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Land Sec. Group PLC LAND Half-yearly results to 30 September 2012


Attachment:

  Land Sec. Group PLC (LAND) - Half-yearly results to 30 September 2012

RNS Number : 5578Q
Land Securities Group PLC
08 November 2012
 



Half-yearly results for the six months ended 30 September 2012

"Our clear plan is driving high levels of activity as we secure lettings and
progress our development programme.  In uncertain market conditions we remain
well positioned"

Results summary

                            30 September 2012   31 March 2012       Change
Valuation deficit (1)       £10.9m              N/A                 Down 0.1%
Basic NAV per share         922p                921p                Up 0.1%
Adjusted diluted NAV per
share (2)                   864p                863p                Up 0.1%
Group LTV ratio (1)         36.2%               38.0%                
                            Six months ended 30 Six months ended 30
                            September 2012      September 2011      Change
Profit before tax           £131.4m             £378.9m             Down 65.3%
Revenue profit (1)          £143.7m             £159.3m             Down 9.8%
Basic EPS                   16.8p               50.0p               Down 66.4%
Adjusted diluted EPS        18.4p               20.5p               Down 10.2%
Dividend                    14.8p               14.4p               Up 2.8%

 

1.     Including share of joint ventures

2.     Our key valuation measure

Resilient performance in challenging market

·      Total property return 2.7%, ahead of IPD Quarterly Universe at 1.1%

·      Adjusted diluted NAV per share up 1p since March 2012

·      Revenue profit of £143.7m, down 9.8% on the six months ended 30
September 2011 following disposals and development starts

·      33,410 sq m of new retail space opened since 1 April 2012 through new
formats for John Lewis and Debenhams plus two new Primark stores

·      £14.6m of development lettings since 1 April 2012 with a further £9.1m
in solicitors' hands

·      £15.1m of investment lettings across the portfolio at 2.8% below ERV
due to pre-development properties

·      Like-for-like voids down at 2.6% from 2.9% since March 2012. Retail at
3.1% from 3.4% and London at 2.0% from 2.4%

·      Units in administration down in Retail at 1.8% from 2.8%, with London
unchanged at 0.1%

·      Weighted average unexpired lease term across the like-for-like
portfolio, completed developments and acquisitions of 9.0 years (31 March
2012: 9.2 years)

Development programme continues to deliver

·      Developments continue to contribute positively to returns - with a
valuation surplus of 8.2% in the six month period

·      £9.1m of London Portfolio development lettings since 1 April 2012

o  20 Fenchurch Street, EC3, now 23% pre-let with a further 11% in solicitors'
hands

o  123 Victoria Street, SW1, practical completion achieved with the building
now 53% let with a further 20% in solicitors' hands

 

·      £5.5m of Retail Portfolio development lettings since 1 April 2012

o  Trinity Leeds development now 76% pre-let with a further 8% in solicitors'
hands and on schedule to open on 21 March 2013

o  185-221 Buchanan Street, Glasgow 92% pre-let with a further 7% in
solicitors' hands and on schedule to open on 22 March 2013

·      Our 11,000 sq m out-of-town development at Crawley, 94% pre-let, has
commenced

·      Work starts this month on the £350m Zig Zag Building and Kings Gate
development on Victoria Street, SW1, with completion due in January 2015

·      Demolition has started at Victoria Circle, SW1, our proposed 84,660 sq
m mix of retail, residential, office and public amenity space

Strong financial position

·      Group LTV ratio including share of joint ventures at 36.2% (38.0% at 31
March 2012)

·      Weighted average maturity of debt at 10.9 years

·      Cash and undrawn facilities of £1.2bn

 

Commenting on the results, Land Securities' Chief Executive Robert Noel said:

 

 

"We continue to deliver on a clear plan, and this is driving high levels of
activity across the business. Having reduced our vacancy rates, and with
encouraging interest in our developments, we have added more schemes to our
development programme.

 

"Our plan is based on a realistic outlook allied to a strong balance sheet.
Every part of the business is focused on protecting and creating value for
shareholders. In challenging market conditions, we remain confident in our
position and in our ability to deliver."

 

Chief Executive's statement

In 2009 Land Securities set out a clear plan for recovery and growth. We have
followed that plan, we are on track and we see no reason to deviate.

 

Our plan was not built on a bull-market strategy and we said that growth would
not be in a straight line. Our action to increase our development activity has
improved our property returns, though funding this activity through sales
rather than increased debt has, as expected, had a short term impact on
earnings. Revenue profit was £143.7m, down 9.8% compared to the first half
last year. Although our combined portfolio saw a small 0.1% fall in value, we
delivered a total property return of 2.7% which outperformed the IPD Quarterly
Universe at 1.1%.  Adjusted diluted NAV per share was up 1p at 864p and, with
our LTV down to 36.2% and £1.2bn of available facilities, we have plenty of
capacity to invest in new opportunities.

 

Over the first six months of this year we continued to reduce voids, while
achieving lettings broadly in line with valuers' estimates. Development
lettings exceeded our expectations in terms of rent, timing and incentives.

 

We have positioned the business to operate efficiently and effectively in a
low-growth environment. Tight financial discipline directs every decision. We
have a clear plan for every asset and are constantly looking for smart ways to
protect and add value. We are reallocating capital realised from sales to make
our shareholders' money work harder elsewhere. We will not allow capital to
languish in under-performing assets.

 

The high levels of activity within our portfolio give us confidence that we
are well placed for the next six months and beyond.

Pockets of opportunity

Over the past six months, our development programme has outperformed the rest
of the portfolio. We expect development activity to continue to generate
higher returns for us over the short to medium term. The next six months will
see us increase activity, with the start of construction on two buildings to
replace Kingsgate House, SW1, and retail developments in Crawley and Taplow as
well as demolition works at Victoria Circle, SW1. We have further schemes
ready to start when we feel it is appropriate. We will continue to be risk
aware but not risk averse.

 

In the London Portfolio, we are confident we are delivering the right space at
the right time. Despite wider business confidence remaining subdued,
relatively low levels of development and evolving occupier needs are combining
to increase interest in our schemes, as we demonstrate that more efficient new
space can reduce overall occupancy cost.  With finance for property
development still tough to secure, the supply of new office space will remain
relatively restricted. As a result, the window for development is likely to be
open for longer than we originally thought. We have the schemes and we have
the financial capability to deliver them.

 

In the face of tough conditions and gloomy sentiment, our performance in
Retail has been ahead of the market. While retailers are generally not hungry
for new units, the most successful operators do have an appetite for the right
space in the right location. We continue to evolve our portfolio so that it
meets the changing needs of retailers and the changing expectations of
shoppers. Leisure is increasingly important so we were pleased to add
Nottingham's Cornerhouse leisure complex to our portfolio in May 2012, and
since the half year we have also acquired The Printworks, Manchester's
dominant leisure destination.

Long-term approach

Our lifeblood comes from achieving planning consents so we can provide better
places for people to live, work, shop and play. We aspire for people to be
pleased that it is Land Securities investing and developing in their area, not
someone else. The quality of our schemes and our strong relationships with
local communities are central to improving returns for shareholders. Our
approach has enabled us to develop and improve major schemes in sensitive and
highly prized city centre locations.

 

For us, development is about placemaking, not simply putting up buildings. By
working to draw people together before, during and after construction, we add
vibrancy. This makes our schemes more attractive and more successful and it
also brings more opportunities our way.

Consistent outlook

Nothing we have seen in the last six months leads us to change our outlook.
 Wider economic uncertainty continues to restrain business confidence but
take-up of new space is coming through and the interest we have in our schemes
is encouraging.

 

Within our market, we expect to see a divergence in rental levels between the
best properties and the rest. In retail, rental growth is most likely to come
from assets that have a dominant position in a thriving location. In London,
rental growth is likely to come from new buildings that meet occupier needs in
terms of technical performance. Value creation will come from responsible and
well financed property companies who are best able to develop winning schemes
profitably and manage mature assets proactively.

 

Over the next six months you will see this business stick to its plan. Every
part of the business is focused on protecting and creating value for
shareholders through an uncertain period in the economy. We will exert tight
financial discipline, progress development ahead of our peers and work hard to
maximise returns through active asset management.

 

 

Robert Noel

Chief Executive

 

Financial review

Overview and headline results

The Group's profit before tax was £131.4m, compared to £378.9m for the six
months ended 30 September 2011. Revenue profit was £143.7m, down from £159.3m
in the comparable period. Basic earnings per share were 16.8p compared to
50.0p for the six months ended 30 September 2011. Adjusted diluted earnings
per share were 18.4p (2011: 20.5p), down 10.2% on the comparable period.

 

Despite a small underlying fall in values of £10.9m, our combined portfolio
increased in value from £10.33bn to £10.58bn, due to capital expenditure on
developments and acquisitions. Net assets per share increased by 1p from 921p
at 31 March 2012 to 922p at 30 September 2012. Adjusted diluted net assets per
share also increased by 1p from 863p at 31 March 2012 to 864p.

Revenue profit

Revenue profit is our measure of the underlying pre-tax profit of the Group,
which we use internally to assess our income performance. It includes the
pre-tax results of our joint ventures but excludes capital and other one-off
items. A reconciliation of revenue profit to our IFRS profit before tax is
given in note 3 to the financial statements.

