25th Aug 2005 07:02
Slough Estates PLC24 August 2005 Part 2 Slough Estates plcGroup income statement For the half year to 30 June 2005 Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Note £m £m £m-------------------------- ----- ---------- --------- ---------- Revenue 5 232.5 161.6 342.7-------------------------- ----- ---------- --------- ---------- Gross rental income from rentalproperties 153.0 132.6 257.4Interest received on finance leaseassets 0.4 0.4 0.9Other property related income 5.9 6.5 13.4Property outgoings (22.4) (19.7) (39.2)-------------------------- ----- ---------- --------- ----------Net rental income 136.9 119.8 232.5-------------------------- ----- ---------- --------- ---------- Proceeds on sale of tradingproperties 49.0 4.3 31.4Carrying value of tradingproperties sold (26.1) (2.1) (27.7)Trading property rental income 1.6 2.0 4.2Property outgoings relating totrading properties (0.4) (0.3) (1.1)-------------------------- ----- ---------- --------- ----------Net income from trading properties 24.1 3.9 6.8-------------------------- ----- ---------- --------- ---------- Income from sale of utilities andgas 22.6 15.8 35.4Cost of sales (23.6) (20.7) (42.8)-------------------------- ----- ---------- --------- ----------Net income from utilities and gas (1.0) (4.9) (7.4)-------------------------- ----- ---------- --------- ---------- Other investment income 3.3 3.2 10.5Administration expenses (7.7) (6.3) (14.7)(Loss)/gain on disposal of propertyassets (3.0) 0.1 64.7Net valuation gains 6 137.6 84.0 166.7-------------------------- ----- ---------- --------- ----------Operating income 290.2 199.8 459.1 Finance costs 7 (58.3) (49.6) (101.9)Exceptional loss on repayment ofbonds 7 (125.6) - --------------------------- ----- ---------- --------- ---------- (183.9) (49.6) (101.9)-------------------------- ----- ---------- --------- ---------- Finance income 8 7.7 2.6 6.7 Share of profit from joint venturesand associate after tax 9 5.0 20.8 24.1-------------------------- ----- ---------- --------- ---------- Profit before tax 119.0 173.6 388.0 Taxation - current 10 (13.5) (11.0) (49.4)- deferred 10 (32.1) (35.7) (42.8)-------------------------- ----- ---------- --------- ---------- (45.6) (46.7) (92.2)-------------------------- ----- ---------- --------- ---------- Profit after tax 73.4 126.9 295.8 Preference dividends 11 - (5.6) (11.2)-------------------------- ----- ---------- --------- ----------Profit for the period 73.4 121.3 284.6-------------------------- ----- ---------- --------- ---------- Attributable to minority interests 1.8 (0.7) (1.2)Attributable to equity shareholders 19 71.6 122.0 285.8-------------------------- ----- ---------- --------- ---------- 73.4 121.3 284.6-------------------------- ----- ---------- --------- ---------- Basic earnings per ordinary share 12 17.1p 29.3p 68.5pDiluted earnings per ordinary share 12 16.7p 27.2p 63.4p Slough Estates plcStatement of recognised income andexpenseFor the half year to 30 June 2005 Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Note £m £m £m------------------------------- ----- -------- ------- -------- Revaluation gains andlosses on properties incourse of development 6 7.5 3.2 24.1 Exchange differencesarising on translation ofoverseas operations 14.7 (6.3) (12.5) Actuarial losses ondefined benefit pensionschemes (3.0) (3.2) (10.6) Deferred tax liabilityarising on items takendirectly to equity (5.7) (1.3) (3.3)------------------------------- ----- -------- ------- --------Net gain/(loss)recognised directly inequity 13.5 (7.6) (2.3) Profit for the period 73.4 121.3 284.6------------------------------- ----- -------- ------- --------Total recognised incomeand expense for theperiod 86.9 113.7 282.3------------------------------- ----- -------- ------- -------- Attributable - equity shareholders 85.1 114.4 283.6to - minority interests 1.8 (0.7) (1.3)--------- ------------------------ ----- -------- ------- -------- 86.9 113.7 282.3------------------------------- ----- -------- ------- -------- Statement of changes in shareholder equityFor the half year to 30 June 2005 Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Note £m £m £m------------------------------- ----- -------- ------- -------- Shareholders' funds at 1January 2,165.1 1,942.4 1,942.4Effect of adopting IAS 32and 39 (103.6) - -------------------------------- ----- -------- ------- --------As restated 2,061.5 1,942.4 1,942.4Preference shareconversions 7.1 - -Issue