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Great Portland Ests. (GPOR)

  Print      Mail a friend       Annual reports

Tuesday 05 June, 2001

Great Portland Ests.

Final Results

Great Portland Estates PLC
5 June 2001

PART 1

PRELIMINARY RESULTS

The Directors of Great Portland Estates P.L.C. announce the results of the
Group for the year ended 31 March 2001.
 
Highlights follow:

- Adjusted earnings up 6% to 11.8p per share (2000: 11.1p)
- Dividend up 3% to 9.75p (2000: 9.5p)
- Net assets per share up 3% to 404p
- Diluted net assets per share up 5% to 396p
- 80p per share returned to shareholders in accordance with timetable
- Over £400 million of property sales in the year
- Over £1 billion of properties held in central London

Richard Peskin, Chairman said:
 
'Last November I mentioned that there was no guarantee that the very strong
rental and capital growth which we had been experiencing for two to three
years could be sustained, and signs of an economic downswing are emerging.
However, the markets in which the Group operates appear, on the whole, to be
firm and the coming months will see a continuing delivery of our strategy, as
the Board believes that shareholder value for the future will best be
realised by concentrating on central London.'

Enquiries:
 
Great Portland Estates P.L.C.
020 7580 3040
Peter Shaw, Managing Director
John Whiteley, Finance Director

Citigate Dewe Rogerson
020 7638 9571
Sue Pemberton
Freida Davidson

KEY STATISTICS
 
At 31st March 2001
 
- Rent Roll £91.6m
- Reversionary potential over the next five years £20.1m
- Average length of lease 8.9 years
- Over £1bn of assets in central London
- Net assets per share 404p
- Diluted net assets per share 396p
- FRS 13 adjustment per share (net of tax) 32p
- Contingent CGT per share 25p
- Interest cover (pre-exceptionals) 1.8 times
- Dividend cover (pre-exceptionals) 1.2 times
- Net gearing 69%
- Average length of debt 15.8 years
- Average cost of debt 7.8%
 
Since 31st March 2001
- £100m Debenture 2016 repaid
- Average cost of debt reduced to 7.5%
 
STATEMENT BY THE CHAIRMAN 
 
Two years ago I announced that it was our intention to become 'architects of
change' and I believe that, since then, we have gone a fair way towards
achieving our goal of transforming the Company into a more focused business.
The turnaround has been effected by the rationalisation of the portfolio,
including immediate withdrawal from industrials, retail parks and high street
shopping, and approaching £600 million of properties, roughly one-third of
the total, has been sold, with £325 million being repaid to shareholders,
mainly by means of a return of capital and partly by share buy backs. The
debt side of the balance sheet has also been addressed with the redemption of
the 9.5% Convertible Unsecured Loan Stock 2002 during the year, and, on 16th
May 2001, the £100 million 9.5% Debenture 2016, thereby not only cutting the
overall cost of debt from 9.5% to 7.5% in four years but also putting us in a
stronger, and more flexible, financial position for the future. The total
return of 26% - share price increase plus dividend - for the year to 31st
March 2001 was an eloquent testimony to the efficacy of our strategy and
comfortably outperformed the main indices, and the majority of our peer group.
 
Whilst these radical initiatives have, of course, had an impact on the profit
and loss account, adjusted earnings per share, excluding exceptional costs
and, in the first half, disappointing losses on the sale of investment
properties, advanced to 11.8p and the directors are recommending a final
dividend of 6.5p, making a total for the year of 9.75p. Net assets stood at
£865 million, representing 404p per share, underpinned by the performance of
the central London properties which were valued at over £1 billion; in the
last three years this element of the portfolio has produced 13% compound
growth, with the West End, which remains our favoured pitch, providing 15%.
 
The increase in central London values was driven by strong rental growth as
demand for offices outstripped the available supply and this imbalance is
forecast to persist, in no small measure due, ironically, to the rigid stance
taken by Westminster City Council with regard to planning. Meanwhile, an
open, albeit somewhat protracted, dialogue is continuing with them in an
attempt to agree normally resoluble issues on our two large medium-term West
End projects, which remain amongst the best able for development within the
portfolio.
 