 

Table 1 shows the composition of our revenue profit including the
contributions from London and Retail.

 

 

Table 1: Revenue profit

                                       30                            30
               Retail    London September    Retail    London September
            Portfolio Portfolio      2012 Portfolio Portfolio      2011 Change
                   £m        £m        £m        £m        £m        £m     £m
Gross
rental
income*         148.2     138.5     286.7     156.1     153.0     309.1 (22.4)
Net service
charge
expense         (0.6)     (0.4)     (1.0)     (1.6)     (1.8)     (3.4)    2.4
Direct
property
expenditure
(net)          (14.2)     (1.4)    (15.6)    (13.6)       1.6    (12.0)  (3.6)
Net rental
income          133.4     136.7     270.1     140.9     152.8     293.7 (23.6)
Indirect
costs          (11.7)     (8.2)    (19.9)    (12.6)     (8.5)    (21.1)    1.2
Segment
profit
before
interest        121.7     128.5     250.2     128.3     144.3     272.6 (22.4)
Unallocated
expenses
(net)                              (16.7)                        (18.8)    2.1
Net
interest -
Group                              (75.2)                        (78.4)    3.2
Net
interest -
joint
ventures                           (14.6)                        (16.1)    1.5
Revenue
profit                              143.7                         159.3 (15.6)

* Includes finance lease interest, net of ground rents payable.

 

Revenue profit declined by £15.6m from £159.3m in the comparative period to
£143.7m for the six months ended 30 September 2012. The 9.8% decrease was
mainly due to a reduction in net rental income, which was down £23.6m, partly
offset by lower indirect and net interest costs. The decline in net rental
income is due to disposals we made last year and the cessation of income on
properties in our development pipeline. Further information on the net rental
income performance of the London and Retail portfolios is given in the
respective business reviews.

 

The aggregate of indirect costs of London and Retail and net unallocated
expenses represent the net indirect expenses of the Group including joint
ventures. The £3.3m reduction in these costs is largely due to lower staff
costs and professional fees.  Net interest expenditure was £4.7m lower due to
higher capitalised interest as we invested capital in our development
programme.

Valuation movement

A key component of our pre-tax profit is the movement in the values of our
investment properties and any profits or losses on disposals. Over the last
six months we saw a small valuation deficit of £10.9m, or 0.1%, and our profit
on disposals was £1.8m, down from £25.4m in the comparable period. A breakdown
of the valuation deficit by category is shown in table 2 below.

 

Table 2: Valuation analysis

 

                 Market
                  value
                                                                          Movement
                     30                    Rental     Net                       in
              September         Valuation   value initial    Equivalent equivalent
                   2012 (deficit)/surplus change*   yield         yield      yield
                     £m                 %       %       %             %        bps
Shopping
centres and
shops           2,193.3             (3.7)   (2.5)     6.2           6.4          5
Retail
warehouses
and food
stores          1,141.6             (2.9)     0.3     5.3           5.8         16
London
offices         3,587.3                 -     0.4     5.0           5.6          -
Central
London shops      775.7               1.2   (0.7)     4.0           5.4       (11)
Other             777.3               1.0     0.4     6.1           6.8       (13)
Total
like-for-like
portfolio       8,475.2             (1.2)   (0.7)     5.4           5.9          1
Proposed                                                               
developments      223.4               4.7     n/a       -           n/a        n/a
Completed
developments      733.4               0.4   (0.2)     3.5           5.2        (2)
Acquisitions       96.1             (3.8)     n/a     5.1           5.6        n/a
Development
programme       1,050.4               8.2     n/a     0.7           5.4        n/a
Total
investment
portfolio      10,578.5             (0.1)   (0.6)     4.7           5.8        (4)

*Rental value change excludes units materially altered during the year and
Queen Anne's Gate, SW1

 

In aggregate, the like-for-like portfolio saw a 1.2% decline in value over the
six months to September 2012 on the back of rental values down by 0.7% with
little change in yields.

 

Shopping centres and shops saw a 3.7% valuation decline, largely due to a 2.5%
fall in rental values.  Values in retail warehouses and food stores were down
by 2.9% due to  an outward movement in equivalent yields particularly for
larger lot sizes.  London offices saw little overall change in value while
central London shops saw a 1.2% valuation surplus as equivalent yield
compression more than offset the decline in rental values.

 

Outside the like-for-like portfolio, completed developments saw little
valuation movement while proposed developments were up 4.7% due to lower than
expected construction costs following receipt of tenders.

 

Purchase costs accounted for the 3.8% valuation decline of acquisitions while
the development programme was up by 8.2% as risk reduced on some of our major
schemes through pre-letting and construction progress.

Earnings per share

Basic earnings per share were 16.8p, compared to 50.0p for the six months
ended 30 September 2011, the reduction being predominantly due to a small
valuation deficit compared to a surplus for the comparable period and lower
profits on investment property disposals.

 

In a similar way that we adjust profit before tax to remove capital and
one-off items to give revenue profit, we also report an adjusted earnings per
share figure. Adjusted diluted earnings per share reduced by 10.2% from 20.5p
for the six months ended 30 September 2011 to 18.4p per share for the current
period, reflecting the reduction in revenue profit.

Total dividend

We will be paying a second quarterly dividend of 7.4p per share on 10 January
2013. Taken together with the first quarterly dividend of 7.4p paid on 12
October 2012, this makes a first half dividend of 14.8p. Shareholders continue
to have the opportunity to participate in our scrip dividend scheme and
receive their dividend in the form of Land Securities shares (a scrip dividend
alternative) as opposed to cash. The take-up for the dividends paid on 26
April 2012 and 26 July 2012 was 22.7% and 17.2% respectively. This resulted in
the issue of 3.1m new shares at between 726p and 735p per share and £22.8m of
cash being retained in the business.

 

All of the cash dividends paid and payable in respect of the six months ended
30 September 2012 comprise Property Income Distributions (PID) from REIT
qualifying activities. In contrast to the cash dividends, none of the scrip
dividends paid to date have been PIDs and therefore they have not been subject
to the 20% withholding tax requirement which applies to PIDs for certain
classes of shareholders. The latest date for election for the non-PID scrip
dividend alternative in respect of the second interim dividend will be 10
December 2012 and the calculation price will be announced on 18 December 2012.

 

The purpose of the scrip dividend alternative is to enable shareholders to
select the distribution they prefer. While the scrip dividend alternative
results in cash being retained in the business, it also results in new shares
being issued. If the new shares are issued at a time when the share price is
below our adjusted net asset value per share, there will be a small dilution
to existing shareholders from this discount. As announced at the year end,
rather than suspend the scrip dividend alternative when the discount is
material, the Company intends to buy back an equivalent number of shares to
those issued in connection with the scrip dividend, thereby retaining choice
for shareholders but minimising any dilution associated with issuing shares.
In accordance with this approach, during the period the Company bought back
3.1m shares at a cost of £23.1m.

Net assets

At 30 September 2012, our net assets per share were 922p, an increase of 1p
from 31 March 2012.

 

In common with other property companies, we calculate an adjusted measure of
net assets which we believe better reflects the underlying net assets
attributable to shareholders. Our adjusted net assets are lower than our
reported net assets primarily due to an adjustment to include our debt at its
nominal value. At 30 September 2012, adjusted diluted net assets per share
were 864p per share, an increase of 1p from 31 March 2012.

 

Table 3 summarises the main differences between net assets and our adjusted
measure of net assets together with the key movements over the period.

 

Table 3: Net assets attributable to owners of the Parent

                                                Six months ended    Year ended
                                               30 September 2012 31 March 2012
                                                              £m            £m
Net assets at the beginning of the period                7,155.4       6,811.5
Adjusted earnings                                          143.4         298.3
Valuation (deficit)/surplus on investment
properties                                                (10.9)         190.9
Profit on disposal of investment properties                  1.8          46.4
Profit on disposal of trading properties                     1.0           5.2
Other                                                      (4.2)        (17.9)
Profit after tax attributable to owners of the
Parent                                                     131.1         522.9
Dividends                                                 (90.8)       (154.8)
Purchase of treasury and own shares                       (23.8)        (18.5)
Other reserve movements                                      0.2         (5.7)
Net assets at the end of the period                      7,172.1       7,155.4
Fair value of interest-rate swaps                           21.4          20.8
Debt adjusted to nominal value                           (442.1)       (450.9)
Adjusted net assets at the end of the period             6,751.4       6,725.3

To the extent tax is payable, all items are shown post-tax

 

Net pension deficit

The Group operates a defined benefit pension scheme which is closed to new
members. At 30 September 2012, the scheme was in a net deficit position of
£4.3m compared to a deficit of £2.4m at 31 March 2012. The change is primarily
due to lower than expected returns on scheme assets.

Cash flow

A summary of the Group's cash flow for the six months is set out in table 4
below.