of ordinary shares 1.4 0.8 3.0Fair value of share basedpayments - 0.2 0.2Purchase of shares inESOP (2.6) - (0.8)Issue of shares in ESOP 0.9 0.8 0.8------------------------------- ----- -------- ------- -------- 2,068.3 1,944.2 1,945.6Total recognised incomeand expense for theperiod 85.1 114.4 283.6Ordinary dividend paid 11 (41.6) (38.4) (64.1)------------------------------- ----- -------- ------- --------Shareholders' funds atend of period 19 2,111.8 2,020.2 2,165.1------------------------------- ----- -------- ------- -------- Slough Estates plcGroup balance sheet 30 June 30 June 31 DecemberAs at 30 June 2005 2005 2004 2004 Note £m £m £m-------------------------- ----- -------- -------- ---------Non-current assetsGoodwill 13 0.6 - -Investment properties 14 3,816.8 3,370.5 3,452.7Property, plant and equipment 15 381.6 353.8 394.8Finance lease receivables 10.8 11.0 10.9Available-for-sale investments 44.5 34.5 38.4Investments in joint ventures andassociate 16 94.1 220.8 84.1Deferred tax asset 0.3 - 0.2-------------------------- ----- -------- -------- ---------Total non-current assets 4,348.7 3,990.6 3,981.1-------------------------- ----- -------- -------- --------- Current assetsInventories 1.8 1.7 1.9Trading properties 104.7 124.5 125.3Finance lease receivables 0.1 0.1 0.1Trade and other receivables 121.9 90.9 115.0Non-current assets classified asheld-for-sale 87.3 - -Cash and cash equivalents 178.3 136.7 397.4-------------------------- ----- -------- -------- ---------Total current assets 494.1 353.9 639.7-------------------------- ----- -------- -------- --------- Total assets 4,842.8 4,344.5 4,620.8-------------------------- ----- -------- -------- --------- Non-current liabilitiesBorrowings 17 1,634.6 1,644.7 1,683.5Obligations under finance leases 0.5 0.5 0.5Pension scheme deficit 18 30.2 27.3 41.5Deferred tax provision 18 488.6 441.1 448.4Provisions for liabilities and charges 18 0.3 20.4 18.3Other payables 14.8 9.1 15.8-------------------------- ----- -------- -------- ---------Total non-current liabilities 2,169.0 2,143.1 2,208.0-------------------------- ----- -------- -------- --------- Current liabilitiesBorrowings 17 331.1 8.0 39.2Liabilities relating to non-currentassets 55.0 - -held-for-saleTax liabilities 9.4 20.2 47.4Trade and other payables 148.0 134.5 141.7-------------------------- ----- -------- -------- ---------Total current liabilities 543.5 162.7 228.3-------------------------- ----- -------- -------- --------- Total liabilities 2,712.5 2,305.8 2,436.3-------------------------- ----- -------- -------- --------- -------------------------- ----- -------- -------- ---------Net assets 2,130.3 2,038.7 2,184.5-------------------------- ----- -------- -------- --------- EquityCalled up ordinary share capital 105.7 138.7 138.8Share premium account 250.3 337.0 339.1Own shares held (6.9) (4.4) (5.2)Other reserves 1,283.2 1,172.1 1,127.2Retained earnings 479.5 376.8 565.2-------------------------- ----- -------- -------- --------- 19 2,111.8 2,020.2 2,165.1Minority interests 18.5 18.5 19.4-------------------------- ----- -------- -------- ---------Total equity 2,130.3 2,038.7 2,184.5-------------------------- ----- -------- -------- --------- Net assets per ordinary share:Basic 12 501p 451p 486pDiluted 12 472p 430p 461p Slough Estates plcSummarised group cash flow statementFor the half year to 30 June 2005 Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Note £m £m £m-------------------------- ----- -------- -------- --------- Cash inflow generated from operations 22 154.1 104.5 202.4 Interest received on deposits 6.2 2.5 7.4Dividends received from joint venturesand associate 2.8 4.3 8.4Dividends received fromavailable-for-sale investments 0.7 2.7 3.1Interest paid (including penalty onbond repayment) (99.9) (51.9) (115.0)Dividend paid to preferenceshareholders (5.6) (5.7) (11.3)Minority dividends paid (3.9) (0.5) (0.9)Tax paid (49.8) (5.9) (15.3)Funding pension scheme deficit (15.0) - --------------------------- ----- -------- -------- ---------Net cash (outflow)/inflow fromoperating activities (10.4) 50.0 78.8-------------------------- ----- -------- -------- --------- Cash Flows from investing activities Purchase and development of investmentproperties (189.8) (21.5) (68.1)Sales of investment properties 14.2 2.7 237.1Amount received from property swaps - - 3.4Legal costs paid in relation toproperty swap (0.6) - (2.2)Purchase of property, plant andequipment (66.6) (27.5) (35.8)Sale of