Discussions are also taking place, and a provisional understanding has been
reached, with adjoining owners to form a partnership to develop a very large
City scheme in line with current Mayoral views. Although rents in some prime
Mayfair locations appear to have faded slightly from their recent record
highs, the levels in our main spheres of operation in London still leave us
with plenty of scope for active management and reversionary potential.
 
There have been a number of Board changes and rearrangements during the year.
David Godwin became Deputy Chairman on the retirement of Roger Payton after
the Annual General Meeting in July, and Patrick Hall, the director in charge
of acquisitions and disposals since joining in 1991, resigned from the Board
in October, at which time Peter Shaw took over as Managing Director. The
restructuring of the Company has put extra pressure on everyone, both the
executive directors and the professional and dedicated members of our team at
B & H S Management. During this period, not only have they always pulled
their weight, but they have assumed all new responsibilities willingly and
cheerfully. My thanks go to them for their hard work and unflagging
enthusiasm.
 
Last November in the Interim Report I mentioned that there was no guarantee
that the very strong rental and capital growth which we had been experiencing
for two to three years could be sustained, and signs of an economic downswing
are emerging. However, the markets in which the Group operates appear, on the
whole, to be firm and the coming months will see a continuing delivery of our
strategy, as the Board believes that shareholder value for the future will
best be realised by concentrating on central London.

OPERATING REVIEW 
 
OVERVIEW
 
In the year ended 31st March 2001 we have addressed the focus, size and
financing of the Company, with the disposal of £400 million of properties,
the return of £285 million to shareholders, and the redemption of expensive
debt. These measures, together with movements in the portfolio valuation,
have increased the exposure to our chosen core areas of central London and
offices in the South East from 59% last year to 77% at 31st March 2001, and,
following disposals since the year end, to 81%.

At 31st March 2001, the portfolio was valued by CB Hillier Parker at £1.5
billion, representing an annual uplift of 1.9% on a like-for-like basis.
Offices north of Oxford Street increased by 12.6% and in the rest of the West
End by 6.1%, whilst in the City they rose by 10.0%. However, West End retail
gained only 1.6% in value, shopping centres, which formed 20% of the
portfolio at the year end, fell by 12.8%, and South East offices were
virtually unchanged.
 
The revaluation surplus together with the effect of sales and net rental
income produced a total annual return of 14.4% for central London, although
this was reduced to 6.8% for the entire portfolio, primarily due to the
performance of the shopping centres and the disposal of non-core assets. The
valuation reflected a gross running yield of 6.1%, and a reversionary yield
of 7.8%, representing the reversionary potential of the portfolio over the
next five years of £20.1 million, of which £17.6 million is attributable to
central London. Tenant demand remained strong in all of our areas of
activity; voids were less than 1% of the rent roll at 31st March 2001, as
they had been throughout the year. Rental growth has been particularly strong
in central London, with 21% in West End offices, and 31% in the City and
Holborn.
 
WEST END AND COVENT GARDEN
 
Demand for offices in the West End has been exceptionally robust this year,
and it is pleasing to be able to report that, at the year end, there was full
occupancy of our available properties.
 
Rental values for office space in our traditional area north of Oxford Street
are approaching £40 per sq.ft., against an average rent passing of £23 per
sq.ft., and remain highly competitive with other areas in the West End.
Whilst the initial yield on the West End and Covent Garden portfolio is
currently 5.3%, this reversionary potential provides a reversionary yield of
7.2%. These days our tenant base in the West End centres on Professional
Services, Advertising and PR, and Government. Much has been made of the risk
to West End investors of 'dot com' and Internet start up companies, but we
have no such direct exposure. The average length of lease in the West End
portfolio is 7.7 years, and we continue to offer tenants a variety of terms
and buildings to accommodate customer demand, serviced by our flexible,
rolling refurbishment programme, which has been a cornerstone of our
activities for many years.
 
Our two proposed medium-term West End redevelopment schemes, at Mortimer
Street/Great Titchfield Street, W1 and 190 Great Portland Street, W1 which
should provide 400,000 sq.ft. gross with an end value of some £200 million,
have made slow progress during the year on planning. I am not alone in
believing that, if the West End is to retain its vibrancy, Westminster
Council will need to adopt a more constructive approach.
 
