Preliminary Results 2004
Slough Estates PLC
23 March 2005
23rd March 2005
SLOUGH ESTATES plc
PRELIMINARY RESULTS FOR THE YEAR ENDED 31st DECEMBER 2004
Highlights
• Underlying 4.8% rise in pre-tax profits+
• Diluted NAV per share of 564p, up 11.7%+
• Dividend up 6.7%: 5 year compound growth of 7.4% p.a.
• £386m assets bought during the year and proceeds of £558m from sales
Year to 31 December
Results restated % change
2004 2003
______________________________
£m £m
Property investment income* 247.3 238.2 + 3.8
Profit before tax and exceptional items 146.8 140.1 + 4.8
Profit before tax after exceptional items 209.1 103.8 + 101.4
Adjusted basic earnings per share+ 29.0p 27.6p + 5.1
Basic earnings per share 37.8p 19.6p + 92.9
Final ordinary dividend 9.85p 9.2p + 7.1
Total ordinary dividend 16.0p 15.0p + 6.7
Basic net assets per share+ 601p 536p +12.1
Adjusted diluted net assets per share increased by 11.7% to 564p in 2004 ++
* Property investment income comprises investment and joint venture property
income.
+ Adjusted to exclude exceptional items and FRS19 deferred tax.
++ Exceptional items are profits/ (losses) on the sale of investment properties
and the provision for Quail West in 2003.
Commenting on the results, Chairman, Sir Nigel Mobbs, said: 'The Group has
delivered a good set of results for the year. It has been a very busy year in
which the company has completed purchases and sales of over £900 million in
value. The effective driver of this activity is our increased focus on flexible
business space, at a time when we expect to see a cyclical upturn in this
segment of the property market. Key economic indicators are showing encouraging
levels of growth and, with an increasing number of enquiries, we expect to see
improving demand for our core business space portfolio in 2005 and beyond. A key
driver to future earnings growth is that our strong balance sheet will enable
the company to develop out our extensive strategic landbank over the next few
years.'
Throughout this announcement adjusted net assets per share and adjusted earnings
per share measures are adjusted to exclude exceptional items and FRS19 deferred
tax.
For further information contact:
Slough Estates plc Shared Value Limited
Ian Coull, Chief Executive Andrew Best
Dick Kingston, Finance Director Emily Bruning
Tel: 01753 537171 Tel: 020 7321 5022 / 5027
A meeting for analysts will be held at 9.30am on 23rd March at The Great Eastern
Hotel, Liverpool Street, London EC2 and will be audio streamed on Slough
Estates' website: www.sloughestates.com.
A conference call for international investors will be held at 16.30 (UK time) on
23rd March. The dial-in numbers are: +44 (0)207 784 1018 or +1 718 354 1171 and
participants should quote Slough Estates. A recording of the conference call
will be available for 7 days, accessible on +44 (0)207 784 1024 or +1 718 354
1112, passcode 6806646#
Preliminary Statement 2004
2004 has been a successful and active year for Slough Estates and we have made
substantial property purchases and sales within the portfolio, including the
further disposal of non-core assets. As a result of these acquisitions and
disposals, Slough Estates is achieving a greater focus on its core business,
which is the provision of 'edge of town' flexible business space to companies in
the UK, Europe and California. In total, the Group received proceeds of £557.7m
from investment property disposals and acquired a further £385.6m which
represents a high turnover when compared to the year end property portfolio
valuation of £3,887.9m.
During 2004, while delivering these changes, adjusted diluted net assets per
share have increased from 505p to 564p, a rise of 11.7%, and profit before tax
grew by 101.4% to £209.1m. Diluted net assets per share increased from 464p to
521p. We are proposing a final dividend of 9.85p per share, up 7.1%, while the
total distribution for the year of 16.0p rises by 6.7%. The dividend continues
to grow at a rate considerably in excess of inflation and, over five years, has
grown at a compound growth of 7.4% per annum. The final ordinary dividend, if
approved, will be payable on 20th May 2005 and the record date is 22nd April
2005.
Despite the good overall financial performance of the Group, the returns from
the core UK property business were slightly disappointing. Overall property
investment income was up by 3.8% at £247.3m including joint ventures. Property
revenue benefited from additional lease surrender premiums of £6.1m, but was
impacted by the expensing of £8.2m of interest on development projects in 2004.
However, with increased development activity, particularly the re-start of
development at Farnborough where interest is again being capitalised in the
normal way, the overall net interest burden will be lower in 2005.
Slough Estates' total return for 2004 was 14.9% on a diluted and adjusted basis,
and on a five year basis we have produced a compound total return of 7.1% per
annum. The total return for 2004 was 15.7% on an unadjusted diluted basis. These
returns illustrate the long term attractions of developing and managing 'edge of
town' flexible business space for a diverse customer base. It is an excellent
business to be in, but one that is changing rapidly, and in today's markets we
need to be more tightly focused in terms of property types and geography. We
need to deliver a very flexible but generic product across all our markets so
that we can adapt quickly to the requirements of the global companies that we
serve.
Last week we announced a new regional structure for the UK business which will
now operate in six independent regions, each with its own management reporting
to John Heawood, Head of UK Property. You will find the breakdown of these
regions in our operating review with the key facts and recent developments for
each region. Our objective is to provide more customer focus and market
familiarity to our property management and development, in order to make our
business more responsive to client needs so that we can achieve greater
occupancy and identify more opportunities. Our businesses in Europe and North
America already have devolved management.
Major Property purchases and sales
There were a number of major purchases and sales within the portfolio over the
year. In the UK, the Group has sold the majority of its retail assets in
exchange for business space properties. Slough Estates USA is now primarily
focused on its health science real estate portfolio and has largely exited from
its other North American property interests.
Major purchases and sales in 2004:
• Purchase of Land Securities' industrial portfolio for £340.4m. Slough
Estates secured an excellent industrial portfolio in exchange for the major
part of our retail portfolio. This transaction was a one-off opportunity to
acquire a high quality south eastern England portfolio that had been built up
over a number of years by Land Securities.
• Sale of shopping centres in UK to Land Securities for £332.8m. In the
UK, the ground breaking £673m property swap with Land Securities has enabled
Slough to exit from the majority of its shopping centre portfolio. Slough
Estates' retail portfolio was too small to be an effective hedge for the
overall portfolio so there was a choice; either to grow this portfolio
substantially, or to exit. We plan to exit our remaining shopping centre
investments in due course.
• Sale of 34,051 sq.m. of light industrial/warehouse space at Neuss, Germany for
£21.4m. Part of Slough's holding at Neuss was sold to IVG for £21.4m in
December 2004.
• Sale of Pfizer Center in San Diego for £190.7m. The sale of the 71,709
sq.m. Pfizer Campus in San Diego is the first major disposal from the Slough
Estates health science portfolio in the US. The development cost for the
campus was £91.1m and the campus had been valued at £143.2m at the half year,
which shows that Slough Estates has achieved an excellent price, and supports
our positive view for the entire Slough health science portfolio. It is our
intention to continue to recycle assets within the Californian portfolio so
that Slough USA operates on a stand alone basis.
• Acquisition of 32.5 hectares of land at Parkway Business Centre, Poway,
San Diego for £24.6m. 14,492 sq.m. of space is currently under construction
on a 19.5 hectare plot, which was acquired in the first half of 2004. A
further 13.0 hectare plot was acquired in the second half.
• Disposal of Willingdon Park, Vancouver for £33.4m. A quality 71,117 sq.m
office development, well placed for Vancouver's city center, was sold to
our partner Hospitals of Ontario Pension Plan. Willingdon Park had been
developed over 15 years and had a rental income of £2.6m. The exit from
Vancouver completes Slough Estates' withdrawal from the Canadian market.
• Sale of Quail West for net £30.0m. Conditional contracts were exchanged for
the sale of the leisure complex at Quail West in December 2004. The net
book value of this project at the end of 2004 was £7.4m after deducting
the provision against future costs, which was established in 2003 in reaction
to the poor sales that were being achieved at that time. However, in 2004 the
market for high-end leisure properties improved and we are very pleased to
have agreed a price considerably over the written down value, receivable by
instalments over four years. None of the gain has been recognised in 2004.
Joint Venture - HelioSlough
In April 2004 we announced a new joint venture with Helios Properties. The
venture, called HelioSlough Ltd., is a 50/50 joint venture, which has the aim of
developing a network of strategic distribution parks throughout the UK.
Slough Estates has been very successful in developing distribution parks in
France and Belgium but has not had a significant presence in the UK. We believe
that, with the continuing changes in supply chain management in the UK, the
market for distribution facilities will remain strong for the foreseeable
future.
The joint venture is a £150m project in the initial stages with joint equity,
with Helios Properties injecting development land for some five million square
feet of logistics space and Slough Estates arranging loan finance. By the year
end there was one scheme under construction in Doncaster and infrastructure work
had commenced at Thorne, South Yorkshire.
Leasing
A key objective in 2004 was to reduce the void space in our portfolio, with a
particular emphasis on the UK business space sector. We have been successful in
leasing 102,821 sq.m. of space in the year in the UK, up from 83,836 sq.m. in
2003, which is a very impressive result given the market conditions and close to
our record level. However, a general improvement in occupancy remains elusive
and, not withstanding our success in leasing a large amount of space, we also
had 143,467 sq.m. of space returned to us in the UK, mainly as a result of
corporate relocations and rationalisations, bringing UK occupancy at the
year-end to 90.6%. However of the space returned, 35,997 sq.m. is deemed
redundant space and the land is available for redevelopment. For occupancy data,
vacant units which have the benefit of a rental guarantee, are considered
occupied. The mix of occupancy has also changed as a result of the property swap
with Land Securities where we exchanged nearly fully let shopping centres for UK
industrial property with lower levels of occupancy. In cycles of stronger
occupancy demand, the level of space surrendered could be regarded as a
significant opportunity for redevelopment and portfolio modernization. Steps are
being taken across the portfolio to upgrade customer retention and the marketing
of space and improvements to individual estate environments.
In Europe and in the US we have continued with our successful leasing programme
but occupancy fell to 87.9% and 86.2% in Europe and the US respectively, due to
construction completions, disposals of fully let space and space being returned.
Of the space returned in Europe and the US, 13,652 sq.m. is deemed redundant.
Group occupancy marginally improved to 89.6%.
Leasing of space vs. space returned
Slough Trading Other UK Europe US
Estate sq.m. sq.m. sq.m. sq.m.
Lettings 43,082 59,739 49,465 25,347
Pre-lets 1,444 7,644 31,601 72,464
New space completed and unlet 0 1,868 35,331 0
Space Returned 51,645 91,822 31,653 36,595
Major lettings have included:
UK
• Letting of 2,827 sq.m. new office building at 240 Bath Road, Slough to
Fiat UK Limited at £269.10 per sq.m.
• Letting of 1,444 sq.m. at 275 Leigh Road, Slough to Ferrari Maserati
UK at £123.69 per sq.m.
• Letting of two units of 1,247 sq.m. and 1,595 sq.m. at Southern Cross,
Southampton at rents of £72.66 per sq.m. and £72.74 per sq.m. respectively,
making Phase 100 fully let.
