Land Securities Group
Annual Report 1999

Plain-text annual report

L A N D S E C U R I T I E S Report and Financial Statements 31 March 1999 Home Contents Search Next Back Contents Corporate Statement Financial Highlights Valuation Chairman’s Statement Operating and Financial Review Chief Executive‘s Review The Group’s Developments Offices Shops and Shopping Centres Retail Warehouses and Food Superstores Hotels, Leisure and Residential Warehouses and Industrial Financial Review Environment and Health & Safety 1 2 4 6 8 10 12 16 20 23 24 27 32 Corporate Governance Report of the Remuneration Committee Directors’ Report Directors and Advisers Senior Management Directors’ Responsibilities Auditors’ Report Valuers’ Report Consolidated Profit and Loss Account Balance Sheets Consolidated Cash Flow Statement Other Primary Statements Notes to the Financial Statements Ten Year Record Major Property Holdings Investor Information 33 35 38 40 41 42 42 43 44 45 46 47 48 62 63 (Inside Back Cover) Home Contents Search Next Back FINANCIAL CALENDAR 1999 2000 January Interim dividend payable 26 May 7 June 11 June 14 July 26 July November Preliminary Announcement Ex-dividend date Registration qualifying date for final dividend Annual General Meeting Final dividend payable Announcement of interim results (unaudited) LAND SECURITIES PLC Home Contents Search Next Back Corporate Statement We are committed to providing our shareholders with sustainable and growing returns underpinned by secure and increasing income, together with capital appreciation. We deliver these returns by developing and investing for the long term to create and enhance a portfolio of high quality commercial properties to meet the needs of our customers. 1 Home Contents Search Next Back LAND SECURITIES PLC Financial Highlights N E T R E N TA L I N C O M E * R E V E N U E P R O F I T ( P R E -TA X ) P R E -TA X P R O F I T P O S T-TA X P R O F I T * A D J U S T E D E A R N I N G S P E R S H A R E * A D J U S T E D D I LU T E D E A R N I N G S P E R S H A R E D I V I D E N D S P E R S H A R E D I V I D E N D C OV E R ( t i m e s ) 31 March 31 March 1999 1998 Change % Ten Year Compound Growth % £427.5m £414.1m £292.7m £265.9m £293.3m £266.0m £216.4m £196.7m 39.11p 38.86p 29.50p 1.31 37.07p 36.77p 28.00p 1.30 +3.2 +10.1 +10.3 +10.0 +5.5 +5.7 +5.4 +7.0 +7.0 +6.1 +6.5 +6.4 +6.4 +7.4 D I LU T E D N E T A S S E T S P E R S H A R E 975p 910p +7.1 +1.4 P R O P E R T I E S B O R R O W I N G S E Q U I T Y S H A R E H O L D E R S ’ F U N D S G E A R I N G ‡ G E A R I N G ( n e t ) † I N T E R E S T C OV E R ( t i m e s ) £6,910.5m £6,435.7m £1,569.3m £1,652.3m £5,470.4m £5,001.5m 28.7% 19.8% 3.03 33.0% 22.1% 2.72 * Excludes results of property sales. ‡ Total borrowings less short term deposits, corporate bonds and cash, as a percentage of equity shareholders’ funds. † Number of times that interest payable is covered by operating profit and interest receivable. 2 REVENUE PROFIT (PRE-TAX) £m ADJUSTED DILUTED EARNINGS PER SHARE pence 95 96 97 98 99 95 96 97 98 99 241.3 95 238.7 96 235.7 97 265.9 292.7 98 99 DIVIDENDS PER SHARE pence DILUTED NET ASSETS PER SHARE pence 25.0 95 26.0 96 27.0 97 28.0 29.5 98 99 34.3 33.7 32.9 36.8 38.9 691 688 774 910 975 LAND SECURITIES PLC Home Contents Search Next Back 3 Home Contents Search Next Back LAND SECURITIES PLC Valuation The portfolio was valued by Knight Frank at over £6.9bn at 31 March 1999. After adjusting for sales, acquisitions and other expenditure, the value increased by 5.1%. A more detailed breakdown by sector is provided this year, including comprehensive analyses of the Group’s valuation and rental income. Last autumn, property yields were adversely affected by turmoil in the international markets and concerns about the rate of future economic growth in the UK. The subsequent improvement in sentiment has restored confidence and generally property yields strengthened, and this improvement has continued since 31 March. Within the portfolio, the best performance came from offices in the West End, shopping centres in the stronger towns and cities and in the relatively small leisure sector where we renegotiated the lease of the London Hilton on Park Lane. Retail warehouses, an outstanding performer for most of the 1990s, provided only a small valuation increase, as rental growth has been more subdued than for some time. Shops in the West End and Victoria, which had shown exceptional growth in the previous year, also experienced a year of consolidation, with rental levels in Oxford Street falling from the peak levels of early 1998, and other in-town shops produced little capital growth. After excluding those properties in the schedule of developments and refurbishments on pages 10 and 11 which were producing less than half of their anticipated income at 31 March, together with other vacant pre-development holdings, the value of the portfolio at 31 March 1999 was £6.63bn. At the same date the annual rent roll, net of ground rents and excluding the same properties, was 6.6% of this figure. The lower yield on present income compared with the previous valuation mainly reflects an improvement in the reversionary potential of the portfolio. ANALYSIS OF VALUATION SURPLUS % increase/(decrease) on prior year OFFICES West End and Victoria City and Midtown Elsewhere 10.0 3.0 3.9 SHOPS AND SHOPPING CENTRES Shopping centres Central London shops Other in-town shops RETAIL WAREHOUSES AND FOOD SUPERSTORES Parks Other WAREHOUSES AND INDUSTRIAL HOTELS, LEISURE AND RESIDENTIAL 7.5 (0.1) 1.2 1.7 2.9 5.2 15.5 OVERALL SURPLUS 5.1 RENTAL INCOME BY TYPE year ended 31 March 1999 PORTFOLIO VALUATION BY TYPE at 31 March 1999 PORTFOLIO VALUATION BY LOCATION at 31 March 1999 41.1% 39.2% OFFICES SHOPS AND SHOPPING CENTRES 40.3% 38.7% 10.2% RETAIL WAREHOUSES AND FOOD SUPERSTORES 11.9% 6.6% 2.9% WAREHOUSES AND INDUSTRIAL HOTELS, LEISURE AND RESIDENTIAL 5.6% 3.5% NORTH, N.W., YORKSHIRE & HUMBERSIDE £931.9m | 13.5% E. & W. MIDLANDS & E. ANGLIA £531.7m | 7.7% SCOTLAND & N. IRELAND £610.0m | 8.8% GREATER LONDON & HOME COUNTIES £1,019.9m | 14.7% WALES & SOUTH WEST £448.1m | 6.5% CITY & MIDTOWN £1,206.6m | 17.5% WEST END & VICTORIA £2,162.3m | 31.3% 4 Portfolio valuation by tenure at 31 March 1999 O F F I C E S W E S T E N D A N D V I C T O R I A C I T Y A N D M I D T O W N E L S E W H E R E I N T H E U N I T E D K I N G D O M S H O P S A N D S H O P P I N G C E N T R E S S H O P P I N G C E N T R E S C E N T R A L LO N D O N S H O P S O T H E R I N -T O W N S H O P S R E TA I L WA R E H O U S E S A N D F O O D S U P E R S T O R E S PA R K S O T H E R WA R E H O U S E S A N D I N D U S T R I A L H O T E L S , L E I S U R E A N D R E S I D E N T I A L Leasehold Over 50 years to run Under 50 years to run Total £m £m £m % 82.9 291.9 38.8 399.5 161.2 397.9 75.3 4.1 6.0 5.8 6.9 40.2 – – 3.6 – – – 0.1 2.3 1,437.3 1,157.3 191.3 1,208.9 576.1 885.6 617.1 207.6 389.4 239.9 20.8 16.7 2.8 17.5 8.4 12.8 8.9 3.0 5.6 3.5 Freehold £m 1,347.5 825.2 152.5 809.4 411.3 487.7 541.8 203.5 383.3 231.8 5,394.0 1,463.4 53.1 6,910.5 P E R C E N TAG E BY T E N U R E 78.0 21.2 0.8 100.0 Freeholds include £371.1m of leaseholds with unexpired terms in excess of 900 years. Where properties include mixed uses, their values have been apportioned accordingly. % YIELD ON PRESENT INCOME at 31 March % YIELD ON PRESENT INCOME by sector at 31 March 1999 9 . 9 3 . 9 4 . 8 0 . 6 2 . 8 1 . 8 3 . 8 8 . 7 8 . 6 6 . 6 90 91 92 93 94 95 96 97 98 99 OFFICES SHOPS AND SHOPPING CENTRES RETAIL WAREHOUSES AND FOOD SUPERSTORES WAREHOUSES AND INDUSTRIAL HOTELS, LEISURE AND RESIDENTIAL 6.9 6.3 6.0 8.2 5.7 LAND SECURITIES PLC Home Contents Search Next Back 5 Home Contents Search Next Back LAND SECURITIES PLC Chairman’s Statement I am pleased to make my first annual statement at a time when Land Securities is strongly positioned to enter a new phase of growth. increased Land Securities enjoyed a year of positive growth. Pre-tax profits rose by 10.3% to £293.3m. Net assets from £5,001.5m to £5,470.4m following a valuation uplift of 5.1%. Diluted net assets per share increased by 65p to 975p per share. The Group generated cash flow for investing of £73.5m and has a strong balance sheet with capacity to take advantage of further opportunities. After taking into account the current strength of the Company, the Board recommends a final dividend of 21.65p per share, an increase of 6.1% over that for the previous year, making a total distribution for the year of 29.50p, an increase of 5.4%. The dividends paid and proposed will be covered 1.31 times. We have made progress with our substantial development programme during the year and continue to expand it, while at the same time seeking to maximise returns from our existing portfolio. As many of our proposed developments are complex and require considerable commitment of time and resources, a strong balance sheet is essential to provide us with the financial flexibility to pursue long term programmes. a period of considerable Following uncertainty, the UK economy is showing some signs of recovery and the property industry is generally in good shape. The supply and demand equation is in reasonable balance and there is currently relatively little speculative development in progress. While rental and capital growth may have 6 disappointed some optimistic expectations of a year ago, the overall performance should be viewed in the context of a headline annual inflation rate of less than 2%. Property performance should not be judged in the short term and, measured by total returns, Land Securities was the only one of the top ten property stocks by market capitalisation to outperform the sector in each of the past 5, 10, 15 and 20 years*. With the introduction of European Economic and Monetary Union, we have reviewed our investment policy but continue to believe that we can best serve the interests of our shareholders by operating exclusively in the UK market, where we can generate better returns and benefit from our specialist knowledge and experience. in particular, We will maintain our focus on creating investments which we believe will provide the the strongest growth; provision of major city centre retail and mixed use schemes in anticipation of our customers’ requirements. We will continue to rationalise our smaller holdings and larger concentrate on investments which will achieve dominance in their catchment area, thereby attracting the strongest tenant demand. There is potential to add to shareholder value by further exploiting our existing portfolio and we will also use our considerable resources to take advantage of other opportunities that will provide our shareholders with a positive return. creating the Right Ian Henderson and Peter Birch My predecessor, John Hull, has been a director since 1976 and was Chairman from December 1997 until the Annual General Meeting in July 1998. His active involvement in the business, his knowledge of property and wise counsel over many years of change and growth will be much missed when he retires at this year’s Annual General Meeting. My colleagues and I are most grateful to him for all he has done for the Group and wish him a long and happy retirement. It is with great sadness that I have to report the death of Louis Freedman, who was the founding Chairman of Ravenseft Properties Limited and a long serving director of Land Securities. We owe much to his drive and enthusiasm. I am most grateful to Ian Henderson and his management team for their support during my first year as Chairman. Land Securities is fortunate to have such professional and dedicated staff. I should like to thank them all on behalf of the shareholders for their contribution. The outlook is positive and I believe that Land Securities is well placed to continue to provide increasing shareholder value. P E T E R G . B I R C H *Source: Datastream Home Contents Search Next Back Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Chief Executive’s Review Developing quality assets and creating value is our core strategy in the current low inflation environment. The strong rental and capital growth which had been apparent from the beginning of 1998 continued during the first quarter of the period under review. However, the major economic problems in Asia, Russia and Brazil caused serious concern in the autumn and affected the confidence of investors and tenants alike. The worst prophecies, of a major contraction in demand for City offices, have proved unfounded but consolidation among financial institutions continues. Confidence has started to return but the slowdown in the UK economy, together with a low level of inflation, means that rental growth generally is likely to be subdued this year. Inflation will no longer flatter performance and, in the prevailing economic circum- stances, we will continue to focus on those sectors where we expect to obtain the best returns. Against this background, in the year under review we have extended our development programme from an estimated £650m to some over £1,050m, providing 6.3m ft2 (585,000 m2). Property additions amounted to £267.3m, of which £154.3m has been incurred on our development activity. We have also continued the rationalisation of our existing portfolio, with disposals of a further £125.4m. In the 8 last three years proceeds from sales amounted to almost £600m and we have reduced the number of properties in the portfolio by almost 20%. We plan to make further disposals of properties which do not meet our investment criteria. Developing quality assets and creating value is our core strategy in the current low inflation environment. The priority is to maximise the return from our £6.9bn portfolio and to pursue good long term opportunities. By maintaining a strong focus on working our portfolio, we can deliver an investment return not just on the new capital being introduced but also by enhancing the performance, and hence the yield, on our existing holdings. This policy should provide a significantly higher return than that which we could expect from acquiring completed investments. The Group is concentrating on develop- ments which will contribute to the regeneration of our town and city centres. Demand continues to polarise towards the dominant the country. We anticipated this trend and are meeting occupiers’ future requirements by exploiting our key holdings. We will extend the development programme accordingly. Town and city centres can provide a unique throughout locations range of social, cultural and leisure facilities and we fully endorse Government policy supporting their revitalisation and the adoption of a wider mix of uses. In response to increasing competition and the potential impact of electronic retailing, city centres must provide an accessible, shopping attractive and environment. stimulating a We have started on site at Sunderland and Livingston and are making good progress with our central London developments. We recently announced The Birmingham Alliance, limited partnership with Hammerson plc and Henderson Investors, in which we will jointly undertake a redevelopment to provide up to 2.7m ft2 (250,840 m2) of retail space in the city centre. This project will provide a cohesive strategy for the revitalisation of retailing in Birmingham. It will be a good long term investment in a city which is currently under-provided with adequate shopping. We report more fully on our development programme later in this review. Major schemes, requiring complex site assembly and planning approval, particu- larly in sensitive city centres, are inevitably challenging to deliver. However, we are confident that we have the teams and Home Contents Search Next Back Operating and Financial Review | LAND SECURITIES PLC following the forthcoming revaluation, by adopting a graduated approach to such adjustments. Any further increase in stamp duty must also be strongly resisted, as it will reduce liquidity and the investment appeal of UK property. In the prevailing environment of low inflation, correct sector and asset allocation is crucial.We shall continue to invest where the best growth will be achieved. I A N J . H E N D E R S O N balance sheet strength to take on these commitments. Most of the programme comprises city centre retail, where our policy is to commence development only when a substantial proportion of future income is secured by pre-letting. In addition to our enlarged programme, we are considering a number of significant potential schemes which could add substantially to our total expenditure. and manage our portfolio. We made a number of promotions to the boards of subsidiary companies which will further strengthen the Group and provide the new directors with the opportunity to widen their experience and develop their careers within the Group. We also completed the reorganisation of the management of our regional portfolio with the opening of our Leeds office last November. Occupational demand remained strong for most of the year under review and we have achieved significant pre-lettings at our retail developments in Sunderland and at Tottenham Court Road W1. We have also pre-let the last 73,500 ft2 (6,790 m2) of offices at 2 Theobald’s Court WC1. The increase of 5.1% in the value of our portfolio this year means that valuation increases in the last three years have averaged nearly 9%, in a period when inflation averaged 2.7%. Our portfolio is underpinned by an average yield on present income at 31 March 1999 of 6.6% which compares favourably with current returns on long gilts, and is a source of strength during a period of low economic growth. We have a strong management team to implement our development programme I referred last year to the discussions concerning the creation of more liquid vehicles for property ownership. The debate continues and the outcome is dependent mainly on the granting of tax transparency. To be able to take advantage of a favourable result, it is important to retain our financial flexibility. The issue of maintaining the competitive position of the UK remains of paramount importance. The introduction of European Economic and Monetary Union and the continuing process of consolidation within major business sectors increases pressure on London to provide, on competitive terms, the quality of space and flexibility of lease required by occupiers. In order to withstand competition from the other major European cities, it is essential that the Government limits the effects of any in Uniform Business Rate changes 9 Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review The Group’s Developments The successful completion and letting of the major extension to our shopping centre at Bootle marked the end of our previous development programme. further projects We have added to the current development programme, enlarging the overall size to some 6.3m ft2 (585,000 m2).The new projects, including the substantially revised proposals for Birmingham, are highlighted on the schedule opposite. The estimated capital cost has increased from some £650m to over £1,050m exclusive of interest and the book value of those holdings in our portfolio prior to assembling this programme. This estimate includes some £40m relating to completed projects and about £185m to those in progress. A breakdown is given in columns 1 and 2 of the schedule opposite. By the year end we had spent approximately £180m on the programme with the balance to be expended over a number of years. Many of the schemes are at the planning and design stages and will only proceed if they are viable. If all of the wholly owned schemes go ahead they would produce over: • 1,769,000 ft2 (164,340 m2) of new shopping development • 678,000 ft2 (62,990 m2) of shopping centre refurbishment • 1,008,500 ft2 (93,690 m2) of central London offices • 773,000 ft2 (71,810 m2) of leisure • 481,500 ft2 (44,730 m2) of retail warehouses • 480,300 ft2 (44,620 m2) of warehouses and industrial. In addition, we will also have a one-third in The Birmingham Alliance interest projects of 2.68m ft2 (248,970 m2) and half interests in the 256,000 ft2 (23,780 m2) Designer Outlet and Leisure Centre in Livingston and the 193,600 ft2 (17,990 m2) led mixed use leisure development at Hungate,York. A number of other potential developments, some of which are mentioned in this review, are also under consideration and if they proceed the estimated cost of the revised programme will increase substantially. Fully let or agreed to be let Part let or agreed to be let £m refers to estimated capital expenditure COMPLETED DURING THE YEAR ENDED 31 MARCH 1999 STRAND CENTRE, BOOTLE Multi-storey car park and 92,000 ft2 (8,550 m2) extension to existing shopping centre. Completed November 1998 (in previous development programme). (cid:2) TOWER CENTRE, BALLYMENA 175,000 ft2 (16,260 m2) shopping centre refurbishment. Completed August 1998. £2.4m. STRATFORD CENTRE, STRATFORD E15 290,000 ft2 (26,940 m2) shopping centre refurbishment. Completed August 1998. £5.3m. (cid:2) WILLIAMSON SQUARE, LIVERPOOL 55,000 ft2 (5,110 m2) retail development. Completed November 1998. £6.2m. (cid:2) GREAT BARR, BIRMINGHAM 83,500 ft2 (7,760 m2) hypermarket. Replacement of existing buildings. Completed April 1998. £3.5m. SLOUGH RETAIL PARK (FORMERLY TWINCHES LANE RETAIL PARK) 36,500 ft2 (3,390 m2) development of industrial holding to extend retail park. Completed May 1998. £4.9m. (cid:2) MIDDLETON ROAD, BANBURY 240,000 ft2 (22,300 m2) high bay warehousing/distribution space. Completed October 1998. £11.2m. PUMP LANE, HAYES 33,500 ft2 (3,110 m2) warehouse units. Completed December 1998. £1.7m. CENTURION PARK, TAMWORTH PHASE II 141,800 ft2 (13,170 m2) high bay warehousing/distribution space. Completed January 1999. £4.2m. 10 (cid:2) ✛ (cid:2) (cid:2) (cid:2) (cid:2) Operating and Financial Review | LAND SECURITIES PLC IN PROGRESS AT 31 MARCH 1999 PROPOSED FUTURE DEVELOPMENTS ✛ ALMONDVALE CENTRE, LIVINGSTON – DESIGNER OUTLET CENTRE 180,000 ft2 (16,720 m2) retail and 76,000 ft2 (7,060 m2) leisure, including multiplex cinema (joint ownership with BAA McArthurGlen). Completion due August 2000. £38.0m. ✛ NUNEATON 13,000 ft2 (1,210 m2) retail units. Completion due October 1999. £1.4m. ✛ THE BRIDGES, SUNDERLAND PHASE II 265,000 ft2 (24,620 m2) retail. Completion due September 2000. £38.1m. * MIDDLETON ROAD, BANBURY PHASE IV 