 

Table 4: Cash flow and net debt

                                              Six months ended    Year ended
                                             30 September 2012 31 March 2012
                                                            £m            £m
Operating cash inflow after interest and tax              66.5         254.1
Dividends paid                                          (90.9)       (153.1)
Non-current assets:                                                         
Acquisitions                                            (73.7)       (107.3)
Disposals                                                396.6         513.7
Capital expenditure                                    (143.5)       (307.0)
                                                         179.4          99.4
Loans repaid by third parties                              0.8          22.8
Net payments to joint ventures                         (101.9)        (45.5)
Fair value movement of interest-rate swaps               (1.6)         (4.5)
Purchase of own shares and treasury shares              (19.8)        (18.5)
Other movements                                          (6.7)        (24.3)
Decrease in net debt                                      25.8         130.4
Net debt at the beginning of the period              (3,183.2)     (3,313.6)
Net debt at the end of the period                    (3,157.4)     (3,183.2)

 

The main cash flow items are typically operating cash flows, the dividends we
pay and the capital transactions we undertake. Operating cash inflows after
interest and tax were £66.5m for the six months ended 30 September 2012.

 

Although we did not make any disposals during the six months, we received
£396.6m from sales recognised in the prior period, including the disposals of
Arundel Great Court, WC2, St Johns Centre, Liverpool and 50% of our interest
in Victoria Circle, SW1. We spent £217.2m on assets: investment property
acquisitions cost £73.7m and capital expenditure totalled £143.5m, principally
on our developments at Trinity Leeds, 123 Victoria Street, SW1 and 62
Buckingham Gate, SW1. Our largest investment property acquisition in the
period was The Cornerhouse, Nottingham which cost £50.0m.

 

The net payment of £101.9m to our joint ventures is largely the result of a
partner loan to The Scottish Retail Property Limited Partnership, which was
used to repay external debt, development funding for 20 Fenchurch Street, EC3
and further partner loans to the St. David's Limited Partnership.

Net debt and gearing

As a result of the cash flows described above, our IFRS net debt decreased by
£25.8m to £3,157.4m, while the reduction in borrowings in our joint ventures
led to our IFRS net debt (including joint ventures) falling by £81.1m to
£3,470.2m (£3,551.3m at 31 March 2012). Adjusted net debt, which includes our
joint ventures and the nominal value of our debt but excludes the
mark-to-market on our swaps, was down £90.5m at £3,890.9m (31 March 2012:
£3,981.4m).

 

Table 5 below sets out various measures of our gearing.

 

Table 5: Gearing

                                                         30 September 31 March

                                                                 2012     2012
                                                                    %        %
Adjusted gearing* - including notional share of joint
venture debt                                                     57.6     59.2
Group LTV                                                        39.0     40.4
Group LTV - including share of joint ventures                    36.2     38.0
Security Group LTV                                               36.8     37.6

* Book value of balance sheet debt increased to recognise nominal value of
debt on refinancing in 2004 divided by adjusted net asset value.

 

The measure most widely used in our industry is loan-to-value (LTV). We focus
most on Group LTV including our notional share of joint venture debt, despite
the fact that lenders to our joint ventures have no recourse to the Group for
repayment.

 

Group LTV (including joint ventures) declined from 38.0% at March 2012 to
36.2% at September 2012. This reflects proceeds received this year relating to
sales recognised prior to 31 March 2012.

 

Our interest cover, excluding our share of joint ventures, has reduced from
2.7 times in the comparative period to 2.3 times, as a result of the decline
in revenue profit and an increase in interest margins on our revolving credit
facility. Under the rules of the REIT regime, we need to maintain an interest
cover in the exempt business of at least 1.25 times to avoid paying tax. As
calculated under the REIT regulations, our interest cover of the exempt
business for the six months to 30 September 2012 was 2.0 times.

Financing structure and strategy

The total capital of the Group consists of shareholders' equity,
non-controlling interests and net debt. Since IFRS requires us to state a
large part of our net debt at below its nominal value, we view our capital
structure on a basis which adjusts for this. Table 6 below outlines our main
sources of capital. Further details are given in notes 14 and 15 to the
financial statements.

Table 6: Financing structure

                                  30 September 2012              31 March 2012
                                     Joint                      Joint
                            Group ventures Combined    Group ventures Combined
                               £m       £m       £m       £m       £m       £m
Bond debt                 3,358.8        -  3,358.8  3,363.5        -  3,363.5
Bank borrowings             255.0    329.4    584.4    300.0    393.4    693.4
Amounts payable under
finance leases               24.2      4.6     28.8     23.3      4.5     27.8
Less: cash and
restricted deposits        (46.6)   (34.5)   (81.1)   (59.2)   (44.1)  (103.3)
Adjusted net debt         3,591.4    299.5  3,890.9  3,627.6    353.8  3,981.4
                                                                              
Non-controlling
interests                     0.1        -      0.1      0.2        -      0.2
Adjusted equity
attributable to owners
of the Parent             6,738.1     13.3  6,751.4  6,711.0     14.3  6,725.3
Total adjusted equity     6,738.2     13.3  6,751.5  6,711.2     14.3  6,725.5
                                                                              
Total capital            10,329.6    312.8 10,642.4 10,338.8    368.1 10,706.9

 

In general, we follow a secured debt strategy as we believe that this gives
the Group and joint ventures better access to borrowings and at lower cost.
Other than our finance leases, all our borrowings at 30 September 2012 were
secured.

 

A key element of the Group's capital structure is that the majority of our
borrowings are secured against a large pool of our assets (the Security
Group). This enables us to raise long-term debt in the bond market as well as
shorter-term flexible bank facilities, both at competitive rates. In addition,
the Group holds a number of assets outside the Security Group structure (in
the Non-Restricted Group). These assets are typically our joint venture
interests or other properties on which we have raised separate, asset-specific
finance. By having both the Security Group and the Non-Restricted Group, and
considerable freedom to move assets between the two, we are able to raise the
most appropriate finance for each specific asset or joint venture.

 

Importantly, we can use borrowings raised against the Security Group to fund
expenditure on both acquisitions and developments. At a time when finance to
fund capital expenditure on speculative developments is largely unavailable or
prohibitively expensive, this gives the Group a considerable advantage in
being able to develop at this point in the cycle.

 

The weighted average duration of the Group's debt (including joint ventures)
is 10.9 years with a weighted average cost of debt of 5.1%.

Hedging

We use derivative products to manage our interest-rate exposure, and have a
hedging policy which generally requires at least 80% of our existing debt plus
increases in debt associated with net committed capital expenditure to be at
fixed interest rates for the coming five years. Specific interest-rate hedges
are also used within our joint ventures to fix the interest exposure on
limited-recourse debt. At 30 September 2012, Group debt (including joint
ventures) was 95.3% fixed (31 March 2012: 94.8%) and the notional amount of
outstanding interest-rate swaps (including joint ventures) was £1,057.8m (31
March 2012: £618.9m).

Taxation

As a consequence of the Group's conversion to REIT status, income and capital
gains from our qualifying property rental business are now exempt from UK
corporation tax. No tax charge arose in the period. The Group holds provisions
of £21.3m for interest on overdue tax in relation to a matter in dispute with
HMRC, which will become payable if it is not settled in our favour. The
provision will be released, and the tax paid to date of £60.7m recovered, if
the Group's claim is successful.

 

Martin Greenslade

Chief Financial Officer

 

London Portfolio

Highlights

·      Valuation surplus of 2.0% since March 2012

·      £7.1m of investment lettings in the period, at 8.5% below ERV, but 4.5%
ahead of ERV excluding pre-development properties. A further £2.1m in
solicitors' hands

·      £9.1m of development lettings since 1 April 2012, with a further £5.1m
in solicitors' hands

·      Like-for-like voids down from 2.4% to 2.0%

·      20 Fenchurch Street, EC3, now 34% let or in solicitors' hands

·      Construction to commence at The Zig Zag Building and Kings Gate, SW1,
and demolition started at Victoria Circle, SW1

Our market

Overall the dynamics of our market remain unchanged: a market structurally
undersupplied with new space despite below-average levels of take-up.

 

The period January to June saw muted take-up of new office space.  However, in
July to September we saw a marked improvement in active demand which has
continued.  As active demand is a lead indicator of take-up, this is
encouraging and we are particularly pleased by the level of enquiries, active
discussions and transactions under way in our schemes.

 

The supply of new office developments in central London remains relatively
low. CB Richard Ellis forecast that an average of 0.4m sq m of new space will
be delivered per year between 2012 and 2015, less than half the long run
average take-up rate of 1.1m sq m per year. Furthermore, of the total 1.6m sq
m due in this timeframe, only half is actually under construction and 0.2m sq
m is already pre-let.  This supply is less than we envisaged in 2010 primarily
due to the lack of available development finance.  As a consequence, our
window for development has been extended and we are well placed to take
advantage of this.

 

The property investment market remains competitive as London's qualities as a
leading financial and commercial centre continue to attract investors from
overseas. We will maintain a disciplined approach to buying given the relative
attraction of the opportunities within our portfolio.

 

London's population is rising and demand for central London residential space
remains strong. All of the units at Wellington House, SW1, were sold ahead of
completion of the building. We expect this demand to continue, particularly in
our core area of activity.

Our performance

Our London Portfolio, valued at £5,807.0m at 30 September 2012, produced a
valuation surplus for the period of 2.0%. West End offices were up 3.1%; City
offices were up 2.6%; and central London shops up 1.9% with inner London down
2.1%. Included within these figures are properties in the development
programme, with a surplus of 13.4%.

 

The portfolio produced a total property return of 4.4%, compared to its sector
benchmark in the IPD Quarterly Universe of 4.3%. Offices outperformed their
benchmark by 0.5%, while our central London shops under performed their
benchmark by 2.5%.