• In early 2005, a letting of 11,189 sq.m. of existing business space on
the Slough Trading Estate to a major financial institution for an IT backup
centre, at a rent of £91.49 per sq.m.
Europe
• A total of 16,048 sq.m. was let at Pegasus Park.
• 12,861 sq.m. let at Cergy-Pontoise in France.
• Pre-let of 18,327sq.m. or 87% of a 21,000 sq.m. warehouse development,
at Neuss, Germany to ASICS for delivery in October 2005.
USA
• Genentech agreed to lease 72,464 sq.m. (780,000 sq.ft.) of office and
laboratory space in eight new buildings on Slough's Britannia East Grand
site in South San Francisco in December 2004. This is one of the largest
single projects undertaken by the company. This is a four year project,
with the first phase of 41,805 sq.m currently under construction. It is
estimated to cost over £169m and will be funded from the proceeds of
selective asset sales by Slough Estates USA, which is now well established
as a market leader in the provision of generic health science real estate
in California.
Development
In 2004, we have continued to hold back on development activity, waiting until
we were more certain of better occupier demand. In the second half of the year,
with more encouraging levels of enquiries, we have increased the number of
starts on site but we are still developing with caution. However, it is
important that we continue to ensure that we have sufficient business space to
meet the growth in demand in 2005 and beyond, and as at the year end we had
167,964 sq.m. under construction, of which 43% is pre-leased. During 2004, we
completed 77,713 sq.m., of which 52% is now let.
In what have been quieter markets we have continued to work hard in obtaining
the requisite consents and to put in the necessary infrastructure on our
strategic landbank so we are now ready to start developments quickly as the
market strengthens. We are encouraged by the continued resilience of the
flexible business space market and highlight in particular the strong
contribution of the Californian portfolio, which has been so successful in
supplying generic laboratory space to the health science sector.
CURRENT DEVELOPMENTS sq.m. Spend Estimated Anticipated
Seven Major Schemes to date development completion date
£m cost to come £m
______________________________________________________________________________
Farnborough 153,000 109 267 2013
Cambridge 40,000 35 55 2014
Pegasus Park, Brussels 170,000 29 147 2010
333 Oyster Point, San
Francisco 29,000 8 52 2010
East Grand, San Francisco 73,000 40 129 2007
Poway, San Diego 78,000 27 101 2011
Thorne, nr. Doncaster
(50% JV HelioSlough) 79,000 8 36 2007
______________________________________________________________________________
Excludes buildings already completed
Valuation
The year end valuation of all the Group's investment properties was undertaken
as at 31st December by external valuers, apart from the properties acquired from
Land Securities which are included at fair value. The valuation of £3,795.6m
resulted in a surplus of £186.6m. This represented an increase of 5.2% or 5.7%
excluding the ex-Land Securities' properties. With a UK revaluation surplus of
£118.9m, we are encouraged that the prospects for UK business space are
improving.
Revaluation Movements December 2004 % Change
from
£m Dec 2003
UK Industrial 109.8 6.4
Office 13.0 3.1
Retail 17.3 10.1
Land (21.2) (11.9)
__________________________________________________
Total UK 118.9 4.7
__________________________________________________
Overseas USA 60.5 12.4
Europe 7.2 2.4
__________________________________________________
Total Overseas 67.7 8.7
__________________________________________________
Total 186.6 5.2
______________________________________________________________________________
Joint ventures / Associate 14.5 14.1
Other activities
We have made good progress in the sale of our non-core activities. Agreement has
been reached to sell Quail West. We have settled the outstanding litigation with
regard to Tipperary Oil & Gas, which means that we expect to be able to exit
this trade investment successfully at our own timing. We reduced our holding in
Tipperary Oil & Gas to 54% in 2004. Slough Heat & Power has continued to improve
its operating performance over the past six months.
Major post year end event
In the US, Slough USA has taken back surplus space from Pfizer in South San
Francisco following the successful sale of its Torrey Pines Campus to Pfizer in
San Diego for £190.7m. This termination resulted in a premium of £35.1 million
for Slough Estates which will benefit 2005. The San Francisco campus consists of
three modern buildings and of the total space of 20,665 sq.m. vacated by Pfizer,
6,287 sq.m. has already been let to Exelixis.
Tax Transparent Property Trusts (REITs)
We were very pleased that the Government decided last week to move forward with
the introduction of UK REITs into the UK in 2006. The discussion paper is
indicating a preference for a flexible format which has been strongly favoured
by ourselves and virtually all of the UK real estate industry. There are still
unresolved issues particularly in relation to the conversion charge and gearing.
We will continue to cooperate with the UK industry groups during the
consultation process and we are satisfied that our corporate structure means
that we could convert if the overall legislative proposals and terms are
favourable.
Outlook
There is increasing evidence from the market that occupier demand is continuing
to improve although the pace of change has been slower than had generally been
anticipated a year ago. The Group has made excellent progress in further
focusing our activities on flexible business space at what is an early stage in
the business cycle, and this will benefit shareholders in the medium and longer
term. It is for this reason that the Board is confident in recommending an
increase of 7.1% in the final dividend.
The overall property market is in a robust state and there has been a revival in
investment in property as there is a recognition of the attractions of property
as a key component in investment portfolios. Though offices in the UK, and in
particular in the Thames Valley, still face some shortage in occupier demand and
industrial growth continues to be slower than expected, there is today a strong
investor demand for well-located and well-let property business space. The
investment case is underpinned by low inflation, affordable interest rates and a
lack of funding to support speculative development excesses.
The yield compression of the last two years looks set to continue in the first
half of 2005. This structural change in yield reflects the changing sentiment
towards real estate as an asset class, together with the current low
inflationary environment. The weight of money seeking real estate is continuing
the downward pressure on yields, but we do not believe that such downward
pressure can continue into the second half of the year.
• In the UK, Slough Estates' focus will be on flexible business space.
Our portfolio has been enhanced by the newly acquired industrial properties
and today 86% of our UK industrial portfolio is in the South East of
England. We will continue to look to strengthen this position, both by
acquisition and the development of our two major sites at Farnborough and
Cambridge.
• We plan to grow our established position in Continental Europe, where
we see good opportunities for expanding our base in the industrial,
logistics and suburban office markets. To this end, we have brought our
Continental European operations together under a single management
structure, based in Paris.
• In North America, our health science property portfolio is developing
extremely well and the prospects for the current pipeline are excellent.
Slough Estates has built up a leading position in the provision of space to
the health science community which means that we can expect to see a very
positive contribution towards Group earnings from both our completed
laboratory space and from our strong development pipeline. The US business
is self-financing and capital will be recycled selectively to exploit future
development opportunities.
The Board believes that Slough Estates is today well positioned to take
advantage of the opportunities in the marketplace as the Group has excellent
properties and substantial land holdings with planning consents for development,
located in many of the prime international business centres. This will enable us
to start to build into the recovery in occupier demand and, having successfully
put in the infrastructure for these new schemes in 2005, it will be possible to
accelerate this development pipeline as demand requires.
Ian Coull
Chief Executive
Slough Estates is a leading provider of flexible business space in business
parks in Western Europe and North America, with over 1500 customers occupying
2,996,967 square metres of business space, with a total value of £3.9 billion.
Slough Estates' properties are in suburban locations in close proximity to the
main business centres, where there is long term demand for business
accommodation to serve these key economic regions. The company's main activities
are currently based around London, Brussels, Paris, Dusseldorf, San Francisco
and San Diego and the company continues to develop new business parks with the
long term objective of building shareholder value and enhancing its reputation
for quality buildings offering excellent value to customers.
www.sloughestates.com
Operating Review
Slough Trading Estate
• Value £1.2bn
• 673,000 sq.m. (7.2m sq. ft.) business space and 33,737 sq.m. (0.4m sq.ft.)
retail space
• 200 hectare (500 acre) site
• 394 customers
• Approximately 20,000 employees based on the Trading Estate
• Website: www.sloughte.com
• Customers include: Allied Carpets, B&Q, Black & Decker, Celltech R&D,
Comet Group, Equant, Furniture Village, Ferrari Maserati UK, Fiat Auto
(UK), Ipsen, John Menzies, Kingston Communications, L G Electronics UK,
Lonza Biologics, Mars, NEC (UK), O2, Polycom (UK), Sun Chemical, Unatrac
Limited, Xenova
• 100% owned
• Rent passing £69.0m pa
• Average passing rent:
Business space:
- industrial £98.54 per sq.m
- office £247.70 per sq.m
Retail: £192.71 per sq.m
• 2,394 sq.m. under construction
• 89% occupancy by area
The Slough Trading Estate is the largest business park in Europe and has been
Slough Estates' core property asset since the company was founded over 80 years
ago. Today the Estate is a modern business park in close proximity to London's
Heathrow airport, which is the world's busiest international airport, and it has
excellent access to the M4 and M40 motorways.
In 2004 the levels of customer enquiries, viewings and proposals on the Slough
Trading Estate made in the UK have all increased from the levels recorded in
2003 and lettings completed in 2004 totalled 51,645 sq.m., a 110% increase over
2003.
We are confident that this increased activity points to an improving business
environment but at present the market for offices in Slough continues to be
weak, which is reflected by some downward pressure on rental levels for offices.
Our occupancy is 89%, compared with 88% at December 2003.
• Letting of 2,827 sq.m. new office building at 240 Bath Road, to Fiat UK
Limited at £269.10 per sq.m.
• Letting of 61 Whitby Road (WH Smith), and of 275 Leigh Road (Ferrari).
• In early 2005, a letting of 11,189 sq.m. of existing business space to a
major financial institution for an IT backup centre, at a rent of £91.49
per sq.m. showing return of demand for large deals and giving encouragement
for 2005.
Heathrow and West London
• Value £489m
• 332,712 sq.m. (3.6m sq.ft.) business space and 4,370 sq.m. (47,038
sq.ft.) retail in: Feltham, Hayes, Hounslow, Isleworth, Poyle, West
Drayton, Park Royal, Uxbridge, Greenford, Ruislip, Heston
• 82 hectares (203 acres) in total
• 240 customers
• Website: www.thelhr.com
• Customers include: DFS Furniture Company, Federal Express Europe,
Fujitsu, National Express Operations, Scottish & Newcastle, Thorn, TNT,
Tristar Cars, VG Systems
• 100% owned
• Rent passing £29.1m pa
• Average passing rent: £86.29 per sq.m.
• 14,276 sq.m. under construction at West Drayton and Hounslow, 20%
preleased
• 92% occupancy by area
This region includes Slough Estates' holdings in West London and those
immediately adjacent to London's Heathrow airport, (not including the Slough
Trading Estate). The properties have been managed as one estate since 2003 and
this has brought great operating efficiencies in West London. The excellent
communications to the West of London make this a premier location for business
in the UK.
• A total of 12,322 sq.m. of space let in 2004.
• Letting of 1,010 sq.m. at Park Royal, NW10 at a rent of £99.02 per sq.m.
• Purchase of 0.47 hectares of land and 3,422 sq.m. of space at Hounslow,
adjacent to an existing holding.