65,000 ft2 (6,040 m2) high bay warehousing/distribution space. Completed May 1999. £4.5m. * 2 TEMPLE AVENUE EC4 31,000 ft2 (2,880 m2) air conditioned office refurbishment. Completion due May 1999. £9.2m. 1 THEOBALD’S COURT WC1 (FORMERLY ADASTRAL HOUSE) 124,000 ft2 (11,520 m2) air conditioned offices. Completion due July 1999. £29.0m. 2 THEOBALD’S COURT WC1 (FORMERLY LACON HOUSE) 205,000 ft2 (19,040 m2) air conditioned offices with 4,500 ft2 (420 m2) retail and a further 6,000 ft2 (560 m2) leisure facility. Completion due August 1999. £45.5m. 6/17 TOTTENHAM COURT ROAD W1 56,500 ft2 (5,250 m2) retail, 2,500 ft2 (230 m2) offices and nine residential units. Residential element sold April 1999. Completion due July 1999. £8.7m. ✛ CAXTONGATE PHASE II, NEW STREET AND CORPORATION STREET, BIRMINGHAM 40,000 ft2 (3,720 m2) retail and residential accommodation. Completion due November 1999. £7.6m. *(cid:2) ALMONDVALE CENTRE, LIVINGSTON PHASE I 213,000 ft2 (19,790 m2) shopping centre refurbishment. Completion due June 1999. £4.7m. * ESSO HOUSE/GLEN HOUSE (INCLUDING 16 PALACE STREET) SW1 500,000 ft2 (46,450 m2) air conditioned offices and 140,000 ft2 (13,010 m2) retail. GULF HOUSE W1 100,000 ft2 (9,290 m2) air conditioned offices and 20,000 ft2 (1,860 m2) additional retail. †* ST ALBAN’S HOUSE SW1 46,000 ft2 (4,270 m2) air conditioned office refurbishment. PRINCESSHAY, EXETER 465,000 ft2 (43,200 m2) retail development with some residential accommodation. COPPERGATE CENTRE, YORK PHASE II 240,000 ft2 (22,300 m2) retail development with some residential accommodation. * EMPRESS STATE BUILDING SW6 560,000 ft2 (52,030 m2) proposed conversion to a 504 bedroom hotel. CAXTONGATE PHASE III, NEW STREET AND CORPORATION STREET, BIRMINGHAM 70,000 ft2 (6,500 m2) retail and mixed use. NEWGATE STREET, NEWCASTLE UPON TYNE 207,000 ft2 (19,230 m2) leisure complex, including multiplex cinema. THE BIRMINGHAM ALLIANCE (Partnership with Hammerson plc and Henderson Investors:) * BULL RING, BIRMINGHAM 1.2m ft2 (111,480 m2) retail development. * MARTINEAU GALLERIES PHASE I, BIRMINGHAM 180,000 ft2 (16,720 m2) retail development. * MARTINEAU GALLERIES PHASE II, BIRMINGHAM Up to 1.3m ft2 (120,770 m2) retail and leisure development. WHITEFRIARS, CANTERBURY 400,000 ft2 (37,160 m2) retail development with some residential accommodation. * HUNGATE, YORK 193,600 ft2 (17,990 m2) leisure and mixed use development (joint ownership with Evans of Leeds PLC). †* KINGSWAY RETAIL PARK, DUNDEE 220,000 ft2 (20,440 m2) partial redevelopment and extension to retail warehouse park. † QUEENS ROAD RETAIL PARK, MANCHESTER 95,000 ft2 (8,830 m2) retail warehousing. * LAKESIDE RETAIL PARK, THURROCK 46,500 ft2 (4,320 m2) extension to retail warehouse park. * Added or significantly changed during 1998/99 † Included in capital commitments Home Contents Search Next Back 11 (cid:2) ✛ ✛ LAND SECURITIES PLC | Operating and Financial Review Offices • In central London limited supply supports rental levels • Strong demand in West End and Victoria • 1 and 2 Theobald’s Court offices pre-let Our portfolio is principally in the City, Midtown, West End and Victoria areas of London where we expect good long term growth. The valuation reflected the stronger market in the West End and Victoria where restrictions on the creation of new supply supported higher levels of rental growth and an improvement in yields compared with the City and Midtown. Our major refurbishments at 1 and 2 Theobald’s Court WC1 and 2 Temple Avenue EC4 are progressing well and we have continued with our rolling programme of refurbishment at Portland House SW1. 1 Theobald’s Court is pre-let to Warner Bros. and since the year end the first eight floors have been handed over on time. The offices at 2 Theobald’s Court are pre-let and are due to be completed in August. 2 Temple Avenue is attracting tenant interest ahead of our proposed marketing campaign. American Express now have leases on 93,500 ft2 (8,690 m2) at Portland House, having taken a further 44,000 ft2 (4,090 m2) during the year. In the West End and Victoria, we have applied for planning permission for the substantial rebuilding of Gulf House W1 and are preparing plans for a major office and retail development of 640,000 ft2 (59,460 m2) on the sites of the existing Esso and Glen Houses and 16 Palace Street SW1. Home Contents Search Next Back 12 VALUATION AT 31 MARCH 1999 £2,785.9m RENTAL INCOME FOR YEAR ENDED 31 MARCH 1999 £186.2m % OF GROUP VALUATION 40.3 VALUATION % VALUATION BY LOCATION 41.5 51.6 CITY & MIDTOWN WEST END & VICTORIA 6.9 ELSE- WHERE E. & W. MIDLANDS & E. ANGLIA £30.6m | 1.10% RENTAL INCOME % 45.0 45.8 CITY & MIDTOWN WEST END & VICTORIA 9.2 ELSE- WHERE WEST END & VICTORIA £1,437.3m | 51.59% GREATER LONDON & HOME COUNTIES £128.4m | 4.61% CITY & MIDTOWN £1,157.3m | 41.54% ELSEWHERE IN THE UK £32.3m | 1.16% Home Contents Search Next Back Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Offices continued Since the year end we have purchased the freehold of Elliot House, Bressenden Place SW1, which is adjacent to some of our key holdings in the area. This investment has the benefit of a planning permission for a new 90,000 ft2 (8,360 m2) office building. We acquired the long leasehold interest in Chatham Place, East Harding Street EC4 which we propose to incorporate in the potential redevelopment of our adjacent New Fetter Lane holdings; meanwhile we have secure income from the property. Above Dashwood House, Old Broad Street EC2 Right 7/8 Essex Street WC2 14 level of over-renting and also allowed us to benefit from rent reviews on a number of our properties. During the last calendar year there was a record level of take up of office space in central London which is unlikely to be repeated this year. Despite the lower rate of economic growth, there is relatively little supply available to meet new demand, particularly in the West End and Victoria. However, the potential for increased development both in the City and Canary Wharf may affect future rental and capital growth in those areas. In order to extend our holdings in the immediate vicinity, we purchased a 28,100 ft2 (2,610 m2) office investment at 7/8 Essex Street WC2. We also bought the freehold of Dashwood House, Old Broad Street EC2 to consolidate our interest in this property. At Bowater House, Knightsbridge SW1, prior to the expiry of Rexam PLC’s lease in June 2000, we are in discussion with the sub-tenants with a view to granting new relatively short term leases to enable a redevelopment to be planned to suit our overall development programme. Terms have been agreed for approximately 55% of the space at rents considerably in excess of the income received under the existing lease, which does not provide for reviews. The planning application for a change of use of Empress State Building SW6, from offices to an hotel, is still under consideration by the local authority. We continue to seek opportunities to upgrade the office portfolio whenever possible and maintain a high standard of service to our customers. During the year we have let or agreed to let some 217,000 ft2 (20,160 m2) in the City and Midtown and 321,400 ft2 (29,860 m2) in the West End and Victoria, reducing our office voids to 1.5% by rental value. Increased estimated rental values have reduced the Operating and Financial Review | LAND SECURITIES PLC Home Contents Search Next Back 1 and 2 Theobald’s Court WC1 15 LAND SECURITIES PLC | Operating and Financial Review Shops and Shopping Centres • Encouraging rental growth in strong centres • Development programme located principally in towns and cities which dominate their catchment area • Commitment to urban regeneration through a wide range of public and private sector partnerships • Continuing rationalisation through sales of secondary centres and high street shops Despite mixed messages from recent trading statements issued by retailers and limited growth in consumer expenditure, we are encouraged by the strength of demand for the best retail units in the strongest locations. This experience confirms our belief that by creating the dominant centres in major cities we should achieve long term outperformance. Our current development programme is therefore mainly in towns and cities where we can add value to our existing shopping centres. At Bootle, our Strand Centre now totals some 400,000 ft2 (37,160 m2), following the successful completion of the 92,000 ft2 (8,550 m2) second phase, together with a new multi-storey car park and bus station. In Liverpool, we concluded the purchase of the 55,000 ft2 (5,110 m2) Williamson Square retail scheme which is fully let and adjoins our St Johns Centre, where we have agreed to let the Beacon tower to Liverpool Radio City for their new operational headquarters. Planning permission has been obtained for the erection of a skyline advertising display which will offer a unique opportunity for a major international brand. Home Contents Search Next Back VALUATION AT 31 MARCH 1999 £2,670.6m RENTAL INCOME FOR YEAR ENDED 31 MARCH 1999 £177.6m 16 VALUATION % VALUATION BY LOCATION 45.3 21.6 33.1 SHOPPING CENTRES CENTRAL LONDON SHOPS OTHER IN-TOWN SHOPS RENTAL INCOME % 44.9 18.2 36.9 NORTH, N.W., YORKSHIRE & HUMBERSIDE £578.3m | 21.65% E. & W. MIDLANDS & E. ANGLIA £321.3m | 12.03% SCOTLAND & N. IRELAND £514.4m | 19.26% GREATER LONDON & HOME COUNTIES £316.1m | 11.84% WALES & SOUTH WEST £364.4m | 13.65% CITY & MIDTOWN £41.8m | 1.56% WEST END & VICTORIA £534.3m | 20.01% % OF GROUP VALUATION SHOPPING CENTRES 38.7 CENTRAL OTHER IN-TOWN LONDON SHOPS SHOPS Home Contents Search Next Back Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Shops and Shopping Centres continued At Livingston we will complete the refurbishment of Almondvale Phase I later this year, which will complement the Phase II development, providing a fully integrated shopping centre of 520,000 ft2 (48,310 m2). Construction has also commenced on the 256,000 ft2 (23,780 m2) designer centre, outlet being developed in association with BAA McArthurGlen, in which we have a 50% interest. Opening is planned for the summer of 2000. Following its completion, Livingston will provide a regional centre for shopping and leisure of some 1m ft2 (92,900 m2), of which 76% will be in our ownership. shopping We have continued refurbishing our shopping centres and have completed schemes at Stratford E15 and Ballymena. Works are also underway to remodel retail space at Ballymena to create ten new shops, subject to five of which are pre-let completion of lease documentation. In Birmingham we continue our development of Caxtongate. Phase I is fully let and Phase II, which includes a residential conversion of the upper floors, is under construction. Over 50% of the shop rent roll has been secured by lettings to leading fashion retailers and we have agreed terms to dispose of the residential content by way of a long lease. Following our announcement in February of the formation of The Birmingham Alliance to develop the new Bull Ring and Martineau Galleries shopping centres, we are in the process of concluding legally binding documentation with The Bridges Sunderland – Phase II 18 ft2 In central London our 56,500 (5,250 m2) development at 6/17 Tottenham Court Road W1 will be completed later this summer. Over 83% of the rent roll for these shops has either been secured or is agreed subject to completion of lease documentation, and the residential content has been forward In Victoria we have exchanged sold. contracts to let the ground floor of Saga Petroleum House to J Sainsbury for a new “Local” format store. We have begun construction in Sunderland on the 265,000 ft2 (24,620 m2) extension to The Bridges which, when combined with our existing shops, will create a centre of 515,000 ft2 (47,850 m2). Some 75% of the additional rent is secured or agreed subject to completion of lease documentation. Hammerson plc and Henderson Investors. The partnership arrangements provide the Group with one-third interests in both developments. The Birmingham Alliance will be working closely with the City Council to renew and regenerate the eastern side of the city. The partnership has been established to maximise the values of the founders’ the property development and management of the largest city centre retail regeneration project ever undertaken in Europe. This will provide an opportunity to create two major shopping centres totalling almost 2.7m ft2 (250,840 m2). interests through We propose to start Phase I of Martineau Galleries in April 2000 with completion one year thereafter. At the Bull Ring, work on the new market hall is planned to start this summer following which the site will be cleared and the redevelopment will commence in the autumn of 2000 with completion programmed for the autumn of 2003. The development of Martineau Galleries Phase II is planned to follow the completion of the Bull Ring. In York, we are working with the Council to revise our proposals, with the intention of submitting a new planning application for a 240,000 ft2 (22,300 m2) extension to the Coppergate Centre this summer. At Canterbury, following the grant of detailed planning permission for the 400,000 ft2 (37,160 m2) Whitefriars development, we are awaiting the outcome of the compulsory purchase inquiry for Operating and Financial Review | LAND SECURITIES PLC Home Contents Search Next Back the Government’s of shopping centres and retail investments, including latest guidelines on retail and transportation policy. The potential effects of electronic shopping, in its various applications, will also influence retailers’ preferences for type and location of property. While it is premature to assess the long term effects of this new technology on shopping patterns, it is likely to have a greater impact on the than on sale of convenience goods comparison shopping. Our objective is to increase the appeal of our centres by making shopping a more enjoyable activity. Our development programme will create major retail centres in towns and cities which will dominate their catchment areas and which should deliver good future growth. 481-485 Oxford Street W1 19 Acquisitions existing adjacent ownerships have been completed in a number of locations including Canterbury and Exeter. to At St David’s Centre, Cardiff we completed the purchase of the City Council’s remaining financial interest following which we now receive all the income from the centre. In strengthening our relationships with retailers and their agents, our in-house leasing team continues to maintain market awareness and to let shops through our ‘Talk Direct’ campaign. We have recently opened our new marketing suite in Mayfair Place W1 to complement these activities. to meet The benefit of working closely with our tenants their occupational requirements is demonstrated by the transaction completed with Hennes & Mauritz in Oxford Street for the expansion of their existing Marble Arch unit. This involved the acquisition of the leases of two adjoining shop premises to create this flagship store of 16,500 ft2 (1,530 m2). We continue to participate in many Town Centre Management initiatives throughout the United Kingdom and in the work of the British Council of Shopping Centres, the English Historic Towns Forum and the British Urban Regeneration Association. These activities support the Government’s declared objective to promote the urban regeneration of towns and cities. There are a number of new factors which are likely to affect the future performance site assembly. We are finalising proposals with Fenwick for their new department store, and with Marks & Spencer and Boots for their new space requirements. Terms have been agreed with Canterbury City Council for our new ground lease. Subject the development to completion of agreement and confirmation of the compulsory purchase order, we anticipate starting on site towards the end of this year. ft2 the 465,000 We continue to progress our plans at Exeter, in association with the City Council, (43,200 m2) for Princesshay scheme. Revised proposals have been submitted which, following extensive public consultation, will be formally determined by the Council this autumn. Other projects under consideration include a major scheme in the centre of Bristol, where the City Council has appointed us to undertake a detailed viability study for a 680,000 ft2 (63,170 m2) retail scheme. We are also investigating the feasibility of schemes involving our ownerships in Reading and East Kilbride. We continue to focus on working and refining the portfolio to secure maximum future growth. At the year end, void properties available to let, excluding those being held for development, represented 1.4% of rental value. During the year we Eccles, sold Knightswood and Leith and 51 other retail properties comprising over 200 shops. While we will continue to rationalise our in-town shopping, almost 80% by value is located in the top 100 towns and cities in the UK. shopping centres at LAND SECURITIES PLC | Operating and Financial Review Retail Warehouses and Food Superstores • Current planning policies should enhance future values • Enlarging and re-configuring parks improves retail mix and increases value • 75% by value in parks The 4.9m ft2 (455,220 m2) portfolio contains over 2.8m ft2 (260,130 m2) with open A1 non-food or completely open retail consent. Our portfolio mainly consists of parks for which there continues to be a healthy demand and as a result we have only 27,800 ft2 (2,580 m2) vacant and available for letting. All our holdings comply with our criteria of main road prominence, easy access and good car parking provision. The strong rate of rental growth experienced at the beginning of 1998 was not sustained and this is reflected in the annual valuation. The recent slowdown in the economy has affected certain occupiers. However, a number of retailers, particularly in the DIY and electrical sectors, continue to pursue acquisition programmes, generally with increased store size requirements. Growth will be stimulated by demand from those high street retailers which are unable to satisfy their requirements for larger stores in their traditional locations. Our objective is to enhance the value of our holdings by increasing their size and improving the retail offer. Full rental value on review can only be unlocked by securing evidence of open market lettings in the same park or immediate vicinity. We therefore seek to create new letting opportunities by negotiating the surrender of existing leases, extending or dividing units or by constructing new units. Home Contents Search Next Back 20 VALUATION AT 31 MARCH 1999 £824.7m VALUATION % 74.8 PARKS RENTAL INCOME FOR YEAR ENDED 31 MARCH 1999 VALUATION BY LOCATION 25.2 OTHER NORTH, N.W.,YORKSHIRE & HUMBERSIDE £296.7m | 35.98% £46.6m % OF GROUP VALUATION 11.9 RENTAL INCOME % 68.5 PARKS 31.5 OTHER E. & W. MIDLANDS & E. ANGLIA £122.9m | 14.90% SCOTLAND & N. IRELAND £60.2m | 7.30% GREATER LONDON & HOME COUNTIES £273.6m | 33.18% WALES & SOUTH WEST £71.3m | 8.64% Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Retail Warehouses and Food Superstores continued Home Contents Search Next Back Following the surrender of a large unit at Bexhill we completed the letting of 30,000 ft2 (2,790 m2) to Currys and PC World. The park has been enhanced further by reletting the former Currys store of 10,000 ft2 (930 m2) to Boots. We completed the extension and upgrading of the J Sainsbury foodstore at Wakefield and are about to start construction on a 15,000 ft2 (1,390 m2) unit at Chadwell Heath, pre-let to Currys. We acquired a further 15 acres of land at Dundee which has the benefit of outline planning permission for retail use. We plan to increase our existing park, which will adjoin a proposed 110,000 ft2 (10,220 m2) Above Retail and Leisure Park, Bexhill Right Lakeside Retail Park, West Thurrock 22 Tesco store, from 186,800 ft2 (17,350 m2) to 320,000 ft2 (29,730 m2) to create a new regional centre. We have disposed of properties at Beeston, Bolton, Christchurch, Coventry and Weston-super-Mare where we believe growth potential is limited. for to purchase subject to Terms have been agreed, planning consent, land adjoining our parks at Chesterfield and Gloucester the construction of additional units. At Erdington, Birmingham we will be carrying out a comprehensive upgrading to our park of 154,000 ft2 (14,310 m2). We have also secured subject to completion of a consent, planning agreement, to enlarge Lakeside Retail Park, West Thurrock to 360,000 ft2 (33,450 m2). of out further Current Government planning policy restricting town development will reduce future supply which, together with reviving demand and our policy of exploiting opportunities to improve our holdings, should enhance the value of our existing investments. Hotels, Leisure and Residential We continue to progress our leisure projects and to consider a number of new town centre schemes. to At Newcastle upon Tyne we have received planning consent for a 207,000 ft2 (19,230 m2) scheme include a multiplex cinema, restaurants, themed attractions and related retail. In association with the City Council, we are proceeding with a compulsory purchase inquiry to complete site assembly. We anticipate starting early next year with completion in the summer of 2002. In York, in joint ownership with Evans of Leeds PLC, we are planning a new leisure the city walls. The quarter within development will an regenerate underutilised area of the city and we are in working with formulating the planning brief for the site. the City Council We granted a new 35 year lease on the London Hilton, Park Lane W1, at an enhanced rent, to enable the hotelier to carry out a substantial refurbishment programme including an extension at first floor level. Operating and Financial Review | LAND SECURITIES PLC Home Contents Search Next Back ‘Tiger Tiger’, Haymarket House SW1 London Hilton on Park Lane W1 23 Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Warehouses and Industrial • Rents increasing in areas of strong economic activity • 80% let to warehouse and service sector users • 73% by value in south east We are improving the 7.7m ft2 (715,350 m2) portfolio through land acquisition, development and sales. During the year we completed the construction of 415,300 ft2 (38,580 m2) of warehouse and industrial accommodation. At Banbury we developed and let 240,000 ft2 (22,300 m2) in two high bay warehouses. A further 65,000 ft2 (6,040 m2) warehouse was completed in May.This 22.8 acre estate adjacent to Junction 11, M40 now comprises some 403,900 ft2 (37,520 m2). At Centurion Park, Tamworth we have built and are marketing a second high bay warehouse of 141,800 ft2 (13,170 m2). This estate comprises 262,900 ft2 (24,420 m2) on 13.2 acres adjacent to Junction 10, M42. Our three-unit scheme of 33,500 ft2 (3,110 m2) in Pump Lane, Hayes, Middlesex is complete with two units let and the remaining 7,450 ft2 (690 m2) agreed to be let subject to concluding legal documentation. We took advantage of the stronger investment market in this sector to dispose of a number of secondary properties totalling 448,000 ft2 (41,620 m2). These were located in the Glasgow suburbs, Weston- super-Mare, Caldicot, Horwich, Chester and Uxbridge. 