Planning permission was achieved for the redevelopment of 22/25
Northumberland Avenue, WC2, close to Trafalgar Square, increasing the floor
space of the existing building by 50% to 19,500 sq.ft. The current end value
is in the region of £11 million and we expect construction to begin in
September for completion in summer 2003.
During the year we completed and let our major 14,400 sq.ft. refurbishment of
28 Savile Row, W1, at rents of £55 per sq.ft., some £20 per sq.ft. above that
anticipated when the refurbishment began. North of Oxford Street, our Market
Place, W1 urban regeneration initiative with the City of Westminster bore
further fruit with the opening of a Reiss flagship fashion store and Soup
Opera, adjoining Carluccio's restaurant. Our efforts in this piazza have
acted as a catalyst for the area, with further new lively and vibrant
occupiers opening in the vicinity.

Last summer, we sold our 12.2% share in the Pollen Estate at a profit of £4.5
million on an investment of £10.4 million, and simultaneously acquired more
valuable leasehold interests in our four properties on the Estate through a
property exchange.

Our residential development of 11 units at Ranelagh House, Chelsea SW3 was
completed recently and already two apartments have been sold and four are
under offer. The high quality of the finished product has enabled us to
increase our expectation of total sale proceeds to over £8 million, and we
anticipate a trading profit of approaching £1 million over the scheme as a
whole.
 
CITY AND HOLBORN
 
Our City and Holborn properties represent 17% of the total portfolio, but
have significantly different characteristics to the West End, being less
management intensive and typically having longer leases - the average lease
length is currently 8.9 years. Here, too, voids are negligible, and the
properties provide a bedrock contribution of solid income from strong
covenants. During the year progress has been made with a consortium of
landowners over the appraisal of a site for large-scale redevelopment to
incorporate our holdings in Bishopsgate, St. Mary Axe and Camomile Street,
EC2. We are encouraged that both the Mayor and the City of London recognise
that the City needs to provide very large buildings to maintain London's
pre-eminent position as the world's leading financial centre.
 
SHOPPING CENTRES
 
Generally these are difficult times for retailers, but the combination of
active management and the strength of our centres and the towns in which they
are situated, has limited voids to a mere 2% at the year end. Reflecting the
nervousness in the retail property investment market, CB Hillier Parker's
valuation has recorded a fall of 12.8% in the capital value of the centres,
notwithstanding an uplift in rental values of 2.7%.
 
At Harlow we are advancing our discussions with the Local Authority over our
master plan for regenerating the centre of the town; we believe that with our
dominant ownership and an M11/M25 catchment population of some 725,000 there
are excellent medium-term opportunities. In High Wycombe our development
partners and the local authority continue to face serious delays in
fulfilling the conditions of our funding arrangement. The retail landscape at
Burnley was transformed with the opening of 127,000 sq.ft. of new stores
including New Look, T J Hughes, Wilkinsons and Poundland, and the centre has
been enlivened with an additional 550 ft. of new retail frontage.

OTHER DEVELOPMENTS
 
Having secured planning permission for an 81,000 sq.ft. office redevelopment
on the site of a 72,000 sq.ft. warehouse adjacent to junction 4 on the M3 at
Frimley, currently let to Toshiba at £405,000 p.a. until 2003, we sold the
building shortly after the year end for £9.25 million, well in excess of last
year's valuation.
 
At Sol Central, Northampton, the 200,000 sq.ft. in-town leisure development
is scheduled for completion in the autumn. Further lettings of a health and
fitness club, a night club and a cafe/bar have been achieved in a difficult
year for the UK leisure industry, and complement the ten screen cinema and
150 bed hotel already pre-let within the scheme.
 
RETURN OF CAPITAL AND PORTFOLIO RATIONALISATION
 
Around 18 months ago, our share price, in common with many companies in the
property sector, had fallen whilst property values had risen, thereby
widening to an historically high level the discount of the share price to the
value of our underlying assets. The Board took the initiative to take
advantage of the strong property market and, at the same time, to refocus our
portfolio, and announced a disposal programme, the proceeds of which would be
used to return cash to shareholders.