South London and Southern England
• Value £336m
• 269,545 sq.m. (2.9m sq.ft.) business space in: Basingstoke, Portsmouth,
Camberley, Southampton, Epsom, Leatherhead, Farnborough, Coulsdon, Croydon,
Fareham, Frimley, Guildford, SW19, Swanley, Crawley
• 115 hectares (284 acres) in total
• 129 customers
• Customers include: Agustawestland International, Autodesk, Carlsberg UK,
Siemens Real Estate, Thales Properties, The Big Yellow Self Storage
Company, Oddbins, Pinnacle Entertainment, Volkswagen Group UK
• 100% owned
• Rent passing £13.8m pa
• Average passing rent: £51.28 per sq.m
• 5,434 sq.m. under construction at Camberley and Portsmouth, 46% presold
or prelet
• 82% occupancy by area, excl. rental guarantee.
95% occupancy incl. rental guarantee
South London and Southern England is a newly designated region which covers
south London, primarily between the M23 and the M3 motorways down to the south
coast. It covers the counties of Surrey, Sussex, Kent and Hampshire which are
affluent commuting areas.
Slough Estates' holdings in this region have been substantially strengthened in
2004 by the acquisition of an industrial portfolio from Land Securities with
assets in Coulsdon, Croydon, Fareham, Frimley, Guildford, London SW19 and
Swanley
• A total of 6,622 sq.m. let in 2004
• Letting of two units of 1,247 sq.m. and 1,595 sq.m. at Southern Cross,
Southampton at rents of £72.66 per sq.m. and £72.74 per sq.m. respectively,
making Phase 100 fully let.
North London and East of England
• Value £346m
• 292,920 sq.m. (3.2m sq.ft.) business space in: Elstree, Welwyn Garden
City, Chelmsford, Radlett, Luton, Basildon, Hatfield, Thurrock, Barking,
Huntingdon, Cambridge
• 124 hectares (309 acres) in total
• 166 customers
• Customers include: Blue Star Engineering, Ford Motor Company, NTL,
Starbucks Coffee Company, Sheffield Insulations, Tibbett & Britten, Tesco,
WH Smith
• 100% owned
• Rent passing £17.6m pa
• Average passing rent: £59.90 per sq.m.
• 9,454 sq.m. under construction at Radlett
• 83% occupancy by area, excl. rental guarantee
88% occupancy incl. rental guarantee
North London and East of England is a newly designated region which covers an
area north of London but to the east of the M1 motorway and reaches out as far
as Cambridge and along the M11 motorway. The Cambridge area has been identified
by the Government as a major growth area for development and is the main home to
the UK's biotech industry.
• A total of 15,278 sq.m. let in 2004.
• Letting of 1,575 sq.m. at Radlett to Phoenix Healthcare Distribution Ltd
at a rent of £79.65 per sq.m.
• Agreement to lease 2,152 sq.m at Waterhouse Lane in Chelmsford.
Thames Valley and West of England
• Value £410m
• 289,942 sq.m. (3.1m sq.ft.) business space in: High Wycombe, Yate,
Weston Super Mare, Swindon, Bristol, Wokingham, Winnersh, Ascot, Bracknell,
Oxford, Haresfield
• 98 hectares (242 acres) in total
• 173 customers
• Customers include: Agere Systems, Agilent Technologies UK, Business
Express Network, Fujitsu, Intel Corporation, Knorr-Bremse, Mars, NTL, Rusch
Manufacturing, Solaglas, The Post Office
• 100% owned
• Rent passing £25.5m pa
• Average passing rent: £87.82 per sq.m.
• 88% occupancy by area, excl. rental guarantee
92% occupancy, incl. rental guarantee
This newly designated region (which excludes Slough and LHR) covers the area
adjacent to the M4 motorway between London and Bristol in the west. The M4
Corridor has been the most successful business area in the south east of England
in recent years and Slough has leading Business Parks across the region.
• A total of 14,386 sq.m. let in 2004.
• Letting of 1,712 sq.m. at Beeches Industrial Estate, Yate, at a rent of
£51.13 per sq.m.
• Letting of 1,577 sq.m. at Faraday Road, Swindon at £69.97 per sq.m.
• Acquisition from Royal Mail Group plc of remaining 2.86 hectares of land
at Winnersh Triangle, not already owned by Slough.
• Completion of new 3,372 sq.m. warehouse facility at Emerald Park,
Bristol, pre-leased to Knorr-Bremse at £72.70 per sq.m. This deal, plus an
additional letting of 704 sq.m., represented the final lettings in the
22,044 sq.m. built scheme.
Midlands
• Value £186m
• 168,371 sq.m. (1.8m sq.ft.) business space and 16,733 sq.m. (180,000 sq.
ft.) of retail space in: Birmingham, Huddersfield, Chester, Derby,
Northampton, Runcorn, Warrington, Oldbury
• 54.0 hectares (133.5 acres) in total
• 154 customers
• Customers include: Aggregate Industries Management, British Midland,
DSG, Newey & Eyre, Reid Furniture, Sec. of State for the Environment,
Tesco, Wolseley UK
• 100% owned
• Rent passing £11.6m pa
• Average passing rent: £62.80 per sq.m.
• 89% occupancy by area
The Midlands region is centred around Birmingham, the UK's second largest City,
and its main industrial centre. The largest asset is the Kings Norton business
park to the south of Birmingham. There are also a few properties in the North.
• A total of 9,644 sq.m. let in 2004.
• Letting of 2,157 sq.m. at Kings Norton Business Centre, at a rent of
£60.74 per sq.m.
• Letting of 1,861 sq. m. at Derby at an average rent of £43.07 per sq.m.
over 5 years.
Joint Ventures - HelioSlough
• Trading book value £10m
• 26.5 hectares (65.4 acres) owned in total
• 50/50 JV with Helios Properties
Formation of a new joint venture company, HelioSlough, with Helios Properties.
The 50/50 JV, which has £150 million of funding available, aims to develop a
network of large scale strategic distribution parks throughout the UK.
• 11,148 sq.m. under construction at Trax Park, Doncaster.
• Infrastructure work at Thorne, comprising formation of a new entrance
roundabout, some off-site road realignment and new services.
Belgium
• Investment property value £189.1m
Trading book value £11.5m
• 177,955 sq.m. (1.9m sq.ft.) business/office space and 2,797 sq.m.
(30,100 sq.ft.) of retail in: Brussels Pegasus Park (81,679 sq.m.),
Woluwe, Relegem, Bornem, Nivelles, Zaventem, Horizon, Diegem, Rumst,
Zellik, Sirius, Kortenberg
• 67 hectares (168 acres) in total
• 87 customers
• Customers include: Cisco, Johnson Controls, Regus, DHL, Bornem, UPS,
Telenet, Sungard, Emerson, Agilent, Ecolab (Henkel), Synstar
• Rent passing £14.4m pa
• Average passing rent: £80.71 per sq.m.
• 85% occupancy by area
Slough Estates has been operating in Belgium since 1963. Its Pegasus Park
development is the largest office park in Brussels and is adjacent to Brussels
International Airport. The Company is also a leading provider of distribution
space within 'the golden triangle' between Brussels, Ghent and Antwerp.
• A total of 20,348 sq.m. let in 2004.
• Lettings of 5,917 sq.m. at Pegasus Park, bringing vacancy down to under
6% (surrounding market vacancy is close to 20%).
• Start on site of construction of 6,360 sq.m. speculative office building
at Pegasus Park (start: June 2004, delivery: July 2005).
• Sale of 3,382 sq.m. at Kortijk and 2,302 sq.m. at Kortenberg.
France
• Investment property value £108.2m
Trading book value £28.5m
• 239,996 sq.m. (2.6m sq.ft.) business space and 17,812 sq.m. (190,000
sq.ft.) of retail in: Marly la Ville, Cergy Pontoise, Evry, Bures Orsay,
Colombes, Le Blanc Mesnil, Aulnay sous Bois, Nanterre and Paris
• 56 hectares (138 acres) in total
• 20 customers
• Customers include: Geodis, Daher, Deluxe, Staci, Conforama,
Stockalliance, Gefco, Mory Team, Guilbert, UPS Patisfrance
• Rent passing £10.3m pa
• Average passing rent: £43.00 per sq.m.
• 9,858 sq.m. under construction at Le Blanc Mesnil, 33% preleased
• 96% occupancy by area
Slough Estates has been operating in France since 1972. The business is centred
on Paris. The main developments have been around Paris' orbital motorway, La
Francilienne, where a number of distribution facilities have been developed.
More recently there has been greater emphasis on business space at such sites as
Le Blanc Mesnil.
• A total of 20,160 sq.m. let in 2004.
• Delivery of 1st phase of 7,472 sq.m. of light industrial units at Le
Blanc Mesnil, close to Le Bourget (48% leased on delivery).
Germany
• Trading book value £52.8m
• 60,224 sq.m. (650,000 sq.ft.) business space in: Neuss, Hamburg,
Ratingen, Monchengladbach, Frankfurt, Kapellen, Krefeld
• 27 hectares (67 acres) in total
• 57 customers
• Customers include: CC Bank, Qits, SATO, Listan, Phonet, Flashpoint,
Spacelabs, ADCO, Bernd John, Junkers, Tholstrup, Robin (Europe)
• 100% owned
• Rent passing £2.5m pa
• Average passing rent: £40.93 per sq.m.
Slough Estates has been operating in Germany since 1974. The business is centred
on the Ruhr which is the industrial heartland of western Germany. The business
is focused on developing small industrial parks and then selling these
developments to German institutions.
• A total of 8,957 sq.m. let in 2004.
• Pre-let of 87% of a 21,000 sq.m. warehouse at Neuss, to ASICS for
delivery in October 2005.
• Pre-let of 3,000 sq.m. unit at Krefeld.
• Sale of 34,051 sq.m at Neuss.
• 46,704 sq.m. under construction at Neuss, Kapellen and Krefeld, 46%
preleased.
California
• Investment property £541.4m
• 343,431 sq.m. (3.7m sq.ft.) business space in: San Francisco, San Diego
• 129 hectares (319 acres) in total
• 50 customers
• Customers include: Amgen, Exelixis, Pfizer, Rigel, Robert Half
International, FibroGen, Raven, SkyePharma, Aradigm, Millenium
Pharmaceuticals, Syrrx, ProBusiness Services
• Rent passing £45.0m pa
• Average passing rent: £131.17 per sq.m.
• 62,336 sq.m. under construction at South San Francisco and Poway, 67%
preleased
Slough Estates has been operating in North America since 1951 but today its
operations are centred in the Bay Area of San Francisco and San Diego in
California. In terms of product the business is focused on providing buildings
to the healthscience industry.
Occupancy has fallen to 86% at year end from 87% in 2003 but this reflects major
sales within the portfolio as 25,347 sq.m. were let in 2004.
• Genentech, Inc. agreed to terms to lease approx. 72,464 sq.m (780,000
sq.ft.) of office and laboratory space in eight new buildings on the
Britannia East Grand site, South San Francisco. Construction will take
place in two phases over 4 years and is estimated to cost over
£169 million.
• Acquisition of 32.5 ha of land at Parkway Business Centre, Poway, San
Diego.
• Purchase of 3 ha site in San Francisco containing a 15,128 sq.m.
redundant building which will be redeveloped.
• Completion and letting of last two buildings (approximately 18,821
sq.m.) of the Pfizer Global Research and Development Center in Torrey Pines
Science Center (totalling 71,709 sq.m.).