24 VALUATION AT 31 MARCH 1999 £389.4m RENTAL INCOME FOR YEAR ENDED 31 MARCH 1999 £30.0m % OF GROUP VALUATION 5.6 VALUATION BY LOCATION NORTH, N.W., YORKSHIRE & HUMBERSIDE £35.6m | 9.14% E. & W. MIDLANDS & E. ANGLIA £55.7m | 14.31% SCOTLAND & N. IRELAND £4.1m | 1.05% GREATER LONDON & HOME COUNTIES £285.6m | 73.34% WALES & SOUTH WEST £8.4m | 2.16% Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Warehouses and Industrial continued Home Contents Search Next Back Middleton Road, Banbury Excluding properties under development, voids represented 3.9% by value at 31 March. In a joint venture with Gazeley Properties Limited, we hold options on some 300 acres at Milton Keynes, adjacent to the M1 motorway, and are in active discussion with the local authority to develop this land. We appreciate the need to respond to customer requirements for shorter leases and greater flexibility in the provision of space. There are some encouraging indications that rents can be varied to reflect a range of lease options. Rental growth in this sector is likely to remain limited, although we anticipate increases in areas of strong economic activity and restricted land supply. 26 Home Contents Search Next Back Operating and Financial Review | LAND SECURITIES PLC Financial Review % O F R E N T R O L L S E C U R E D T O 2 5 M A R C H 5 9 2 9 6 8 3 8 9 7 6 7 1 7 7 6 5 6 3 6 0 0 0 2 1 0 0 2 2 0 0 2 3 0 0 2 4 0 0 2 5 0 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 We reduced the Group’s net irrecoverable property outgoings by a further £0.6m to £7.5m which is less than 1.7% of rent roll net of ground rents. This reflects a level of voids in the portfolio of 1.6% of rent roll. The shortfall includes the running costs of properties that have been emptied pending redevelopment or refurbishment. The increase in property management and administration expenses includes initial depreciation of the new computer finance system and the first award under the Group’s long term incentive plan which replaced the 1984 Executive Share Option Scheme. the income Looking forward, rental income of £9.3m from our recently completed development programme had been secured but not received at 31 March 1999. At the same date, we had secured £26.6m of annual investment from rental portfolio which is subject to rent-free periods. However, rental income in the current year will show the effect of property sales, less acquisitions, completed in the year under review of some £6.5m, new voids in the portfolio and an estimated loss of £4.3m from properties which will cease in or anticipation refurbishment. In addition, at 31 March we had secured further income of £20.2m relating to the current development programme which had not yet been received. This income will flow from developments which are either currently in progress or very recently completed. income-producing redevelopment to be of Improving rental levels during the year have resulted in the portfolio, excluding voids, being 6.0% reversionary, although there are still some central London offices which are significantly over-rented. Leases for the majority of these buildings still have several years to expiry and almost 63% of our total rent roll is secured on good covenants and on long leases without breaks and with upward only rent reviews for more than 10 years. Shops, Shopping Centres Retail Warehouses and and Leisure Food Superstores Warehouses and Industrial 1.4 13.0 0.7 14.7 3.9 (3.9) % of rent roll Total 1.6 6.0 27 R E S U LT S Pre-tax profit increased from £266.0m to £293.3m. After excluding the results of property sales, revenue profit for the year increased by 10.1% to £292.7m. The increase of £5.3m in pre-tax revenue profit in the second half of the year, compared with the first half, was almost entirely due to higher levels of rental income. shareholders’ Taking into account the effect of the annual valuation, funds increased by £468.9m, compared with the previous year, and diluted net assets per share increased by 7.1% to 975p per share. After including the interim and proposed there was a final gross dividends, 13.5% increase in shareholders’ funds. The return on equity was 11.2% and the average return over the last three years has been 16.9%. Rental income increased from £438.9m to £453.6m despite a net loss of income from the continuing rationalisation of the portfolio. After adjusting for the effect of acquisitions and sales during the last two financial years, rental income on properties owned throughout the period under review increased by £21.2m. First lettings provided an additional £13.3m, mainly from the recently completed development programme, and increases from rent reviews contributed a further £7.6m. P O R T F O L I O S TAT U S at 31 March 1999 Voids by rental value Reversionary/(over-rented) Offices 1.5 (1.9) Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Financial Review continued Revenue profit benefited from a fall in net interest costs of £14.3m. The major reduction in interest payable resulted from conversions of convertible bonds during the previous accounting period and a further £83.2m of conversions of 7% Convertible Stock 2008 during the period under review. Interest receivable increased by £4.4m. The tax charge, equivalent to 26.2% of revenue profit, reflects the benefit of capital allowances from developments, refurbishments and acquisitions. Following the latest annual property valuation, there is an estimated potential capital gains tax liability in the region of £430m. Adjusted earnings per share increased from 37.07p to 39.11p after taking into account the increase in share capital largely resulting from bond conversions. These figures have been calculated assuming all conversions immediately took place interest ceased to accrue on the relevant convertible stock. Earnings growth, a positive cash flow and sizeable cash balance, together with a dividend cover of 1.31 times, have enabled the Directors to propose a final dividend of 21.65p, making an increase of 5.4% for the year. After all financing costs, dividends and taxation, the Group produced cash flow for investment of £73.5m. Expenditure on properties amounted to £267.3m, of which £154.3m was incurred on development and refurbishment. £129.5m of this relates to costs associated with the current development programme. investment £106.2m was acquisitions, future development in mind, showing an initial return of 6.2%. spent on many with Portfolio activity (£m) Acquisitions/ Sales Year ended 31 March 1999 developments proceeds Retail/Leisure 112.4 113.0 Offices 137.6 2.9 Warehouses and Industrial 17.3 267.3 10.1 126.0 In the same period, net proceeds from sales of properties amounted to £126.0m. The properties sold yielded 9.7% after deducting all our costs. Sales realised a small surplus, before tax, over book value and exceeded costs to the Group by £75.7m. B A L A N C E S H E E T Following conversions into equity and some small repayments, total borrowings amounted to £1,569.3m at the year end. Short term investments and cash of £486.6m was a seasonally high amount following receipt of March rentals. The Group also had £250m of committed bilateral standby facilities available on competitive terms should further funds be required. Prior to investment in property, funds are invested to achieve the best returns within rigorous controls which are reviewed regularly by the Board. In all investment decisions careful consideration is given to creditworthiness and deposit limits to minimise exposure to a single institution. As at 31 March 1999 the Group had no outstanding interest rate swaps or other derivatives. and At the year end, outstanding expenditure on the current £1,050m development programme amounted to some £870m. Capital creditors at 31 March 1999 amounted capital to £65.1m commitments were £158.6m. In addition, we have many further potential develop- ment opportunities which are not yet sufficiently far advanced to be listed in the schedule of Group developments on page 11. The most relevant measure of gearing, interest cover, was some 3.03 times and balance sheet gearing, taking net debt as a percentage of net assets, was 19.8% at 31 March 1999. The Group also views its development programme as a form of gearing and therefore estimates of balance sheet gearing should take this into account. We are confident that we will be able to capitalise on our balance sheet strength by developing and acquiring additional property assets in accordance with our strategy, but in the event that we cannot fully use that strength then we will consider alternative methods of exploiting our balance sheet strength for the benefit of shareholders. Property development and investment is a long term capital intensive activity and the 28 Group has sought to minimise the risk of fluctuations in finance costs as a result of changes in interest rates by using long term fixed rate debt to match its property In common with many commitments. investment mature UK companies, the current average cost of debt is high, as the majority of borrowings were raised during a period of much higher interest rates and investment returns. property During the year, the Financial Reporting Standard 13, “Derivatives and Other Financial Instruments”, was introduced and the additional disclosures required by the Standard are shown in Note 25 on pages 60 and 61. The note shows the market value, defined as the fair value, the Group’s borrowings including of convertible bonds. The fair values as at 31 March 1999 exceeded the book values of the Group’s borrowings by £723.9m, in respect of a reflecting £680.1m reduction in long term interest rates since the borrowings were originally taken out and £43.8m respect of equity conversion terms of the convertible bonds. The adjustment to fair value would reduce reported diluted net assets per share by 115p and would increase balance sheet gearing. However, after taking account of tax relief, the adjustment to net assets would be 79p per share. in There is no obligation or present intention to redeem or retire the borrowings, other than at maturity when their redemption from would be made at par. The only cash the Group’s outflows arising borrowings are the future fixed interest payments and the redemption at par of those borrowings that do not convert into ordinary shares. These outflows are unaffected by the fair values referred to above. the impact of the exercise of equity conversion terms of the convertible bonds on the fair values will not result in any cash outflow by the Group, as conversion is a non-cash transaction. In particular, Market values are affected by a number of external factors, including strength of covenant and, ironically, the stronger the company, the narrower the trading margin over the relevant Government gilt and consequently the higher the market value of debt. It is also worth noting that the current strength of our balance sheet affords us the ability to raise finance for acquisitions and further developments at current interest rates. such G O I N G C O N C E R N After reviewing detailed profit projections, taking into account the available bank facilities and making further enquiries as they consider appropriate, the Directors are satisfied that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements. Home Contents Search Next Back Operating and Financial Review | LAND SECURITIES PLC AC C O U N T I N G I S S U E S several new In addition to FRS 13, accounting standards and discussion papers were published during the year. FRS 14 “Earnings per Share” has had no material effect on the financial statements but its application has required mandatory disclosure of diluted earnings per share. FRS 15 “Tangible Fixed Assets” was issued in February but investment properties have been exempted from its provisions and are still to be accounted for under Statement of Standard Accounting Practice 19 “Accounting for Investment Properties”. The International Accounting Standards Committee (IASC) is currently reviewing accounting for investment properties and is expected to report later this year. The implementation of the new financial reporting standards has had no effect on the profit or net assets attributable to shareholders in these financial statements. on harmonising Discussions the accounting for deferred taxation and pensions continue and the recommended methods of accounting are expected to be issued shortly. A discussion paper on a revised method of accounting for lease arrangements is also anticipated later this year. The issue of recording the fair values of derivatives and other financial instruments in financial statements is currently under active consideration by the IASC. The inclusion of such information in the 29 LAND SECURITIES PLC | Operating and Financial Review Financial Review continued balance sheet, especially when debt is intended to be held to maturity, will be strongly resisted. The proposal, included in the exposure draft on tangible fixed assets, for revising FRS 3 “Reporting Financial Performance” to exclude from the profit and loss account profits or losses arising on sales of investment properties, was not implemented in the published standard. However, consideration is being given to the replacement of the profit and loss account and other primary statements with a single statement incorporating all movements in shareholders’ funds. We favour this approach to accounting for the results of property investment companies. We continue to hold firmly to the view expressed last year that the UK’s accounting standards should not be compromised in circumstances where general business practice in the United Kingdom would be adversely affected by the application of an international accounting standard. We will continue to uphold this position in our discussions with the Accounting Standards Board interests of our shareholders and the property industry. the best in Home Contents Search Next Back While property values can benefit from a favourable movement in valuation yields, usually resulting from particularly strong prospects for rental growth or reflecting favourable returns compared with other improvements in forms of investment, revenue profit depend on sustainable rental growth. The Group’s balance sheet strength, significant cash balances and long term future growth prospects underpin the Board’s decision to increase the rate of dividend for the year. A low inflation environment should discourage some of the excesses which have damaged the UK property industry in the past and led to significant cyclical fluctuations. The prospects of less volatility together with the Group’s prudent accounting policies support a lower level of dividend cover than was maintained in periods of higher inflation when a cover of about 1.5 times was considered appropriate. strategy of T H E F U T U R E increasing The Group’s shareholder value by development or refurbishment and by acquiring assets which can be worked to increase growth potential requires long term commitment. As we do not capitalise interest as part of the cost of development, a substantial development programme inevitably affects profits during the expenditure period. We do, however, reflect the changing value of our developments in progress by obtaining annual valuations of all the property assets in our portfolio. It is also necessary continually to review and alter the balance of the portfolio to anticipate the effects of changes in technology and demographics. The pace of rationalisation of the portfolio through judicious sales has increased in recent years and we will continue to make disposals. This process often involves an initial loss of income as we dispose of properties which are unlikely to provide future growth. Although the assets we acquire, usually with development potential, will provide increasing income and capital growth for shareholders in the future, there is likely to be a short term cost. Falling short term interest rates will also reduce the return from the temporary deployment of funds prior to investment in property. 30 is continuing with M I L L E N N I U M A N D E U R O I S S U E S the The Group programme of activities mentioned in last year’s report to achieve compliance with year 2000 requirements. Its objective is to ensure that the business of the Group continues without interruption during the millennium period. As confirmation of our commitment, we have signed up to Pledge 2000™ launched by the Department of Trade and Industry to encourage co- operation in the resolution of problems associated with the year 2000. The Group has established a team to implement its year 2000 compliance programme. The team comprises in-house engineering, computer and management staff and external consultants to provide specialist skills where necessary. Regular reports are made to the Board and the Computer Steering Committee so that all senior levels of the Group are kept fully informed of the scope of the exercise. Our staff are also briefed on the importance of giving priority to this issue. that our As a result of these initiatives, and following specific checks and tests, we are internal computer satisfied systems will be year 2000 compliant in time. As this exercise has been carried out in conjunction with projects to replace the mainframe computer with client server technology and to change the Group’s property and accounting systems, much of the cost of achieving compliance has been absorbed within these larger projects and has been capitalised within fixed assets. Other associated costs have not been significant. The review of building services within our properties is also well advanced. We have completed surveys and risk assessments and we expect to complete mock millennium testing of systems, where necessary, this summer. We have advised our tenants of those properties which are let on full repairing terms of the potential problems and requested their confirmation that measures are being taken to deal with the matter. We have also contacted our key suppliers and trading partners to seek assurances that they will continue to provide uninterrupted service during the millennium period and we will monitor the situation. We appreciate the importance of the year 2000 problem and consider that we have taken all reasonable steps to mitigate its likely effects. Excluding the use of internal resources, the anticipated revenue cost of our programme of activities is unlikely to exceed £100,000. Despite the Group’s efforts to deal with the year 2000 issue, there can be no assurances that the steps taken will eliminate all the problems associated with the year change.We are therefore preparing contingency plans, which will comprise Operating and Financial Review | LAND SECURITIES PLC arrangements required to be in place at or around the millennium date, to deal with any problems that may arise from unexpected events. The working party appointed to investigate the likely impact of the euro on our business continues to monitor the latest developments. We commissioned a report on the implementation of the euro within the business and are ready to take the appropriate action if the Government commits the United Kingdom to entry. We do not intend to expend additional shareholder funds until a decision is made and, together with many other businesses, have pressed the Government to ensure that for time businesses to amend internal systems prior to entry to the European Economic and Monetary Union. is allowed sufficient Home Contents Search Next Back 31 LAND SECURITIES PLC Environment and Health & Safety E N V I R O N M E N T Land Securities recognises the importance of good environmental management and performance both in terms of protecting the local and global environment and in minimising risks to protect the interests of our investors. The Group fully supports the Government’s aims for sustainable development and it continued to advance its own environmental initiatives during the past year. We are committed to an annual review of our energy and environmental policies. This year, without significantly altering the substance of the environmental policy, we have modified it to allow clear objectives and targets to emerge more easily. We have a management structure that supports the implementation of our policy. Last summer our new environmental manual was introduced to all members of staff through a series of presentations which stressed the importance which we place upon this aspect of our business. All staff have electronic access to this manual. Training is an important area and we have held a series of staff seminars to provide instruction on a range of subjects. We have also set up an internal environment panel to interpret the objectives of our policy to those who have to implement it. The Group has joined the Property and Environment Group. It is encouraging that the overall performance of the property a marked improvement in 1998 and Land Securities those organisations remains amongst leading the way. We have played a full part showed sector in the review of Part L of the Building Regulations which the Government has identified as an important mechanism for helping to meet its target for reducing the UK’s level of carbon dioxide emissions. We set ourselves a target of 20 energy audits to be carried out over the course of the year and completed 22. Several opportunities have been identified for reducing energy consumption without impacting upon performance. The chilled ceiling system being used in the developments at 1 and 2 Theobald’s Court is at the commissioning stage and we are confident that both properties will score very well under the Building Research Establishment Environmental Assessment two new system. The warehouse units at Slough Retail Park both achieved “good” ratings. Comprehensive environmental impact assessments are carried out on all of our proposed major city centre retail developments. At the Olympia Centre in East Kilbride replacing low voltage tungsten lighting lamps has with compact fluorescent enhanced the appearance of the lighting scheme and greatly reduced running costs. At our request, a lighting manufacturer developed new dual technology fittings to enable the replacement of 700w exterior floodlights with multivapour lamps at the Ards Centre, Newtownards. This should produce a 75% saving in energy consumption. 