The disposal programme was at its most intense in the summer, and during the
same period we gained the approval of the holders of our 9.5% Convertible
Unsecured Loan Stock 2002 to redeem their stock early, without which the
return of capital could not have been effected. In early September, with the
CULS redeemed and most of the disposal programme completed, we applied to the
Court for, and received, the approval of the reduction in our share capital,
in order to pay 80p per share to shareholders, and on 20th September 2000,
earlier than our published timetable, the payment, amounting to £285 million
in aggregate, was duly made.
 
Clearly, the disposal process has been pivotal to the Group's transformation
this year. Some 57 properties were sold in 18 separate transactions, raising
£400 million of proceeds. We have completely withdrawn from the high street
shopping, retail warehousing, and industrial/distribution warehousing markets
and now have relatively few holdings outside London and the South East.
 
Since the year end, in addition to Frimley mentioned above, we have
contracted to sell our three smaller shopping centres, at Bridgend, Torquay
and Yeovil, for £66 million, increasing our central London and South East
offices representation to 81% of the remaining portfolio.
 
SUMMARY
 
Whilst the rate of growth which we have experienced during the last couple of
years is unlikely to be sustained, particularly at the top end of the market,
I expect our chosen areas of focus to continue to outperform. Great Portland
has proved its ability to provide shareholder value in the year, and the
focus on central London will remain a fundamental part of our strategy.

FINANCIAL REVIEW 
 
The results for the year ended 31st March 2001 and the financial position of
the Group have been significantly influenced by two major features this year:
the disposal of over 20% of the Group's property portfolio for £400 million,
and the capital reduction and share consolidation, which resulted in a return
of capital of 80p per share to shareholders, and reduced the number of shares
in issue by 40%.
 
RESULTS
 
Profit on ordinary activities after tax, excluding exceptional items and the
loss on sale of investment properties, fell from £41.4 million to £32.8
million in the year to 31st March 2001, but, following the reduction in the
number of shares in issue, corresponding earnings per share rose from 11.1p
to 11.8p. A final dividend of 6.5p has been proposed, making a total for the
year of 9.75p (2000: 9.5p).
 
Rent receivable of £106.8 million was £13.0 million, or 11%, lower than last
year. Property disposals reduced rents by £22.3 million and expires by £2.6
million, against which acquisitions contributed an increase of £6.0 million,
£4.4 million was provided by new lettings and renewals and £1.5 million by
rent reviews.
 
Property costs and administration expenses were £1.9 million higher than in
2000, due to exceptional costs incurred in the capital reduction process. The
loss on sale of investment properties of £12.8 million, primarily in the
first half of the year, partly comprised selling costs of £4.9 million,
excluding which the loss on the sale of the properties represented less than
2% of their values at 31st March 2000. Net interest payable of £57.8 million
was distorted by an exceptional premium on the early redemption of the 9.5%
Convertible Unsecured Loan Stock 2002 of £5.0 million. The redemption of the
loan stock had the dual effect of ensuring the implementation of the capital
reduction, and increasing diluted net assets by 8p per share. The £5.0
million loss before tax is offset by £3.2 million of future interest savings,
and, therefore, enhances future earnings. Before this exceptional item, net
interest payable fell by £2.2 million against the previous year.
 
The effective rate of tax of 37.7% was heavily distorted by the exceptional
items, which attracted tax relief at 30%, and by the loss on the disposal of
investment properties, on which no relief was immediately available; on an
adjusted basis it was 25.6% (2000: 25.7%) which was less than the standard
rate of corporation tax, primarily due to the benefit of capital allowances
available on plant and equipment within the investment property portfolio.
The final dividend will be paid, subject to shareholders' approval, on 20th
July 2001 to shareholders on the register at 15th June; the total dividend
for the year of 9.75p (2000: 9.5p) was covered 1.2 times by adjusted earnings
(2000: 1.2 times).

FINANCING
 
In early March 2001, new interest rate swaps on borrowings of £150 million
superseded more expensive ones and, together with the redemption on the
Convertible Unsecured Loan Stock mentioned above, resulted in a reduction in
the weighted average cost of borrowing to 7.8%, from 8.3% twelve months
earlier. Gearing at 31st March 2001 was 69% (2000: 60%), net of cash balances
of £96 million, and the Group had in place undrawn bank facilities of £60
million. Under FRS 13, the market value of the Group's financial instruments
at 31st March 2001 exceeded the amount at which they were shown in the
consolidated balance sheet by £98.7 million, representing a potential
reduction in net assets per share of 46p, before tax relief.