• Sale of Pfizer Center in San Diego for £190.7 million.
Financial Highlights
Profit and Loss Account Year ended Year ended
31 Dec 2004 31 Dec 2003
______________________________________________________________________________
Rental income (UK) £174.4m £167.3m
Rental income (Group) £252.1m £240.8m
Net interest payable £94.7m £88.5m
Profit / (loss) on property trading and £68.9m (£29.0m)
disposal of fixed assets
Underlying profit before taxation* £140.2m £132.8m
Profit before taxation £209.1m £103.8m
Tax charge £41.7m £12.4m
Adjusted diluted earnings per share 28.2p 27.6p
Diluted earnings per share 36.0p 19.6p
Ordinary dividend per share 16.0p 15.0p
______________________________________________________________________________
* profit before taxation less profit on property trading and disposal of fixed
assets
Balance Sheet 31 Dec 2004 31 Dec 2003
______________________________________________________________________________
Total properties £3,795.6 £3,563.9
Adjusted net assets £2,647.1 £2,369.2
Net assets £2,446.2 £2,176.1
Adjusted diluted net asset value per share 564p 505p
Diluted net asset value per share 521p 464p
Adjusted debt / equity ratio 50% 64%
______________________________________________________________________________
Total Return (adjusted diluted net asset value per share growth plus dividend)
for the year 14.9%.
Financing statistics (Group) 31 Dec 2004 31 Dec 2003
______________________________________________________________________________
Net debt £1,325.3m £1,507.8m
Weighted average debt maturity 9.7 years 10.8 years
Weighted average interest rate 6.41% 6.68%
% of net debt at fixed / capped interest rates 105% 95%
Interest cover (net rents / net interest) 2.2 times 2.0 times
Cash and available committed facilities £720.6m £523.5m
Financial Review
•Dividend up 6.7 per cent in 2004 and up 7.4% compound over five years.
•Property investment income including joint ventures and associate up 3.8
per cent.
•Diluted adjusted net assets per share up 11.7 per cent.
Results
Pre-tax profit, excluding exceptional items, rose by £6.7 million or 4.8 per
cent in 2004 from £140.1 million to £146.8 million. Earnings per share, adjusted
on a similar basis, and excluding the effects of FRS19 deferred tax, were up by
5.1 per cent to 29.0 pence. Year end exchange rates reduced profit before tax,
excluding exceptional items, by £2.2 million.
Including the substantial effects of investment property sales and the 2003
£37.9 million Quail West write-down/provision, profit before tax of £209.1
million was 101 per cent ahead of 2003's £103.8 million.
Property activities
Investment properties
Rental income excluding recharges rose by £11.3 million or 4.7 per cent from
£240.8 million in 2003 to £252.1 million. The main factors behind this increase
are as set out below:
£m 2004 2003
___ ______ _____
Properties owned throughout 231.4 224.2
Acquisitions 1.9 0.2
Developments 13.9 18.4
Properties sold (2.9) (3.9)
Surrender premiums 11.7 5.6
Exchange translation (3.9) (3.7)
______ _____
252.1 240.8
______ _____
Rent lost from vacated properties exceeded rent gained from re-lets by £6.7
million during 2004. On a like-for-like basis, rental income increased by £3.1
million or 1.2 per cent, 1.4 per cent in the UK and 0.7 per cent overseas. After
accounting for £13.1 million (2003 £15.8 million) of tenant recharges, property
costs of £34.3 million (2003 £33.5 million) and our profit share of £16.4
million (2003 £15.1 million) from property investment joint ventures and an
associate, property investment income was up by 3.8 per cent from £238.2 million
to £247.3 million.
As far as the future is concerned additional year on year rental income of £20.5
million has already been secured on recent project completions or properties
currently under development, £1.8 million of which will fall into 2005. The UK
portfolio of occupied space was 1.4 per cent reversionary at the end of 2004,
which equates to £2.1 million of potential future rental income as rents are
reviewed or properties re-let. The estimated rental value of vacant space at the
year end was £32. 3 million (excluding the portfolio acquired from Land
Securities which has rental guarantees), of which £21.8 million was in the UK.
Sales of investment properties realised a surplus of £62.3 million over book
value in 2004, compared to £1.6 million in 2003. The main contributors were the
Pfizer campus (£52.1 million), the retail properties involved in the swap with
Land Securities (£6.7 million), and Willingdon Park, Vancouver (£3.5 million).
Property trading
Property trading profits of £7.1 million were at the same level as those in
2003. Several projects in Belgium contributed, as did the sale of Neuss phase 5
in Germany. Net rental income from trading properties fell from £4.0 million in
2003 to £3.2 million. The inclusion of £0.5 million of losses (2003 profit £0.2
million) from property trading joint ventures brought the overall contribution
from property trading in 2004 down to £6.6 million, against £7.3 million in
2003. The 2004 losses arose mainly from the set up costs of the HelioSlough
joint venture. There are sufficient projects in the UK, Belgium, France and
Germany to suggest a reasonable level of trading profits in 2005.
The residential leisure development at Quail West in Florida had a much better
year in 2004, with the sale of 11 lots. The net book value of this project at
the end of 2004 was £7.4 million after deducting the provision against future
costs which was established in 2003. The sale of Quail West is expected to
complete during the first half of 2005 for a net $57.5 million (£30.0 million)
to be received over a four year period.
Non-property activities
The return from the Group's utilities, oil and gas and other activities improved
from a loss of £2.9 million in 2003 to a surplus of £2.8 million.
Slough Heat & Power
SH&P's losses of £4.1 million were only marginally lower than those of 2003
(£4.2 million) due to continuing plant availability problems, particularly in
the first half of the year, and higher fuel costs. Greater plant reliability
towards the end of the year, which has been sustained so far in 2005, points to
a significantly improved SH&P performance in 2005.
Tipperary
Losses on the Group's investment in Tipperary fell from £3.5 million in 2003 to
£3.1 million. The cost of developing the coal seam gas reserves in Queensland
will enhance the returns from the eventual sale of the Group's investment, which
had a market value of £57.7 million against a net book value of £11.7 million at
the end of 2004.
Other income
The profit from other activities rose by £5.2 million to £10.0 million in 2004,
thanks largely to a gain of £4.2 million on the sale of 1.5 million shares in
Tipperary Corporation, which reduced the Group's interest in that company from
61 per cent to 54 per cent. The sale of warrants in Tularik, one of the Group's
customers in California, generated a gain of £2.2 million. The contributions
from Candover and Charterhouse USA fell from £4.7 million to £3.5 million,
although there was a net cash inflow of £5.6 million from those investments.
With an investment of £38.3 million remaining in these funds and uncalled
commitments to them of £17.3 million, further profits can be expected in the
future, although their timing and quantum are difficult to predict. The Group
does not intend to invest in new funds of this nature.
Financing costs
Net interest costs rose by £6.2 million during 2004 to £94.7 million. Net
interest payable (before capitalisation of interest) was unchanged at £111.6
million. Capitalised interest fell by £6.2 million to £16.9 million, partly due
to the reduction in earlier years in the development programme, but also to the
expensing of an additional £1.8 million of interest in 2004 that had previously
been capitalised, mainly on projects such as Farnborough and Cambridge. Interest
capitalisation ceased on both of those projects in mid-2003 following extended
periods of development inactivity at the two sites. Capitalisation restarted at
Farnborough during the first half of 2004 with the resumption of development
there. Interest was expensed at Cambridge throughout 2004.
Gross interest cover improved from 2.0 times in 2003 to 2.2 times in 2004,
excluding exceptional items.
Taxation
The Group's effective current tax rate of 10.5 per cent excluding exceptional
items was slightly lower than 2003's 11.1 per cent. This rate benefits from the
effect of capital allowances, a deduction for interest that is capitalised in
the profit and loss account, and the availability of capital losses to shelter
lease surrender premiums. The effective current tax rate is expected to move up
to circa 15 per cent in 2005. FRS19 deferred tax has had a considerable effect
on earnings, with a charge of £5.6 million in 2004 compared to a credit of £3.0
million in 2003. This was largely due to 2003 benefiting in deferred tax terms
from the Quail West write down/provision. This is the main factor giving rise to
a higher overall effective tax rate in 2004 of 19.9 per cent against 11.9 per
cent in 2003. The Group has an estimated potential capital gains tax liability
of £176 million (2003 £129 million), assuming that all properties are sold at
their current balance sheet carrying values.
Security of income
The Group has excellent income security. 56 per cent of the current Group
annualised contracted rents of £245.7 million is secured on leases with at least
ten years unexpired, or 46 per cent if all tenants exercise break clauses and
vacate at the earliest opportunity. Over the last five years, 67 per cent of
customers with the option to break leases have not exercised those options. The
weighted average term of unexpired leases is 11.3 years excluding breaks or 9.8
years assuming all breaks are exercised.
The Group is not dependent on any one customer for its principal revenues as it
has over 1300 tenants in the UK and just under 1550 tenants in total worldwide.
No tenant accounts for more than 4 per cent of Group rental income. Nor is the
Group reliant on any one business sector. Its worldwide portfolio (by rent) is
occupied by customers in manufacturing 18 per cent, logistics 10 per cent,
health science research 29 per cent, TMT 22 per cent, service 14 per cent,
retail 5 per cent and others 2 per cent.
Dividend
The Board has proposed a total dividend of 16.0 pence per share for 2004, an
increase of 6.7 per cent on 2003. Dividend cover of 1.8 times, adjusted to
exclude exceptional items and FRS19 deferred tax, remained at the same level as
that of 2003.
Cash Flow
The net cash inflow from operations of £204.9 million was £9.4 million lower
than in 2003, due largely to the proceeds of £20.5 million from a 2004 trading
property sale being received in 2005. Without this timing difference, 2004
operating cash flow would have been £11.1 million higher than that of 2003.
After the payment of all interest, dividends and tax, there was a free cash
inflow of £17.3 million. Capital expenditure of £86.4 million on the investment
property portfolio was more than offset by proceeds of £228.4 million from
investment property sales. Overall, there was a net cash inflow of £146.4
million for the year.
Balance Sheet and Capital Structure
Shareholders' funds excluding FRS19 deferred tax rose by £277.9 million during
the year to £2,647.1 million. There was consequently an 11.7 per cent increase
in diluted net assets per share (NAPS) from 505 pence to 564 pence. The main
influences behind these movements are shown on the table below:
Net Diluted*
Assets * NAPS
£m Pence
_______ _____
2003 net asset value 2,369.2 505
Valuation surpluses/(deficits)
- retail 55.6 12
- industrial 109.7 23
- office 14.1 3
- development land 7.2 2
- joint ventures 14.5 3
Retained earnings 96.4 21
Exchange differences (12.1) (3)
Others (7.5) (2)
_______ _____
2004 net asset value 2,647.1 564
_______ _____
* Excludes deferred tax
The total deferred tax liability rose from £182.3 million to £192.1 million
during 2004. Diluted NAPS including deferred tax increased from 464 pence in
2003 to 521 pence.
