales of investment properties 17.8 8.9 - -
Bid costs written off (3.6) (1.8) (16.0) (8.0)
Finance costs (net) (82.0) (41.0) (47.6) (23.8)
Profit(loss) before tax 29.8 14.9 (9.0) (4.5)
Profit/(loss) after tax 13.4 6.7 (9.0) (4.5)
======= ======= ======= =======
30.09.02 30.09.02 31.03.02 31.03.02
Telereal Group's share Telereal Group's share
100% 50% 100% 50%
£m £m £m £m
------------- ------------- ------------- -------------
Fixed assets - properties 2,119.8 1,059.9 2,386.8 1,193.4
Current assets 218.8 109.4 208.8 104.4
------------- ------------- ------------- -------------
2,338.6 1,169.3 2,595.6 1,297.8
======= ======= ======= =======
Securitisation (1,761.6) (880.8) (1,760.0) (880.0)
Bank debt (214.6) (107.3) (391.2) (195.6)
Other liabilities (99.0) (49.5) (66.8) (33.4)
======= ======= ======= =======
(2,075.2) (1,037.6) (2,218.0) (1,109.0)
------------- ------------- ------------- -------------
Net assets 263.4 131.7 377.6 188.8
======= ======= ======= =======
Financed by
Shareholders' equity 193.2 96.6 292.8 146.4
Reserves 70.2 35.1 84.8 42.4
------------- ------------- ------------- -------------
263.4 131.7 377.6 188.8
======= ======= ======= =======
The properties held by Telereal at 30 September 2002 are part of the 30-year
contract with BT and are held at cost to the group. During the period to 30
September 2002, Telereal sold its investment properties for a total
consideration of £270m. Part of the proceeds were used to repay debts secured
on those assets and part was returned to the partners.
The group's 50% share of the fair value of Telereal's financial liabilities as
30 September 2002 is £1,028.2m (31 March 2002 £1,042.8m).
The Telereal entities include two partnerships. Telereal Securitised Property
Limited Partnership and Telereal General Property Limited Partnership, which are
registered in England and Wales and whose accounts are dealt with in the group
financial statements by way of gross equity accounting and are consolidated in
the group's financial information as set out above.
19. HOLDING COMPANY
The balance sheet of the ultimate holding company, Land Securities Group PLC, as
at 30 September 2002 comprised:
£m
Investment in group undertaking (at cost) 4,087.1
Investments: short term deposits 0.9
Cash at bank 0.1
Debtor 0.2
Loan from group undertaking (512.8)
Proposed interim dividends (44.1)
---------
Total assets less liabilities 3,531.4
======
Called up share capital 76.8
Merger reserve 373.6
Profit and loss account 3,081.0
---------
Shareholders' funds 3,531.4
======
Attributable to:
Equity shareholders 3,501.0
Non-equity shareholders 30.4
---------
3,531.4
======
Land Securities Group PLC has adopted the same accounting policies as Land
Securities PLC except that it carries its investment in group undertaking at
cost.
20. MEMBERSHIP OF CERTAIN UNDERTAKINGS
During the period, the group has been a member of the following limited
partnerships, all of which are registered in England. The accounts of the
partnerships, drawn up to the dates indicated below, are proportionally
consolidated in the group's financial statements as joint arrangements.
Gross Gross Gross Gross Gross Gross
Assets Assets Assets Liabilities Liabilities Liabilities
Group Share 30.09.02 30.09.01 31.03.02 30.09.02 30.09.01 31.03.02
Partnership % £m £m £m £m £m £m
--------- --------- --------- --------- --------- ---------
Martineau Limited
Partnership
(31 December) 33 1/3 125.0 96.9 125.0 (3.7) (1.8) (4.8)
Martineau
Galleries Limited
Partnership (31 33 1/3 117.8 112.2 114.8 (2.5) (1.8) (1.7)
December)
Bull Ring Limited
Partnership
(31 December) 33 1/3 310.3 176.0 235.9 (160.7) (25.8) (85.9)
Gunwharf Quays
Limited
Partnership
(31 March) 50 131.1 93.6 117.0 (1.8) (1.6) (2.5)
Ebbsfleet Limited 50 35.3 26.5 26.5 (0.1) (13.4) (13.4)
Partnership (31
March)
--------- --------- --------- --------- --------- ---------
719.5 505.2 619.2 (168.8) (44.4) (108.3)
====== ====== ====== ====== ====== ======
Profit/(loss) Profit/(loss) Profit/(loss)
before tax before tax before tax
Six months Six months Year
to 30.09.02 to 30.09.01 to 31.03.02
Partnership £m £m £m
--------- --------- ---------
Martineau Limited Partnership
(31 December) 2.4 0.3 3.9
Martineau Galleries Limited
Partnership (31 December) 2.1 2.5 5.1
Bull Ring Limited Partnership
(31 December) (0.5) (0.1) (0.3)
Gunwharf Quays Limited Partnership
(31 March) 3.4 2.6 5.2
Ebbsfleet Limited Partnership (31 March) - - -
--------- --------- ---------
7.4 5.3 13.9
====== ====== ======
21. CONTINGENT LIABILITIES
The group has a contingent liability arising from a performance guarantee that
Land Securities PLC, as the parent company of Land Securities Trillium Limited,
has given, severally with its Telereal joint venture partner, for the
performance by Telereal Services Limited of its service obligations to BT
together with a guarantee related to transaction issues associated with the BT
outsourcing contract. The group's maximum liability under the guarantee is £50m
plus a further amount which is capped by reference to amounts either distributed
or available for distribution to each shareholder by certain of the Telereal
companies up to a further £50.7m. The transaction element of the guarantee is
capped at £10m. The maximum potential liability which the company could be
exposed to under such arrangements is capped at £110.7m. The total maximum
liability of £110.7m will, however, amortise over time in accordance with a
contractual formula included and defined in the agreement with BT. At 30
September 2002, the estimated amount of the group's exposure to the guarantee
was approximately £100.7m.
Review Report by the Auditors
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2002
INDEPENDENT REVIEW REPORT TO Land Securities Group PLC
Introduction
We have been instructed by the Company to review the financial information set
out above. We have read the other information contained in the interim report
and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibIlities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the Interim Report in accordance with Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions.
It is substantially less in scope than an audit performed in accordance with
Auditing Standards and therefore provides a lower level of assurance than an
audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2002.
PricewaterhouseCoopers
Chartered Accountants
London
20 November 2002
Land Securities
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