32 H E A LT H & S A F E T Y We employ a Health & Safety Officer who has direct accountability to the Board for the implementation of our health and safety policy. Assisted by the appropriate staff and external consultants, he ensures that comprehensive risk assessments and analyses are carried out both at existing investments to developments in order to ensure that safety standards are maintained. relation and in Home Contents Search Next Back ‘Big Painting Sculpture’ by Patrick Heron – Stag Place, Victoria SW1 Corporate Governance introduction of any significant changes to employee share or pension schemes. All Directors have access to the Company Secretary who is responsible for ensuring that Board procedures are complied with and who advises the Board on corporate governance and compliance matters. The Board has resolved that directors may seek independent professional advice at the Group’s expense in the furtherance of their duties as directors. The roles of chairman and chief executive are split and there exists a strong Non- executive element on the Board which currently consists of four Executive and four Non-executive Directors. The Board considers that all the Non-executive Directors should be regarded as being independent. The senior Non-executive Director other than the Chairman is John Hull who is Deputy Chairman. The Board believes that the present balance and composition of the Board is appropriate in the light of prevailing circumstances. The Board is supplied with comprehensive management information on a regular and timely basis, principally by means of a monthly Board Report and detailed reviews of rental income and financial projections every six months. The Group’s cash management and treasury activities are reviewed at each Board Meeting. In view of the size of the Board, it has not been considered appropriate to establish a Nomination Committee; instead the entire Board acts as a Nomination Committee and is responsible for the selection and approval of candidates for appointment to the Board. In accordance with the Companies Acts and the Articles of Association of the Company, all Directors are required to submit themselves to shareholders for re-election to the Board at the first Annual General Meeting following their appointment and at regular intervals thereafter. A resolution will be proposed at the 1999 Annual General Meeting to amend the Company’s Articles of Association so that in future every Director is required to stand for re- election every three years (under the Articles of Association as currently worded, there may in certain circumstances be a four-year interval between the re-election of Directors and the Company did not comply with this provision of the Code in the year under review). Non-executive Directors are appointed for an initial period of three years which is extendable upon mutual agreement. John Hull, who is Deputy Chairman, has served as a Director since 1976; he will retire from the Board on 14 July 1999. or Directors are provided with training and induction into the responsibilities of a immediately to, director prior following, their appointment to the Board, if that appointment is the first occasion that they have been appointed to the Board of a listed company. The training needs of Directors are reviewed periodically to ensure that they are kept up to date on relevant new legislation and changing commercial risks. LAND SECURITIES PLC Home Contents Search Next Back 33 T H E C O M B I N E D C O D E – P R I N C I P L E S O F G O O D G OV E R N A N C E A N D C O D E O F B E S T P R AC T I C E ( D E R I V E D F R O M T H E C A D B U RY, G R E E N B U RY A N D H A M P E L C O M M I T T E E in contained R E P O R T S ) . As required by the Combined Code, the Board is reporting on how it applies the principles the Code. Throughout the year ended 31 March 1999, the Company has generally been in compliance with the provisions of the Code. Areas where the Company has not complied fully with the Code are detailed in the following review. While strongly endorsing the importance of accountability, the Board supports the view expressed in the final report issued by the Hampel Committee that “the board’s first responsibility is to enhance the prosperity of the business over time”. It is your Board’s responsibility to ensure good governance but this process cannot be an end in itself. and operating It operates D I R E C T O R S The Board normally meets at least eight Its principal task is to times a year. formulate strategy and to monitor and control financial performance in pursuit of the Group’s in strategic objectives. accordance with a formal schedule of to matters for decision. include These matters property developments, refurbishments, acquisitions and disposals in excess of £30 million, fund raising, loan repayments and treasury policy. They also include the appointment or removal of Directors and the the Company the Board Secretary reserved and LAND SECURITIES PLC Corporate Governance continued D I R E C T O R S ’ R E M U N E R AT I O N Details of the Company’s Remuneration Committee and Directors’ remuneration are contained in the Report on page 35. imposed to ensure R E L AT I O N S W I T H S H A R E H O L D E R S The Company values dialogue with institutional and private shareholders, and the Chief Executive together with the Finance Director hold regular meetings with institutional shareholders to discuss strategic and other issues within the constraints the protection of price sensitive information which has not already been made available generally to the Company’s shareholders. The Board welcomes moves towards a more constructive use of Annual General Meetings and regards the Annual General Meeting principal opportunity to meet private shareholders. In future, details of proxy voting will be disclosed on each resolution after it has been dealt with by a show of hands; the Company did not comply with this provision of the Code in respect of the 1998 Annual General Meeting. the as The Chairmen of the Audit and Remuner- ation Committees normally attend each Annual General Meeting in order to answer any questions relating to the activities of these Committees. The Company supports the concept of individual resolutions on each substantially separate issue at General Meetings and will continue to propose a separate resolution relating to the Report and Financial Statements. 34 Home Contents Search Next Back With effect from the 1999 Annual General Meeting, the Company is arranging for the Report and Financial Statements and related papers to be posted to shareholders so as to allow at least 20 working days for consideration prior to the Annual General Meeting. AC C O U N TA B I L I T Y A N D AU D I T Financial Reporting The Board seeks to present a balanced and understandable assessment of the Company’s position and prospects, and details are given in the Chairman’s Statement and the Operating and Financial Review. Internal Control Pending the production of guidance by the Institute of Chartered Accountants in England and Wales on the scope, extent, nature and review of internal controls to which the Code refers, the Board is, as recommended by the London Stock Exchange, reporting on the Group’s internal financial controls pursuant to the guidance for directors on internal controls and financial reporting issued in December 1994. Internal financial controls are the pro- cedures established to provide reasonable assurance of: (a) the safeguarding of assets against unauthorised use or disposition; and (b) the maintenance of proper accounting records and the reliability of financial information used within the business or for publication. The Directors are responsible for the system of internal financial control which is designed to provide reasonable but not absolute against material assurance misstatement or loss. reviewed The Directors have the effectiveness of the system of internal financial control, the key procedures of which are: (a) clearly defined organisational responsi- bilities and limits of authority. (b) annual and long term revenue, cash flow and capital forecasts, updated regularly during the year; monthly monitoring of cash flow and capital expenditure and monthly reporting of key financial information to the Board; quarterly and half yearly revenue comparisons with forecasts. (c) financial controls and procedures, including information systems, detailed in policies and procedures manuals. (d) clearly defined guidelines for capital expenditure and disposals, including detailed appraisal procedures, defined levels of authority and monthly reporting on all capital projects. (e) an internal audit function which reviews business processes and controls and reports directly to the Board. (f ) an Audit Committee which approves audit plans and published financial information and reports from internal and external auditors, dealing with any significant control matters raised. reviews Report of the Remuneration Committee LAND SECURITIES PLC Corporate Governance continued AU D I T C O M M I T T E E The Audit Committee consists solely of the Non-executive Directors and is chaired by Peter Hardy. At its regular meetings the Committee seeks to ensure that appropriate accounting systems and financial controls are in operation and that the Group’s financial statements comply with statutory and other requirements. The Committee receives reports from and consults with the internal and external auditors. It reviews the interim and annual results and considers any matters raised by the internal and external auditors. It also monitors the scope, cost effectiveness, independence and objectivity of the external audit. The terms of reference of the Committee were reviewed and updated by the Board during the year under review. VALUAT I O N S The Group has for many years given the valuers and auditors access to each other. These advisers have a dialogue and exchange of information which is entirely independent of the Group. N O N - E X E C U T I V E D I R E C T O R S Remuneration for the Chairman and Non- executive Directors is determined by the Board within the levels set in the Articles of Association. They do not participate in any of the Company’s share incentive, bonus or pension schemes. The Chairman and Non- executive Directors are currently appointed for an initial period of three years subject to renewal for further periods and to the rotation provisions under the Articles of Association. They do not have service agreements with the Company. complies with D I R E C T O R S ’ R E M U N E R AT I O N the The Company requirements of the Combined Code in relation to directors’ remuneration. The Board has established a Remuneration Committee which operates within agreed terms of reference and which makes recommendations to the Board on the Company’s framework and cost of executive remuneration. No Director is involved in deciding his own remuneration. 1 . C O M P O S I T I O N O F T H E C O M M I T T E E The Committee consists solely of the Non-executive Directors and is chaired by John Hull. 2 . F U N C T I O N O F T H E C O M M I T T E E The function of the Committee is to review and determine annually within the context of the Board’s remuneration policy the individual salaries and other terms and conditions of employment of the Executive Directors, together with any incentive or bonus scheme in which the Executive Directors and other senior executives may be invited to participate.The Committee also reviews the Chief Executive’s remuneration proposals for the Group’s staff other than the Executive Directors. The Committee consults the Chief Executive in relation to proposals for the remuneration of the other Executive Directors and the Committee has access to professional advice where this is considered appropriate. 3 . R E M U N E R AT I O N P O L I C Y The objective of the Group’s remuneration policy is to provide remuneration in a form and amount to attract, retain and motivate high quality management. The levels remuneration are set of to ensure comparability across a broad spectrum of UK based companies of similar size from all sectors but with particular emphasis on the property industry. of aligning importance In deciding on the appropriate level of remuneration, the Board is mindful of the long term nature of the business and the any performance awards with returns to shareholders. It attempts to achieve this balance through a base annual salary and cash bonuses which are geared to the achievement of short term objectives while providing an incentive to achieve longer term success through the Group’s Long Term Incentive Plan. reflects his Each Executive Director receives a salary which responsibilities, experience and performance. Salary is reviewed annually and the review process includes using comparator information and reports from specialist consultants. However, the Committee is mindful of the need to treat such comparisons with caution so that they do not result in an upward ratchet of remuneration levels with no in performance and also takes account of pay and employment conditions elsewhere in the Group, especially when determining annual salary increases. The performance related elements of directors’ remuneration are designed to form an important part of their total remuneration package, to align their interests with those of shareholders and to give directors incentives to perform. corresponding improvement Home Contents Search Next Back 35 Home Contents Search Next Back LAND SECURITIES PLC Report of the Remuneration Committee continued Details of each Director’s emoluments and share options are shown in Note 7 on pages 51 and 52. 4 . R E M U N E R AT I O N O F N O N - E X E C U T I V E regard D I R E C T O R S The annual remuneration of the Chairman of the Board, Peter Birch, is determined by the Committee having to independent advice. The other Non- executive Directors each receive a fee agreed by the Board following a review of fees paid by comparable organisations. Neither the Chairman nor the other Non- executive Directors receive any pension benefits from the Company, nor do they participate in any bonus or incentive schemes. All Non-executive Directors are appointed on the basis of serving for an initial three-year period, which can be renewed. All are subject to retirement by rotation in accordance with the Articles of Association of the Company. 5 . E M O LU M E N T S A N D S H A R E O P T I O N S Executive Directors’ emoluments consist of salary, car benefit, pension contribution, medical and life insurance, together with participation in savings related share option, profit sharing and profit related pay schemes which are also open to property management and administration staff. Executive Directors also participate in an annual bonus scheme which is open to selected senior executives in the Group. This scheme measures performance against a series of targets based on criteria established by the Committee. The potential maximum payment under this scheme is currently 20% of salary. The key criteria are reviewed annually to ensure that targets are set in line with prevailing business circumstances. Current criteria cover such areas of the business the development as programme, rent reviews and renewals and levels of voids, property outgoings shortfalls and bad debts. progress with Following the decision by the Government to phase out the tax concessions associated with profit related pay, the Group has decided to replace the current scheme, which is open to all property management and administration staff, with a scheme which more closely associates individual reward with the performance of the Group. This new bonus scheme will use annually adjusted earnings per share data as its key measure of performance and will result in payments of between 2% and 10% of salary each year. The current Profit Related Pay Scheme has paid out approximately 4% of salary and has also enjoyed the tax advantages associated with such schemes. Following the introduction of this new scheme, the maximum payment under the existing Annual Bonus Scheme, open to senior executives, will be limited to 10%, so that the maximum benefit from both annual bonus schemes in one year will not exceed 20% of salary. The 1984 Executive Share Option Scheme expired in April 1995. As a result, no options have been granted since July 1994. A long term incentive plan was introduced to replace the 1984 Executive Share Option Scheme and awards under the Plan depend on the Group’s total shareholder return five-year achieved over a series of performance periods as compared with the total shareholder returns achieved by a selected peer group of companies carrying on comparable businesses. No award will be paid in respect of any particular period unless the Group is ranked in the first four of the eight companies in the peer group in that period. Awards for ranking positions in the first four of the group range from 25% for fourth position to a maximum of 55% of salary for first position. Half of any award will be payable in cash and half in shares, such shares to be released to the beneficiary on the second anniversary of the award. Current participants under the Plan are the Executive Directors, Company Secretary and the Directors and Assistant Directors of the Group’s operating company. Selection of participants is at the discretion of the Remuneration Committee. The Plan includes transitional provisions to reflect the Committee’s original intention that the Plan would be effective from 1 April 1996 with performance measured by three rather than five-year periods. There are therefore three transitional performance periods, each commencing on 1 April 1996 and ending respectively on 31 March 1999, 2000 and 2001. Following the expiry of the first transitional period, the Group achieved a ranking of third position within the peer group, which gave rise to an award of 35% of salary, half of which is payable in cash, with the balance being due in shares. 36 LAND SECURITIES PLC Home Contents Search Next Back to length of service, with a pension of up to two-thirds of final salary, subject to Inland Revenue limits and other statutory rules. The Scheme also provides lump sum death-in-service benefits of four times pensionable salary and pension provision for dependants of members. Only basic salary is treated as pensionable pay. With effect from 1 January 1999 this scheme was closed to new entrants and replaced by a contributory Money Purchase Scheme. 7 . S E R V I C E A G R E E M E N T S The Executive Directors accepted a reduction of the notice period in their service agreements from two years to one year, which took effect from 1 April 1998. The Chairman and the other Non-executive Directors do not have service contracts with the Company. J O H N H U L L , C h a i r m a n o f t h e C o m m i t t e e f o r a n d o n b e h a l f o f t h e B o a r d The following table shows the Executive Directors’ accrued pension entitlements as at 31 March 1999, which are based upon a normal retirement age of 60. The increase in accrued pensions during the year reflects the change in retirement age from 62 to 60 which took effect from 1 April 1998 but excludes any increase for inflation. The transfer values have been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. These values represent a liability on the Group’s pension scheme and not a sum payable to the individual Directors. Therefore transfer values cannot meaningfully be annual remuneration. added to AC C R U E D P E N S I O N S year ended 31 March 1999 Accrued at Increase Transfer value 31 March 1999 during year of increase £ £ £ I J Henderson M R Griffiths K Redshaw J I K Murray 173,506 110,820 110,215 118,685 52,717 1,075,500 15,357 400,400 14,253 385,600 16,879 415,800 37 following The cash payments in respect of the three- year period to 31 March 1999 will be as follows: I J Henderson £58,625, M R Griffiths £39,375, K Redshaw £39,375, and J I K Murray £41,125. Each Executive Director will also be awarded conditional rights to receive Ordinary Shares in the Company having an average market value for the seven dealing days the announcement of the Company’s results equivalent to the cash bonus shown above. The Executive Directors will normally become those shares only after remaining employed for a further two years. If a Director leaves the Company during that two-year period (except in the case of normal retirement, disability or death), his conditional entitlement to those shares will lapse, subject to the overriding discretion of the Remuneration Committee. entitled receive to interests of The the four Executive Directors at 31 March 1999 under the Plan could amount to a maximum of 55% of their basic salaries for the four outstanding performance periods if a ranking position of first is achieved for each period.The Plan will terminate in June 2006, 10 years after the date of its adoption by shareholders. 6 . P E N S I O N S The Executive Directors participate in a non-contributory defined benefit pension scheme which was open to property management and administration staff until 31 December 1998. This scheme provides them, at normal retirement age and subject Home Contents Search Next Back LAND SECURITIES PLC Directors’ Report for the year ended 31 March 1999 The Directors submit their Report with the financial statements for the year to 31 March 1999. A review of the Group’s business and results for the year is contained in the Chairman’s Statement and the Operating and Financial Review, which should be read in conjunction with this Report. 