Year end net borrowings of £1,325.3 million fell by £182.5 million during the
year. Gearing (the ratio of net borrowings to shareholders' funds, excluding
FRS19 deferred tax) dropped from 64 per cent in 2003 to 50 per cent at the end
of 2004, mainly due to the effect of the revaluation surplus and the high level
of property sales. The exchange rate effect reduced net borrowings by £31.8
million.
The Group has very little off-balance sheet debt. In addition to the £1,325.3
million of net borrowings disclosed as such in the balance sheet, £40.8 million
of joint venture debt is included in the balance sheet as part of the £46.4
million 'Investments in joint ventures-share of gross liabilities'. Only £1.5
million, relating to the Group's share of debt in a property backed associate,
is not carried on balance sheet.
Treasury Policies and Financial Risk Management
The Group operates a UK based centralised treasury function. Its objectives are
to meet the financing requirements of the Group on a cost effective basis,
whilst maintaining a prudent financial position. It is not a profit centre and
speculative transactions are not permitted. Board policies are laid down
covering the parameters of the department's operations including the interest
rate mix of borrowings, net assets exposed to exchange rate movements and
aggregate exposure limits to individual financial institutions. Derivative
instruments are used to hedge real underlying debt, cash or asset positions and
to convert one currency to another.
The main financial risks facing the Group are liquidity risk, interest rate risk
and foreign exchange translation exposure.
Regarding liquidity, as property investment is a long term business, the Group's
policy is to finance it primarily with equity and medium and long term
borrowings. The weighted average maturity of borrowings at the year end was 9.7
years. £46.5 million of debt is due for repayment or rollover in 2005/2006.
£1,202.5 million or 70 per cent of the Group's gross debt of £1,722.7 million
matures in more than five years.
At the year end, the Group had £397.4 million of cash balances on deposit and
£323.2 million of undrawn bank facilities. This availability is more than
adequate to cover the Group's development plans over the next two years or so.
Spend on the development programme is expected to amount to some £200 million in
2005 and about £225 million in 2006. This will obviously depend on prevailing
market conditions. Committed property expenditure amounted to £184.1 million at
the end of 2004, 70 per cent of which relates to pre-let opportunities. There
are no restrictions on the transfer of funds between the parent and subsidiary
companies. All covenants in bank or loan agreements restricting the extent to
which the Group may borrow leave substantial headroom for the Group to expand
its operations.
The Group's approach to interest rate risk is that a minimum of around 70 per
cent of the gross debt portfolio must attract a fixed rate of interest or be
variable rate debt hedged with a derivative instrument providing a maximum
interest rate payable. At the year end, 81 per cent of the debt portfolio was at
fixed rate. The weighted average cost of fixed rate debt was 7.08 per cent which
falls to 6.41 per cent when variable rate debt is included.
A number of the Group's historic fundings are at fixed interest rates which are
high compared with current rates, but which reflect market conditions at the
time they were completed. FRS 13 requires the disclosure of the 'fair value' of
these loans and derivatives. The fair value at 31 December 2004 of the Group's
borrowings was some £226.5 million higher than book value before tax or £158.5
million after tax.
The main currency risk is translation exposure, i.e. the exchange rate effect of
retranslating overseas currency denominated assets back into sterling at each
balance sheet date. The Group's policy is that currency assets should be
substantially hedged by maintaining liabilities (normally debt or currency
swaps) in a similar currency. Net assets exposed to exchange rate fluctuations
amounted to £430 million. A 10 per cent movement in the value of sterling
against all currencies affects net assets per share by 9 pence or 1.6 per cent,
although experience shows that sterling rarely moves in the same direction
against the two main overseas currencies involved in the Group's operations.
Accounting Policies
The Group's two defined benefit pension schemes were actuarially valued as at 31
March and 5 April 2004, resulting in an overall past service deficit of £30
million. The company is currently in discussion with the trustees of the pension
schemes to determine how the deficits in both schemes will be financed. However,
had FRS17 'Retirement Benefits' been adopted in full, net assets at 31 December
2004 would have been reduced by £28.3 million (2003 £20.2 million) net of
deferred tax to reflect the 'Net pension liability' calculated as specified by
the standard.
International Financial Reporting Standards ('IFRS')
We will adopt IFRS, as required, with effect from 1 January 2005. Our first
statements under IFRS will be for the six months to 30 June 2005, when we will
restate the comparative figures for the corresponding period of 2004.
IFRS will have a major impact on the Group's accounts, as they will on many
other property companies' accounts. The areas that will be most significantly
affected include property valuation movements, deferred tax, classification of
leases, preference shares and our defined benefit pension schemes.
Surpluses or deficits arising from the revaluation of investment properties will
be taken through the profit and loss account rather than the Statement of Total
Recognised Gains and Losses as at present. This will add considerably to the
volatility of the Group's results.
IFRS requires deferred tax to be provided for on asset revaluation movements,
which is not required currently under UK GAAP. This will increase the volatility
of deferred tax charges and add a significant liability to the Group's balance
sheet.
Those leases meeting IFRS's definition of finance leases will affect the profit
and loss account to the extent that interest income will replace rental income,
albeit with slightly different values. Although this is not expected to have
much of an effect on income or net asset value, it has the potential to greatly
confuse property companies' accounts.
The accounting treatment of the Group's £136 million convertible preference
shares will change significantly under IFRS. Under IFRS the shares are
considered to be a form of debt with an embedded derivative in respect of the
option for shareholders to convert. The value of the shares will have to be
split between a financial liability shown within Creditors and an equity element
shown within Shareholders' Funds. The apparent effect of this accounting will be
to reduce the Group's net assets and increase finance charges.
The Group's defined benefit pension schemes' deficits will also be included on
the balance sheet, with movement thereon taken through the statement of
recognised income and expenses.
There are several other areas that will also be affected, but not to the same
extent as those above.
During the transition to IFRS, we will provide reconciliations between UK GAAP
and IFRS to help with an understanding of the main changes. It is important to
note that, although IFRS will significantly affect the presentation of the
Group's financial statements, it will not affect cash flow or the Group's
strategic direction.
Dick Kingston
Finance Director
Portfolio Highlights
VALUATION Value Revaluation Change Portfolio
BY SECTOR £m Movement £m % %
______________________________________________________________________________
UK
Business Space
Industrial 2,088 107 5.4 53.5
Suburban Offices 451 13 3.0 11.5
R&D 80 2 2.6 2.0
Retail 263 28 11.9 6.7
Land 142 (21) (12.9) 3.6
______________________________________________________________________________
Total UK 3,024 129 4.4 77.3
______________________________________________________________________________
Overseas
USA 588 64 12.2 15.0
Europe 301 8 2.7 7.7
______________________________________________________________________________
Total Overseas 889 72 8.8 22.7
______________________________________________________________________________
VALUATION Value Revaluation Change Portfolio
BY LOCATION £m Movement £m % %
______________________________________________________________________________
UK
Slough 1,168 55 4.9 29.8
Thames Valley 369 13 3.7 9.4
Other South 1,186 43 3.8 30.3
Midlands & North 301 18 6.4 7.7
______________________________________________________________________________
Total UK 3,024 129 4.4 77.3
______________________________________________________________________________
Continental Europe
Belgium 193 3 1.6 4.9
France 108 5 4.9 2.8
______________________________________________________________________________
Total Europe 301 8 2.7 7.7
______________________________________________________________________________
Worldwide
UK 3,024 129 4.4 77.3
Europe 301 8 2.7 7.7
USA 588 64 12.2 15.0
______________________________________________________________________________
Total Worldwide 3,913 201 5.4 100.0
______________________________________________________________________________
Excludes trading properties in Europe
Includes share of joint ventures and associate
LONG LEASE PROFILE
Weighted average lease term, years
to expiry to first break
______________________________________________________________________________
UK 9.5 7.8
Business Space
Industrial 9.1 6.6
Suburban Offices 9.1 6.6
R&D 15.6 11.6
Retail 12.1 11.5
______________________________________________________________________________
Overseas
USA 19.8 19.8
Europe 6.6 3.9
Group 11.3 9.8
______________________________________________________________________________
SECURITY OF INCOME
% of income remaining at:
expiry first break
______________________________________________________________________________
5 years 91% 76%
10 years 56% 46%
CURRENT YIELDS Current yield Reversionary yield
% %
______________________________________________________________________________
UK
Business Space
Industrial 5.90 7.11
Suburban Offices 6.68 8.02
R&D 6.76 6.72
Retail 5.30 5.99
______________________________________________________________________________
Total UK 5.99 7.19
______________________________________________________________________________
Overseas
USA 9.60 8.11
Europe* 7.59 7.92
______________________________________________________________________________
Initial yield: current rent passing divided by current capital value
Reversionary yield: current estimated rental value divided by current capital
value
* Excludes trading properties
DEVELOPMENT PROGRAMME
Location Type Practical Work in Anticipated Potential
Completions Progress completion starts 2005
2004 Dec 2004 date* sq.m.
sq.m
_______________________________________________________________________________________________________________
UK
Slough
275 Leigh Road Industrial 1,444 Let to Ferrari Maserati
61 Whitby Road Industrial 3,387 Let to WH Smith
381 Sykes Road Industrial 2,394 Q1
628-630 Ajax Avenue Industrial 6,310
2D-E Buckingham Avenue Retail 1,500
2F-L Buckingham Avenue Industrial 5,500
115-118 Buckingham Avenue Industrial 2,725
11A-D Buckingham Avenue Retail 2,440
91-94 Farnham Road Retail 2,322
505A, 803/813 Weston Road Industrial 3,800
Total Slough 4,831 2,394 24,597
Birmingham
K800 Industrial 1,868
K600 Retail 1,115
Bristol
Phase 400 Industrial 3,372 Let to Knorr-Bremse
Portsmouth
Site D Industrial 2,950 Q3
Radlett
Phase 200 Industrial 9,454 Q2
Phase 300 Industrial 7,073
West Drayton
Stone Close Phase 1 Car Showroom 2,926 Q1 Pre-let to HR Owen
Stockley Close Phase 1 Industrial 6,032 Q3
Camberley
Stanhope Road Industrial 2,484 Q1 Presold to Dolphin Head
Phase 100 Industrial 9,638
Hounslow
Pulborough Way Industrial 5,318 Q3
Farnborough
200/250 The Square Offices 6,677
Q134 Offices 4,245
Feltham
Phase 1000 Industrial 2,257
Luton
Phase 200 Industrial 3,829
Uxbridge
Phase 300/400 Industrial 4,627
Weston Super Mare
Phase 100 Industrial 1,768 Pre-let to Bradford & Sons
HelioSlough
Trax Park, Doncaster Industrial 11,148 Q2
_______________________________________________________________________________________________________________
UK TOTAL 10,071 42,706 65,826
_______________________________________________________________________________________________________________
* Applies to 2005, unless stated otherwise
DEVELOPMENT PROGRAMME Cont.
Location Type Practical Work in Anticipated Potential
Completions Progress completion starts
2004 Dec date* 2005
sq.m 2004 sq.m.