property, plant and equipment 3.7 0.9 0.9Purchase of available-for-saleinvestments (2.7) (4.6) (16.2)Proceeds from disposal ofavailable-for-sale investment 4.7 11.6 20.5Proceeds from reduction in holding ofsubsidiary - - 3.3Investment and loans to associate andjoint ventures (5.3) (1.2) (3.8)Investment in longer term deposits 180.6 - (184.5)Acquisition of minority interests - - (4.0)Contribution from minorities - 0.2 4.6-------------------------- ----- -------- -------- ---------Net cash used in investing activities (61.8) (39.4) (44.8)-------------------------- ----- -------- -------- --------- Cash flows from financing activitiesDividend paid to ordinary shareholders (41.6) (38.4) (64.1)Net increase in borrowings 71.2 4.9 88.2Proceeds from issue of ordinary shares 0.7 0.8 3.0Purchase of own shares (1.0) - (0.8)-------------------------- ----- -------- -------- ---------Net cash used in financing activities 29.3 (32.7) 26.3-------------------------- ----- -------- -------- --------- Net (decrease)/increase in cash andcash equivalents (42.9) (22.1) 60.3 Cash and cash equivalents at thebeginning of the year 218.1 158.6 158.6 Effect of foreign exchange ratechanges (0.1) (1.4) (0.8)-------------------------- ----- -------- -------- ---------Cash and cash equivalents at the endof the year 175.1 135.1 218.1-------------------------- ----- -------- -------- --------- Cash and cash equivalents per balancesheet 178.3 136.7 397.4Less restricted deposits - - (176.0)-------------------------- ----- -------- -------- --------- 178.3 136.7 221.4Bank overdrafts (3.2) (1.6) (3.3)-------------------------- ----- -------- -------- ---------Cash and cash equivalents per cashflow 175.1 135.1 218.1-------------------------- ----- -------- -------- --------- Independent review report to Slough Estates plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2005 which comprises the consolidated interimbalance sheet as at 30 June 2005 and the related consolidated interim statementsof income, cash flows, recognised income and expense, changes in equity and therelated notes for the six months then ended. We have read the other informationcontained in the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. As disclosed in note 2, the next annual financial statements of the group willbe prepared in accordance with accounting standards adopted for use in theEuropean Union. This interim report has been prepared in accordance with thebasis set out in note 2 and 24. The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. As explained in note 2, there is,however, a possibility that the directors may determine that some changes arenecessary when preparing the full annual financial statements for the first timein accordance with accounting standards adopted for use in the European Union.The IFRS standards and IFRIC interpretations that will be applicable and adoptedfor use in the European Union at 31 December 2005, are not known with certaintyat the time of preparing this interim financial information. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for thecompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005.PricewaterhouseCoopers LLP, Chartered AccountantsLondon 24 August 2005 Notes: a) The maintenance and integrity of the Slough Estates plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website. b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. SLOUGH ESTATES plc NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL Slough Estates plc ("the group") is a limited company incorporated in England. These financial statements are presented in millions and in sterling since thatis the currency in which the majority of the group's transactions aredenominated. The results for the year ended 31 December 2004 have been audited whilst theresults for the six months ended 30 June 2004 and 30 June 2005 are unaudited. The Interim Report is unaudited and does not constitute statutory accountswithin the meaning of s240 of the Companies Act 1985. The statutory accounts for2004, which were prepared under UK Generally Accepted Accounting Principles("GAAP"), have been delivered to the Registrar of Companies. The auditors'opinion on these accounts was unqualified and did not contain a statement madeunder s237(2) or s237(3) of the Companies Act 1985. The income statement and balance sheet have been prepared, in accordance withapplicable International Accounting Standards (IAS) and International FinancialReporting Standards (IFRS) issued by the International Accounting StandardsBoard (IASB) and on the basis that all such standards will be endorsed by theEuropean Union ("the EU"). These standards are also collectively referred to as "IFRS". 2. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) All listed companies in the EU are required to present their consolidatedfinancial statements for accounting periods beginning on or after 1 January 2005in accordance with IFRS as adopted by the EU. Therefore, the group'sconsolidated financial statements for the year ending 31 December 2005 will bepresented on this basis with IFRS comparatives. These interim financialstatements have been prepared on the basis of the IFRS accounting policiesexpected to be adopted in the year end consolidated financial statements.Reconciliations have been provided of certain key figures to UK GAAP and these,together with an explanation of the resulting changes in accounting policies,are set out in note 24. The group's transition date for the adoption of IFRS is 1 January 2004 and itstransition date for the implementation of IAS 32 and IAS 39 dealing withfinancial instruments is 1 January 2005. These transition dates have beenselected in accordance with IFRS 1, "First-time adoption of InternationalFinancial Reporting Standards". Although there is now a fairly stable platform, standards continue to evolve andthose currently in issue and endorsed by the EU are subject to interpretation bythe International Financial Reporting Interpretations Committee (IFRIC) andfurther standards may be issued and endorsed by the EU before 31 December 2005.These uncertainties could result in the need to change the basis of accountingor presentation of certain financial information from that applied in thepreparation of this document. The group is required to apply its IFRS accounting policies retrospectively todetermine its opening IFRS balance sheet at the transition date of 1 January2004 and the comparative information for the year ending 31 December 2005.Business combinations prior to 1 January 2004 have not been restated to complywith IFRS 3, "Business Combinations". The group has applied IFRS 2, "Share-basedpayment", retrospectively only to awards made after 7 November 2002 that had notvested at 1 January 2005. The preparation of financial statements in conformity with IFRS requires the useof estimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Although these estimates arebased on management's best knowledge of the amount, event or actions, actualresults may ultimately differ from those estimates. 3. ACCOUNTING POLICY CHANGES An explanation of the changes in accounting policies as a result of adoptingIFRS, together with a full list of the revised accounting policies are shown innote 24. Notes to the financial statements(continued)4. Segmental analysis Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m--------------------- -------- -------- -------- ---------Primary segments Investment propertyTurnover 159.3 139.5 271.7Operating costs (22.4) (19.7) (39.2)---------------------------- -------- -------- --------- Operating profit 136.9 119.8 232.5(Loss)/gain on disposal of propertyassets (3.0) 0.1 64.7Net valuation gains 137.6 84.0 166.7Share of profit from joint venturesand associate after tax 5.3 20.9 24.9---------------------------- -------- -------- --------- Operating result 276.8 224.8 488.8--------------------- -------- -------- -------- --------- Trading propertyTurnover 50.6 6.3 35.6Operating costs/cost of sale (26.5) (2.4) (28.8)---------------------------- -------- -------- --------- Operating profit 24.1 3.9 6.8Share of loss from joint venturesafter tax (0.3) (0.1) (0.8)---------------------------- -------- -------- --------- Operating result 23.8 3.8 6.0--------------------- -------- -------- -------- --------- Utilities and gasTurnover 22.6 15.8 35.4Cost of sales (23.6) (20.7) (42.8)--------------------- -------- -------- -------- ---------Operating result (1.0) (4.9) (7.4)--------------------- -------- -------- -------- --------- Operating result of 299.6 223.7 487.4segmentsOther investment income 3.3 3.2 10.5Administration expenses (7.7) (6.3) (14.7)Net finance costs (176.2) (47.0) (95.2)Taxation (45.6) (46.7) (92.2)--------------------- -------- -------- -------- ---------Net profit for period 73.4 126.9 295.8--------------------- -------- -------- -------- --------- Geographic segments TurnoverUnited Kingdom 106.2 106.3 211.7Australia - Gas 3.5 1.5 4.7Canada - 1.2 2.3USA 89.1 39.2 73.1Europe 33.7 13.4 50.9--------------------- -------- -------- -------- --------- 232.5 161.6 342.7--------------------- -------- -------- -------- --------- Operating result ofsegmentsUnited Kingdom 193.4 150.6 301.4Australia - Gas (1.8) (1.9) (3.3)Canada - 4.2 5.0USA 87.1 54.1 150.4Europe 20.9 16.7 33.9--------------------- -------- -------- -------- --------- 299.6 223.7 487.4--------------------- -------- -------- -------- --------- Notes to the financial statements(continued) 4. Segmental analysis (continued) Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m----------------------------- -------- -------- --------Property investment turnovercomprisesRentsUnited Kingdom 83.9 89.7 174.1Canada - 0.9 1.7USA 58.9 32.0 61.5Europe 10.6 10.4 21.0----------------------------- -------- -------- -------- 153.4 133.0 258.3----------------------------- -------- -------- -------- Tenant recharges and otherUnited Kingdom 2.2 2.3 4.4Canada - 0.3 0.7USA 3.4 3.7 7.8Europe 0.3 0.2 0.5----------------------------- -------- -------- -------- 5.9 6.5 13.4----------------------------- -------- -------- -------- Total property investment revenueUnited Kingdom 86.1 92.0 178.5Canada - 1.2 2.4USA 62.3 35.7 69.3Europe 10.9 10.6 21.5----------------------------- -------- -------- -------- 159.3 139.5 271.7----------------------------- -------- -------- -------- Rents include a significant surrender premium of £36.6m (half year 2004 £7.5m :year 2004 £7.5m). 5. Revenue Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m----------------------------- -------- -------- --------Rental income from investmentproperties 153.0 132.6 257.4Interest received on finance leaseassets 0.4 0.4 0.9Service charge income 5.6 6.1 12.6Miscellaneous property income 0.3 0.4 0.8----------------------------- -------- -------- --------Total property investment revenue 159.3 139.5 271.7Proceeds on sale of trading properties 49.0 4.3 31.4Trading property rental income 1.6 2.0 4.2Sale of electricity, water and steam 19.1 14.3 30.7Sale of oil and gas 3.5 1.5 4.7----------------------------- -------- -------- --------Total revenue 232.5 161.6 342.7----------------------------- -------- -------- -------- 6. Net valuation gainsThe total valuation gains and losses for the period are shown in the financialstatements as follows: Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m----------------------------- -------- -------- -------- Income statement 137.6 84.0 166.7Statement of recognised income andexpense 7.5 3.2 24.1----------------------------- -------- -------- --------Total valuation gains of groupcompanies 145.1 87.2 190.8----------------------------- -------- -------- -------- The valuation gains and losses of joint ventures and associate are includedwithin their results shown on the face of the income statement and are excludedfrom the above figures. Notes to the financial statements(continued) 7. Finance costs Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m-------------------------------- -------- -------- -------- Interest on bank loans and overdrafts 11.6 9.7 20.5Interest on other loans 46.6 46.9 95.9Interest on convertible redeemablepreference shares 6.6 - -Unwinding of discount on the pensionsliability less return on assets 0.7 0.4 0.9Unwinding of discount on provisions 0.2 0.2 0.5-------------------------------- -------- -------- --------Total borrowing costs 65.7 57.2 117.8Less amount charged to : thedevelopment of trading properties (0.4) (0.7) (0.8): the development of investmentproperties (8.5) (6.1) (14.0): the development of other assets (0.5) (0.8) (1.2)-------------------------------- -------- -------- --------Net borrowing cost 56.3 49.6 101.8Fair value losses on interest rateswaps and other derivatives 2.0 - -Exchange differences - - 0.1-------------------------------- -------- -------- --------Total finance costs 58.3 49.6 101.9-------------------------------- -------- -------- ---------------------------------------- -------- -------- --------Exceptional loss on exchange of bonds(see explanation below) 125.6 - --------------------------------- -------- -------- -------- On 10 May 2005 the group announced a debt exchange programme whereby holders ofthe following bonds were offered the chance to exchange the bonds at marketvalue plus an incentive into new longer dated current coupon bonds: £50m 10% Euro Bond 2007£31.8m 12.375% Unsecured Loan Stock 2009£100m 11.625% Euro Bond 2012£100m 10% Euro Bond 