1 B U S I N E S S O F T H E G R O U P During the year the Group has continued its business of property investment and retail development of offices, warehouses, leisure, warehouse industrial premises throughout the United Kingdom, together with the management of its properties. food superstores, and shops, 2 R E S U LT S F O R T H E Y E A R A N D D I V I D E N D S The results are set out in the Consolidated Profit and Loss Account on page 44. An interim dividend of 7.85p per share was paid on 4 January 1999 and the Directors now recommend the payment of a final dividend of 21.65p per share making a total of 29.50p per share for the year ended 31 March 1999, an increase of 5.4% over that for the previous year. Subject to authorisation at the Annual General Meeting to be held on 14 July 1999, the final dividend will be paid on 26 July 1999 to shareholders registered on 11 June 1999. The shares are expected to be quoted ex-dividend from 7 June 1999. 3 VALUAT I O N A N D N E T A S S E T S (i) Valuation In accordance with their report reproduced on page 43, Knight Frank valued the Group’s properties at £6,910.5m as at 31 March 1999. This is an increase of £474.8m over that at the previous year end. After taking into account total 38 expenditure on properties of £267.3m and the aggregate book value of properties sold during the year of £125.4m, the surplus on valuation was £332.9m. (ii) Net Assets valuation has been The portfolio included in the financial statements for the year ended 31 March 1999 and the net assets of the Group at that date amounted to £5,470.4m. Without adjusting for any taxation which would become payable in the event of properties being sold, the net assets attributable to each share in issue on that date were 987p. Taking into account shares reserved for issue under the terms the Group’s convertible bonds and of employee share schemes, the diluted net asset value per share was 975p. The amount of tax on capital gains, which would become payable in the event of sales of the properties at the amounts at which they are included in the financial statements, is given in Note 8 on page 53. in the region of £430m The amount, (1998 £350m), represents approximately 6.2% of the aggregate valuation. 4 D I R E C T O R S The Directors who held office during the year were: *P G Birch CBE FCIB *John Hull CBE I J Henderson BSc FRICS *H I Connick LLB (retired 1 July 1998) M R Griffiths FRICS K Redshaw BSc FRICS J I K Murray MA FCA *P B Hardy *Sir Alistair Grant DL FRSE *Non-executive and member of the Remuneration and Audit Committees. Biographical details of the Directors appear on page 40. John Hull will retire from the Board on 14 July 1999 and does not wish to offer himself for re-election. and P B Hardy I J Henderson retire from the Board by rotation and, being eligible, offer themselves for re-election. I J Henderson has a service agreement with the Company with a notice period of one year. P B Hardy does not have a service agreement with the Company. Particulars of the interests of each Director in the shares and debentures of the Company, as shown by the Register of Directors’ Share and Debenture Interests, and of their holdings of options over Ordinary Shares, are set out in Note 7 on pages 52 and 53. Apart from share options, no contract subsisted during or at the end of the financial year in which a Director of the Company is or was materially interested and which is or was significant in relation to the Group’s business. 5 S H A R E C A P I TA L The Company was authorised at the Annual General Meeting held in 1998 to purchase in the market Ordinary Shares representing up to approximately 9.25% of the issued share capital at that time.This authority has the not been used and expires at conclusion of the 1999 Annual General Meeting. A resolution will be proposed as a special resolution at the 1999 Annual General Meeting to renew the authority until the conclusion of the Annual General Meeting in 2000. LAND SECURITIES PLC Home Contents Search Next Back The Group has recently revised its Business Ethics Policy and copies have been circulated to all staff who are required to abide by its provisions. 8 D O N AT I O N S During the year ended 31 March 1999 the Group made no contributions of a political nature. Charitable donations amounted to £135,000. 1 1 A N N UA L G E N E R A L M E E T I N G Accompanying this Report is the Notice of the Annual General Meeting which sets out the usual resolutions for the meeting and the special business resolutions. These are explained in a letter from the Chairman which accompanies the Notice. The special business resolutions are: To amend the Savings-Related Share Option Scheme. 9 E N V I R O N M E N T The Group’s environmental policy is outlined on page 32. To adopt a new Profit Sharing Scheme to replace the 1989 scheme which has expired. 1 0 PAY M E N T P O L I C Y The Group is a registered supporter of the CBI’s Better Payment Practice Code to which it subscribes when dealing with all of its suppliers. that payments are made The Code requires a clear and consistent policy in accordance with contract or as required by law; that payment terms are agreed at the outset of a transaction and adhered to; that no amendments to payment terms are made without the prior agreement of suppliers and that there is a system which deals quickly with complaints and disputes to ensure that suppliers are advised accordingly without delay when invoices or parts thereof are contested. Copies of the Code are available on application to the Company Secretary. To increase the annual limit on fees payable to Directors of the Company. To amend the Articles of Association. To renew the Directors’ authority for the Company to purchase its own shares. forming a new 1 2 AU D I T O R S During the year the auditors, Price Waterhouse, merged with Coopers and Lybrand firm PricewaterhouseCoopers. As a consequence of this merger Price Waterhouse resigned as July 1998 and PricewaterhouseCoopers were appointed in their place. PricewaterhouseCoopers have expressed to continue in office and a resolution will be proposed for their reappointment at the Annual General Meeting. their willingness auditors on 20 The effect of the Group’s payment policy is that its trade creditors at the financial year end represented 14.8 days’ purchases. By order of the Board P M D U D G E O N , S e c r e t a r y 26 May 1999. 39 6 S U B S TA N T I A L S H A R E H O L D E R S At 13 May 1999 the following interests in issued share capital had been notified to the Company under Part VI of the Companies Act 1985. Shares Merrill Lynch and Co, Inc Prudential Corporation plc 56,354,503 34,193,513 % 10.2 6.2 in 7 S TA F F The Group operates profit sharing and savings related share option schemes and administers the executive share option scheme the options respect of outstanding. Under the 1989 profit sharing scheme an aggregate of 886,596 Ordinary Shares has been appropriated for the benefit of employees up to 31 March 1999. Details of the savings related and executive share option schemes are shown in Note 6 on page 51. The executive share option scheme expired on 24 April 1995. The Group also operates a profit related pay scheme for all administration staff. Through these schemes a widespread interest in the Group’s future is assured and all staff are kept informed of the Group’s progress. The Board welcomes the significant involvement in the Group’s future which these schemes encourage. The Group continues to operate its health and safety policy in accordance with all relevant legislation and gives full and fair consideration to applications by disabled persons for employment. In all employment matters the Group maintains its commitment to an equal opportunities policy. Communication with staff is achieved in a number of ways, which include an in-house staff newsletter. Home Contents Search Next Back LAND SECURITIES PLC Directors and Advisers 31 March 1999 L A N D S E C U R I T I E S P L C B OA R D O F D I R E C T O R S Peter G Birch 61 Keith Redshaw 53 Joined the Group in 1970. Appointed a Director of Land Securities Properties Limited in 1986 and to the Board in 1990. Past President of the British Council of Shopping Centres and Member of The Oxford Retail Group. Responsible for the retail portfolio and management of the Group’s properties outside central London. James I K Murray 52 Joined the Group in 1981 and appointed a Director of Land Securities Properties Limited in 1986. Appointed to the Board in 1990, Finance Director in 1991. Member of the Technical Committee of The Hundred Group. Peter B Hardy 60 Appointed to the Board in 1992. Managing Director, Investment Banking with SG Warburg Group plc until 1992. Director of Kingfisher plc, Foreign and Colonial PEP Investment Trust plc, Fairview Holdings plc, Howard de Walden Estates Limited and Barnardos. Sir Alistair Grant 62 Chairman of Safeway plc until March 1997. Chairman of Scottish and Newcastle plc and Governor of the Bank of Scotland. Appointed a Director in 1997 and Chairman in July 1998. Chief Executive of Abbey National plc until March 1998. Chairman of Trinity plc. Director of N M Rothschild & Sons Limited, Coca-Cola Beverages plc, Dah Sing Financial Holdings Limited and Travelex Exchange Corporation Ltd. John Hull 73 Appointed a Director and Deputy Chairman in 1976, Chairman from December 1997 to July 1998. A Director of Legal and General Group plc until 1990 and Chairman of J Henry Schroder Wagg & Co Limited 1977-83. Deputy Chairman of the Panel of Takeovers and Mergers. Ian J Henderson 55 Joined the Group in 1971. Appointed a Director of Land Securities Properties Limited in 1979 and Managing Director in 1990. Joined the Board in 1987, appointed Deputy Managing Director in 1996 and Chief Executive in December 1997. Vice-chairman of the Board of Management of Central and Cecil Housing Trust and past Chairman of Westminster Property Owners Association. Michael R Griffiths 54 Joined the Group in 1973. Appointed a Director of Land Securities Properties Limited in 1986 and to the Board in 1990. Vice-president of City Property Association. Responsible for the central London portfolio and the Group’s project management. S O L I C I T O R S Nabarro Nathanson 50 Stratton Street London W1X 6NX AU D I T O R S PricewaterhouseCoopers Southwark Towers 32 London Bridge Street London SE1 9SY VALU E R S Knight Frank 20 Hanover Square London W1R 0AH B A N K E R S Lloyds TSB Bank Plc 72 Lombard Street London EC3P 3BT J Henry Schroder & Co Limited 120 Cheapside London EC2V 6DS R E G I S T R A R Lloyds TSB Registrars The Causeway Worthing West Sussex BN99 6DA S T O C K B R O K E R S Warburg Dillon Read 1 Finsbury Avenue London EC2M 2PP Cazenove & Co 12 Tokenhouse Yard London EC2R 7AN 40 LAND SECURITIES PLC Senior Management 31 March 1999 P R I N C I PA L P R O P E R T Y O W N I N G C O M PA N I E S R AV E N S E F T P R O P E R T I E S L I M I T E D DIRECTORS I J Henderson BSc FRICS Chairman K Redshaw BSc FRICS Managing Director M R Griffiths FRICS J I K Murray MA FCA R H DeBarr FRICS N W Johnson FRICS A R Strange FRICS †P G Cottingham BSc ARICS †J C Grimes BSc ARICS †G A Jones BSc FIPD †C J Oppé BA †T A Seddon BSc ARICS T H E C I T Y O F LO N D O N R E A L P R O P E R T Y C O M PA N Y L I M I T E D DIRECTORS I J Henderson BSc FRICS Chairman M R Griffiths FRICS Managing Director J I K Murray MA FCA M A Bird FRICS N W Johnson FRICS †P J Harwood †N Pennell BTech CEng MCIBSE †A G Williams ACII R AV E N S I D E I N V E S T M E N T S R AV E N S E F T I N D U S T R I A L L I M I T E D DIRECTORS I J Henderson BSc FRICS Chairman J Maynard Managing Director M R Griffiths FRICS K Redshaw BSc FRICS R D S Nevett FRICS R N Hodder ARICS †K B Venables E S TAT E S L I M I T E D DIRECTORS I J Henderson BSc FRICS Chairman J Maynard Managing Director M R Griffiths FRICS K Redshaw BSc FRICS R D S Nevett FRICS †D P Wynne BSc ARICS G R O U P O P E R AT I O N S L A N D S E C U R I T I E S P R O P E R T I E S L I M I T E D DIRECTORS I J Henderson BSc FRICS Chairman and Managing Director M R Griffiths FRICS K Redshaw BSc FRICS J I K Murray MA FCA J Maynard N W Johnson FRICS A R Strange FRICS N A C Moore FCA M A Bird FRICS R H DeBarr FRICS R W Heskett BSc FRICS ASSISTANT DIRECTORS R D S Nevett FRICS A M C Dobbin TD MA FCA G Field MSc FRICS S M A Shah BSc FCA P J Cleary BSc ARICS P H Frackiewicz BSc FRICS M J McGuinness BSc ARICS *D M Rippon BSc PhD †R J Akers MA ARICS SECRETARY P M Dudgeon LLB FCIS *appointed 1 October 1998 †appointed 1 April 1999 Home Contents Search Next Back 41 Home Contents Search Next Back LAND SECURITIES PLC Directors’ Responsibilities & Auditors’ Report with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. O P I N I O N In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group at 31 March 1999 and of the profit and cash flows of the Group for the year then ended and have been properly prepared in accordance with the Companies Act 1985. PricewaterhouseCoopers Chartered Accountants and Registered Auditors London 26 May 1999. D I R E C T O R S ’ R E S P O N S I B I L I T I E S The Directors are required by company law to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the Group as at the end of the financial year and of their profit or loss for that period and comply with the Companies Act 1985. The Directors are responsible for ensuring that applicable accounting standards have been followed and that suitable accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, have been used in the preparation of the financial statements. It is also the responsibility of the Directors to prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business. The Directors are also responsible for maintaining proper accounting records so as to enable them to comply with company law. The Directors have general responsibilities for safeguarding the assets of the Company and of the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities. R E P O R T O F T H E A U D I T O R S T O T H E M E M B E R S O F L A N D S E C U R I T I E S P L C We have audited the financial statements on pages 44 to 61. Respective Responsibilities of Directors and Auditors The Directors are responsible for preparing the Annual Report including, as described on this page, the financial statements. Our responsibilities, as independent auditors, are established by statute, the Auditing Practices Board, the Listing Rules of the London Stock Exchange and our profession’s ethical guidance. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act. We also report to you if, in is not our opinion, the Directors’ Report consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law or the Listing Rules regarding directors’ remuneration and transactions is not disclosed. We read the other information contained in the Annual Report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. We review whether the statement on page 33 reflects the Company’s compliance with those provisions of the Combined Code specified for our review by the London Stock Exchange, and we report if it does not.We are not required to form an opinion on the effectiveness of the Company or Group’s corporate governance procedures or its internal controls. B A S I S O F AU D I T O P I N I O N We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and It also disclosures in the financial statements. includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us 42 No allowance has been made for expenses of realisation or for any taxation which might arise and our valuations are expressed exclusive of any Value Added Tax that may become chargeable. As in previous years, investment properties held for, or in the course of, development are included at Open Market Value. Our valuations assume that the properties have good and marketable titles and are free of any undisclosed onerous burdens, outgoings or restrictions. We have not seen planning consents and, except where advised to the contrary, have assumed that the properties have been erected and are being occupied and used in accordance with all requisite consents and that there are no outstanding statutory notices. We have not read documents of title or leases and, for the purpose of our valuations, have accepted the details of tenure, tenancies and all other relevant information with which we have been supplied by your Company. When considering the covenant strength of individual tenants we have not carried out credit enquiries but have reflected in our valuations our general understanding of purchasers’ likely perceptions of tenants’ financial status. We have, in addition, discussed with the Company any bad debts or material arrears of rent such as might reflect on covenant. We were not instructed to carry out structural surveys of the properties, nor to test the services, but have reflected in our valuations, where necessary, any defects, items of disrepair or outstanding works of alteration or improvement which we noticed during the course of our inspections or of which you have advised us. Our valuations assume the buildings contain no deleterious materials and that the sites are unaffected by adverse soil conditions except where we have been notified to the contrary. For the purposes of this valuation we have assumed that, where appropriate, suitable action has been taken to ensure year 2000 compliance in respect of the properties and their services. The Company has informed us that its objective is to meet the Definition of Year 2000 Conformity Requirements issued by the British Standards Institution. Valuers’ Report We have not carried out any scientific investigations of the sites or any of the properties to establish the existence or otherwise of any environmental contamination. The Company has established procedures for identifying and investigating environmental matters and we have been provided with reports for certain properties which we have discussed with the Company. The environmental reviews which have been carried out by or on behalf of the Company have not, we understand, led the Directors to believe that there are any significant potential environmental problems within the Group’s portfolio. In accordance with our enquiries of the Company, and the contents of the above mentioned reports, we have assumed that the land and buildings, the subject of our valuations, do not suffer from any significant environmental problems. Having regard to the foregoing we are of the opinion that the values as at 31 March 1999 totalled £6,910,477,500, (SIX THOUSAND NINE HUNDRED AND TEN MILLION FOUR HUNDRED AND SEVEN THOUSAND FIVE HUNDRED POUNDS). SEVENTY We understand that the tables which accompany this valuation giving a breakdown of the portfolio by tenure, property types and regional distribution are to be reproduced elsewhere in the Company’s Report and Financial Statements as will a listing of the majority of properties by value. Our valuation is for the use only of the party to whom it is addressed and no responsibility is accepted to any third party for the whole or any part of its contents. If our opinion of value is disclosed to persons other than the addressees of this report, the basis of valuation should be stated. If it is proposed to publish the figure, the form and context in which the figure is to appear should be approved by us beforehand. Yours faithfully, K N I G H T F R A N K 20 Hanover Square, London W1R 0AH 29 April 1999. LAND SECURITIES PLC Home Contents Search Next Back 43 The Directors L A N D S E C U R I T I E S P L C 5 Strand, London WC2N 5AF. Dear Sirs, In accordance with your instructions to prepare a valuation for balance sheet purposes we have inspected the properties, made all relevant enquiries, and obtained such further information as necessary to provide you with our opinion of the current Open Market Values of all the freehold and leasehold properties owned by your Company and its subsidiaries as at 31 March 1999, with the exception of short leasehold accommodation occupied by the Company for the purposes of its business. As is your customary practice, all properties for which there was an unconditional contract to purchase at the valuation date have been included in the valuation and those for which there was an unconditional contract for sale have been excluded. The properties have been valued individually on the basis of “Open Market Value” in accordance with the Appraisal and Valuation Manual published by the Royal Institution of Chartered Surveyors and the valuation has been undertaken by us as External Valuers. Open Market Value is defined as: “an opinion of the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the date of valuation, assuming: a) a willing seller; b) for the interest, that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the the proper marketing of agreement of the price and terms and for the completion of the sale; that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation; that no account is taken of any additional bid by a prospective purchaser with a special interest; and that both parties transaction had to acted knowledgeably, prudently and without compulsion”. the c) d) e) Home Contents Search Next Back 1999 £m 500.2 427.5 (29.0) 398.5 .6 399.1 38.7 (144.5) £m 265.9 .1 1998 £m 484.0 414.1 (28.1) 386.0 .1 386.1 34.3 (154.4) 293.3 266.0 LAND SECURITIES PLC | Operating and Financial Review Consolidated Profit and Loss Account for the year ended 31 March 1999 Notes £m G R O S S P R O P E R T Y I N C O M E N E T R E N TA L I N C O M E Property management and administration expenses O P E R AT I N G P R O F I T Profit on sales of properties P R O F I T O N O R D I N A RY AC T I V I T I E S B E F O R E I N T E R E S T A N D TA X AT I O N Interest receivable and similar income Interest payable and similar charges Revenue profit Profit on sales of properties P R O F I T O N O R D I N A RY AC T I V I T I E S B E F O R E TA X AT I O N Taxation on: Revenue profit Property sales Taxation P R O F I T O N O R D I N A RY AC T I V I T I E S A F T E R TA X AT I O N Dividends R E TA I N E D P R O F I T F O R T H E F I N A N C I A L Y E A R E A R N I N G S P E R S H A R E A D J U S T E D E A R N I N G S P E R S H A R E D I V I D E N D S P E R S H A R E D I V I D E N D C OV E R (times) Profit after taxation Profit excluding results of property sales after taxation 2 2 3 4 4 8 9 21 10 10 9 292.7 .6 (76.8) (.1) (76.9) 216.4 (165.2) 51.2 Basic Diluted 39.21p 39.11p 38.95p 38.86p 1999 29.50p 1.31 1.31 (67.9) (1.4) Basic 36.84p 37.07p (69.3) 196.7 (151.6) 45.1 Diluted 36.55p 36.77p 1998 28.00p 1.30 1.31 All income was derived from within the United Kingdom from continuing operations. No operations were discontinued during the year. The notes on pages 48 to 61 form an integral part of these financial statements. 