 

Rental values in our like-for-like portfolio (excluding units materially
altered during the period and Queen Anne's Gate, SW1) increased marginally by
0.2%. Like-for-like voids were 2.0%, compared to 2.4% at March 2012. Void
levels on the like-for-like central London shops were 0.6% (March 2012: 1.2%)
and London offices were 2.4% (March 2012: 2.6%).

 

Table 7: Net rental income

                                    30 September 30 September

                                            2012         2011 Change
                                              £m           £m     £m
Like-for-like investment properties        120.9        119.2    1.7
Proposed developments                        1.5          3.5  (2.0)
Development programme                        1.0          5.4  (4.4)
Completed developments                       9.7          8.0    1.7
Acquisitions since 1 April 2011                -            -      -
Sales since 1 April 2011                     0.8         14.5 (13.7)
Non-property related income                  2.8          2.2    0.6
Net rental income                          136.7        152.8 (16.1)

 

Net rental income reduced by £16.1m to £136.7m. The main reason behind this
reduction is £13.7m of net rental income foregone on the properties we sold in
the prior year, which included Eland House, SW1, 50% of Victoria Circle, SW1,
Arundel Great Court, WC2 and Bonhill Street, EC2. Overall, like-for-like
investment properties showed a small increase in net rental income, largely
due to higher income from Piccadilly Lights, W1, and the newly refurbished 40
Strand, WC2.  Completed developments saw net rental income increase by £1.7m
reflecting lettings at One New Change, EC4, while the development programme is
down by £4.4m, driven by the expiry of rental income at Kingsgate House, SW1
prior to demolition.  Our two proposed developments, Victoria Circle, SW1 and
1 & 2 New Ludgate, EC4, both saw income decline as leases ended in preparation
for redevelopment.

Acquisitions

We have secured two predominantly vacant strategic sites for £35.9m: we
purchased St James's Park Centre in Victoria, SW1, an important extension to
our masterplan for Victoria; and, since the half year, we acquired 19-23
Shaftesbury Avenue, W1, completing the freehold island site behind Piccadilly
Lights, W1 and opening up a number of reconfiguration options.

Asset management

We have continued to focus on asset management to lengthen and strengthen
income. During the period we let or restructured 25,320 sq m of space. £7.1m
of new lettings were completed at 8.5% below ERV but 4.5% ahead of ERV
excluding pre-development properties, where we seek to maintain full occupancy
with flexibility for development. Our weighted average unexpired lease term on
the like-for-like portfolio, completed developments and acquisitions is now
9.8 years (31 March 2012: 9.9 years).

 

Key activity during the period included:

 

·      One New Change, EC4

In the retail element of this scheme we completed lettings to Boots and Bang &
Olufsen, both ahead of ERV. With 3,230 sq m of office space let to Panmure
Gordon and bwin in the period, the scheme is now 95% let overall.

 

·      47 Mark Lane, EC3

We restructured the leases with AXA Insurance UK, securing an additional five
years of income on 1,460 sq m of space. In addition, a letting to Jubilee
Insurance Services was secured ahead of Marsh vacating the building.

 

·      Times Square, EC4

This building is now fully let following the 4,800 sq m lettings to Research
Now and National Institute of Clinical Excellence.

 

·      Cardinal Place, SW1

We completed the lease restructure and additional letting to Ruffer, who have
doubled their occupancy to 4,150 sq m and extended their lease from 2016 to
2021. A part surrender and part lease re-structure with 3i was completed in
June 2012, securing one of the largest tenants until 2025. As part of this
transaction we took back 1,910 sq m of space which has since been refurbished
and for which we have good interest.  In a small but significant letting, KPI
Oil have taken part of the 4th floor at £65 psf setting a new rental tone for
the six-year-old building. Through negotiating the surrender of the Thorntons
unit and the simultaneous letting to Space NK, we have further strengthened
the retail offer.

 

·      Oriana, W1

Primark opened their new flagship store on 20 September 2012 at the east end
of Oxford Street at our Oriana scheme jointly owned with Frogmore. The joint
venture has submitted a planning application for Phase II of the scheme which
will add an additional 6,950 sq m of retail space along with 18 residential
apartments.

Development

We have maintained good momentum on our development pipeline since March with
a total of 21,900 sq m of development lettings and have progressed our plans
for transforming Victoria.

 

·      123 Victoria Street, SW1

Practical completion was achieved in August 2012.  Jimmy Choo increased its
occupancy by 1,070 sq m to 4,450 sq m and a further 2,870 sq m has been let to
CDC Group plc taking the percentage let to 53%. A further 20% is in
solicitors' hands.

 

·      62 Buckingham Gate, SW1

This 24,160 sq m office and 1,450 sq m retail development is the next
development we will complete in Victoria and is slightly ahead of programme
for completion in spring next year. As we approach completion, we have strong
interest in the floorspace.

 

·      20 Fenchurch Street, EC3

We continue to be encouraged by the interest in this world class 63,980 sq m
office building being developed with our partner Canary Wharf Group for spring
2014. During the period we saw our first pre-letting, to Markel International
for 4,730 sq m, followed by Kiln Group who have taken 7,270 sq m. Since
September we have pre-let a further 2,730 sq m to Ascot Underwriting. The
development is now 23% pre-let with a further 11% in solicitors' hands.  All
of the deals completed have been ahead of our expectations in terms of rental
level, lease length and incentives.

 

·      The Zig Zag Building and Kings Gate, SW1 (formerly Kingsgate House)

Construction of two new developments will start this month on Victoria Street.
The £350m scheme comprises The Zig Zag Building, a 17,450 sq m office building
over 12 floors, and Kings Gate, a 14 storey building comprising 100
residential apartments. Both buildings will provide a new enhanced retail and
leisure offer with 4,150 sq m of space. The estimated completion of the
buildings is January 2015.

 

·      1 & 2 New Ludgate, EC4

With demolition completed and a construction time of approximately 22 months
from instruction, we expect to start this 35,210 sq m development of high
quality office, restaurant and retail accommodation, in early 2013.

 

·      Victoria Circle, SW1

We are working with our partner Canada Pension Plan Investment Board to
deliver this proposed scheme of six new buildings occupying an island site
opposite Victoria station. The completed scheme will provide a spectacular
84,660 sq m mix of retail, residential, office and public amenity space.  As
planned, by 30 September, we had secured vacant possession from around 170
leasehold interests at below cost estimates. Demolition work started
immediately on the site in tandem with Transport for London works on the
Victoria station upgrade.

 

Other development projects in the course of design include 20 Eastbourne
Terrace, W2; Portland House, SW1; and Oxford House, W1.

Looking ahead

We continue to deliver on the plan we set out when we restarted our
development programme. The key drivers of supply and demand are broadly
consistent with those set out at that time. Although take-up of office space
has been slower than originally expected, there have been fewer development
starts.  

 

We are confident about the prospects for new, efficient, well configured
office space which is evidenced by the strength of interest we are seeing on
our schemes. While we remain of the view that delivering developments early in
the cycle is preferable, we believe that the period of opportunity will last
longer than we had anticipated in 2010 as completions of new space over the
next three years will be insufficient to meet demand. We are able to take
advantage of this with our pipeline of oven-ready schemes.

 

.

We outline our development pipeline in table 8.

 

Table 8: London development pipeline at 30 September 2012

                                                                                           Total    Forecast
                                                                      Net            development       total
Property                                                          income/ Estimated/    costs to development
                         Ownership   Size          Letting Market     ERV     actual        date        cost
             Description  interest        Planning  status  value         completion
                  of use         %   sq m   status       %     £m      £m       date          £m          £m
Developments                                                     
after
practical
completion                                                                                                  
123 Victoria      Office       100 18,490               42    212    13.5   Aug 2012         155         155
Street, SW1*      Retail            2,620              100                                                  
                                                                                                            
Developments                                                     
approved or
in progress                                                                                                 
62                                                            203
Buckingham        Office       100 24,160                -           17.6   May 2013         139         178
Gate, SW1         Retail            1,450                -                                                  
20 Fenchurch      Office        50 62,890               19    136    21.0   Apr 2014         110         239
Street, EC3       Retail            1,090                -                                                  
The Zig Zag                                                   124
Building and
Kings Gate,       Office       100 17,450                -           16.2   Jan 2015         111         343
SW1                                                              
(formerly         Retail            4,150                -                                                  
Kingsgate                                                        
House)       Residential           10,090                -                                                  
                                                                                                            
Proposed                                                         
developments                                                                                                
1 & 2 New         Office       100 32,180       PR       -    n/a     n/a       2015         n/a         n/a
Ludgate, EC4      Retail            3,030                -                                                  
                  Office        50 57,480       PR       -    n/a     n/a    2016-18         n/a         n/a
Victoria                                                         
Circle, SW1       Retail            8,490                -                                                  
             Residential           18,690                -                                                  

*Office refurbishment only. Figures provided are for the property as a whole
including the retail element.

 

Developments let and transferred or sold

One New Change, EC4 Office 100 31,990    92 490 27.6 Oct 2010 530 530
                    Retail     20,160    99                          

 

Where the property is not 100% owned, floor areas shown above represent the
full scheme whereas all other figures represent our proportionate share.
Letting % is measured by ERV and shows letting status at 30 September 2012.
Trading property development schemes (e.g. Wellington House, SW1) are excluded
from the development pipeline.