________________________________________________________________________________________________________________________
Belgium
Kortrijk Office 3,882 Sold to Deloitte & Touche
Rumst Industrial 9,696 20,000
Pegasus Park Office 6,360 Q3
Kortenberg Industrial 2,302 Sold to DK Moves
Nivelles Industrial 10,000
Zaventem III Industrial 5,000
Zellik Industrial 8,950
Bornem Industrial 33,000
15,880 6,360 76,950
______ ______ ______
France
Avenue Kleber Office 3,221
Nanterre Office 5,803
Le Blanc Mesnil Industrial 7,472 9,858 Q2 8,830 4,694 sq.m. let to Blindage de France,
Ditac and 3,216 sq.m. prelet to
Finemetal
16,496 9,858 8,830
______ ______ ______
Germany
Frankfurt Industrial 10,863 1,236 sq.m. let to Schulte
Ratingen II Industrial 5,582 1,376 sq.m. let to Farbory Centres
and MCE Computers
Neuss V Industrial 5,802 Q1 and Q3
Neuss IV Asics Industrial 21,120 Q4 18,327 sq.m. prelet to ASICS
Krefeld Industrial 7,596 Q4 3,021 sq.m. prelet to Nachi
Kapellen, Phase III Logistics 12,186 Q2
Kapellen, Phase II Industrial 8,000
Neuss IV, Phase II Industrial 8,701
Frankfurt II Industrial 12,567
Hamburg III Industrial 5,410
16,445 46,704 34,678
______ ______ ______
USA
Torrey Pines
Lot 21-22 & 23 R&D 18,821 Let to Pfizer
Poway Industrial 14,492 Q2 17,837
East Grand R&D 41,805 2006 Prelet to Genentech
Pointe Grand R&D 6,039 Q2
Britannia Oyster
Point II 10,498
Britannia Oyster
Point E 9,144 Prelet to Amgen
285 E Grand 6,968
18,821 62,336 44,447
______ ______ ______
OVERSEAS TOTAL 67,642 125,258 164,905
GROUP TOTAL 77,713 167,964 230,731
Let or sold 52.1% 42.7% 4.7%
________________________________________________________________________________________________________________________
* Applies to 2005, unless stated otherwise
SLOUGH ESTATES plc
2004 PRELIMINARY RESULTS
Group profit and loss account 2004 2003
For the year ended 31 December 2004 Note £m £m £m £m
_____ _____ ______ _____ _____
Turnover
Group - continuing 323.7 312.4
- discontinued 13.3 13.5
_____ _____
Total group 3 337.0 325.9
_____ _____
Joint ventures - continuing 10.8 8.6
- discontinued 8.9 8.2
_____ _____
Total joint ventures 3 19.7 16.8
_____ _____
Group operating income
Property investment - continuing 3 220.6 212.1
- discontinued 3 10.3 11.0
_____ _____
230.9 223.1
Property trading - operating 3 7.1 7.1
Property trading -
exceptional provision 3 - (37.9)
_____ _____
7.1 (30.8)
Utilities 3 (4.1) (4.2)
Oil and gas 3 (3.1) (3.5)
Other income 10.0 4.8
Administration expenses 4 (15.2) (14.0)
_____ _____
Group operating profit 225.6 175.4
====== ======
Continuing 3 215.3 164.4
Discontinued 3 10.3 11.0
====== ======
Share of operating profit/(loss) of property
joint ventures and associate
Property investment 16.4 15.1
Property trading (0.5) 0.2
_____ _____
15.9 15.3
_____ _____
Total operating profit 241.5 190.7
Profit on sale of investment
properties - continuing 55.5 1.6
- discontinued 6.8 -
_____ _____
62.3 1.6
_____ _____
Profit before interest and
taxation 303.8 192.3
Interest (net) 5 (94.7) (88.5)
_____ _____
Profit on ordinary
activities before taxation 209.1 103.8
Taxation - current 6 (35.1) (14.7)
- deferred 6 (6.6) 2.3
_____ _____
(41.7) (12.4)
_____ _____
Profit on ordinary
activities after taxation 167.4 91.4
Minority interests - equity 1.6 1.8
Preference dividends 7 (11.2) (11.4)
_____ _____
Profit attributable to
ordinary shareholders 157.8 81.8
Ordinary dividends 7 (67.0) (62.5)
_____ _____
Retained profit 90.8 19.3
_____ _____
Basic earnings per ordinary
share 8 37.8p 19.6p
Adjustment to exclude profits and losses
on sale of investment
properties net of tax and minority and
the exceptional provision
for Quail West (10.1p) 5.2p
Adjustment to exclude FRS19
Deferred Tax 1.3p 2.8p
_____ _____
Adjusted basic earnings per
ordinary share 8 29.0p 27.6p
_____ _____
Diluted earnings per
ordinary share 8 36.0p 19.6p
_____ _____
Unless otherwise indicated all operations are continuing. The discontinued activity
relates to retail shopping centres.
STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31 December 2004
2004 2003
£m £m
_____ _____
Profit attributable to ordinary shareholders 157.8 81.8
Surplus/(deficit) on revaluation of - properties 186.6 (97.7)
- joint ventures
and associate 14.5 10.8
Exchange differences (10.2) (3.5)
Taxation (14.0) 4.0
Minority interests (0.6) (1.9)
_____ _____
Total recognised gains and losses for the year 334.1 (6.5)
_____ _____
RECONCILIATION OF MOVEMENT IN GROUP SHAREHOLDERS' FUNDS
For the year ended 31 December 2004
2003
2004 restated
£m £m
______ ______
Profit attributable to ordinary shareholders 157.8 81.8
Ordinary dividends (67.0) (62.5)
______ ______
90.8 19.3
Revaluation surplus/(deficit) 201.1 (86.9)
Other recognised gains and losses (24.8) (1.4)
Ordinary shares issued 3.0 5.2
Purchase of shares into ESOP trust (note 2) (0.8) (2.0)
Issue of shares from ESOP trust (note 2) 0.8 1.1
______ ______
Net increase/(decrease) in shareholders' funds 270.1 (64.7)
Shareholders' funds at 1 January 2,176.1 2,240.8
______ ______
Shareholders' funds at 31 December 2,446.2 2,176.1
===== =====
The opening shareholders' fund as at 1st January 2004 and 1st January 2003 as
previously reported amounted to £2,181.3 million and £2,245.1 million before the
prior year adjustments of £5.2 million and £4.3 million respectively (see note
2).
GROUP BALANCE SHEET 2003
As at 31 December 2004 Note 2004 restated
£m £m
____ _______ ________
Fixed assets
Intangible asset- goodwill 9 (4.7) -
Tangible assets - investment properties 10 3,795.6 3,563.9
- other 11 118.0 41.8
Investments in joint ventures: ======== =========
- share of gross assets 134.8 255.9
- share of gross liabilities (46.4) (50.5)
======== =========
12 88.4 205.4
Investment in associate 12 3.9 3.9
_______ ________
4,001.2 3,815.0
_______ ________
Current assets
Stocks 13 127.2 123.2
Debtors 13 61.2 35.9
Trading investments 13 38.4 107.3
Cash and deposits 17 397.4 159.3
_______ ________
624.2 425.7
_______ ________
Prepayments and accrued income 23.1 19.3
_______ ________
Total assets 4,648.5 4,260.0
_______ ________
Capital and reserves
Called up share capital 138.8 138.9
Share premium account 14 339.1 336.0
Capital reserves 14 1,664.6 1,439.2
Own shares held 14 (5.2) (5.2)
Profit and loss account 14 308.9 267.2
_______ ________
Shareholders' funds 2,446.2 2,176.1
Minority interests - equity 21.0 22.1
- non-equity 0.3 0.3
Provisions for liabilities and charges 16 211.6 205.6
Creditors falling due within one year ======= ========
Borrowings 17 39.2 40.5
Other 18 231.5 179.3
======= ========
270.7 219.8
Creditors falling due after more than one year ======= ========
Borrowings 17 1,683.5 1,626.6
Other 18 15.2 9.5
======= ========
1,698.7 1,636.1
_______ ________
4,648.5 4,260.0
_______ ________
Shareholders' funds attributable to:
Equity shareholders - ordinary shares 2,310.2 2,038.3
Non-equity shareholders - preference shares 136.0 137.8
_______ ________
2,446.2 2,176.1
_______ ________
Net assets per ordinary share
- basic 8 553p 490p
- basic excluding FRS19 deferred tax 8 601p 536p
- diluted 8 521p 464p
- diluted excluding FRS19 deferred tax 8 564p 505p
Approved by the Board on 22 March 2005
SUMMARISED GROUP CASH FLOW STATEMENT
For the year ended 31 December 2004
2004 2003
£m restated
£m
_____ _____
Net cash inflow from operating activities - see (a)
below 204.9 214.3
Dividends from joint ventures and associate 8.3 8.8
Net interest paid (105.6) (110.4)
Dividends paid to preference and minority shareholders (12.1) (12.3)
Taxation (14.1) (14.1)
Equity dividends paid (64.1) (59.6)
Purchase and development of investment properties (86.4) (109.5)
Sales of investment properties 228.4 59.3
Other net investments (12.9) (31.8)
_____ _____
Net cash inflow/(outflow) before use of liquid
resources 146.4 (55.3)
and financing
Management of liquid resources
Investment in term deposits (230.6) (46.1)
Financing
Issue of ordinary shares 3.0 5.2
Payment to acquire own shares (0.8) (2.0)
Increase in debt 87.3 118.3
_____ _____
Increase in cash - see (b) below 5.3 20.1
===== =====
(a) Reconciliation of Group operating profit to net
cash inflow from operating activities 2004 2003
£m restated
£m
_____ _____
Operating profit 225.6 175.4
Less other income reallocated (5.1) (2.4)
Add back depreciation 4.5 3.2
Add back exceptional provision against Quail West - 37.9
Adjust for other non-cash items 0.1 1.6
_____ _____
225.1 215.7
Movement in stocks, debtors and creditors (18.3) (1.4)
Decrease in provision for liabilities and charges (1.9) -
_____ _____
Net cash inflow from operating activities 204.9 214.3
===== =====
(b) Reconciliation of net cash flow to movement in net
debt 2004 2003
£m £m
_____ _____
Increase in cash in the year 5.3 20.1
Increase in debt (87.3) (118.3)
Increase in liquid resources 230.6 46.1
_____ _____
Change in net debt resulting from cash flows 148.6 (52.1)
Unamortised borrowing costs 2.1 2.2
Net debt acquired - (0.8)
Translation difference 31.8 32.5
_____ _____
Movement in net debt in the year 182.5 (18.2)
Net debt at 1 January 2004 (1,507.8) (1,489.6)
_____ _____
Net debt at 31 December 2004 (1,325.3) (1,507.8)
===== =====
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The financial information is prepared on the basis of the accounting policies
set out in the Group's statutory accounts for the year ended 31 December 2004,
all of which have been applied consistently throughout this and the preceding
year, except for the restatement as explained in note 2 below.
These accounts are abridged preliminary Group accounts for the year ended 31
December 2004, together with prior year comparatives. These are not statutory
accounts and have been extracted from the full statutory accounts for 2004,
which will be delivered to the Registrar of Companies in due course and on which
the auditors' report is unqualified. The results for 2003 are an abridged
statement of the Group accounts for that year, which have been delivered to the
Registrar of Companies and on which the auditors' report was unqualified.