In September 2000, 150,000 shares were bought by the Company and cancelled.
At the Annual General Meeting on 17th July 2001, the Board will seek to renew
shareholders' authority to buy 15% of the Company's issued share capital.

Following consultation with the Association of British Insurers, who approved
the Company's proposal, the Company repaid in full its £100 million 9.5%
First Mortgage Debenture Stock 2016 at a premium of £28.2 million on 16th May
2001. This debenture accounted for £27.8 million of the £98.7 million
potential excess liability calculated in accordance with FRS 13. The premium
paid of £28.2 million will be charged as an exceptional item in the profit
and loss account for the year ending 31st March 2002 and is likely to attract
tax relief in full in that year. In addition to reducing the potential FRS 13
liability of the Group, the repayment of this debenture reduced the weighted
average cost of borrowing from 7.8% to 7.5% - it was 9.5% four years ago -
and will have the effect of enhancing future earnings.

CASH FLOW
 
Net cash from operating activities, after the payment of interest and tax,
was £22.4 million, out of which an interim dividend of £7.0 million was paid
on the reduced share capital, together with a final dividend of £22.7 million
for 2000 on the original number of shares. Proceeds from the sales of
investments and investment properties of £400.8 million financed the return
of capital of £285.4 million and the redemption of the Convertible Unsecured
Loan Stock of £57.9 million, and capital expenditure of £23.3 million; most
of the remaining £24.6 million was used to repay bank loans or was placed on
deposit, leaving an increase in the net cash position at 31st March 2001 of
£2.3 million.

NET ASSETS
 
Shareholders' funds fell by £262.7 million to £865.1 million in the year to
31st March 2001. This fall was primarily due to the 80p per share returned to
shareholders, comprising £285.4 million in aggregate and resulting in
adjusted net assets of £842.4 million, against which to compare the position
at 31st March 2001. The resulting growth in net assets comprised increases in
the revaluation of the West End portfolio by £58.3 million and in the City by
£23.6 million, together with retained profits before exceptional items of
£11.9 million and a net increase in the proceeds from exercised share options
over share buy-backs of £0.2 million. Against these increases, shopping
centres fell in value by £44.4 million and the portfolio in the rest of the
UK fell by £9.3 million, the loss on the sale of investment properties
reduced net assets by £12.8 million and exceptional items lost £4.8 million.
 
Net assets per share at 31st March 2000 of 316p, when adjusted to take
account of the capital reduction and share consolidation, are restated to
393p. At 31st March 2001, net assets per share were 404p, representing growth
of 2.8% on a like-for-like basis; diluted net assets per share increased by
4.8% to 396p.
 
In previous years, the contingent liability for taxation on capital gains has
been calculated by reference to the portfolio as a whole. However, following
the significant number of disposals in the year and the increase in the value
of central London properties against the fall in the value of others, coupled
with the reduction in the size of the balance sheet, the Board believes it is
more prudent to use a method which takes cognisance of the fact that
properties are likely to be sold individually. Under this method, the
contingent liability to taxation on capital gains if the investment
properties were to be sold at their valuation at 31st March 2001, would be
approximately £53 million, or 25p per share.

FINANCIAL INSTRUMENTS
 
The Group raises finance through equity and borrowings, and places surplus
cash on short-term deposit. The primary sources of borrowing are debenture
loans, convertible loans, and bank and other loans. The Group also enters
into interest rate swaps, collars and caps, but solely as a way of managing
the interest rate risks arising from some of the Group's sources of finance,
primarily bank loans.
 
The main risks arising from the Group's Financial Instruments are interest
rate risk, liquidity risk and credit risk. The policies for managing these
are reviewed by the Board, and have been in place throughout the year ended
31st March 2001.
 
Interest Rate
 
Borrowings are made either at fixed rates of interest, or at floating rates,
which can be fixed simultaneously, and co-terminously, by means of interest
rate swaps. The Group's policy has been to ensure that most of its borrowings
were at fixed rates; at 31st March 2001, 99% of borrowings were at fixed
rates after taking account of interest rate swaps.
 