 

Planning status for proposed developments

PR - Planning received

 

Total development cost

Total development cost refers to the book value of the land at the
commencement of the project, the estimated capital expenditure required to
develop the scheme from the start of the financial year in which the property
is added to our development programme, together with capitalised interest,
being the Group's borrowing costs associated with direct expenditure on the
property under development. Interest is also capitalised on the purchase cost
of land or property where it is acquired specifically for redevelopment. Of
the properties in the development pipeline at 30 September 2012, there were no
properties on which interest was capitalised on the land cost. The figures for
total development costs include £152.0m for the residential elements of Kings
Gate, SW1.

 

Net income/ERV

Net income/ERV represents net headline annual rent on let units plus ERV at 30
September 2012 on unlet units.

 

 

Retail Portfolio

Highlights

·      Valuation deficit of 2.5% since March 2012

·      £8.0m of investment lettings in the period, 2.9% ahead of ERV, with a
further £3.0m in solicitors' hands

·      £5.5m of development lettings since 1 April 2012, with a further £4.0m
in solicitors' hands

·      Like-for-like voids down from 3.4% to 3.1% and units in administration
down from 2.8% to 1.8%

·      Trinity Leeds 84% pre-let or in solicitors' hands

·      Crawley development started with Taplow expected to start soon

Our market

Although there has been no let-up in the pressure on consumers and the
challenges for retailers, there continues to be demand for space in the right
locations as retailers respond to the growth of multi-channel retailing and
the evolution of consumer shopping habits.

 

With consumer weakness continuing to hold back rental growth, retail property
owners must keep ahead of the changing trends. For both retailers and
consumers, the leisure and food and beverage offer in retail centres, together
with convenience, continue to be important drivers of behaviour. As a result,
retailers retain a preference for larger shopping centres and out-of-town
locations. Our portfolio is positioned to take advantage of this.

 

Consumers also appear to favour shopping less often but taking longer and
spending more per trip.  This shift is something our own portfolio has
mirrored in the period with footfall down but retailer sales up.

 

Retailers continue to look for new ways to respond to the challenge of
attracting customers to their brands both physically and on-line and our scale
allows us to be in constant touch with their thinking on new store strategies
and new format ideas.  The new Debenhams at Chesterfield is an example of this
as is our work with John Lewis to develop a new format shop in Exeter
following on from us delivering their first 'at home' shop in Poole.

 

We continue to stay at the forefront of the use of digital technology to
support retailers and shoppers.  The local product search trial with Google at
the White Rose Centre has now been rolled out to our other shopping centres
and extended to include other landlords and retailers.

Our performance

Our Retail Portfolio, valued at £4,771.5m at 30 September 2012, produced a
valuation deficit of 2.5% overall, with shopping centres and shops down 3.1%
and retail warehouses and food stores down 2.7%. Included within these figures
are our current development projects which were down 0.3%. Our portfolio of
Accor hotels showed a valuation surplus of 0.4%, driven by the London
properties. Rental values on our like-for-like portfolio (excluding units
materially altered during the period) decreased by 2.5% for our shopping
centres and shops, and increased by 0.3% for our retail warehouses and food
stores.

 

Overall, the portfolio produced a total property return of 0.5%, compared to
its sector benchmark in the IPD Quarterly Universe of 0.0%. Our shopping
centres outperformed their IPD sector benchmark by 0.1% and retail warehouses
outperformed their sector benchmark by 0.3%.

 

Voids across our like-for-like Retail Portfolio reduced from 3.4% at 31 March
2012 to 3.1% at 30 September, of which 1.1% are subject to temporary lettings.
Units in administration were 1.8%, down from 2.8% at 31 March 2012. Of these
units in administration, 0.8% were still trading and, including these and our
temporary lettings, our overall level of occupancy was 97.0%.

 

Footfall in our shopping centre portfolio in the period was down 2.6% on the
same period in the prior year against the national benchmark which was down
2.7%. Our measured same store like-for-like sales were up 1.3% against the
British Retail Consortium (BRC) benchmark which was down 0.2%. Our same centre
sales, taking into account new lettings and tenant changes, were up 3.7%. Our
measured retailer rent/sales ratio for the year ended 30 September 2012 was
10.0%. Total occupancy costs (including rent, rates, service charge and
insurance) represented 17.5% of sales.

 

Table 9: Net rental income

                                    30 September 30 September

                                            2012         2011 Change
                                              £m           £m     £m
Like-for-like investment properties        123.9        123.7    0.2
Proposed developments                      (0.3)          0.4  (0.7)
Development programme                        1.2          1.8  (0.6)
Completed developments                       4.1          4.0    0.1
Acquisitions since 1 April 2011              2.2          0.4    1.8
Sales since 1 April 2011                     0.6          8.6  (8.0)
Non-property related income                  1.7          2.0  (0.3)
Net rental income                          133.4        140.9  (7.5)

 

Net rental income is down by £7.5m to £133.4m, the primary driver being the
properties we sold in the prior year, which included St Johns Centre,
Liverpool and Corby Town Centre. Acquisitions have contributed £2.2m of net
rental income, mainly due to The Cornerhouse, Nottingham and Kingsmead, Bath.

 

The rest of the portfolio is broadly flat with small declines due to proposed
and current developments.  At the Bishop Centre, Taplow, almost all income has
now ceased in advance of redevelopment.

Acquisitions and sales

Acquisitions in the period totalled £63.7m at an average yield of 5.0%. In
line with our belief in the growing importance of leisure, the key transaction
was the off-market acquisition of The Cornerhouse leisure complex in
Nottingham for £50.0m. This acquisition further strengthens our excellent
relationships with leisure operators across the portfolio.

 

We also made a number of smaller acquisitions including site assembly in
Crawley for £6.0m and Europa House, Portsmouth, for £3.3m delivering an empty
office block, now with planning permission for a 170 bedroom hotel, and 400
car park spaces close to Gunwharf Quays. To complement our Kingsmead leisure
asset, Bath, we forward purchased a 108 bedroom Premier Inn hotel on the
adjacent site. 

 

Since the half year, we have acquired a further city centre leisure scheme,
The Printworks in Manchester, for £93.9m.  Also, we have satisfied the
planning conditions relating to the sale of land at Banbridge, NI, and we
completed the sale of 12 acres to Tesco after the half year for £17.5m.

Asset management

Whilst the retail environment remains challenging, we continue to utilise our
asset management skills to drive new lettings and provide the space retailers
want. We continue to execute plans for every asset.

 

Bringing in major new occupiers

 

Our work to bring in major new occupiers is resulting in 27,930 sq m of new
openings this autumn.

·      John Lewis Partnership

We have worked with John Lewis to create its first flexible format department
shop at Sidwell Street in Exeter.  The shop opened on 12 October and occupies
10,080 sq m over five floors, offering the full John Lewis range by maximising
the opportunity for "omnichannel" shopping. John Lewis is a significant
addition to the retail offer in Exeter and complements our other holdings in
the city including our Princesshay shopping centre, which together with the
new shop, are held jointly with the Crown Estate.

 

·      Primark

On 1 October we opened a new 6,500 sq m Primark store at Westwood Cross,
Thanet. The new store is the latest addition to the shopping park and joins
M&S, Debenhams, H&M, Topshop and Next in providing an exciting fashion offer. 
At The Bridges shopping centre in Sunderland, Primark will open a 5,550 sq m
store this month providing a major new anchor for the centre.

 

·      Debenhams

At the Ravenside Retail Park in Chesterfield, we worked with Debenhams to open
a department store which extends to 5,800 sq m including its mezzanine floor.
The new store replaces the former Focus unit and further cements the park as a
stand-alone shopping destination.  Since the half year, we have also entered
into an agreement for lease for a 7,600 sq m department store at Southside,
Wandsworth, part of our Metro joint venture with Delancey.

 

Improving leisure and food and beverage provision

 

·      Kingsmead, Bath

This 8,400 sq m leisure and restaurant complex in the heart of Bath is now
100% let following the opening of Frankie & Benny's. Our forward purchase of a
108 bedroom Premier Inn hotel next to the centre complements our existing
ownership and improves Bath's under-provided budget hotel offer.

 

·      The O2 Centre, Finchley Road

Work is under way to significantly enhance the retail and leisure offer at
this centre. Space has been reconfigured to create four new retail units with
lettings to Oliver Bonas, Paperchase and Bo Concept.  Planning permission has
been granted for improvements to the frontage and increasing the first floor
restaurant space and in addition, Vue Cinemas have completed work to add four
new screens.

 

Retail warehouse asset management activity

 

·      Ravenside Retail Park, Chesterfield

Planning consent has been granted for the construction of an additional 2,460
sq m of floorspace in 2 new stores, pre-let to Asda Living and Hobbycraft, due
to open in November 2013. 

 

·      Nene Valley Retail Park, Northampton

We have lengthened income at this retail park through lease restructuring. As
a result, the average unexpired lease term on the park moved from 3.5 years at
31 March 2012 to 8.1 years at 30 September 2012.  A further letting, currently
in solicitors' hands, will take this to 9.2 years when completed.