2. Restatement
In accordance with UITF 38, which became effective for accounting periods ending
on or after 22 June 2004, consideration paid by the Employee Share Ownership
Plans (ESOPs) trust for the company's own shares is deducted from shareholders'
equity. The shares held by the ESOPs trust are treated as if they were cancelled
for the purposes of calculating earnings and net assets per ordinary share.
Previously all shares held by the ESOPs trust were held in prepayments at cost
less amounts written off. Where appropriate, previously reported figures have
been restated to show the financial effect of this change in accounting policy.
There is no effect on the profits for the current and prior periods. The effect
on shareholders' funds is shown in note 14 of these preliminary results.
3. Turnover and Group operating Turnover Group operating profit
profit _______________ ______________________
2004 2003 2004 2003
£m £m £m £m
_____ _____ _____ _____
Business segments:
Property investment - continuing 251.9 243.1 220.6 212.1
- discontinued 13.3 13.5 10.3 11.0
Property trading - operating 36.7 40.6 7.1 7.1
- exceptional provision - - - (37.9)
Utilities 30.7 25.2 (4.1) (4.2)
Oil and gas 4.4 3.5 (3.1) (3.5)
Other activities - - 10.0 4.8
Common costs - - (15.2) (14.0)
_____ _____ _____ _____
337.0 325.9 225.6 175.4
===== ===== ===== =====
Geographical segments:
United Kingdom - continuing 198.7 183.7 135.0 130.1
- discontinued 13.3 13.5 10.3 11.0
Australia - oil and gas 4.4 3.5 (3.1) (3.5)
Canada 2.4 2.6 1.7 2.2
USA 65.1 60.9 55.1 4.6
Europe 53.1 61.7 26.6 31.0
_____ _____ _____ _____
337.0 325.9 225.6 175.4
===== ===== ===== =====
The 2003 exceptional provision above was in respect of the residential leisure
development at Quail West in Florida.
Property investment discontinued is in respect of the disposal of retail
properties during the period.
3. Turnover and Group operating profit (continued)
Joint ventures (Group share) Turnover
___________________________
2004 2003
£m £m
_____ _____
Geographical segments:
United Kingdom 13.8 12.1
USA 3.9 4.4
Europe 2.0 0.3
_____ _____
19.7 16.8
==== ====
Property investment turnover comprises:
Tenant recharges
Rents and other Total
________________ ________________ ______________
2004 2003 2004 2003 2004 2003
£m £m £m £m £m £m
_____ _____ _____ _____ _____ _____
Rents and recharges
- United Kingdom 174.4 167.3 4.4 4.7 178.8 172.0
- Canada 1.7 2.1 0.7 0.5 2.4 2.6
- USA 54.1 49.6 7.5 10.1 61.6 59.7
- Europe 21.9 21.8 0.5 0.5 22.4 22.3
_____ _____ _____ _____ _____ _____
252.1 240.8 13.1 15.8 265.2 256.6
===== ===== ===== ===== ===== =====
Property investment Property trading Utilities Oil and gas Total
_________________ ________________ _____________ _______________ _______________
Net operating 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
income comprises: £m £m £m £m £m £m £m £m £m £m
_____ _____ _____ _____ _____ _____ _____ ______ _____ _____
Turnover 265.2 256.6 36.7 40.6 30.7 25.2 4.4 3.5 337.0 325.9
_____ _____ _____ _____ _____ _____ _____ ______ _____ _____
Ground rents
payable (0.8) (1.7) - - - - - - (0.8) (1.7)
Depreciation (0.5) (0.3) - - (2.1) (1.2) (1.1) (0.9) (3.7) (2.4)
Exceptional
provision - - - (37.9) - - - - - (37.9)
Other property
outgoings/cost
of sales (33.0) (31.5) (29.6) (33.5) (32.7) (28.2) (6.4) (6.1) (101.7) (99.3)
_____ _____ _____ _____ _____ _____ _____ ______ _____ _____
Total property
outgoings/cost
of sales (34.3) (33.5) (29.6) (71.4) (34.8) (29.4) (7.5) (7.0) (106.2) (141.3)
_____ _____ _____ _____ _____ _____ _____ ______ _____ _____
Net operating
income 230.9 223.1 7.1 (30.8) (4.1) (4.2) (3.1) (3.5) 230.8 184.6
===== ===== ===== ===== ===== ===== ===== ====== ===== =====
4. Administration expenses 2004 2003
£m £m
_____ _____
Directors' remuneration 2.5 2.2
Depreciation of tangible fixed 0.8 0.8
assets
Auditors' remuneration 0.7 0.7
Other administration costs 11.2 10.3
_____ _____
15.2 14.0
===== =====
4. Administration expenses (continued)
Property Utilities Oil Total Total
management £m and gas 2004 2003
£m £m £m £m
_____ _____ ______ ______ ______
Employees' staff costs
were:
Wages and salaries 15.5 5.8 1.4 22.7 22.1
Social security costs 1.6 0.5 0.1 2.2 2.1
Pension contributions 2.9 1.2 - 4.1 3.9
_____ _____ ______ ______ ______
20.0 7.5 1.5 29.0 28.1
_____ _____ ______ ______ ______
5. Interest (net) 2004 2003
£m £m
______ ______
On bank loans and overdrafts 20.6 20.4
On other loans 94.6 93.0
Unwinding of discount on provision 0.5 -
______ ______
115.79 113.4
Less interest received (6.7) (4.1)
Less amount charged to : the
development of trading properties (0.8) (1.5)
: the development of investment
properties (14.9) (20.1)
: the development of other assets (1.2) (1.5)
______ ______
Charged to profit and loss
account: - Group 92.1 86.2
- Joint ventures 2.5 2.2
- Associate 0.1 0.1
_____ ______
94.7 88.5
_____ ______
6. Taxation 2004 2003
£m £m
______ ______
Current tax
Provision for taxation based on profits for the year
United Kingdom
Corporation tax charged at 30 per
cent (2003 30 per cent) 14.1 14.2
Over provision in earlier years (2.8) (2.5)
Tax in joint venture 1.0 0.6
______ ______
12.3 12.3
Overseas
Current tax charge 2.4 3.2
Over provision in earlier years 0.6 (0.8)
Tax charge/(credit) on sale of
investment properties 19.7 (0.1)
Tax in joint venture 0.1 0.1
______ ______
Total current tax 35.1 14.7
______ ______
6. Taxation (continued) 2004 2003
£m £m
______ ______
Deferred tax
Origination and reversal of timing differences 32.1 17.3
Effect of changes in tax rates on opening timing
differences - (2.2)
Released in respect of property disposals (26.5) (3.5)
Credit in respect of the exceptional provision for
Quail West - (14.6)
Other deferred tax 1.0 0.7
______ ______
Total deferred tax charge/(credit) 6.6 (2.3)
______ ______
Total tax 41.7 12.4
______ ______
2004 2003
£m £m
______ ______
7. Dividends
Preference dividends
Dividend paid to 1 September 7.5 7.6
Dividend accrued for period from 2 September to 31
December 3.7 3.8
_____ ______
11.2 11.4
_____ ______
Ordinary dividends
Interim dividend at 6.15p per share (2003 5.8p) 25.8 24.1
Proposed final dividend at 9.85p per share (2003
9.2p) 41.2 38.4
_____ ______
67.0 62.5
_____ ______
8. Earnings, capital surplus/(deficit) and net assets per
ordinary share
2003
Earnings per share 2004 restated
The weighted average number of shares used for the calculation of the
earnings per share is as follows:
Weighted average number of shares in issue Shares m 418.6 416.6
Less the weighted average number of shares held by the ESOP Shares m (1.4) (1.4)
______ ______
Weighted average number of shares used for the basic EPS calculation a Shares m 417.2 415.2
Dilution adjustments:
Preference shares (2003 anti-dilutive) Shares m 50.4 -
Share options and save as you earn schemes Shares m 1.3 0.7
______ ______
Diluted weighted average number of shares b Shares m 468.9 415.9
______ ______
Earnings used for the calculation of earning per share:
Attributable profit c £m 157.8 81.8
Dividends on preference shares (2003 anti-dilutive) £m 11.2 -
______ ______
d £m 169.0 81.8
Exceptional provision on Quail West net of tax £m - 23.3
Deferred tax relating to investment properties £m 5.6 11.6
Profit and losses on sale of investment properties net of tax and
minorities £m (42.6) (1.7)
______ ______
Diluted adjusted earnings e £m 132.0 115.0
______ ______
Basic adjusted earnings f £m 120.8 115.0
______ ______
Earnings per share:
Basic c/a pence 37.8 19.6
Basic - adjusted f/a pence 29.0 27.6
Diluted d/b pence 36.0 19.6
Diluted - adjusted e/b pence 28.2 27.6
Capital surplus/(deficit) per ordinary share
Capital surplus/(deficit) attributable to ordinary shareholders g £m 176.3 (88.3)
Capital surplus/(deficit) per ordinary share - basic g/a pence 42.3 (21.3)
- diluted g/b pence 37.6 (21.2)
Net assets per ordinary share
The number of shares used for the calculation of the net assets per
ordinary share is as follows:
Number of shares in issue Shares m 419.3 417.8
Less shares held by the ESOP (note 2) Shares m (1.4) (1.4)
______ ______
Basic number of shares h Shares m 417.9 416.4
Dilution adjustments:
Preference shares Shares m 50.4 51.1
Share options and save as you earn schemes Shares m 1.3 1.4
______ ______
Diluted number of shares I Shares m 469.6 468.9
______ ______
Total equity attributable to ordinary shareholders £m 2,315.4 2,043.5
Less shares held by ESOP (note 2) £m (5.2) (5.2)
______ ______
Restated equity j £m 2,310.2 2,038.3
Adjustment to exclude FRS 19 deferred tax £m 200.9 193.1
______ ______
Adjusted equity attributable to ordinary shareholders k £m 2,511.1 2,231.4
Dilution adjustment for the preference shares £m 136.0 137.8
______ ______
Adjusted diluted equity attributable to ordinary shareholders m £m 2,647.1 2,369.2
______ ______
Diluted equity attributable to ordinary shareholders n £m 2,446.2 2,176.1
______ ______
Net assets per ordinary share
Basic j/h pence 553 490
Basic - adjusted for FRS 19 deferred tax k/h pence 601 536
Diluted n/I pence 521 464
Diluted excluding FRS 19 deferred tax m/I pence 564 505
8. Earnings, capital surplus/(deficit) and net assets per ordinary share
(continued)
In 2004, the effect of the preference shares is dilutive and therefore they are
included in the diluted earnings per share calculation. In 2003, the effect of
the preference shares was anti-dilutive and therefore they were excluded from
the diluted earnings per share calculation. The preference shares are dilutive
in 2004 and 2003 for the purpose of the diluted net assets per share
calculations and have been treated as such.
The Group has also presented an adjusted basic earnings per share figure to
exclude the impact of exceptional items, profits and losses on the sale of
investment properties (net of taxation and minority interests) and deferred tax
in respect of investment properties. The directors consider that this adjusted
figure gives a more meaningful comparison for the periods shown in the
consolidated financial statements. Deferred tax has been excluded from the
adjusted calculation as the Group has no plans to sell a significant proportion
of its investment properties, and in any case it is generally very unusual for
UK capital allowances to be recaptured on the disposal of a property. Profits
and losses on the sale of investment properties are excluded from adjusted
earnings as these are non-recurring items.