2017£40m 11.25% 1st Mortgage Debenture 2019 The three shorter dated bonds were exchanged into a new unsecured issue bearinga coupon of 5.5% with a maturity date of 2018. The two longer dated bonds wereexchanged into a new unsecured issue bearing a coupon of 5.75% with a maturitydate of 2035. Those investors unable to hold the new bonds because of durationmismatches or because of the unsecured nature of the new bonds were offered acash-out alternative whereby the company bought back the new bonds forredemption. The proposals were voted on at bondholders' EGMs on 8 June 2005 and as over 75%of all holders of each issue voted in favour of the proposals, they were adoptedin full and the old bonds were effectively redeemed on 21 June 2005 and werereplaced with the following new debt. £200m 5.5% Euro Bond 2018£100m 5.75% Euro Bond 2035£146m of new bank line drawings at circa 5% The cost of the exchange reflecting the mark-to-market fair value of the oldbonds plus the £4.9m incentive fee results in a once-off tax deductible financecharge of £125.6m to the half year income statement. However, future cashinterest charges should be reduced by circa £11.0m per annum. -------------------------------- -------- -------- -------- 8. Finance income Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m-------------------------------- -------- -------- --------Interest received on bank deposits 6.4 2.5 6.7Fair value gains on interest rateswaps and other derivatives 0.7 - -Exchange differences 0.6 0.1 --------------------------------- -------- -------- -------- 7.7 2.6 6.7-------------------------------- -------- -------- -------- Notes to the financial statements(continued) 9. Share of profit from joint Half year to Half year to Year toventures and associate after tax 30 June 30 June 31 December 2005 2004 2004 £m £m £m---------------------------------- -------- -------- --------Group share of :Operating profit before finance andvaluation gains 4.3 7.6 15.4Finance cost (1.3) (1.3) (2.7)Valuation gains 2.4 17.7 15.4---------------------------------- -------- -------- --------Profit before tax 5.4 24.0 28.1Current taxation (0.5) (0.4) (1.1)Deferred taxation 0.1 (2.8) (2.9)---------------------------------- -------- -------- --------Profit after tax 5.0 20.8 24.1---------------------------------- -------- -------- -------- 10. Taxation Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m---------------------------------- -------- -------- --------Current taxCorporation tax charge at 30 percent 13.5 11.0 15.0(2004 30 per cent)Tax in respect of property disposals - - 34.4---------------------------------- -------- -------- -------- 13.5 11.0 49.4---------------------------------- -------- -------- -------- Deferred taxOrigination and reversal of timingdifferences 10.9 10.7 30.1Released in respect of propertydisposals in the period (0.9) - (51.6)On valuation surplus 38.8 21.8 58.2---------------------------------- -------- -------- --------Total deferred tax in respect ofinvestment properties 48.8 32.5 36.7Released in respect of Quail West 12.7 - -Other deferred tax (29.4) 3.2 6.1---------------------------------- -------- -------- --------Total deferred tax 32.1 35.7 42.8---------------------------------- -------- -------- --------Total tax on profit on ordinaryactivities 45.6 46.7 92.2---------------------------------- -------- -------- -------- A contingent tax asset of £93.9m relating to unused indexation allowances hasnot been recognised in the financial statements due to the restrictions in IFRS(see note 24(a)). 11. Dividends Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m---------------------------------- -------- -------- --------Ordinary dividends paidFinal dividend for the year ended 31December 2004 @ 9.85p per share 41.6 - -Final dividend for the year ended 31December 2003 @ 9.2p per share - 38.4 38.4Interim dividend for the year ended31 - - 25.7December 2004 @ 6.15p per share -------- -------- ------------------------------------------ 41.6 38.4 64.1---------------------------------- -------- -------- -------- The board have proposed an interim dividend of 6.5p per share (2004 6.15p). Asrequired by IFRS this dividend is not recognised in the financial statementsuntil paid. The preference dividend paid during the period of £5.6m (2004 half year £5.6m;year 2004 £11.2m) is included in 2005 within finance costs. Notes to the financialstatements (continued) 12. Earnings and net assets Half year to Half year to Year