 

·      Bexhill Retail Park

We secured planning permission in August for the 4,920 sq m M&S store at this
park. Works are due to start later this month, with completion in August 2013.

Development

·      Trinity Leeds

Further letting progress has moved Trinity Leeds from 65% pre-let at March
2012 to 76% with Urban Outfitters and Victoria's Secret taking the final major
stores.  A further 8% is in solicitors' hands. Trinity Leeds is the only major
new shopping centre under construction in the UK and is due to open on 21
March 2013. Other occupiers already signed up to the scheme include M&S,
Primark, Cult, Hollister, Next, River Island, H&M, and Topshop/Topman. The
Topshop store fronting Briggate opened on 4 October 2012. An amendment to the
scheme has been implemented, restructuring the existing Boots store and
creating a new food service area, extending and improving the food and
beverage offer in the scheme in line with greater demand from this sector.
This has added £15m to total development costs.

 

·      185-221 Buchanan Street, Glasgow

Work is on schedule to complete this scheme in March next year. The retail
element of the scheme is 92% pre-let to occupiers including Forever21,
Paperchase, Gap, Fat Face and Watches of Switzerland. A further 7% is in
solicitors' hands.

 

·      Bishop Centre, Taplow

In September, full planning consent was secured for redevelopment of the
existing shopping centre. The new 12,260 sq m development is 51% pre-let to
Tesco with a further 17% in solicitors' hands. We are engaged in detailed
design at the moment and aim to be on site in early 2013.

 

·      Crawley

We have commenced development of the 7,000 sq m supermarket, pre-let to
Morrisons, 600 sq m of restaurant space and a 110 bedroom Travelodge hotel.
The scheme is 94% pre-let.

 

·      Whalebone Lane, Chadwell Heath

Having pre-let this 4,470 sq m development to Asda, we expect to start on site
by the end of the year.

 

·      Meteor Centre, Derby

We are not planning to start development here until we have a pre-let for the
major store.  This scheme has therefore been removed from our proposed
developments for the time being.

Looking ahead

Overall, the retail market is characterised by a continuing tough environment
and evolving consumer and retailer demand.

 

Our asset management actions and our targeted, de-risked development schemes
help us to deliver the right assets in the right locations. The quality of our
portfolio and the relationships we have with retailers will be increasingly
important in the current environment as retailers continue to take space, but
in formats and locations which meet their new requirements.

 

As technology advances, new ways will emerge for consumers to shop and stay
informed. Successful retail centres will increasingly polarise into those
which are destination centres with a strong leisure component and those which
are convenience-led in great locations. Our strategy is well placed to respond
to these trends.

 

We outline our development pipeline in table 10.

 

Table 10: Retail development pipeline at 30 September 2012

                                                                                           Total    Forecast
                                                                      Net            development       total
Property                                                          income/ Estimated/    costs to development
                         Ownership   Size          Letting Market     ERV     actual        date        cost
             Description  interest        Planning  status  value         completion
                  of use         %   sq m   status       %     £m      £m       date          £m          £m
                                                                                                            
Developments                                                     
approved or
in progress                                                                                                 
Trinity                                                       305
Leeds             Retail       100 75,900               72           29.5   Feb 2013         256         378
185-221                                                        60
Buchanan          Retail       100 10,700               92            4.7   Mar 2013          39          61
Street,                                                          
Glasgow      Residential            4,200                                                                   
Crawley           Retail       100 11,000               94     11     2.6   Dec 2013          12          39
                                                                                                            
Proposed                                                         
developments                                                                                                
Bishop                                                        n/a
Centre,
Taplow            Retail       100 12,260       PR      51            n/a       2014         n/a         n/a
Whalebone                                                     n/a
Lane,
Chadwell
Heath             Retail       100  4,470       PR     100            n/a       2013         n/a         n/a
                                                                                                            

 

Where the property is not 100% owned, floor areas shown above represent the
full scheme whereas all other figures represent our proportionate share.
Letting % is measured by ERV and shows letting status at 30 September 2012.
Trading property development schemes are excluded from the development
pipeline.

 

Planning status for proposed developments

PR - Planning received

 

Total development cost

Total development cost refers to the book value of the land at the
commencement of the project, the estimated capital expenditure required to
develop the scheme from the start of the financial year in which the property
is added to our development programme, together with capitalised interest,
being the Group's borrowing costs associated with direct expenditure on the
property under development. Interest is also capitalised on the purchase cost
of land or property where it is acquired specifically for redevelopment. Of
the properties in the development pipeline at 30 September 2012, interest was
capitalised on the land cost at Trinity Leeds and 185-221 Buchanan Street,
Glasgow. The figures for total development costs include £12.9m for the
residential elements of 185-221 Buchanan Street, Glasgow.

 

Net income/ERV

Net income/ERV represents net headline annual rent on let units plus ERV at 30
September 2012 on unlet units.

 

Principal risks and uncertainties

The principal risks of the business are set out on pages 41-43 of the 2012
Annual report alongside their potential impact and related mitigations. These
risks fall into four categories: financial (including liability structure),
property investment (including customers, composition of our property
portfolio and acquisition), development and regulatory (including health and
safety and environment). The Board has reviewed the principal risks in the
context of the second half of the current financial year.

 

The Board believes that the risks outlined in the Annual Report have not
changed and that the existing mitigation measures within the business remain
relevant for the risks highlighted.

 

Statement of directors' responsibilities

The Directors confirm to the best of their knowledge that the condensed
interim financial statements have been prepared in accordance with IAS 34,
'Interim Financial Reporting', as adopted by the European Union and that the
interim management report herein includes a fair review of the information
required by Disclosure and Transparency Rules 4.2.7 and DTR 4.2.8, namely:

 

·      An indication of important events  that have occurred during the  first 
six months ended 30 September 2012  and their impact on the condensed  interim 
financial  statements,  and   a  description  of   the  principal  risks   and 
uncertainties for the remaining six months of the financial year; and

·      Any material related party transactions  in the first six months  ended 
30 September 2012 and any material  changes in the related party  transactions 
described in the last Annual Report.

 

The Directors of Land Securities Group PLC as at the date of this announcement
are as set out below:

 

Alison Carnwath, Chairman Robert Noel, Chief Executive
David Rough*              Martin Greenslade, Chief Financial Officer
Sir Stuart Rose*          Richard Akers, Executive Director
Kevin O'Byrne*             
Chris Bartram*             
Simon Palley*              
Stacey Rauch*

 

* Non-executive directors

 

 

A list of the current Directors is maintained on the Land Securities Group PLC
website at: www.landsecurities.com.

 

By order of the Board

 

Adrian de Souza

Group General Counsel and Company Secretary

7 November 2012

 

 

Independent review report to Land Securities Group PLC

Introduction

We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly results for the six months ended 30 September
2012, which comprises the unaudited consolidated income statement, unaudited
statement of comprehensive income, unaudited consolidated balance sheet,
unaudited consolidated statement of changes in equity, unaudited consolidated
statement of cash flows and related notes. We have read the other information
contained in the half-yearly results and considered whether it contains any
apparent misstatements or material inconsistencies with the information in the
condensed set of financial statements.

Directors' responsibilities

The half-yearly results are the responsibility of, and have been approved by,
the directors. The directors are responsible for preparing the half-yearly
results in accordance with the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority.

 

As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in the half-yearly results has
been prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly results based on our review.
This report, including the conclusion, has been prepared for and only for the
Company for the purpose of the Disclosure and Transparency Rules of the
Financial Services Authority and for no other purpose. We do not, in producing
this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
results for the six months ended 30 September 2012 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.

 

 

 

PricewaterhouseCoopers LLP

Chartered Accountants

London

7 November 2012

 

 

Notes:

1.    The maintenance and integrity of the Land Securities Group 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
financial statements since they were initially presented on the website.

2.    Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.

 

Financial Statements

Unaudited consolidated income statement for the six
months ended 30 September 2012                                Six months ended
                                                                  30 September
                                                                  2012    2011
                                                        Notes       £m      £m
Group revenue (1)                                         4      303.6   339.0
Costs                                                          (102.4) (114.8)
                                                                 201.2   224.2
Profit on disposal of investment properties               3        1.8    24.4
Net (deficit)/surplus on revaluation of investment
properties                                                3      (4.2)   172.3
Impairment release/(charge) on trading properties         3        3.1   (1.6)
Operating profit                                                 201.9   419.3
Interest expense                                          5     (98.0)  (99.3)
Interest income                                           5       14.0    12.8
Fair value movement on interest-rate swaps                5      (1.6)   (3.9)
                                                                 116.3   328.9
Share of post tax profit from joint ventures             10       15.1    50.0
Profit before tax                                                131.4   378.9
Income tax                                                           -     8.0
Profit for the period                                            131.4   386.9
                                                                              
Attributable to:                                                              
Owners of the Parent                                             131.1   386.3
Non-controlling interests                                          0.3     0.6
Profit for the period                                            131.4   386.9
                                                                              
Earnings per share attributable to the owners of the
Parent (pence)                                                                
Basic earnings per share                                  7       16.8    50.0
Diluted earnings per share                                7       16.8    49.9

 

1.    Group revenue excludes the share of joint ventures' revenue of £59.1m
(30 September 2011: £50.2m).

 