Liquidity
 
The Group operates a long-term business, and its policy is to finance it
primarily with equity, and medium-term and long-term borrowings. Accordingly,
at the year end 62% of the Group's borrowings were due to mature in more than
15 years. Short-term flexibility is achieved by cash balances and overdraft
facilities.
 
Credit
 
At 31st March 2001, the Group had £95.2 million on short-term deposit with
financial institutions. It is the Board's policy that deposits and derivative
contracts are placed only after consideration of the current credit
worthiness of the counter-party.
 
GROUP PROFIT AND LOSS ACCOUNT
For the year ended 31st March 2001
 

                                                                              
                                                           2001           2000
                                         Notes               £m             £m
                                                   ------------   ------------
  Rent receivable                            2            106.8          119.8
  Ground rents                                            (1.9)          (2.0)
                                                   ------------   ------------
  Net rental income                                       104.9          117.8
  Property and refurbishment costs                        (2.8)          (3.5)
  Administration expenses                    3            (7.1)          (4.5)
                                                  -------------   ------------
                                                           95.0          109.8
  Trading profits                                             -            1.0
                                                  -------------   ------------
  Operating profit                                         95.0          110.8
  (Loss)/profit on sale of investment                    (12.8)            4.7
  properties                                      -------------   ------------
  Profit on ordinary activities before                     82.2          115.5
  interest                                                                    
  Interest receivable                        5              2.8            3.0
  Interest payable                           6           (60.6)         (58.0)
                                                 --------------   ------------
  Profit on ordinary activities before                     24.4           60.5
  taxation                                                                    
  Tax on profit on ordinary activities       7            (9.2)         (14.4)
                                                 --------------   ------------
  Profit on ordinary activities after                      15.2           46.1
  taxation                                                                    
  Dividends                                  8           (20.9)         (34.5)
                                                 --------------   ------------
  Retained (loss)/profit for the year                     (5.7)           11.6
                                                 --------------   ------------
  Earnings per share - basic                 9             5.5p          12.3p
                                                 --------------   ------------
  Earnings per share - adjusted              9            11.8p          11.1p
                                                 --------------   ------------
 
A statement of the movement on reserves is given in note 20
 
GROUP BALANCE SHEET
As at 31st March 2001

                                                                              
                                       Notes             2001             2000
                                                           £m               £m
                                                 ------------    -------------
  Tangible fixed assets                                                       
  Investment properties                   10          1,502.6          1,845.0
  Investments                             11                -             14.9
                                               --------------    -------------
                                                      1,502.6          1,859.9
                                               --------------    -------------
  Current assets                                                              
  Stock of trading properties                             6.9              1.4
  Debtors                                 12             24.9             30.8
  Cash at bank and short-term                            96.0             85.4
  deposits                                      -------------    -------------
                                                        127.8            117.6
  Creditors: amounts falling due          13             72.2             88.3
  within one year                               -------------   --------------
  Net current assets                                     55.6             29.3
                                                -------------   --------------
  Total assets less current                           1,558.2          1,889.2
  liabilities                                   -------------   --------------
  Creditors: amounts falling due                                              
  after more than one year                                                    
  Debenture loans                         14            454.0            454.1
  Convertible loans                       15             56.8            109.6
  Bank and other loans                    16            182.3            197.7
                                                -------------    -------------
                                                        693.1            761.4
                                                -------------    -------------
                                                        865.1          1,127.8
                                                -------------    -------------
  Capital and reserves                                                        
  Called up share capital                 18            107.1            178.4
  Share premium account                   19             24.8            238.4
  Revaluation reserve                     20            570.9            607.3
  Other reserves                          20             19.4             19.3
  Profit and loss account                 20            142.9             84.4
                                                -------------    -------------
  Equity shareholders' funds                            865.1          1,127.8
                                                     ========    -------------
 
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31st March 2001

                                                                              
                                                          2001            2000
                                                            £m              £m
                                                 -------------   -------------
  Profit for the year                                     15.2            46.1
  Unrealised surplus on revaluation of fixed              28.2            85.7
  assets                                         -------------   -------------
  Total recognised gains and losses for the               43.4           131.8
  year                                           -------------   -------------