44 Home Contents Search Next Back Operating and Financial Review | LAND SECURITIES PLC Balance Sheets 31 March 1999 Group Company Notes 1999 £m 1998 £m 1999 £m 1998 £m 11 13 14 15 15 16 17 18 19 20 21 21 21 21 10 10 6,910.5 6,435.7 2,117.9 1,931.2 13.1 9.7 6,923.6 6,445.4 – 4,830.1 6,948.0 – 4,629.5 6,560.7 71.5 1.0 486.6 – 559.1 (424.8) 134.3 69.5 28.5 547.3 .1 645.4 (418.4) 227.0 58.5 – 14.3 – 72.8 39.5 27.6 17.9 – 85.0 (194.4) (121.6) (210.3) (125.3) 7,057.9 6,672.4 6,826.4 6,435.4 (1,295.0) (1,295.5) (1,286.4) (1,286.7) (272.4) (20.1) (355.1) (20.3) (66.7) (7.0) (149.9) (6.9) 5,470.4 5,001.5 5,466.3 4,991.9 554.3 284.0 541.1 213.1 554.3 284.0 541.1 213.1 3,286.5 3,028.7 3,750.0 3,430.8 632.0 713.6 556.9 661.7 179.4 698.6 158.2 648.7 5,470.4 5,001.5 5,466.3 4,991.9 987p 975p 924p 910p F I X E D A S S E T S Tangible assets Properties Other tangible assets Investments in group undertakings C U R R E N T A S S E T S Debtors falling due within one year Debtors falling due after more than one year Investments: short term deposits and corporate bonds Cash at bank and in hand C R E D I T O R S falling due within one year N E T C U R R E N T A S S E T S / ( L I A B I L I T I E S ) T O TA L A S S E T S L E S S C U R R E N T L I A B I L I T I E S C R E D I T O R S falling due after more than one year Debentures, bonds and loans Convertible bonds Other creditors C A P I TA L A N D R E S E R V E S Called up share capital Share premium account Revaluation reserve Other reserves Profit and loss account E Q U I T Y S H A R E H O L D E R S ’ F U N D S N E T A S S E T S P E R S H A R E D I LU T E D N E T A S S E T S P E R S H A R E P G Birch J I K Murray Directors The financial statements on pages 44 to 61 were approved by the Directors on 26 May 1999. 45 LAND SECURITIES PLC | Operating and Financial Review Consolidated Cash Flow Statement for the year ended 31 March 1999 N E T C A S H I N F LO W F R O M O P E R AT I N G AC T I V I T I E S R E T U R N S O N I N V E S T M E N T S A N D S E R V I C I N G O F F I N A N C E Interest received Interest paid N E T C A S H O U T F LO W F R O M R E T U R N S O N I N V E S T M E N T S A N D S E R V I C I N G O F F I N A N C E TA X AT I O N – Corporation tax paid N E T C A S H I N F LO W F R O M O P E R AT I N G AC T I V I T I E S A N D I N V E S T M E N T S A F T E R F I N A N C E C H A R G E S A N D TA X AT I O N C A P I TA L E X P E N D I T U R E Additions to properties Sales of properties Investing in properties Increase in other tangible assets Notes 22 £m 1999 £m 409.9 £m 26.9 (202.2) (196.0) 246.3 50.3 (3.7) 36.3 (143.7) (255.6) 126.0 (129.6) (5.8) (107.4) (73.4) 229.1 (135.4) (155.6) (61.9) 60.7 N E T C A S H ( O U T F LO W ) / I N F LO W O N C A P I TA L E X P E N D I T U R E E Q U I T Y D I V I D E N D S PA I D C A S H ( O U T F LO W ) / I N F LO W B E F O R E U S E O F L I Q U I D R E S O U R C E S A N D F I N A N C I N G M A N A G E M E N T O F L I Q U I D R E S O U R C E S F I N A N C I N G Issues of shares Decrease in debt N E T C A S H I N F LO W / ( O U T F LO W ) F R O M F I N A N C I N G D E C R E A S E I N C A S H I N Y E A R R E C O N C I L I AT I O N O F N E T C A S H F LO W T O M OV E M E N T S I N N E T D E B T Decrease in cash in year Cash outflow from decrease in debt Cash (inflow)/outflow from (decrease)/increase in liquid resources Change in net debt resulting from cash flow Non-cash changes in debt Movement in net debt in year Net debt at 1 April Net debt at 31 March 23(a) 20 23(b) 24 24 24 46 1.6 (.8) 3.6 (15.2) .8 (.4) (.4) .8 (60.7) (60.3) 82.5 22.2 (1,104.9) (1,082.7) (1,362.7) (1,104.9) Home Contents Search Next Back 1998 £m 399.5 (175.3) (56.0) 168.2 46.6 (142.5) 72.3 (61.5) (11.6) (.8) (.8) 15.2 61.5 75.9 181.9 257.8 Operating and Financial Review | LAND SECURITIES PLC Other Primary Statements for the year ended 31 March 1999 S TAT E M E N T O F T O TA L R E C O G N I S E D G A I N S A N D LO S S E S Profit on ordinary activities after taxation (page 44) Unrealised surplus on valuation of properties Total gains and losses recognised since last financial statements N O T E O F H I S T O R I C A L C O S T P R O F I T S A N D LO S S E S Profit on ordinary activities before taxation (page 44) Valuation surplus of previous years realised on sales of properties Historical cost profit on ordinary activities before taxation Taxation Historical cost profit on ordinary activities after taxation Dividends Retained historical cost profit for the year R E C O N C I L I AT I O N O F M OV E M E N T S I N E Q U I T Y S H A R E H O L D E R S ’ F U N D S Profit on ordinary activities after taxation (page 44) Dividends Retained profit for the financial year (page 44) Unrealised surplus on valuation of properties Premium arising on issues of shares Increase in share capital Opening equity shareholders’ funds Closing equity shareholders’ funds Notes 21 21 8 9 9 21 21 20 1999 £m 216.4 332.9 549.3 1999 £m 293.3 75.1 368.4 (76.9) 291.5 (165.2) 126.3 1999 £m 216.4 (165.2) 51.2 332.9 71.6 13.2 468.9 5,001.5 5,470.4 1998 £m 196.7 733.0 929.7 1998 £m 266.0 53.3 319.3 (69.3) 250.0 (151.6) 98.4 1998 £m 196.7 (151.6) 45.1 733.0 160.6 25.6 964.3 4,037.2 5,001.5 Home Contents Search Next Back 47 Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Notes to the Financial Statements for the year ended 31 March 1999 1 Accounting Policies The financial statements have been prepared under the historical cost convention modified by the revaluation of properties and in accordance with applicable accounting standards. Compliance with SSAP 19 “Accounting for Investment Properties” requires a departure from the requirements of the Companies Act 1985 relating to depreciation and amortisation and an explanation of this departure is given in (e) below. The significant accounting policies adopted by the group are set out below. ( a ) C O N S O L I DAT I O N The consolidated financial statements of the group include the audited financial statements of the company and group undertakings, all of which were for the year ended 31 March 1999. ( b ) C O N S O L I DAT E D P R O F I T A N D LO S S AC C O U N T A N D O T H E R P R I M A RY S TAT E M E N T S The profit on ordinary activities before taxation is arrived at after taking into account income and outgoings on all properties, including those under development and, in accordance with FRS3 “Reporting Financial Performance”, profits and losses on sales of properties calculated by comparing net sales proceeds with book values. Realised surpluses and deficits relating to previous years on properties sold during the year are taken to other reserves. Unrealised capital surpluses and deficits, including those arising on valuation of properties, are taken to revaluation reserve. ( c ) TA X AT I O N Taxation attributable to sales of properties is charged against the profits realised. No provision is made for taxation which would become payable under present legislation in the event of future sales of the properties at the amounts at which they are stated in the financial statements. However an estimate of the potential liability is shown in Note 8. Deferred taxation is accounted for in respect of timing differences between profit as computed for taxation purposes and profit as stated in the financial statements to the extent that liabilities or assets are expected to be payable or receivable in the foreseeable future. ( d ) P R O P E R T I E S Properties are included in the financial statements at open market values based on the latest professional valuation. At 31 March 1999 a valuation was carried out by Knight Frank and a copy of their report is set out on page 43. The valuation included all properties for which there were unconditional contracts to purchase but excluded those for which there were unconditional contracts for sale. Additions to properties include costs of a capital nature only; interest and other costs in respect of developments and refurbishments are treated as revenue expenditure and written off as incurred. ( e ) D E P R E C I AT I O N A N D A M O R T I S AT I O N In accordance with SSAP 19, no depreciation or amortisation is provided in respect of freehold or leasehold properties held on leases having more than 20 years unexpired. This departure from the requirements of the Companies Act 1985, for all properties to be depreciated, is, in the opinion of the Directors, necessary for the financial statements to give a true and fair view in accordance with applicable accounting standards, as properties are included in the financial statements at their open market value. The effect of depreciation and amortisation on value is already reflected annually in the valuation of properties, and the amount attributed to this factor by the valuers cannot reasonably be separately identified or quantified. Had the provisions of the Act been followed, net assets would not have been affected but revenue profits would have been reduced for this and earlier years. Other tangible assets are depreciated on a straight-line basis over their estimated useful lives of four to ten years. ( f ) I N V E S T M E N T S I N G R O U P U N D E R TA K I N G S The company’s investments in the shares of group undertakings are stated at Directors’ valuation on a basis which takes account of the professional valuation of the properties of the group undertakings at 31 March 1999. Surpluses and deficits arising from the Directors’ valuation are taken to revaluation reserve. ( g ) P E N S I O N S Contributions to defined benefit pension schemes, based on independent actuarial advice, are charged to the profit and loss account on a basis that spreads the expected cost of benefits over the employees’ working lives with the group. Variations from regular costs are spread over the anticipated remaining working lives of employees in the schemes. 48 Home Contents Search Next Back Operating and Financial Review | LAND SECURITIES PLC Notes to the Financial Statements for the year ended 31 March 1999 2 Net Rental Income Rental income Service charges and other recoveries Gross property income Ground rents payable Other property outgoings 1999 £m 453.6 46.6 500.2 (18.6) (54.1) (72.7) 427.5 1998 £m 438.9 45.1 484.0 (16.7) (53.2) (69.9) 414.1 Other property outgoings are costs incurred in the direct maintenance and upkeep of investment properties. Void costs, which include those relating to empty properties pending redevelopment and refurbishment, costs of investigating potential development schemes which are not proceeded with and £4.2m (1998 £4.6m) in respect of housekeepers and outside staff described as direct property services and shown in staff costs in Note 5, are also included. 3 Property Management and Administration Expenses These include: Auditors’ remuneration (Company: 1999 £66,000; 1998 £64,000) Staff costs (Note 5) Directors’ remuneration Depreciation of other tangible assets 1999 £m .2 13.3 1.6 2.2 1998 £m .2 13.3 1.5 1.3 Property management and administration expenses consist of all costs of managing the portfolio, including the costs of staff involved in development projects, together with costs of rent reviews and renewals, relettings of properties and all office administration and operating costs of the group. No staff costs or overheads are capitalised. In addition to their fees for the audit, £275,400 (1998 £78,100) was payable to the auditors for other services. This comprised compliance and certification work £38,000 (1998 £25,100) and taxation advice and consultancy fees £237,400 (1998 £53,000). 4 Interest R E C E I VA B L E : Short term deposits and corporate bonds Other interest receivable PAYA B L E : Borrowings not wholly repayable within five years Borrowings wholly repayable within five years Other interest payable 1999 £m 36.8 1.9 38.7 1998 £m 33.7 .6 34.3 142.5 152.7 1.0 1.0 .5 1.2 144.5 154.4 49 Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Notes to the Financial Statements for the year ended 31 March 1999 5 Staff and Pensions E M P LOY E E S The average number of employees during the year, excluding directors, and the corresponding aggregate staff costs were: Property management and administration Direct property services: Full time Part time S TA F F C O S T S Salaries Social Security Other pension Cash and share incentive schemes 1999 No. 1998 No. 1999 £m 1998 £m 258 188 48 494 277 219 81 577 13.3 13.3 3.9 .3 17.5 12.6 1.2 2.2 1.5 17.5 4.2 .4 17.9 13.2 1.2 2.3 1.2 17.9 P E N S I O N S The group operates two funded Inland Revenue approved non-contributory pension schemes which provide defined benefits based on final pensionable salary. Both schemes are closed to new entrants. The assets of these schemes are held in self-administered trust funds which are separate from the group’s assets. Contributions to the schemes are determined by qualified independent actuaries on the basis of triennial valuations using the projected unit method. For both schemes the key assumptions made in the valuations were a total annual investment return of 8%, assuming an increase of 3.8% in dividend income, annual increases of 6.25% in pensionable earnings and 4% in the Retail Prices Index. The last valuations as at 6 April 1996, after excluding annuities purchased to provide for pensions in payment which are held outside the two schemes, indicated the following: Main scheme Closed scheme Value of Assets £28.6m £2.8m Funding Level 102% 104% The company has implemented the actuary’s recommendation that pension contributions to both schemes be adjusted to reduce surpluses on a straight line basis over the remaining working lives of members in the schemes. A contributory money purchase scheme was introduced on 1 January 1999 for all new administrative and senior property based staff, subject to eligibility, together with a separate similar scheme, effective 1 April 1998, for other property based staff. The charge to the profit and loss account for pension costs amounted to £2.8m (1998 £2.7m) which includes the costs of permitting scheme members to select a reduced retirement age of 60. No other post-retirement benefits are made available to employees of the group. 50 Home Contents Search Next Back Operating and Financial Review | LAND SECURITIES PLC Notes to the Financial Statements for the year ended 31 March 1999 6 Executive and Savings Related Share Option Schemes At 1 April 1998 Granted Exercised Lapsed At 31 March 1999 No. of Options 1984 1983 & 1993 Executive Savings Related Option price Share Option Scheme Share Option Schemes 553,950 469,414 736p 61,636 (96,050) (91,468) – (28,793) 457,900 410,789 The options outstanding under the executive share option scheme are exercisable at prices between 503.7p and 618.6p, up to the year 2004. The options outstanding under the savings related share option schemes are exercisable at prices between 324p and 736p, after three, five or seven years from the date of grant. 7 Directors’ Emoluments, Share Options and Interests in Ordinary Shares E M O LU M E N T S The emoluments of the directors including pension contributions and £178,500 receivable (1998 £Nil) under the long term incentive plan amounted to £1,891,000 (1998 £1,620,000). £’000 E X E C U T I V E : I J Henderson M R Griffiths K Redshaw J I K Murray Sir Peter Hunt (Chairman – to 8.12.97) N O N - E X E C U T I V E : P G Birch (Chairman – appointed 1.7.98) John Hull (Chairman – to 30.6.98) H I Connick (retired 1.7.98) P B Hardy Sir Alistair Grant Total 1999 Total 1998 Basic Salary 300 205 205 212 – – – – – – 922 1,024 Profit Sharing & Bonuses Benefits Car & Medical Total Emoluments excluding Pensions Pension Contributions Fees 1999 1998 1999 1998 36 27 27 28 – – – – – – 118 160 11 12 6 7 – 14 9 – – – 59 33 – – – – – 100 80 6 26 24 236 146 347 244 238 247 – 114 89 6 26 24 282 228 223 234 250 23 54 23 23 23 126 83 83 86 – – – – – – 84 57 57 59 – – – – – – 1,335 378 1,363 257 Benefits include all assessable tax benefits arising from employment within the group comprising the provision of a company car, private medical facilities, the value of shares allocated under the 1989 Profit Sharing Scheme, payments under the profit related pay scheme and a bonus of 5 per cent of salary payable under the annual bonus scheme. The total emoluments of the highest paid director, including £58,625 (1998 £Nil) receivable under the long term incentive plan but excluding pension contributions, amounted to £405,625 (1998 £337,300 including gains before tax of £114,300 on the exercise of share options). The accrued pension as at 31 March 1999 for the highest paid director was £173,500 (1998 £93,000). Pensions of £173,000 (1998 £148,700) were paid to former directors. A brief explanation of pension arrangements for directors, including a table of accrued pension entitlements as at 31 March 1999, and details of amounts receivable under the long term incentive plan are provided on page 37. 51 LAND SECURITIES PLC | Operating and Financial Review Notes to the Financial Statements for the year ended 31 March 1999 7 Directors’ Emoluments, Share Options and Interests in Ordinary Shares continued O P T I O N S OV E R O R D I N A RY S H A R E S Granted during year Exercised during year Options at 31 March 1999 I J Henderson M R Griffiths K Redshaw J I K Murray No. of options at 1 April 1998 27,000 7,508 33,500 5,720 6,329 42,000 6,258 No. 529 468 Grant price (pence) Exercise price (pence) No. Market price on exercise (pence) 736.0 2,168 415.0 858.5 No. 27,000 7,508 33,500 4,081 6,797 5,000 618.6 927.0 37,000 6,258 Exercise price (pence) 618.6 439.4* 618.6 572.9* 469.7* 618.6 455.3* Exercisable dates 7/1997 – 7/2004 7/1999 – 7/2004 7/1997 – 7/2004 8/2000 – 7/2005 7/1999 – 7/2004 7/1997 – 7/2004 7/1999 – 7/2004 * weighted average exercise price The range of the closing middle market prices for Land Securities shares during the year was 701.5p to 1078.0p. The middle market price at 31 March 1999 was 820p. No options lapsed during the year. The share options are held under the 1984 Executive Share Option Scheme, except for those shown in italics which are held under the 1983 and 1993 Savings Related Share Option Schemes. The aggregate of gains before tax made by the directors on exercise of share options during the year amounted to £25,000 (1998 £169,200). The 1984 Executive Share Option Scheme was approved by the Inland Revenue on 24 April 1985 and permitted the Remuneration Committee to grant options to directors and key executives for a consideration of £1 for each grant. The Scheme, which expired on 24 April 1995, complied with best practice at the time of its introduction and included such standard terms as a limitation on the aggregate value of grants to each selected executive of four times that individual’s annual remuneration and a bar on the exercise of options within three years of their issue. Options granted under the savings related schemes are exercisable at prices between 324p and 736p per share after five or seven years from date of grant. Non-executive directors do not participate in, and hence do not hold any options under, the group’s share option schemes. Home Contents Search Next Back 52 Operating and Financial Review | LAND SECURITIES PLC Notes to the Financial Statements for the year ended 31 March 1999 7 Directors’ Emoluments, Share Options and Interests in Ordinary Shares continued I N T E R E S T S I N O R D I N A RY S H A R E S The beneficial interests of the directors in the ordinary shares of the company as at 31 March were: P G Birch John Hull I J Henderson M R Griffiths K Redshaw J I K Murray P B Hardy Sir Alistair Grant No. of shares 1999 12,722 2,907 71,895 25,035 27,643 22,990 19,200 15,000 1998 200 2,907 70,968 21,984 25,367 22,006 19,200 5,000 John Hull, I J Henderson, M R Griffiths and J I K Murray are Trustees of the 1989 Profit Sharing Scheme and as a consequence at 31 March 1999 held a non-beneficial interest in 224,618 shares (1998 238,308 shares). The beneficial interests of I J Henderson, M R Griffiths and J I K Murray each include 3,029 shares (1998 3,424 shares) appropriated under the scheme, which are also included in their non-beneficial holdings. There have been no changes in the beneficial and non-beneficial shareholdings of the directors since the end of the financial year up to 26 May 1999. No director had any other interests in the securities of Land Securities PLC or any of its subsidiary undertakings during the year. The registers of directors’ share and debenture interests and holdings of options, which are open to inspection at the company’s registered office, contain full details of directors’ interests. 8 Taxation The charge for taxation is made up as follows: Revenue profit at the Corporation Tax rate of 31% (1998 31%) Tax allowances on expenditure relating to properties Movement in deferred taxation Other adjustments Adjustments relating to previous years On revenue profit On property sales 1999 £m 90.7 (12.8) (.3) (.3) 77.3 (.5) 76.8 .1 76.9 1998 £m 82.4 (12.8) .7 (1.1) 69.2 (1.3) 67.9 1.4 69.3 The amount of tax on capital gains which would become payable in the event of sales of the properties at the amounts at which they are stated in Notes 11(a) and (b) is in the region of £430m (1998 £350m) for the group and £155m (1998 £120m) for the company. Home Contents Search Next Back 53 Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Notes to the Financial Statements for the year ended 31 March 1999 9 Equity Dividends Interim paid Proposed final 1999 pence 1998 pence per share per share 7.85 21.65 29.50 7.60 20.40 28.00 1999 1998 £m 45.2 120.0 165.2 £m 41.2 110.4 151.6 Interim paid includes an additional £1.7m (1998 £0.2m) of prior year final dividend arising from increases in share capital before the record date of 5 June 1998. 