toper ordinary share 30 June 30 June 31 December 2005 2004 2004--------------------------- ---- --- ------- -------- -------- --------Earnings per ordinaryshare The weighted average number of shares used for the calculation of the earnings per shareis as follows: Weighted average number ofshares in issue Shares m 420.7 418.2 418.6 Less weighted averagenumber of shares held by ESOP Shares m (1.7) (1.4) (1.4) --------------------------- ------- -------- -------- --------Basic weighted averagenumber of shares a Shares m 419.0 416.8 417.2 Dilution adjustments:Preference shares Shares m 47.1 50.4 50.4 Share options andsave-as-you-earn schemes Shares m 1.5 1.3 1.3--------------------------- --- ------- -------- -------- -------- Diluted weighted averagenumber of shares b Shares m 467.6 468.5 468.9--------------------------- ---- ------- -------- -------- -------- Earnings used for the calculation of earnings per share isas follows: Attributable profit c £m 71.6 122.0 285.8Dividends on preferenceshares £m 6.6 5.6 11.2--------------------------- ---- ------- -------- -------- -------- d £m 78.2 127.6 297.0Deferred tax relating toinvestment properties £m 10.9 12.2 30.1Revaluation surplusesincluding joint venturesand associatenet of deferred tax andminority £m (101.7) (76.8) (146.3)Add back exceptional losseson repayment of bonds netof tax £m 88.0 - -Profits and losses on saleof investment properties net of tax and minorities £m 2.1 (0.1) (54.6)Add back profit on the saleof Quail West net of tax £m (9.5) - ---------------------------- ---- ------- -------- -------- --------Adjusted diluted earnings e £m 68.0 62.9 126.2--------------------------- ---- ------- -------- -------- --------Adjusted basic earnings f £m 61.4 57.3 115.0--------------------------- ---- ------- -------- -------- -------- Earnings per ordinaryshareBasic c/a pence 17.1 29.3 68.5Basic adjusted f/a pence 14.7 13.7 27.6Diluted d/b pence 16.7 27.2 63.4Diluted adjusted e/b pence 14.5 13.4 26.9 Net assets per ordinaryshareThe number of ordinary shares used for the calculation of net assets pershare is as follows: Number of shares in issue Shares m 422.9 418.7 419.3 Less number of shares heldby ESOP Shares m (1.7) (1.2) (1.4) --------------------------- ----- ------- -------- -------- --------Basic number of shares h Shares m 421.2 417.5 417.9 Dilution adjustments:Preference shares Shares m 47.1 50.4 50.4 Share options andsave-as-you-earn schemes Shares m 1.5 1.4 1.3--------------------------- ----- ------- -------- -------- -------- Diluted number of shares l Shares m 469.8 469.3 469.6--------------------------- ----- ------- -------- -------- -------- Equity used for the calculation of net assetsper ordinary share is as follows:Total equity attributableto ordinary shareholders £m 2,118.7 1,888.6 2,034.3Less shares held by ESOP £m (6.9) (4.4) (5.2)--------------------------- ----- ------- -------- -------- --------Restated equity j £m 2,111.8 1,884.2 2,029.1Adjustment to excludedeferred tax on investmentpropertiesand latent CGT onrevaluation surpluses £m 513.2 460.2 457.3 --------------------------- ----- ------- -------- -------- --------Adjusted equityattributable k £m 2,625.0 2,344.4 2,486.4to ordinary shareholdersDilution adjustment forpreference shares £m 106.4 136.0 136.0--------------------------- ----- ------- -------- -------- --------Adjusted diluted equityattributable to ordinaryshareholders m £m 2,731.4 2,480.4 2,622.4--------------------------- ----- ------- -------- -------- --------Diluted equity attributableto ordinary shareholders n £m 2,218.2 2,020.2 2,165.1--------------------------- ----- ------- -------- -------- -------- Net assets per ordinaryshareBasic j/h pence 501 451 486Basic adjusted for deferredtax on investment property k/h pence 623 562 595Diluted n/l pence 472 430 461Diluted adjusted fordeferred tax on investment property m/l pence 581 529 558 Notes to the financial statements (continued) 12. Earnings and net assets per ordinary share (continued) The group has also presented an adjusted basic earnings per share figure toexclude the impact of profits and losses on the sale of investment properties(net of taxation and minority interests), profit from the sale of Quail West,loss on the refinancing of bonds, revaluation surpluses on investment propertiesand deferred tax that would arise on the sale of investment properties. Adjustedprofit before tax for the six months to 30 June 2004 and the year to 31 December2004 have