GROUP STATEMENT OF CASH FLOWS
For the year ended 31st March 2001

                                                                              
                                   2001         2001         2000         2000
                                     £m           £m           £m           £m
                             ----------   ----------   ----------   ----------
  Net cash inflow from                          81.6                     112.7
  operating activities 
                                                       
  Returns on investments                                                      
  and servicing of finance                                                     
  Interest received                 3.0                       3.5             
  Interest paid                  (48.7)                    (57.8)             
                             ----------                ----------             
  Net cash outflow from                       (45.7)                    (54.3)
  returns on investments                                                      
  and servicing of finance 
                                                    
  Corporation tax paid                        (13.5)                    (13.0)

  Capital expenditure 
                                                        
  Payments to acquire            (23.3)                   (144.7)             
  investment properties 
                                                      
  Receipts from sales of          385.9                      86.4             
  investment properties 
                                                      
  Payments to acquire                 -                     (0.5)             
  investments 
                                                                
  Receipts from sale of            14.9                         -             
  investments  
                             ----------                ----------             
  
  Net cash                                     377.5                    (58.8)
  inflow/(outflow) from                                                        
  capital expenditure 
                                                        
  Equity dividends paid                       (29.7)                    (35.4)
                                          ----------                ----------
  Net cash                                     370.2                    (48.8)
  inflow/(outflow) before                                                      
  use of liquid resources                                                     
  and financing 
                                                               
  Management of liquid                         (9.8)                      87.4
  resources 
                                                                  
  Cash (placed on) /                                                          
  withdrawn from                                                              
  short-term deposit
                                                          
  Financing 
                                                                  
  Issue of share capital            0.6                         -             
  Return of capital             (285.4)                         -             
  Redemption of loans            (57.9)                     (3.5)             
  Repayment of bank loans        (15.0)                         -             
  Purchase of shares              (0.4)                    (38.4)             
                             ----------                ----------             
  Net cash outflow from                      (358.1)                    (41.9)
  financing                               ----------                ----------
  Increase/(decrease) in                         2.3                     (3.3)
  cash                                    ----------                ----------
 
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
 

                                                                              
                                                           2001           2000
                                                             £m             £m
  Operating profit                                         95.0          110.8
  (Increase)/decrease in stock of trading                 (5.5)            2.0
  properties                                                                  
  Decrease/(increase) in debtors                            1.1          (1.3)
  (Decrease)/increase in creditors                        (9.0)            1.2
                                                  -------------   ------------
  Net cash inflow from operating activities                81.6          112.7
                                                  -------------    -----------

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
 

                                                                              
                                                          2001            2000
                                                            £m              £m
                                                --------------    ------------
  Increase/(decrease) in cash in the year                  2.3           (3.3)
  Cash placed on/(withdrawn from) short-term               9.8          (87.4)
  deposit                                                                     
  Cash outflow from redemption of loans                   72.9             3.5
                                                --------------   -------------
  Change in net debt arising from cash flows              85.0          (87.2)

  Other non-cash movements                               (5.0)             0.2
                                                 -------------   -------------
  Movement in net debt in the year                        80.0          (87.0)

  Net debt at 1st April 2000                           (677.5)         (590.5)

                                                 -------------    ------------
  Net debt at 31st March 2001                          (597.5)         (677.5)
                                                  ------------    ------------


ANALYSIS OF NET DEBT

                                                                              
                 At 1st April        Cash Flow         Non-cash  At 31st March
                         2000                           Changes           2001
                           £m               £m               £m             £m
               --------------   --------------   --------------   ------------
  Cash                  (1.5)              2.3                -            0.8

  Short-term             85.4              9.8                -           95.2
  deposits  
                                                                  
  Debt due                  -                -            (0.4)          (0.4)
  within                                                                      
  one year 
                                                                   
  Debt due            (761.4)             72.9            (4.6)        (693.1)
  after one    
  year         
               --------------   --------------   --------------   ------------  
                                             
                      (677.5)             85.0            (5.0)        (597.5)
               --------------    -------------   --------------   ------------

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