10 Earnings and Net Assets per Share E A R N I N G S P E R S H A R E Earnings per share Effect of dilutive securities: Convertible bonds Share options Diluted earnings per share A D J U S T E D E A R N I N G S P E R S H A R E Earnings per share Effect of results of property sales after taxation Adjusted earnings per share Diluted earnings per share Effect of results of property sales after taxation Adjusted diluted earnings per share Profit after taxation 1999 £m 216.4 1998 £m 196.7 13.0 7.2 229.4 203.9 Weighted average no. of shares 1999 m 551.9 36.8 .3 589.0 1998 m 533.9 23.4 .6 557.9 Earnings per share 1999 pence 39.21 1998 pence 36.84 38.95 36.55 216.4 (.5) 215.9 229.4 (.5) 228.9 196.7 1.3 198.0 203.9 1.3 205.2 551.9 533.9 551.9 533.9 589.0 557.9 589.0 557.9 39.21 (.10) 39.11 38.95 (.09) 38.86 36.84 .23 37.07 36.55 .22 36.77 Adjusted earnings and adjusted diluted earnings per share have been disclosed to show measures of earnings that reflect the principal operating activities of the group. N E T A S S E T S P E R S H A R E Net assets per share are calculated on net assets of £5,470.4m (1998 £5,001.5m) and on 554.3m shares (1998 541.1m shares). The diluted net assets per share are calculated on adjusted net assets of £5,747.9m (1998 £5,356.6m) and on 589.6m shares (1998 588.5m shares) after adjusting for the effects of the exercise of share options and of conversion rights relating to the convertible bonds on net assets and the number of shares in issue. 54 Home Contents Search Next Back Operating and Financial Review | LAND SECURITIES PLC Notes to the Financial Statements for the year ended 31 March 1999 11 Properties (a) G R O U P At 1 April 1998: at valuation Additions Reclassifications Sales Unrealised surplus on valuation (Note 21(a)) At 31 March 1999: at valuation (b) C O M PA N Y At 1 April 1998: at valuation Additions Transfers from group undertakings Transfer to a group undertaking Sales Unrealised surplus/(deficit) on valuation (Note 21(b)) At 31 March 1999: at valuation Leasehold Over 50 Under 50 Freehold £m years to run £m years to run £m Total £m 4,981.8 1,411.5 42.4 6,435.7 213.5 31.7 (108.6) 52.2 (38.6) (16.8) 5,118.4 1,408.3 275.6 55.1 5,394.0 1,463.4 1.6 6.9 – 50.9 2.2 53.1 267.3 (125.4) 6,577.6 332.9 6,910.5 1,689.3 232.8 9.1 1,931.2 48.4 22.2 (21.9) (22.2) 1,715.8 164.1 1,879.9 5.9 7.9 – (7.9) 238.7 (10.9) 227.8 – – – – 9.1 1.1 54.3 30.1 (21.9) (30.1) 1,963.6 154.3 10.2 2,117.9 In respect of the group: freeholds include £371.1m (1998 £316.2m) of leaseholds with unexpired terms exceeding 900 years; leaseholds under 50 years to run include £9.7m (1998 £8.2m) with unexpired terms of 20 years or less. The historical cost of properties are: group £3,434.2m (1998 £3,217.2m); company £769.7m (1998 £716.1m). 12 Commitments for Future Expenditure Under contract Board authorisations not contracted 13 Other Tangible Assets At 1 April 1998 Additions Disposals Depreciation for the year At 31 March 1999 1999 £m 102.8 55.8 158.6 Group Company 1998 £m 106.3 57.3 163.6 Cost £m 19.7 6.0 (1.0) 24.7 1999 £m 34.4 8.8 43.2 Depreciation £m (10.0) .8 (2.4) (11.6) 1998 £m 76.1 – 76.1 Net £m 9.7 6.0 (.2) (2.4) 13.1 Other tangible assets comprise computers, motor vehicles, furniture, fixtures and fittings and improvements to group offices. Depreciation for the year includes £0.2m (1998 £0.2m) treated as other property outgoings in Note 2. 55 LAND SECURITIES PLC | Operating and Financial Review Notes to the Financial Statements for the year ended 31 March 1999 14 Investments in Group Undertakings At 1 April 1998 Increase during the year Unrealised valuation surplus (Note 21(b)) At 31 March 1999 Shares £m 4,445.6 – 186.1 4,631.7 Loans £m 183.9 14.5 Total £m 4,629.5 14.5 186.1 198.4 4,830.1 Shares comprise ordinary shares of group undertakings and are stated in accordance with the accounting policy explained in Note 1(f). Shares at 1 April 1998 included valuation surpluses of £2,404.0m. Loans to group undertakings have no fixed repayment dates. The principal group undertakings, all of which are wholly owned, incorporated and operating in the United Kingdom, are noted on page 41. As permitted by Section 231 Companies Act 1985, a complete listing of all of the group undertakings has not been provided on the grounds that the information would be of an unduly excessive length. A complete list of group undertakings will, however, be filed with the Annual Return. Group Company Home Contents Search Next Back 15 Debtors Falling due within one year: Trade debtors Capital debtors Other debtors Prepayments and accrued income Taxation recoverable Falling due after more than one year: ACT recoverable Capital debtors Other debtors 16 Creditors falling due within one year Debentures and loans (Note 17) Overdraft Trade creditors Taxation and Social Security Proposed final dividend ACT on proposed final dividend Capital creditors Other creditors Accruals and deferred income Deferred taxation 1999 £m 21.8 12.0 11.1 26.6 – 71.5 – .5 .5 1.0 1999 £m 1.6 .3 2.2 58.4 120.0 – 65.1 16.7 160.5 – 424.8 1998 £m 27.2 9.5 8.7 24.1 – 69.5 27.6 .4 .5 28.5 1998 £m 1.7 – 1.5 54.6 110.4 27.6 48.4 14.0 160.0 .2 418.4 Group 1999 £m 7.6 3.6 3.9 3.2 40.2 58.5 – – – – 1999 £m 1.5 – – – 1998 £m 5.7 .9 3.2 4.1 25.6 39.5 27.6 – – 27.6 1998 £m 1.6 – – – Company 120.0 110.4 – 12.7 10.6 49.6 – 27.6 11.8 10.0 48.9 – 194.4 210.3 Debentures and loans include £0.6m (1998 £0.6m) and £0.5m (1998 £0.5m) of instalments of borrowings that mature after more than one year repayable by the group and company respectively. 56 Home Contents Search Next Back Operating and Financial Review | LAND SECURITIES PLC Notes to the Financial Statements for the year ended 31 March 1999 17 Debentures, Bonds and Loans U N S E C U R E D 9.762 per cent Unsecured Loan Notes 1990/99 103⁄4 per cent Exchange Bonds due 2004 91⁄2 per cent Bonds due 2007 £200m 9 per cent Bonds due 2020 S E C U R E D 43⁄4 per cent First Mortgage Debenture Stock 1970/2005 61⁄4 per cent Mortgage Debenture 2000/05 61⁄2 per cent Mortgages 2000/05 83⁄4 per cent Mortgage 2001/04 73⁄4 per cent Mortgage 2008 63⁄8 per cent First Mortgage Debenture Stock 2008/13 10 per cent First Mortgage Debenture Stock 2025 10 per cent First Mortgage Debenture Stock 2027 10 per cent First Mortgage Debenture Stock 2030 Sundry mortgage Falling due within one year (Note 16) Falling due after more than one year Group Company 1999 £m 1.0 21.2 200.0 196.0 418.2 12.2 9.1 9.1 10.0 5.7 32.3 400.0 200.0 200.0 – 1998 £m 1.1 21.2 200.0 195.8 418.1 12.4 9.3 9.3 10.0 5.7 32.3 400.0 200.0 200.0 .1 1999 £m 1.0 21.2 200.0 196.0 418.2 9.2 9.1 9.1 10.0 – 32.3 400.0 200.0 200.0 – 1998 £m 1.1 21.2 200.0 195.8 418.1 9.3 9.3 9.3 10.0 – 32.3 400.0 200.0 200.0 – 1,296.6 1,297.2 1,287.9 1,288.3 (1.6) (1.7) (1.5) (1.6) 1,295.0 1,295.5 1,286.4 1,286.7 Secured loans are charged on properties of the company and its group undertakings. From time to time, short term deposits are charged as temporary security until substitutions have been agreed for properties taken out of charge. At 31 March 1999, short term deposits of the group £19.3m (1998 £12.0m) and of the company £14.3m (1998 £12.0m) were charged as temporary security for borrowings. The company has guaranteed £3.0m (1998 £3.1m) of debentures and loans of its group undertakings. Borrowings of group undertakings of £8.7m (1998 £8.9m) are secured by charges on properties of the company and its group undertakings. 18 Convertible Bonds £210m 6 per cent Guaranteed Convertible Bonds due 2007 7 per cent Convertible Bonds due 2008 Group Company 1999 £m 205.7 66.7 272.4 1998 £m 205.2 149.9 355.1 1999 £m – 66.7 66.7 1998 £m – 149.9 149.9 In accordance with the terms of their relevant Trust Deeds: 1) The 6 per cent Guaranteed Convertible Bonds, issued by Land Securities Finance (Jersey) Limited and guaranteed by the company, (i), at the holder’s option may be converted, up to and including 22 March 2007, into 21⁄2 per cent Exchangeable Redeemable Preference Shares in the issuer which are exchangeable for up to a maximum of 24,027,345 ordinary shares of £1 each in Land Securities PLC at 874p per share or (ii), at the option of the issuer may be redeemed on or after 14 April 2002 at par; earlier redemption can only take place if at least 85% of the bonds have been converted into ordinary shares or have been purchased or redeemed and then cancelled. During the year £1,000 of the bonds were converted into the issuing company’s preference shares which were then exchanged for 114 fully paid shares of £1 each. 2) The 7 per cent Convertible Bonds (i), at the holders’ option may be converted, up to and including 23 September 2008, into a maximum of 10,421,568 fully paid shares of £1 each at a conversion price of 640p per share or (ii), at the option of the company, may be redeemed at par. During the year, £83,184,000 of the bonds were converted into 12,997,495 fully paid shares of £1 each. 57 LAND SECURITIES PLC | Operating and Financial Review Notes to the Financial Statements for the year ended 31 March 1999 19 Other Creditors falling due after more than one year Deferred income Deferred taxation Capital creditors Other creditors 20 Called up Share Capital Ordinary shares of £1 each: Authorised Allotted and fully paid During the year shares were allotted as follows: Under the 1989 Profit Sharing Scheme On the exercise of options granted under: 1983 and 1993 Savings Related Share Option Schemes (Note 6) 1984 Executive Share Option Scheme (Note 6) On conversions of: 6 per cent Guaranteed Convertible Bonds due 2007 7 per cent Convertible Bonds due 2008 Group Company 1999 £m 17.5 .1 – 2.5 20.1 1998 £m 15.4 .2 2.4 2.3 20.3 1999 £m – – – 7.0 7.0 1999 £m 1998 £m 5.4 – .6 .9 6.9 1998 £m 720.0 554.3 720.0 541.1 Cash consideration received £m .7 .4 .5 No. of shares 75,437 91,468 96,050 114 12,997,495 1.6 13,260,564 The exercise of all options outstanding at 31 March 1999, granted under the 1983 and 1993 Savings Related Share Option Schemes and the 1984 Executive Share Option Scheme, would result in the issue of a further 868,689 ordinary shares. 21 Reserves (a) G R O U P At 1 April 1998 Premium arising on issues of shares Unrealised surplus on valuation of properties (Note 11(a)) Realised on sales of properties Retained profit for the year (page 44) Amortised discount and issue expenses of bonds At 31 March 1999 Share premium account £m Revaluation reserve £m Other reserves £m Profit and loss account £m 213.1 71.6 (.7) 3,028.7 556.9 661.7 332.9 (75.1) 75.1 51.2 .7 Total £m 4,460.4 71.6 332.9 51.2 284.0 3,286.5 632.0 713.6 4,916.1 Home Contents Search Next Back (b) C O M PA N Y At 1 April 1998 Premium arising on issues of shares Unrealised surplus on valuation of properties (Note 11(b)) Realised on sales of properties Revaluation of shares in group undertakings (Note 14) Retained profit for the year Amortised discount and issue expenses of bonds At 31 March 1999 Land Securities PLC has not presented its own profit and loss account, as permitted by Section 230(1)(b) Companies Act 1985. The retained profit for the year of the company, dealt with in its financial statements, was £50.2m (1998 £35.4m). 154.3 (21.2) 186.1 4,450.8 71.6 154.3 213.1 71.6 50.2 (.3) 186.1 50.2 (1.0) 4,912.0 3,750.0 3,430.8 648.7 698.6 284.0 158.2 179.4 21.2 (.7) 58 Home Contents Search Next Back Operating and Financial Review | LAND SECURITIES PLC Notes to the Financial Statements for the year ended 31 March 1999 22 Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities Operating profit (page 44) Depreciation (Note 13) Decrease in debtors Increase in creditors Net cash inflow from operating activities 23 Analysis of Net Cash Flows (a) M A N A G E M E N T O F L I Q U I D R E S O U R C E S Net decrease/(increase) in short term deposits Sales of corporate bonds Net cash inflow/(outflow) from management of liquid resources Liquid resources comprise short term deposits and corporate bonds which are readily realisable within one year. (b) CASH MOVEMENT IN DEBT Debt due within one year – Repayment of secured debt Debt due within one year – Repayment of unsecured debt Debt due after one year Decrease in debt – Repayment of secured debt 24 Analysis of Net Debt Cash at bank and in hand/(overdraft) Liquid resources Debt due within one year Debt due after one year Net debt 1999 £m 398.5 2.4 2.9 6.1 409.9 1999 £m 45.7 15.0 60.7 1999 £m (.6) (.1) (.7) (.1) (.8) 1998 £m 386.0 1.5 .1 11.9 399.5 1998 £m (66.5) 5.0 (61.5) 1998 £m (15.1) (.1) (15.2) – (15.2) 1 April 1998 £m .1 547.3 (1.7) (1,650.6) (1,104.9) Movements during year 31 March Cash Flow Non-Cash £m (.4) (60.7) .7 .1 (60.3) £m (.6) 83.1 82.5 1999 £m (.3) 486.6 (1.6) (1,567.4) (1,082.7) 59 Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Notes to the Financial Statements for the year ended 31 March 1999 25 Financial Assets and Liabilities This note should be read in conjunction with the comments set out in the Operating and Financial Review on page 29. The group has defined financial assets and liabilities as those assets and liabilities of a financial nature, namely cash, investments and borrowings. Short term debtors/creditors, capital debtors/creditors, taxation and prepayments and accruals have been excluded. All of the group’s financial assets and liabilities are sterling based and at fixed rates. There are no floating rate financial assets or liabilities. F I N A N C I A L A S S E T S The group’s financial assets and their maturity profile are: Assets: Short term investments Cash at bank and in hand Maturing in: One year or less, or on demand Weighted average period of fixed interest rates Weighted average interest rate F I N A N C I A L L I A B I L I T I E S The group’s financial liabilities and their maturity profile (together with that of the company’s) are: Liabilities: Debentures, bonds and other loans (Note 17) Convertible bonds (Note 18) Overdraft (Note 16) 1999 £m 486.6 – 486.6 1999 £m 1998 £m 547.3 .1 547.4 1998 £m 486.6 547.4 105 days 6.1% 77 days 7.3% 1999 £m 1998 £m 1,296.6 1,297.2 272.4 .3 355.1 – 1,569.3 1,652.3 60 Operating and Financial Review | LAND SECURITIES PLC Notes to the Financial Statements for the year ended 31 March 1999 25 Financial Assets and Liabilities continued F I N A N C I A L L I A B I L I T I E S c o n t i n u e d Repayable in: One year or less, or on demand (Note 16) More than one year but no more than two years More than two years but no more than five years More than five years Group Company 1998 £m 1.7 .6 1.8 1999 £m 1.5 .5 11.5 1998 £m 1.6 .5 1.5 1999 £m 1.9 .6 11.7 1,555.1 1,569.3 1,648.2 1,652.3 1,341.1 1,354.6 1,434.6 1,438.2 Weighted average period of fixed interest rates Weighted average interest rate 19.8 years 20.3 years 9.0% 8.9% The amount of debt that is repayable by instalments, where any of the instalments fall due after more than five years, is not material. FA I R VALU E S O F F I N A N C I A L A S S E T S A N D L I A B I L I T I E S Short term investments and cash Debentures, bonds, other loans and overdraft Convertible bonds Group Book Value Fair Value 1999 £m 486.6 1998 £m 547.4 1999 £m 487.8 1998 £m 547.1 (1,296.9) (1,297.2) (1,977.0) (1,760.3) (272.4) (355.1) (316.2) (537.1) Fair value has been calculated by taking the market value, where available, and using a discounted cash flow approach for those financial assets and liabilities that do not have a published market value. It is the intention of the group to repay its debentures, bonds and other loans at maturity. The difference between book value and fair value will not result in any change to the cash outflows of the group unless, at some stage in the future, borrowings are purchased in the market. B O R R O W I N G FAC I L I T I E S The group’s various undrawn committed borrowing facilities are summarised below: Expiring in: One year or less, or on demand More than one year but no more than two years More than two years No derivative contracts were entered into during either of the last two financial years. 1999 £m 100 – 150 250 1998 £m 75 50 125 250 Home Contents Search Next Back 61 Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Ten Year Record based on the Consolidated Financial Statements for the year ended 31 March A S S E T S E M P LOY E D Properties Short term deposits, corporate bonds and cash Other assets F I N A N C E D BY Share capital Reserves E Q U I T Y S H A R E H O L D E R S ’ F U N D S Borrowings Other liabilities R E V E N U E Net rental income Revenue profit * Profit/(loss) on sales of properties Pre-tax profit Profit attributable to shareholders Retained profit for the year E A R N I N G S P E R S H A R E ( p e n c e ) On profit after taxation * On results of property sales after taxation Adjusted earnings per share D I LU T E D E A R N I N G S P E R S H A R E ( p e n c e ) A D J U S T E D D I LU T E D E A R N I N G S P E R S H A R E ( p e n c e ) D I V I D E N D S P E R S H A R E ( p e n c e ) D I V I D E N D C OV E R ( t i m e s ) On profit after taxation * On profit excluding results of property sales after taxation N E T A S S E T S P E R S H A R E ( p e n c e ) D I LU T E D N E T A S S E T S P E R S H A R E ( p e n c e ) M A R K E T P R I C E P E R S H A R E AT 3 1 M A R C H ( p e n c e ) 1999 £m 1998 £m 1997 £m 1996 £m 1995 £m 1994 £m 1993 £m 1992 £m 1991 £m 1990 £m 6,910.5 486.6 85.6 6,435.7 547.4 107.7 5,760.0 486.7 91.6 5,265.7 335.2 94.6 5,169.6 209.6 102.5 5,032.4 241.5 98.7 4,098.6 234.2 93.3 4,300.6 307.2 104.2 4,708.5 168.7 112.1 5,611.1 266.8 125.8 7,482.7 7,090.8 6,338.3 5,695.5 5,481.7 5,372.6 4,426.1 4,712.0 4,989.3 6,003.7 554.3 4,916.1 5,470.4 1,569.3 443.0 541.1 4,460.4 5,001.5 1,652.3 437.0 515.5 3,521.7 4,037.2 1,849.4 451.7 510.2 3,014.3 3,524.5 1,767.2 403.8 510.0 3,023.8 3,533.8 1,572.6 375.3 509.8 2,943.3 3,453.1 1,573.3 346.2 504.8 2,039.5 2,544.3 1,515.6 366.2 504.6 2,295.5 2,800.1 1,516.5 395.4 504.4 2,866.5 3,370.9 1,268.8 349.6 504.1 3,927.6 4,431.7 1,280.5 291.5 7,482.7 7,090.8 6,338.3 5,695.5 5,481.7 5,372.6 4,426.1 4,712.0 4,989.3 6,003.7 427.5 292.7 .6 293.3 216.4 51.2 39.21 (.10) 39.11 38.95 38.86 29.50 1.31 1.31 987 975 820 414.1 265.9 .1 266.0 196.7 45.1 36.84 .23 37.07 36.55 36.77 28.00 1.30 1.31 924 910 1058 405.1 235.7 8.1 243.8 178.4 39.3 34.85 (1.68) 33.17 34.50 32.92 27.00 1.28 1.22 783 774 773 400.6 238.7 (1.1) 237.6 171.9 39.3 33.69 .23 33.92 33.46 33.67 26.00 1.30 1.30 691 688 626 400.0 241.3 3.4 244.7 179.7 52.2 35.23 (.67) 34.56 34.91 34.28 25.00 1.41 1.38 693 691 594 389.4 234.8 2.3 237.1 180.6 58.4 35.66 (.46) 35.20 35.30 34.87 24.00 1.48 1.46 677 676 628 380.7 233.4 (4.3) 229.1 165.7 50.4 32.83 .85 33.68 32.76 33.59 22.85 1.44 1.47 504 504 526 353.6 227.5 .6 228.1 167.9 58.1 33.28 (.66) 32.62 33.19 32.54 21.75 1.53 1.50 555 555 391 316.0 215.2 6.9 222.1 159.9 60.3 31.72 (.87) 30.85 31.66 30.81 19.75 1.61 1.56 668 667 537 260.9 175.1 9.1 184.2 128.6 42.9 25.52 (.88) 24.64 25.50 24.62 17.00 1.50 1.45 879 866 486 * These figures, in respect of 1997 only, are after deducting the cost of terminating interest rate swaps. Properties, reserves and net assets per share reflect valuations of properties made by Knight Frank at each year end. With the introduction of FRS3 effective for the year ended 31 March 1994, comparatives, where appropriate, have been restated. However, revenue profit, adjusted earnings and adjusted diluted earnings per share and an alternative dividend cover, which exclude the results of property sales and other exceptional items, are still disclosed. 62 LAND SECURITIES PLC Major Property Holdings at 31 March 1999 At 31 March 1999 there were around 560 properties within the portfolio. In the lists which follow, the valuation level for inclusion is £10m. Office areas are approximately net and generally exclude basements, storage and car parking spaces. Dates indicate initial construction or later refurbishment (R). FREEHOLD† PART FREEHOLD, PART LEASEHOLD AIR CONDITIONED IN COURSE OF DEVELOPMENT OR REFURBISHMENT SHOPPING CENTRE † Properties shown as freeholds include properties held on leases at peppercorns or low fixed rents for 900 years or more. City, Midtown, West End and Victoria properties: EC1 (cid:4) MITRE HOUSE 160 Aldersgate Street: 188,500 ft2 (17,510 m2) offices, 20 flats and car park, 1990. EC2. (cid:4) VERITAS HOUSE 119/125 Finsbury Pavement: 46,200 ft2 (4,290 m2) offices, 1991. 51/55 GRESHAM STREET 76,000 ft2 (7,060 m2) offices and a restaurant, 1991. (cid:4) MOORGATE HALL 143/171 Moorgate: 65,500 ft2 (6,090 m2) offices and 15,600 ft2 (1,450 m2) store, 1990. (cid:4) DASHWOOD HOUSE 69 Old Broad Street: 115,800 ft2 (10,760 m2) offices, 1975 and reinstatement after bomb damage, 1995. EC3 (cid:2) KNOLLYS HOUSE 1/12 Byward Street: 83,600 ft2 (7,770 m2) offices, bank, post office and 9 shops, 1964, part 1984 (R), part 1988/91 (R), part 1998/99 (R). Part air conditioned. 23/39 EASTCHEAP 18,600 ft2 (1,730 m2) offices, 5 shops and restaurant, part 1986 (R) and part 1988 (R). Part air conditioned. 6/12 FENCHURCH STREET AND 1 PHILPOT LANE 51,400 ft2 (4,780 m2) offices and shop, 1985. 13/23 FENCHURCH STREET 168,100 ft2 (15,620 m2) offices and major retail unit, 1968 and 1984 (R). 109/114 FENCHURCH STREET 71,200 ft2 (6,610 m2) offices and banking space and 2 shops, 1976, part 1991 (R) and part 1993/94/95 (R). 51/54 GRACECHURCH STREET (cid:4) REGIS HOUSE 34,100 ft2 (3,170 m2) offices, part 1981 (R) and part 1990 (R). (cid:4) GRACECHURCH HOUSE 55 Gracechurch Street: 62,300 ft2 (5,790 m2) offices and 10,000 ft2 (930 m2) health club, 1993. 34/36 LIME STREET AND 7/11 CULLUM STREET 36,000 ft2 (3,340 m2) offices and 6 shops, 1974. 37/39 AND 40 LIME STREET AND 4 FENCHURCH AVENUE 101,000 ft2 (9,380 m2) offices, 1971/72 (R) part 1988/90 (R), part 1992/94 (R) and part 1998 (R). (cid:4) NEW LONDON HOUSE 6 London Street: 66,500 ft2 (6,180 m2) offices, 2 shops, 2 restaurants and public house, 1993 (R). ST CLARE HOUSE 28/35 Minories: 77,600 ft2 (7,210 m2) offices and restaurant, part 1977 (R), part 1980/1985 (R), part 1995 (R) and part 1998 (R). 14/15 PHILPOT LANE 32,400 ft2 (3,010 m2) offices, 1986. 1 SEETHING LANE 45,700 ft2 (4,250 m2) offices and restaurant, 1977 (R) and part 1988 (R). (cid:4) TOWER HOUSE 34/40 Trinity Square: 44,600 ft2 (4,140 m2) offices, 1979 (R). EC4 (cid:4) CANNON STREET HOUSE AND MARTIN HOUSE 87,200 ft2 (8,100 m2) offices, 1996 (R). King William Street: 87,600 ft2 (8,140 m2) offices, public house and 5,700 ft2 (530 m2) retail, 1998. 