Net assets per share are calculated on the equity shareholders' funds of
£2,310.2 million ( 2003 £2,038.3 million restated). Adjusted net assets per
share have been calculated on the same number of shares but shareholders' funds
exclude the deferred tax liability of £200.9 million (2003 £193.1 million) as it
is the opinion of the directors that deferred tax on capital allowances in
relation to investment properties is unlikely to crystallise materially in
practice.
9. Goodwill
The goodwill arises from the acquisition on 15th December 2004 of Ravenseft
Industrial Estates Limited, formerly a subsidiary of Land Securities Group PLC.
The negative goodwill amounting to £4.7 million is required to be shown as a
negative balance on the balance sheet within fixed assets. The amount is not
amortised and will only be released to profit and loss account on the eventual
sale of the properties acquired.
10. Tangible assets - investment UK Canada USA Europe Total
properties £m £m £m £m £m
______ ______ _____ _____ ______
At 1 January 2004 2,627.8 28.6 622.8 284.7 3,563.9
Exchange movement - 0.1 (42.1) 2.0 (40.0)
Additions 60.0 1.2 47.9 3.3 112.4
Acquisition of Ravenseft 334.9 - - - 334.9
Disposals (184.5) (29.9) (140.2) - (354.6)
Transfer to trading property (7.6) - - - (7.6)
Surplus on valuation 118.9 - 60.5 7.2 186.6
______ ______ _____ _____ ______
At 31 December 2004 2,949.5 - 548.9 297.2 3,795.6
====== ====== ===== ===== ======
Completed properties 2,791.5 - 439.1 266.3 3,496.9
Properties for or under
development 158.0 - 109.8 30.9 298.7
______ ______ _____ _____ ______
2,949.5 - 548.9 297.2 3,795.6
====== ====== ===== ===== =======
The Group's completed investment properties and land held for or under
development were externally valued as at 31 December 2004, in accordance with
the accounting policies, by CB Richard Ellis or DTZ Debenham Tie Leung or
Colliers Conrad Ritblat Erdman in the United Kingdom, in the USA by
Walden-Marling, Inc., in Belgium by De Crombrugghe & Partners s.a. and in France
by CB Richard Ellis Bourdais. The industrial properties acquired from Land
Securities in December 2004 have been included at their fair values as at the
date of acquisition.
11. Tangible assets - other Cost Deprec Net
£m -iation £m
£m
_____ _____ _____
At 1 January 2004 51.9 (10.1) 41.8
Additions 4.9 (3.0) 1.9
Transfer from trade investments 75.7 (1.1) 74.6
Disposals (0.7) 0.4 (0.3)
_____ _____ _____
At 31 December 2004 131.8 (13.8) 118.0
==== ==== ====
The net book value includes Utilities plant and equipment amounting to £40.0
million (2003 £38.8 million) and Tipperary oil and gas assets of £74.6 million
(2003 : Nil).
12. Investments Associate Joint Total Total
£m ventures 2004 2003
£m £m £m
_____ _____ _____ _____
Cost or valuation at 1 January 2004 3.9 205.4 209.3 188.7
Exchange movement (0.3) (1.1) (1.4) (2.3)
Net additions - 7.2 7.2 2.0
Disposal - (141.2) (141.2) -
Reclassified from trading property - - - 6.6
Dividends received (0.2) (8.1) (8.3) (8.8)
Valuation surplus 0.1 14.4 14.5 10.8
Share of profits net of taxation 0.4 11.8 12.2 12.3
_____ _____ _____ _____
Cost or valuation at 31 December 2004 3.9 88.4 92.3 209.3
===== ===== ==== =====
13. Current assets 2004 2003
£m £m
_____ ______
Stocks
Trading properties - completed properties 88.7 75.5
- properties under development 36.6 46.1
_____ ______
125.3 121.6
Utilities stock 1.9 1.6
_____ ______
127.2 123.2
_____ ______
13. Current assets (continued) 2004 2003
£m £m
_____ _____
Debtors (receivable in less than one year)
Trade debtors 47.1 19.5
Amounts recoverable under contracts 2.6 -
Other debtors 9.6 12.2
Tax recoverable 1.3 3.4
_____ _____
60.6 35.1
Debtors (receivable in more than one year)
Other debtors 0.6 0.8
_____ _____
61.2 35.9
_____ _____
Trading investments
Shares - listed (market value £0.6 million) 0.2 0.2
- unlisted 38.2 40.6
Gas investments in USA and Australia * - 66.5
_____ _____
38.4 107.3
_____ _____
* Gas investments in USA and Australia have been reclassified as other fixed
asset investments in 2004.
14. Reserves Share Own Capital Capital Profit
premium shares reserve reserve and Total
account held unrealised realised loss restated
£m £m £m £m £m £m
______ ______ ______ ______ ______ ______
Balance at 1
January 2004 336.0 - 1,377.2 62.0 267.2 2,042.4
Prior year
adjustment (note 2) - (5.2) - - - (5.2)
______ ______ ______ ______ ______ ______
Restated balance 336.0 (5.2) 1,377.2 62.0 267.2 2,037.2
Realisation of
revaluation gains
and losses of
previous years - - (150.5) 150.5 - -
Revaluation surplus - - 201.1 - - 201.1
Other recognised
gains and losses - - (17.5) (4.5) (2.8) (24.8)
Retained profit for
the year - - - - 90.8 90.8
Shares issued 3.1 - - - - 3.1
Reserve transfer - - 10.3 36.0 (46.3) -
______ ______ ______ ______ ______ ______
Balance at 31
December 2004 339.1 (5.2) 1,420.6 244.0 308.9 2,307.4
_______ ______ ______ ______ ______ ______
15. Commitments 2004 2003
£m £m
_____ _____
a) Capital expenditure commitments
Property - United Kingdom 36.6 8.6
- Overseas 147.5 22.8
Utilities 0.6 0.3
Other activities 17.3 35.3
_____ _____
202.0 67.0
_____ _____
b) Operating Leases
2004 2003
£m £m
_____ _____
Leases which expire:
Within two to five years - 1.4
After five years 0.4 0.4
_____ _____
0.4 1.8
_____ _____
16. Provisions for Pensions Quail Deferred Other Total
liabilities and charges £m West tax liabilities £m
£m £m £m
_____ _____ _____ _____ ______
Balance at 1 January 2004 1.2 20.8 182.3 1.3 205.6
Exchange movement (0.1) (1.4) (1.1) - (2.6)
Charged /(credited) to profit
and loss account 0.1 - 6.6 (0.7) 6.0
Unwinding of discount - 0.5 - - 0.5
Deferred tax liability
acquired
on acquisition of
Ravenseft - - 4.1 - 4.1
Other - - 0.2 (0.3) (0.1)
Paid - (1.9) - - (1.9)
_____ _____ _____ _____ ______
Balance at 31 December 2004 1.2 18.0 192.1 0.3 211.6
_____ _____ _____ _____ ______
Deferred tax relates to UK and overseas timing differences arising mainly from
capital allowances on plant, industrial building allowances, overseas
depreciation allowances on properties and interest capitalised and is provided
at 30 per cent (2003 30 per cent) in the UK and at local rates overseas.
16. Provisions for liabilities and charges (continued)
Deferred taxation consists of: 2004 2003
£m £m
______ ______
Accelerated capital allowances 59.7 63.6
Overseas depreciation allowances 52.9 53.7
Interest capitalised 69.5 75.3
Tax losses (5.0) (13.9)
Deferred tax assets (0.5) (0.5)
Acquired on acquisition 4.1 -
Other timing differences 20.2 14.9
______ ______
Total deferred tax in respect of investment properties 200.9 193.1
Deferred tax asset in respect of Quail West (13.1) (14.6)
Other deferred tax 4.3 3.8
______ ______
192.1 182.3
______ ______
The Group has a commitment to support the ongoing activities at the residential
leisure development at Quail West until the overall activity reaches a certain
level, which is not expected to occur for a number of years. In accordance with
UK GAAP, the Group has therefore recognised a provision for the estimated net
liability arising from this commitment. The balance of the provision at 31
December 2004 amounted to £18.0 million (2003: £20.8 million). The most
significant assumption in the determination of the provision is the rate of
membership sales and the consequent timing of the release of the Group's
commitment. The Group board is satisfied that the assumptions used to compute
the provision are appropriate and will review these at each balance sheet date.
The provision is stated at present value. It will be amortised to the profit and
loss account after allowing for the unwind of the discount used, on the basis of
the actual losses incurred by the ongoing activities.
The other liabilities relate principally to provisions for onerous leases on
rented properties and represent the estimated liability of future costs for
lease rentals and dilapidation costs less the expected receipts from sub-letting
these properties which are surplus to business requirements.
The estimated amount of potential taxation, for which no provision has been made
and which would arise if the assets held as long term investments were sold at
the values at which they appear in the balance sheet, amounts to £176.5 million
(2003 £129.5 million).
17. Borrowings 2004 2003
£m £m
______ ______
Currency profile of Group debt
Borrowings
Sterling 964.1 899.0
Australian dollars 47.9 34.2
US dollars 459.8 492.6
Canadian dollars - 8.3
Euros 250.9 233.0
______ ______
1,722.7 1,667.1
______ ______
Cash and deposits
Sterling 200.4 120.2
US dollars 178.9 9.0
Canadian dollars 4.3 6.2
Euros 13.8 23.9
______ ______
397.4 159.3
______ ______
Net borrowings 1,325.3 1,507.8
______ ______
Maturity profile of Group debt
In one year or less 39.2 40.5
In more than one year but less than two 7.3 27.8
In more than two years but less than five 473.7 353.1
In more than five years but less than ten 466.6 488.7
In more than ten years 735.9 757.0
______ ______
Total Group debt 1,722.7 1,667.1
______ ______
Fair value of borrowings Book Fair Book Fair
value value value value
2004 2004 2003 2003
£m £m £m £m
______ ______ ______ ______
Short term fixed and variable rate
borrowings (before swaps etc) 426.0 426.0 331.9 331.9
Long term fixed rate borrowings 1,299.3 1,520.5 1,340.5 1,545.3
Interest rate swaps - 1.7 - 2.0
Swaptions and caps - 4.3 - 4.5
Currency swaps (2.6) (3.3) (5.3) (5.6)
______ ______ ______ ______
1,722.7 1,949.2 1,667.1 1,878.1
Tax relief due on early
redemption/termination (68.0) (63.3)
______ ______ ______ ______
1,722.7 1,881.2 1,667.1 1,814.8
______ ______ ______ ______
After tax mark to market adjustment 158.5 147.7
______ ______
The market value of the preference shares at 31 December 2004 was £282.2 million
(2003: £233.6 million).
18. Creditors - other 2004 2003
£m Restated
£m
______ ______
Creditors falling due within one year
Rents in advance 38.8 37.1
Accruals and other deferred income 68.6 56.9
Trade creditors 10.6 7.7
Other creditors 22.3 21.1
Taxation 46.2 14.3
Proposed ordinary dividend 41.3 38.4
Accrued preference dividend 3.7 3.8
______ ______
231.5 179.3
______ ______
Creditors falling due after more than one year
Other creditors 15.2 9.5
______ ______
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