Unaudited consolidated statement of comprehensive
income                                                        Six months ended
for the six months ended 30 September 2012                        30 September
                                                                  2012    2011
                                                        Notes       £m      £m
Profit for the period                                            131.4   386.9
Other comprehensive income consisting of:                                     
Actuarial losses on defined benefit pension scheme               (4.1)   (8.6)
Share of joint ventures' fair value movement on
interest-rate swaps treated as cash flow hedges          10      (1.2)     3.9
Other comprehensive expense for the period                       (5.3)   (4.7)
Total comprehensive income for the period                        126.1   382.2
                                                                              
Attributable to:                                                              
Owners of the Parent                                             125.8   381.6
Non-controlling interests                                          0.3     0.6
Total comprehensive income for the period                        126.1   382.2

 

 

Unaudited consolidated balance sheet at 30 September
2012                                                    30 September  31 March
                                                                2012      2012
                                                     Notes        £m        £m
Non-current assets                                                            
Investment properties                                  9     8,672.3   8,453.2
Other property, plant and equipment                              8.7       8.8
Net investment in finance leases                               184.7     185.0
Loan investments                                                50.0      50.8
Investments in joint ventures                         10     1,210.5   1,137.6
Other investments                                               32.4      32.3
Total non-current assets                                    10,158.6   9,867.7
Current assets                                                                
Trading properties and long-term development
contracts                                             11       147.2     133.1
Trade and other receivables                                    416.9     759.6
Monies held in restricted accounts and deposits       12        27.3      29.5
Cash and cash equivalents                             13        19.3      29.7
Total current assets                                           610.7     951.9
Total assets                                                10,769.3  10,819.6
Current liabilities                                                           
Borrowings                                            14      (11.3)    (10.8)
Trade and other payables                                     (349.9)   (361.3)
Provisions                                                     (7.8)     (8.6)
Current tax liabilities                                       (20.4)    (21.6)
Total current liabilities                                    (389.4)   (402.3)
Non-current liabilities                                                       
Borrowings                                            14   (3,184.6) (3,225.1)
Derivative financial instruments                               (8.1)     (6.5)
Pension deficit                                                (4.3)     (2.4)
Trade and other payables                                      (10.7)    (27.7)
Total non-current liabilities                              (3,207.7) (3,261.7)
Total liabilities                                          (3,597.1) (3,664.0)
Net assets                                                   7,172.2   7,155.6
Equity                                                                        
Capital and reserves attributable to the owners of
the Parent                                                                    
Ordinary shares                                                 78.9      78.5
Share premium                                                  787.4     786.2
Capital redemption reserve                                      30.5      30.5
Share-based payments                                             5.1       6.8
Retained earnings                                            6,279.3   6,271.2
Own shares                                                     (9.1)    (17.8)
Equity attributable to the owners of the Parent              7,172.1   7,155.4
Non-controlling interests                                        0.1       0.2
Total equity                                                 7,172.2   7,155.6

 

 

Unaudited
consolidated
statement of
changes in equity            Attributable to owners of the Parent                                          
                                        Capital             Retained
                    Ordinary   Share redemption Share-based earnings    Own         Non-controlling   Total
                      shares premium    reserve    payments      (1) shares   Total        interest  equity
                          £m      £m         £m          £m       £m     £m      £m              £m      £m
At 1 April 2011         77.6   785.5       30.5         7.2  5,914.3  (3.6) 6,811.5             0.8 6,812.3
                                                                                                           
Profit for the
financial period           -       -          -           -    386.3      -   386.3             0.6   386.9
Other comprehensive
income:                                                                                                    
Actuarial loss on
pension scheme             -       -          -           -    (8.6)      -   (8.6)               -   (8.6)
Share of joint
ventures' fair
value movement on
interest-rate swaps
treated as cash
flow hedges                -       -          -           -      3.9      -     3.9               -     3.9
Total comprehensive
income
for the six months
ended 30 September
2011                       -       -          -           -    381.6      -   381.6             0.6   382.2
Transactions with
owners:                                                                                                    
Exercise of options        -     0.5          -           -      0.1      -     0.6               -     0.6
New share capital
subscribed               0.5    42.0          -           -        -      -    42.5               -    42.5
Transfer to
retained earnings
in respect of
shares issued in
lieu of cash
dividends                  -  (42.0)          -           -     42.0      -       -               -       -
Fair value of
share-based
payments                   -       -          -         2.3        -      -     2.3               -     2.3
Release on
exercise/forfeiture
of share options           -       -          -       (2.7)      2.7      -       -               -       -
Settlement and
transfer of shares
to employees on
exercise of share
options net of
proceeds                   -       -          -           -    (1.8)    1.8       -               -       -
Dividends to owners
of the Parent              -       -          -           -  (109.5)      - (109.5)               - (109.5)
Distribution paid
to non-controlling
interests                  -       -          -           -        -      -       -           (1.0)   (1.0)
Acquisition of own
shares                     -       -          -           -        - (14.8)  (14.8)               -  (14.8)
Total transactions
with owners of the
Parent                   0.5     0.5          -       (0.4)   (66.5) (13.0)  (78.9)           (1.0)  (79.9)
At 30 September
2011                    78.1   786.0       30.5         6.8  6,229.4 (16.6) 7,114.2             0.4 7,114.6
                                                                                                           
Profit for the
financial period           -       -          -           -    136.6      -   136.6             0.2   136.8
Other comprehensive
income:                                                                                                    
Actuarial loss on
pension scheme             -       -          -           -    (7.5)      -   (7.5)               -   (7.5)
Share of joint
ventures' fair
value movement on
interest-rate swaps
treated as cash
flow hedges                -       -          -           -      1.0      -     1.0               -     1.0
Total comprehensive
income
for the six months
ended 31 March 2012        -       -          -           -    130.1      -   130.1             0.2   130.3
Transactions with
owners:                                                                                                    
Exercise of options        -     0.2          -           -    (0.1)      -     0.1               -     0.1
New share capital
subscribed               0.4    23.7          -           -        -      -    24.1               -    24.1
Transfer to
retained earnings
in respect of
shares issued in
lieu of cash
dividends                  -  (23.7)          -           -     23.7      -       -               -       -
Fair value of
share-based
payments                   -       -          -         2.5        -      -     2.5               -     2.5
Release on
exercise/forfeiture
of share options           -       -          -       (2.5)      2.5      -       -               -       -
Settlement and
transfer of shares
to employees on
exercise of share
options net of
proceeds                   -       -          -           -    (2.5)    2.5       -               -       -
Dividends to owners
of the Parent              -       -          -           -  (111.9)      - (111.9)               - (111.9)
Distribution paid
to non-controlling
interests                  -       -          -           -        -      -       -           (0.4)   (0.4)
Acquisition of own
shares                     -       -          -           -        -  (3.7)   (3.7)               -   (3.7)
Total transactions
with owners of the
Parent                   0.4     0.2          -           -   (88.3)  (1.2)  (88.9)           (0.4)  (89.3)
At 31 March 2012        78.5   786.2       30.5         6.8  6,271.2 (17.8) 7,155.4             0.2 7,155.6
                                                                                                           
Profit for the
financial period           -       -          -           -    131.1      -   131.1             0.3   131.4
Other comprehensive
income:                                                                                                    
Actuarial loss on
pension scheme             -       -          -           -    (4.1)      -   (4.1)               -   (4.1)
Share of joint
ventures' fair
value movement on
interest-rate swaps
treated as cash
flow hedges                -       -          -           -    (1.2)      -   (1.2)               -   (1.2)
Total comprehensive
income
for the six months
ended 30 September
2012                       -       -          -           -    125.8      -   125.8             0.3   126.1
Transactions with
owners:                                                                                                    
Exercise of options        -     1.2          -           -        -      -     1.2               -     1.2
New share capital
subscribed               0.4    22.4          -           -        -      -    22.8               -    22.8
Transfer to
retained earnings
in respect of
shares issued in
lieu of cash
dividends                  -  (22.4)          -           -     22.4      -       -               -       -
Fair value of
share-based
payments                   -       -          -         1.8        -      -     1.8               -     1.8
Release on
exercise/forfeiture
of share options           -       -          -       (3.5)      3.5      -       -               -       -
Settlement and
transfer of shares
to employees on
exercise of share
options net of
proceeds                   -       -          -           -    (6.9)    9.4     2.5               -     2.5
Dividends to owners
of the Parent              -       -          -           -  (113.6)        (113.6)               - (113.6)
Distribution paid
to non-controlling
interests                  -       -          -           -        -      -       -           (0.4)   (0.4)
Acquisition of own
shares and treasury
shares                     -       -          -           -   (23.1)  (0.7)  (23.8)                  (23.8)
Total transactions
with owners of the
Parent                   0.4     1.2          -       (1.7)  (117.7)    8.7 (109.1)           (0.4) (109.5)
At 30 September
2012                    78.9   787.4       30.5         5.1  6,279.3  (9.1) 7,172.1             0.1 7,172.2

 

1.    Included within retained earnings are cumulative losses in respect of
cash flow hedges (interest-rate swaps) of £4.2m (30 September 2011: £4.0m, 31
March 2012: £3.0m).