12/16 GOUGH SQUARE 26,900 ft2 (2,500 m2) offices, 1992. 33 KING WILLIAM STREET 130,500 ft2 (12,120 m2) offices and public house, 1983. 50 LUDGATE HILL 118,800 ft2 (11,040 m2) offices, 12 shops, 2 public houses and 4 restaurants, 1985 (R). 26 OLD BAILEY 64,900 ft2 (6,030 m2) offices, 1984 (R). FLEETBANK HOUSE Salisbury Square: 122,400 ft2 (11,370 m2) offices, 1974. 8 SALISBURY SQUARE 115,200 ft2 (10,700 m2) offices, 1989. LINTAS HOUSE New Fetter Lane: 88,000 ft2 (8,180 m2) offices, 1958, and 1999 (R) 21 NEW FETTER LANE 66,900 ft2 (6,220 m2) offices, 1978 (R), 1993 (R) and 1998 (R). WC1 (cid:4) TURNSTILE HOUSE High Holborn: 76,500 ft2 (7,110 m2) aparthotel, 1 shop and restaurant, 1997. (cid:4) (cid:5) 1 THEOBALD’S COURT (formerly Adastral House), Theobald’s Road: 124,000 ft2 (11,520 m2) offices. Home Contents Search Next Back 63 (cid:2) (cid:3) (cid:4) (cid:5) (cid:6) (cid:2) (cid:4) (cid:2) (cid:2) (cid:2) (cid:4) (cid:3) (cid:4) (cid:2) (cid:4) (cid:2) (cid:4) (cid:2) (cid:2) (cid:4) (cid:3) (cid:2) (cid:2) (cid:2) (cid:4) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:4) (cid:2) (cid:4) (cid:2) (cid:4) (cid:2) (cid:4) (cid:2) (cid:4) (cid:2) (cid:4) (cid:4) (cid:2) (cid:2) Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Major Property Holdings at 31 March 1999 (cid:4) (cid:5) 2 THEOBALD’S COURT (formerly Lacon House), Theobald’s Road: 205,000 ft2 (19,040 m2) offices, 2 shops and leisure. WC2 40 STRAND 92,200 ft2 (8,570 m2) offices and 8 shops, 1997 (R). (cid:4) GRAND BUILDINGS Trafalgar Square: 160,100 ft2 (14,870 m2) offices and 35,000 ft2 (3,250 m2) shops, 1991. 7/8 ESSEX STREET 28,100 ft2 (2,610 m2) offices, 1998 (R). W1 (cid:5) 6/17 TOTTENHAM COURT ROAD 56,500 ft2 (5,250 m2) retail and 2,500 ft2 (230 m2) offices. 12/24 OXFORD STREET AND 2-5 TOTTENHAM COURT ROAD 1 store 90,000 ft2 (8,360 m2) and 3 shops 5,300 ft2 (490 m2), pre- war, part 1995 (R) and part 1998. 26/32 OXFORD STREET air conditioned bank, 1 large shop, a kiosk, a restaurant and 11,300 ft2 (1,050 m2) educational use, 1983 (R). (cid:4) OXFORD HOUSE 70/88 Oxford Street: 61,100 ft2 (5,680 m2) offices and 5 shops. Part 1994 (R). 455/473 OXFORD STREET 6 shops, 1963. 475/497 OXFORD STREET AND PARK HOUSE Park Street: 77,100 ft2 (7,160 m2) offices and 9 shops, 1963. 484/504 OXFORD STREET AND GULF HOUSE 88,200 ft2 (8,190 m2) offices and 7 shops, 1957. (cid:4) LONDON HILTON ON PARK LANE 500 rooms, casino and numerous restaurants, 1963. (cid:4) DEVONSHIRE HOUSE Piccadilly: 152,700 ft2 (14,190 m2) offices and 9 showrooms and shops, 1983 (R), part 1994 (R) and part 1996/97 (R). PICCADILLY CIRCUS 44/48 Regent Street, 1/17 Shaftesbury Avenue, Denman Street, Sherwood Street and Glasshouse Street: 2 major retail trading units, 10 shops, kiosk, public house, 3 restaurants, 15,700 ft2 (1,460 m2) offices and 7,200 ft2 (670 m2) of illuminated advertising, part 1977 (R), part 1979 (redevelopment) and part 1985 (R). 7 SOHO SQUARE 47,900 ft2 (4,450 m2) offices, 1995 (R). 1/11 HAY HILL 18,000 ft2 (1,670 m2) offices and 6,600 ft2 (610 m2) retail/showroom, 1987 (R). SW1 (cid:2) BOWATER HOUSE Knightsbridge: 266,100 ft2 (24,720 m2) offices, 1958. 49/75 BUCKINGHAM PALACE ROAD AND 29 BRESSENDEN PLACE 55,400 ft2 (5,150 m2) offices, 136 bedroom hotel, 30 flats and 7 shops, 1964, offices 1994 (R). (cid:2) HAYMARKET HOUSE Haymarket: 80,900 ft2 (7,520 m2) offices and 38,700 ft2 (3,600 m2) of restaurants, 1955, part 1992 (R) and part 1997/98 (R). 10 BROADWAY New Scotland Yard: 384,000 ft2 (35,670 m2) offices, banking space and restaurant, 1966. (cid:4) WELLINGTON HOUSE Buckingham Gate: 53,500 ft2 (4,970 m2) offices, 1978. (cid:4) THE HOME OFFICE 50 Queen Anne’s Gate: 316,000 ft2 (29,360 m2) offices, 1977. PORTLAND HOUSE Stag Place: 296,900 ft2 (27,580 m2) offices and 16,200 ft2 (1,510 m2) basement restaurant, 1959, part 1986/87 (R), part 1992/95 (R) and part 1996/99 (R). (cid:4) ELAND HOUSE Stag Place: 249,400 ft2 (23,170 m2) offices, 1995. (cid:2) GLEN HOUSE Stag Place: 96,600 ft2 (8,970 m2) offices and 17 shops, 1962 and part 1983/84 and 1994 (R). (cid:4) SELBORNE HOUSE Victoria Street: 111,500 ft2 (10,360 m2) offices, 1966. (cid:4) KINGSGATE HOUSE Victoria Street: 152,400 ft2 (14,160 m2) offices and 18 shops, 1987 (R). (cid:4) WESTMINSTER CITY HALL Victoria Street: 169,500 ft2 (15,750 m2) offices and bank, 1965. (cid:4) ESSO HOUSE Victoria Street: 215,900 ft2 (20,060 m2) offices, 2 banks, 14 shops and restaurant, 1963 and part 1991 (R). (cid:4) 25 VICTORIA STREET 47,100 ft2 (4,380 m2) offices and 3,800 ft2 (350 m2) retail,1996. (cid:4) SAGA PETROLEUM HOUSE 50 Victoria Street: 38,700 ft2 (3,600 m2) offices and 10,000 ft2 (930 m2) retail, 1997. 16 PALACE STREET 52,240 ft2 (4,850 m2) offices, 1960. (cid:2) ROEBUCK HOUSE Residential, 116 flats, 1 fitness centre, 1960. (cid:5) ST ALBAN’S HOUSE Haymarket: 46,000 ft2 (4,270 m2) offices and 2 restaurants, 1963 and part 1987 (R). 1 WARWICK ROW 36,600 ft2 (3,400 m2) offices, 1995 (R). SE1 ST CHRISTOPHER HOUSE 80/112 Southwark Street, 596,500 ft2 (55,420 m2) offices, 8 shops, 1960. The aggregate area of offices and retail accommodation including developments and refurbishments owned in the City, Midtown, West End and Victoria, including the properties listed above, amounts to some 7.55m ft2 (701,410 m2) net of offices and approximately 850,000 ft2 (78,970 m2) of retail and restaurants. 64 (cid:2) (cid:2) (cid:4) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:4) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:3) LAND SECURITIES PLC Major Property Holdings at 31 March 1999 ABERDEEN Bon Accord Centre 255,000 ft2 (23,690 m2): 4 stores, 53 shops, food court, 50,000 ft2 (4,650 m2) leisure space, 29,000 ft2 (2,690 m2) offices and car park, 1990. BOOTLE Strand Centre 400,000 ft2 (37,160 m2): Phases I and II: 3 stores, 129 shops, 2 public houses and 7,400 ft2 (690 m2) offices, 1989 (R) and 1998. Home Contents Search Next Back Towns and cities where the Group owns shop and office properties valued at £10m or above: Note: ‘Shops’ in this section denotes number of current tenancies, rather than number of units originally constructed. Stores, supermarkets, banks and combined units are each shown as one tenancy. STRATFORD E15 Stratford Centre 290,000 ft2 (26,940 m2): 6 stores, 54 shops and 27,800 ft2 (2,580 m2) of air conditioned offices, 1976. BALLYMENA Tower Centre 175,000 ft2 (16,260 m2): 4 stores and 62 shops, 1981 and 1999. BASILDON 72 shops, 1958/60, part 1985 (R) and part 1988 (R). BATH 7 shops, 1961. (cid:2) NOTTING HILL GATE W11 93,400 ft2 (8,680 m2) offices, 53 shops, 2 stores and cinema, 1958. (cid:2) BELFAST 10 shops, 1957, part 1984 and 1995. (cid:2) KENSINGTON HIGH STREET AND YOUNG STREET W8 33,000 ft2 (3,070 m2) retail store, 12,300 ft2 (1,140 m2) offices, 6 shops and club, 1920s and part 1971. FULHAM SW6 Empress State Building, Lillie Road: 350,000 ft2 (32,520 m2) offices, 1962. (cid:2) BIRMINGHAM Caxtongate Phase I: 15 shops and 15,000 ft2 (1,390 m2) offices, 1997. (cid:5) BIRMINGHAM Caxtongate Phase II: 7 shops and residential. BIRMINGHAM Commercial Union House, Corporation Street, Martineau Square and Dale End: 222,500 ft2 (20,670 m2) offices, 1 store, 37 shops and car park, 1962 to 1971, 1975 and part 1993 (R). Prospective development. BIRMINGHAM McLaren Building and Londonderry House: 160,000 ft2 (14,860 m2) offices, multi-storey car park, public house and health club, 1970s. BOLTON 20 shops, 1959. Strand Centre, Bootle Caxtongate Phase II, Birmingham BRISTOL 2 stores, 67 shops and 34,400 ft2 (3,200 m2) offices, 1957/1962. CANTERBURY Longmarket 50,000 ft2 (4,650 m2): 16 shops, 1 conservatory restaurant and museum, 1992. CANTERBURY Clocktower: 5 shops and 14,300 ft2 (1,330 m2) offices, 1993. CANTERBURY Whitefriars/St. George’s Street. 1 store, 25 shops, restaurant, 15,000 ft2 (1,390 m2) offices, showroom and public house, 1960s/1970s. Prospective development. CARDIFF St David’s Centre 350,000 ft2 (32,520 m2): 60 shops, 1981 and 1991 (R). St David’s Link: 12 shops and library, 1986. CHELTENHAM Regent Arcade: 4 shops and a share in balance of Centre, 1984. 2 shops and residential, 1997. COVENTRY 46 shops, public house, 13,500 ft2 (1,250 m2) offices and hotel, 1955/1961 and 1991. EALING Broadway Centre (part) 36,500 ft2 (3,390 m2): 10 shops and 21,700 ft2 (2,020 m2) air conditioned offices, 1984. EAST KILBRIDE Princes Mall 150,000 ft2 (13,940 m2): 2 stores, 38 shops, public house and 10,200 ft2 (950 m2) offices, 1994 (R). EAST KILBRIDE The Olympia 350,000 ft2 (32,520 m2): 2 stores, 48 shops, ice rink, 9 screen cinema, library, restaurant, public house, night club, food court and 7,400 ft2 (690 m2) offices, 1989. EXETER 2 stores, 66 shops and 27,800 ft2 (2,580 m2) offices, 1952/1964 and 1971. (cid:2) HARLOW 47 shops, 1956, part 1988 (R). HULL 48 shops, public house and 27,100 ft2 (2,520 m2) offices, 1952/1956. IRVINE Rivergate Centre 375,000 ft2 (34,840 m2): 1 superstore, 5 stores, 60 shops, public house, car park and 104,400 ft2 (9,700 m2) offices, Phase I 1992 (R) and Phase II 1992. 65 (cid:6) (cid:2) (cid:3) (cid:6) (cid:2) (cid:6) (cid:2) (cid:3) (cid:6) (cid:6) (cid:3) (cid:3) (cid:6) (cid:3) (cid:2) (cid:6) (cid:2) (cid:6) (cid:2) (cid:6) (cid:2) (cid:6) Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Major Property Holdings at 31 March 1999 (cid:3) YORK 14 shops, showrooms and offices and Ryedale House 76,000 ft2 (7,060 m2) 1960s. YORK Coppergate Centre 160,000 ft2 (14,860 m2): 3 stores, 18 shops, museum, 19 flats and car park, 1984. KEIGHLEY Airedale Centre 250,000 ft2 (23,230 m2): 77 shops, 5 kiosks, mall café and car park, 1988 (R). KILMARNOCK Burns Centre, 3 Phases 183,000 ft2 (17,000 m2): 3 stores, 36 shops, public house and 18,900 ft2 (1,760 m2) offices, 1975/1979 and 1991 (R). LEEDS White Rose Shopping Centre 650,000 ft2 (60,390 m2): 2 anchor stores, 11 major space units, 71 shops, restaurant and food court, 1997. LIVERPOOL 21 shops and 4,000 ft2 (370 m2) offices, 1950s and 1999. LIVERPOOL (cid:2) (cid:6) St Johns Centre 360,000 ft2 (33,440 m2): 4 stores, 93 shops, 2 public houses, retail market, food court, hotel, car park and Beacon, 1989 (R). LIVINGSTON (cid:2) (cid:6) Almondvale Centre 520,000 ft2 (48,310 m2): Phases I and II: 7 stores, 106 shops, public house, mall café and car parks, Phase I 1989 and 1996 (R), Phase II 1996. (cid:2) (cid:6) MAGHULL Central Square and Westway 61,000 ft2 (5,670 m2): 1 store and 42 shops, 1963/1969. (cid:2) (cid:6) NEWBURY Kennet Centre 240,000 ft2 (22,300 m2): 2 stores, 55 shops, mall café, car park and 8,300 ft2 (770 m2) offices, part 1972. Refurbished and extended 1985/89. (cid:2) (cid:6) NEWTOWNARDS Ards Centre 285,000 ft2 (26,480 m2): 3 stores, 42 shops, 3 kiosks, food court, 10 unit speciality mall, petrol filling station, car park and drive through restaurant, 1976. Refurbished and extended 1995. (cid:2) NOTTINGHAM Alan House: 4 shops and 21,000 ft2 (1,950 m2) offices, 1985 (R). PLYMOUTH 1 store, 49 shops, 1952/1965. (cid:2) READING Station Hill: 86,400 ft2 (8,030 m2) offices and 13 shops, 1966. Hogg Robinson House: 40,000 ft2 (3,720 m2) offices, 1979. SUNDERLAND (cid:5) (cid:6) The Bridges 250,000 ft2 (23,230 m2): Phase I: 3 stores, 81 shops and mall café, 1969 and 1988 (R): Phase II 265,000 ft2 (24,620 m2): 2 stores, 28 shops and car park. (cid:2) (cid:4) UXBRIDGE ONE 142,500 ft2 (13,240 m2) offices and twin cinemas, 1990. (cid:2) (cid:6) WALLSEND The Forum 103,000 ft2 (9,570 m2): 1 store and 45 shops, 1966 and 1996 (R). (cid:2) WALSALL 13 shops, 1970s and 1987. (cid:6) WALSALL Saddlers Centre 185,000 ft2 (17,190 m2): 2 stores, 38 shops, 4 kiosks and car park, 1980 and 1990 (R). St David’s Centre, Cardiff 66 (cid:6) (cid:6) (cid:6) (cid:2) (cid:3) (cid:3) (cid:6) LAND SECURITIES PLC Major Property Holdings at 31 March 1999 Ings Road, Wakefield (cid:2) LIVINGSTON Almondvale: 103,300 ft2 (9,600 m2) 4 retail warehouses and ice rink (under conversion to retail), 1987. (cid:2) MANCHESTER White City Retail Park: 192,000 ft2 (17,840 m2) 11 retail warehouses, 2 restaurants and ten pin bowl, 1990. (cid:2) PLYMOUTH Friary Centre, Exeter Street: 78,700 ft2 (7,310 m2) 2 retail warehouses, 1990. (cid:2) SLOUGH RETAIL PARK Bath Road: 154,200 ft2 (14,330 m2) 6 retail warehouses, 1989 and 1998. (cid:2) STAINES The Causeway: 40,900 ft2 (3,800 m2) 2 retail warehouses, 1995. (cid:2) STOCKTON-ON-TEES 143,800 ft2 (13,360 m2) food superstore 1970 (R) and 4 retail warehouses 1986/87. (cid:2) WAKEFIELD Ings Road: 100,000 ft2 (9,290 m2) food superstore and 2 retail warehouses, 1988, extended 1997/99. (cid:2) WEST THURROCK Lakeside Retail Park: 310,700 ft2 (28,870 m2) 17 retail warehouses and fast food restaurant, 1988, 1989 and 1997. Extension planned. Retail warehouse and food superstore properties: (cid:2) BEXHILL-ON-SEA Ravenside Retail and Leisure Park: 222,350 ft2 (20,660 m2) 9 retail warehouses, food superstore, fast food restaurant, ten pin bowl and swimming pool, 1989. (cid:2) BIRMINGHAM Great Barr: 83,500 ft2 (7,760 m2) hypermarket, 1998. (cid:2) BLACKPOOL RETAIL PARK 121,500 ft2 (11,290 m2) 9 retail warehouses, 1993, 1995 and 1996. Extension planned. (cid:2) BOLTON Manchester Road: 82,100 ft2 (7,630 m2) 6 retail warehouses, 1985, 1989 and 1997. (cid:2) BRISTOL Longwell Green: 73,000 ft2 (6,780 m2) 2 retail warehouses, 1985/86. (cid:2) CHADWELL HEATH (Near Romford): 76,600 ft2 (7,120 m2) 3 retail warehouses, 1988. 15,000 ft2 (1,390 m2): Extension planned. (cid:2) CHESTERFIELD Ravenside Retail Park, Markham Road: 83,200 ft2 (7,730 m2) 5 retail warehouses, 1982 and 1997. (cid:2) DERBY Meteor Centre: 186,080 ft2 (17,290 m2) 11 retail warehouses fast food restaurant and public house, 1988 and 1994. (cid:2) DERBY Wyvern Centre: 121,400 ft2 (11,280 m2) 6 retail warehouses and fast food restaurant, 1990 and 1996. (cid:2) DUNDEE Kingsway Retail Park: 186,800 ft2 (17,350 m2) 7 retail warehouses and fast food restaurant, 1985/87/88/94. Major extension planned. (cid:2) EDMONTON Ravenside Retail Park: 129,500 ft2 (12,030 m2) 4 retail warehouses and fast food restaurant, 1988. (cid:2) ERDINGTON Ravenside Retail Park, Kingsbury Road: 154,000 ft2 (14,310 m2) 8 retail warehouses, 1987 and 1989. Extension planned. GATESHEAD Team Valley, Retail World Retail Park: 371,300 ft2 (34,490 m2) 19 retail warehouses and fast food restaurant, 1987. (cid:2) GLOUCESTER RETAIL PARK Eastern Avenue: 112,500 ft2 (10,450 m2) 4 retail warehouses, 1989. Extension planned. (cid:2) HATFIELD Oldings Corner: 64,600 ft2 (6,000 m2) 3 retail warehouses, 1988. (cid:2) HIGH WYCOMBE London Road: 47,000 ft2 (4,370 m2) 2 retail warehouses, 1988. (cid:2) HULL Priory Way: 95,300 ft2 (8,850 m2) food superstore and retail warehouse, 1984. (cid:2) KEIGHLEY Cavendish Street: 59,700 ft2 (5,550 m2) food superstore, 1985. (cid:2) LIVERPOOL Racecourse Retail Park, Aintree: 269,700 ft2 (25,060 m2) 15 retail warehouses and fast food restaurant, 1986, 1988 and 1990. Home Contents Search Next Back 67 Home Contents Search Next Back LAND SECURITIES PLC | Operating and Financial Review Major Property Holdings at 31 March 1999 (cid:2) HESTON (Near Heathrow) The Harlequin Business Centre: 67,600 ft2 (6,280 m2) two storey offices, 1989. (cid:2) HINCKLEY Dodwells Road: 301,700 ft2 (28,030 m2), 1989. (cid:2) HUNTINGDON 146,700 ft2 (13,630 m2) on Ermine Business Park, 1989 and 1990 and 72,600 ft2 (6,740 m2) on Stukeley Meadows Industrial Estate, 1988. (cid:2) SUNBURY CROSS Hanworth Road (includes Interchange West): 316,000 ft2 (29,360 m2), 1970 and 1976. (cid:2) TAMWORTH Centurion Park: 262,900 ft2 (24,420 m2) high bay warehousing 1996 and 1999. (cid:2) WELWYN GARDEN CITY Bridge Road: 183,700 ft2 (17,070 m2), 1955/61/76 and 8 acres redevelopment site at Bessemer Road South. (cid:2) WEST THURROCK Motherwell Way: 312,900 ft2 (29,070 m2), 1973, 1975 and 1979 and trailer park of 1.28 acres. Lakerise Industrial Estate: 58,600 ft2 (5,440 m2), 1983. (cid:2) WEYBRIDGE 316,700 ft2 (29,420 m2) on Brooklands Industrial Estate, 1984 and extended 1989. In addition to the major holdings the portfolio includes: Shops and/or office properties at other locations in a number of towns listed and in the centres of Aylesbury, Barry, Beaconsfield, Birmingham, Blackpool, Boston, Bournemouth, Brentwood, Bromley, Bury St Edmunds, Cambridge, Chelmsford, Chester, Chippenham, Cirencester, Colchester, Croydon, Durham, Ealing, Epping, Epsom, Erdington, Falkirk, Fleet, Glasgow suburbs, Grantham, Henley on Thames, Hereford, Horsham, Huddersfield, Ipswich, Kettering, Kings Heath, Kingston upon Thames, Leeds, Leicester, Lincoln, London suburbs, Maidstone, Manchester, Marlow, Melton Mowbray, Milngavie, Newcastle-under-Lyme, Newcastle upon Tyne, Newton Aycliffe, Northampton, Norwich, Nuneaton, Perth, Peterborough, Portsmouth, Redhill, Reigate, Rochdale, Rotherham, Rugby, St Albans, Salisbury, Shrewsbury, Southampton, South Shields, Stirling, Sunderland, Swansea, Swindon, Tamworth, Torquay, Tunbridge Wells, Wakefield, Watford, Wokingham, Workington and Wrexham. Retail warehouse properties in Andover, Bletchley, Bradford, Cardiff, Christchurch, Dewsbury, Doncaster, Fareham, Frimley, Halifax, Hendon, Manchester, Oldham, Peterborough, Poole, Rotherham, Sheffield, Stoke on Trent, Swansea, Wolverhampton, Wrexham and York. Warehouse and industrial properties in Abingdon, Barking, Basingstoke, Bourne End, Bracknell, Bradford, Braintree, Caldicot, Cardiff, Chadwell Heath, Chesham, Chester, Colnbrook (2), Coulsdon (2), Coventry, Dunstable, Eastleigh, Enfield, Glasgow (several estates), Hayes, High Wycombe (2), Leeds, Leighton Buzzard, London (Park Royal), Manchester, Northampton, Peterborough, Rochdale, Sheffield, Slough (2), Swanley, Swindon, Walsall and Wimbledon. Outside the City, West End and Victoria, the Group has holdings in virtually all the major cities and towns throughout the United Kingdom which, including developments and refurbishments, total 6.9 m ft2 (641,030 m2) of retail space, 1.84 m ft2 (170,940 m2) of office space, 7.7m ft2 (715,350 m2) of warehouse and industrial space and 4.9m ft2 (455,220 m2) of out of town retail and food superstore space. The whole portfolio contains in excess of 2,800 shops including 117 supermarkets or stores, each with an area in excess of 10,000 ft2 (930 m2). Pump Lane, Hayes Warehouse and industrial properties: (cid:2) (cid:5) BANBURY Middleton Road: 338,900 ft2 (31,480 m2) high bay distribution warehousing, 1995 and 1998. Construction in progress for additional 65,000 ft2 (6,040 m2). (cid:2) BLACKPOOL Squires Gate Industrial Estate: 1,153,900 ft2 (107,200 m2), 1940s. (cid:2) CHANDLERS FORD (Near Southampton) School Lane: 232,000 ft2 (21,550 m2), 1985/88/89. (cid:2) FRIMLEY (Near Camberley): 206,700 ft2 (19,200 m2) on Albany Park, 1982/84. (cid:2) HATFIELD Welham Green: 337,000 ft2 (31,310 m2), 1986 and extended 1988. (cid:2) HESTON (Near Heathrow) Heston Centre and Spitfire Trading Estate: 309,200 ft2 (28,730 m2), 1977/82/84. 68 Home Contents Search Next Back Investor Information Analyses of Equity Shareholdings at 31 March 1999 BY SHAREHOLDER Individuals Nominee Companies Banks Insurance Companies Pension Funds Other Limited Companies Other Corporate Bodies Shareholders No. % Shareholdings No. % 23,767 12,047 233 55 27 1,489 946 61.63 31.24 0.61 0.14 0.07 3.86 2.45 29,476,050 378,907,638 36,050,546 70,173,170 24,257,184 8,126,661 7,345,705 5.32 68.35 6.50 12.66 4.38 1.47 1.32 38,564 100.00 554,336,954 100.00 BY SIZE OF HOLDING up to 500 501 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 50,000 50,001 to 100,000 100,001 to 500,000 500,001 to 1,000,000 1,000,001 and above Shareholders No. % Shareholdings No. % 12,480 11,336 12,138 981 883 240 339 78 89 32.36 29.41 31.47 2.54 2.29 0.62 0.88 0.20 0.23 3,776,767 8,647,986 24,710,405 7,067,076 19,986,423 18,034,016 77,854,561 56,300,287 337,959,433 0.68 1.56 4.46 1.27 3.61 3.25 14.04 10.16 60.97 38,564 100.00 554,336,954 100.00 REGISTRAR Enquiries concerning holdings of ordinary shares, debentures or loan stocks in Land Securities PLC should be addressed to: Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA. Telephone: 01903 502541. Holders of the Company’s ordinary shares, debentures and loan stocks should notify the Registrar promptly of any change of their address. LOW COST SHARE DEALING FACILITY The Company operates with Cazenove & Co. a postal share dealing facil- ity which provides shareholders with a simple, low cost way of buying and selling Land Securities PLC ordinary shares. For further information, or dealing forms, contact: Cazenove & Co., 12 Tokenhouse Yard, London EC2R 7AN. Telephone: 0171 606 1768. PERSONAL EQUITY PLANS (PEPs) The Company’s General and Single Company PEPs, which were previ- ously managed by Bradford & Bingley (PEPs) Limited, were transferred to The Share Centre on 6 April 1999. With effect from that date, no new PEPs may be opened, although existing PEPs can continue for at least the next five years. For further information, contact The Share Centre, St Peter’s House, Market Place, Tring, Herts HP23 4JG. Telephone: 01442 890844. CORPORATE INDIVIDUAL SAVINGS ACCOUNTS (ISAs) The Company has arranged for a Corporate ISA to be managed by Lloyds TSB Registrars, who can be contacted at The Causeway, Worthing, West Sussex BN99 6UY. Telephone: 0870 24 24 244 CAPITAL GAINS TAX For the purpose of capital gains tax, the price of the Company’s ordinary shares at 31 March 1982, adjusted for the capitalisation issue in November 1983, was 205p. SHARE PRICE INFORMATION The latest information on the Land Securities PLC share price is available on the Financial Times Cityline Service. Telephone: 0906 0033133 (calls charged at 60p per minute). REGISTERED OFFICE 5 Strand, London WC2N 5AF Registered in England and Wales: No.551412 OFFICES 5 Strand, London WC2N 5AF (Telephone: 0171 413 9000) and at Birmingham, Glasgow, Kingston and Leeds e-mail: landsec@landsec.co.uk WEBSITE www.landsec.co.uk The paper used within this report has been produced using pulp from sus- tainably managed forests and using manufacturing processes that have been managed to minimise the emis- sions of pollutants. Designed by Stocks Austin Sice Photography by Matthew Weinreb and Ed Hill Typeset by Wordwork plc Printed by Westerham Press Ltd 

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