also been reduced for comparative purposes, by a notional financecharge in respect of the preference shares. This is the approximate charge thatwould have applied for the periods had the group elected to apply IAS 32 and 39with effect from 1 January 2004. The directors consider that this adjustedfigure gives a more meaningful comparison for the periods shown in theconsolidated financial statements. Deferred tax has been excluded from theadjusted calculation as the group has no plans to sell a significant proportionof its investment properties, and in any case, it is generally very unusual forUK capital allowances to be recaptured on the disposal of a property. Profitsand losses on the sale of investment properties and the loss on the bondrepayment are excluded from adjusted earnings as these are non-recurring items. Net assets per share are calculated using the equity shareholders' funds of£2,111.8 million (2004 half year £1,884.2 million: year 2004 £2,029.1 million).Adjusted net assets per share have been calculated on the same number of sharesbut shareholders' funds exclude the deferred tax liability of £513.2 million(2004 half year £460.2 million; year 2004 £457.3 million) as it is the opinionof the directors that deferred tax on capital allowances and valuation surplusin relation to investment properties is unlikely to crystallise materially inpractice. 13. Goodwill The goodwill arising in the period relates to the acquisition of Mainland BV, acompany incorporated in the Netherlands. The main activity of this company isthe development and sale of trading properties. 14. Investment properties Investment properties consist of completed land and buildings and properties inthe course of redevelopment. They exclude properties occupied by group companiesand land held for development and developments in the course of construction.These are classified as property, plant and equipment in accordance with IAS 16and are shown in note 15. UK North America Europe Total £m £m £m £m--------------------- ------- -------- --------- --------- -------- At 1 January 2005 2,776.8 411.1 264.8 3,452.7Exchange movement - 37.8 (12.5 ) 25.3Additions 27.6 171.7 (1.7 ) 197.6Disposals (13.5) (3.7) - (17.2)Transfer from property, plantand equipment 11.5 3.0 - 14.5Surplus on valuation 127.3 11.0 5.6 143.9------------------- ------- -------- --------- --------- --------At 30 June 2005 2,929.7 630.9 256.2 3,816.8------------------- ------- -------- --------- --------- -------- At 30 June 2004 2,525.5 595.0 250.0 3,370.5------------------- ------- -------- --------- --------- -------- The group's properties were externally valued as at 30 June 2005 by CB RichardEllis, DTZ Debenham Tie Leung or Colliers Conrad Ritblat Erdman in the UnitedKingdom, in the USA by Walden-Marling, Inc., in Belgium by De Crombrugghe &Partners s.a. and in France by CB Richard Ellis Bourdais. The valuation basis isfair value, conforms to international valuation standards and was arrived at byreference to market evidence of the transaction prices for similar properties.All the valuers listed above are qualified valuers who hold a recognised andrelevant professional qualification and have recent experience in the relevantlocation and category of the properties being valued. CB Richard Ellis and DTZ Debenham Tie Leung also undertake some professional andletting work on behalf of the group, although this activity is limited inrelation to the activities of the group as a whole. Both companies advise usthat the total fees paid by the group represent less than 5 per cent of theirtotal revenue in any year and have adopted policies for the regular rotation ofthe responsible valuer. Notes to the financial statements(continued) 14. Investment properties(continued) The external valuation is included on the balance sheetunder the following headings: 30 June 30 June 31 December 2005 2004 2004 £m £m £m------------------ --------- --------- -------- --------- -------- Investment property 3,816.8 3,370.5 3,452.7Property included inproperty, plant andequipment 337.4 244.2 276.7 ------------------ --------- --------- --------- -------- Total assetsexternally valued 4,154.2 3,614.7 3,729.4------------------ --------- --------- -------- --------- -------- 15. Property, plant and equipment Properties in Property Gas & Other plant the course of held for utilities fixtures development own use plant and fittings TotalRelated Shares:
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