 

Unaudited consolidated statement of cash flows                Six months ended
for the six months ended 30 September 2012                        30 September
                                                                  2012    2011
                                                        Notes       £m      £m
Net cash generated from operations                                            
Cash generated from operations                           17      144.3   189.3
Interest paid                                                   (79.6)  (93.4)
Interest received                                                  4.1     6.9
Employer contributions to defined benefit pension
scheme                                                           (2.2)   (2.5)
Corporation tax paid                                             (0.1)   (1.1)
Net cash inflow from operations                                   66.5    99.2
                                                                              
Cash flows from investing activities                                          
Investment property development expenditure                    (114.0)  (65.3)
Acquisition of investment properties and other
investments                                                     (73.7)  (55.6)
Other investment property related expenditure                   (28.4)  (50.5)
Capital expenditure on properties                              (216.1) (171.4)
Disposal of investment properties                                396.6   185.2
Net proceeds on properties                                       180.5    13.8
Expenditure on non-property related non-current assets           (1.1)       -
Net cash inflow from capital expenditure                         179.4    13.8
Receipts/(payments) in respect of finance lease
receivables                                                        0.2  (14.5)
Loans repaid by third parties                                      0.8     1.4
Cash contributed to joint ventures                       10      (1.4)   (2.1)
Loan advances to joint ventures                          10    (116.8)  (10.4)
Loan repayments by joint ventures                        10        3.2    10.0
Distributions from joint ventures                        10       13.1     7.4
Net cash inflow from investing activities                         78.5     5.6
                                                                              
Cash flows from financing activities                                          
Cash received on issue of shares arising from exercise
of share options                                                   3.7     0.5
Purchase of own shares and treasury shares                      (19.8)  (14.8)
Proceeds from new loans (net of finance fees)                     35.0       -
Repayment of loans                                       14     (85.2)  (46.1)
Decrease in monies held in restricted accounts and
deposits                                                 12        2.2     5.0
Decrease in finance leases payable                                   -   (0.1)
Dividends paid to owners of the Parent                    6     (90.9)  (66.9)
Distributions paid to non-controlling interests                  (0.4)   (1.0)
Net cash outflow from financing activities                     (155.4) (123.4)
                                                                              
Decrease in cash and cash equivalents for the period            (10.4)  (18.6)
Cash and cash equivalents at the beginning of the
period                                                            29.7    37.6
Cash and cash equivalents at the end of the period       13       19.3    19.0

 

 

Notes to the Financial Statements

1. Basis of preparation  

 

This condensed consolidated interim financial information for the six months
ended 30 September 2012 has been prepared on a going concern basis and in
accordance with the Disclosure and Transparency Rules of the Financial
Services Authority and with IAS 34 'Interim Financial Reporting' as adopted by
the European Union (EU).  In order to satisfy themselves that the Group has
adequate resources to continue in operational existence for the foreseeable
future the Directors have reviewed an 18 month forecast extracted from the
Group's current five year plan, which includes assumptions about future
trading performance, valuation projections and debt requirements. This,
together with available market information and experience of the Group's
property portfolio and markets, has given them sufficient confidence to adopt
the going concern basis in preparing the financial statements.

 

The condensed consolidated interim financial information does not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006.  Statutory accounts for the year ended 31 March 2012 were approved by
the Board of Directors on 15 May 2012 and delivered to the Registrar of
Companies.  The report of the auditors on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.  The condensed consolidated
interim financial information has been reviewed, not audited.

 

The condensed consolidated interim financial information should be read in
conjunction with the annual financial statements for the year ended 31 March
2012, which have been prepared in accordance with IFRSs as adopted by the EU.

 

This condensed consolidated interim financial information was approved for
issue on 7 November 2012.

 

2. Significant accounting policies  

 

Except as described below, the condensed consolidated interim financial
information has been prepared on the basis of the accounting policies,
significant judgements, key assumptions and estimates as set out in notes 2
and 3 of the Group's Annual Report for the year ended 31 March 2012. Taxes on
income in the interim periods are accrued using the tax rate that would be
applicable to expected total annual earnings.

 

There are no accounting standards or interpretations that have been adopted
since 1 April 2012 which have had a material impact on the Group's financial
statements. The following accounting standards or interpretations were
effective for the financial year beginning 1 April 2012 but have not had a
material impact on the Group:

 

IAS 12 (amendment) 'Income taxes' on deferred tax (not yet endorsed by the EU)

IFRS 1 (amendment) 'First Time Adoption' on hyperinflation and fixed dates
(not yet endorsed by the EU)

IFRS 7 (amendment) 'Financial Instruments' on transfers of financial assets

 

The following IFRS accounting standards and interpretations have been issued
but are not yet effective.  None of these standards or interpretations have
been early adopted by the Group. The Group is in the process of assessing the
impact of these new standards and interpretations on its financial reporting.

 

IAS 1 (amendment) 'Presentation of Financial Statements' on OCI (endorsed by
the EU)

IAS 19 (revised) 'Employee Benefits' (endorsed by the EU)

IAS 27 (revised) 'Separate Financial Statements'

IAS 28 (revised) 'Investments in Associates and Joint Ventures'

IFRS 1 (amendment) 'First Time Adoption' on government grants

IFRS 7 (amendment) 'Financial Instruments' on financial instruments asset and
liability offsetting

IFRS 9 'Financial Instruments'

IFRS 10 'Consolidated Financial Statements'

IFRS 11 'Joint Arrangements'

IFRS 12 'Disclosure of Interests in Other Entities'

IFRS 13 'Fair Value Measurements'

IFRIC 20 'Stripping costs in the production phase of a surface mine'

 

3. Segmental information  

 

Management has determined the Group's operating segments based on the
information reviewed by the Senior Management Board ("SMB") to make strategic
decisions. The SMB consists of the three executive directors.

 

All the Group's operations are in the UK and are organised into two business
segments against which the Group reports its segmental information, being
Retail Portfolio and London Portfolio.  The London Portfolio includes all our
London offices and central London shops (excluding assets held in the Metro
Shopping Fund Limited Partnership joint venture) and the Retail Portfolio
includes all our shopping centres, shops, retail warehouse properties, the
Accor hotel portfolio and assets held in retail joint ventures, excluding
central London shops.

 

The information and reports reviewed by the SMB are prepared on a combined
portfolio basis, which includes the Group's share of joint ventures on a
proportionately consolidated basis. The following segmental information is
therefore presented on a proportionately consolidated basis.

 

The Group's primary measure of underlying profit before tax is revenue
profit.  This measure seeks to show the profit arising from on going
operations and as such removes all items of a capital nature (e.g. valuation
movements, profit/(loss) on disposal of investment and trading properties) and
one-off or exceptional items.  Segment profit is the lowest level to which the
profit arising from the on-going operations of the Group is analysed between
the two segments.  The Group manages its financing structure, with the
exception of joint ventures, on a pooled basis and, as such, debt facilities
and interest charges are not specific to a particular segment.

 

The Group's financial performance is not impacted by seasonal fluctuations.

 

The segmental information provided to senior management for the reportable
segments for the six months ended 30 September 2012 is as follows:

                                                   Six months ended 30 September 2012
                       Retail Portfolio       London Portfolio                  Total
                           Joint                 Joint                   Joint
                  Group ventures  Total  Group ventures  Total  Group ventures  Total
Revenue
profit               £m       £m     £m     £m       £m     £m     £m       £m     £m
Rental
income            121.0     32.3  153.3  126.6      9.1  135.7  247.6     41.4  289.0
Finance
lease
interest            0.9      0.2    1.1    4.5        -    4.5    5.4      0.2    5.6
Gross rental
income
(before
rents
payable)          121.9     32.5  154.4  131.1      9.1  140.2  253.0     41.6  294.6
Rents
payable (1)       (5.0)    (1.2)  (6.2)  (1.7)        -  (1.7)  (6.7)    (1.2)  (7.9)
Gross rental
income
(after rents
payable)          116.9     31.3  148.2  129.4      9.1  138.5  246.3     40.4  286.7
Service
charge
income (2)         15.5      5.0   20.5   19.2      0.6   19.8   34.7      5.6   40.3
Service
charge
expense          (15.6)    (5.5) (21.1) (19.6)    (0.6) (20.2) (35.2)    (6.1) (41.3)
Net service
charge
expense           (0.1)    (0.5)  (0.6)  (0.4)        -  (0.4)  (0.5)    (0.5)  (1.0)
Other
property
related
income (2)          5.6      0.5    6.1    8.6      0.2    8.8   14.2      0.7   14.9
Direct
property
expenditure      (14.8)    (5.5) (20.3)  (9.4)    (0.8) (10.2) (24.2)    (6.3) (30.5)
Net rental
income            107.6     25.8  133.4  128.2      8.5  136.7  235.8     34.3  270.1
Indirect
property
expenditure
(2)              (10.2)    (1.4) (11.6)  (7.6)    (0.2)  (7.8) (17.8)    (1.6) (19.4)
Depreciation      (0.1)        -  (0.1)  (0.4)        -  (0.4)  (0.5)        -  (0.5)
Segment
profit
before
interest           97.3     24.4  121.7  120.2      8.3  128.5  217.5     32.7  250.2
Joint
venture net
interest
expense               -    (8.5)  (8.5)      -    (6.1)  (6.1)      -   (14.6) (14.6)
Segment
profit             97.3     15.9  113.2  120.2      2.2  122.4  217.5     18.1  235.6
             The story
             has been
             truncated,
            
[TRUNCATED]
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