REG - Land Sec. Group PLC - Preliminary results to 31 March 2015 <Origin Href="QuoteRef">LAND.L</Origin> - Part 2
15/07/2015 18:13
- Part 2: For the preceding part double click ID:nRSS5689Na
2015 2014 (1)
£m £m £m
Like-for-like investment properties 202.2 203.2 (1.0)
Proposed developments - - -
Development programme 21.2 0.3 20.9
Completed developments 11.4 9.7 1.7
Acquisitions since 1 April 2013 1.4 - 1.4
Disposals since 1 April 2013(2) 20.1 39.6 (19.5)
Non-property related income 3.6 4.7 (1.1)
Net rental income 259.9 257.5 2.4
1. The split of net rental income and segment profit before interest between the London Portfolio and the Retail
Portfolio has been restated by £1.3m in the prior year to reflect the impact of properties transferred from the London
Portfolio to the Retail Portfolio during the current year.
2. Includes Non-current assets held for sale.
Net rental income increased by £2.4m as income from developments more than offset lost income on disposals. Net rental
income on like-for-like properties declined by £1.0m; gross rental income on these properties was £6.0m higher but this was
more than offset by £3.7m of development feasibility expenditure at Piccadilly Lights, W1, where the scheme was not
sufficiently advanced for costs to be capitalised, £0.8m of void related costs for space which is undergoing refurbishment
and a £1.7m reduction in other income where the prior period benefitted from a surrender receipt and a rights of light
receipt.
The development programme is driven by new lettings at 62 Buckingham Gate, SW1 and the recognition of rent at 20 Fenchurch
Street, EC3 following practical completion. Completed developments contribute a further £1.7m following lettings achieved
at 123 Victoria Street, SW1. Net rental income on properties sold since 1 April 2013 declined by £19.5m largely due to the
disposals in the prior year with the most significant being Bankside 2 & 3, SE1.
Non-property related income decreased by £1.1m driven by a provision against management fees in respect of our long-term
contract at Lodge Hill, Chattenden.
Outlook
Our view on supply in the short-term is unchanged: there will remain a shortage of prime office space to let in London and
we expect rental values to continue to rise. Our focus is on completing and letting our development programme. We have 1.1m
sq ft of well-specified space to let in well-connected locations, so we have plenty of opportunity to capture rising rental
values in these market conditions.
Our principal risks
Principal risks and uncertainties
The Company has identified certain principal risks and uncertainties that could prevent the Group from achieving its
strategic objectives and has assessed how these risks could best be mitigated through a combination of internal controls,
risk management and the purchase of insurance cover. These risks are reviewed and updated on a regular basis and were last
formally assessed in March 2015.
A full description of the principal risks and uncertainties faced by the Group, together with an assessment of their impact
is set out below. Our approach to the management and mitigation of these risks is included in the Company's 2015 Annual
Report.
Risk description Impact
Customers
· Concerns over the economic recovery.· Pressure on consumer spending. · Shift in customer demand with consequent impact on new lettings, renewal of existing leases and rental growth.· Retailers unable to meet existing rental commitments.
Market cyclicality
· Volatility and speed of change of asset valuations and market conditions. · Reduces liquidity and impacts relative property performance.
Acquisitions
· Inability to acquire new assets to replace properties that have been sold. · Reduction in revenue profits.· Reduction in potential future development sites.
Liability structure
· Lack of availability of bank funding. · Increased cost of borrowing.· Limits ability to refinance existing debt maturities and fund forward cash requirements.
· Liability structure is unable to adapt to changing asset strategy or property values. · Bank debt not able to be drawn.· Unable to raise new debt or no flexible debt to repay.· Potentially constrains business decisions.
Development
· Occupiers reluctant to enter into commitments to take new space in our developments.· Subcontractor failure. · Negative valuation movements.· Reduction in income.· Delay to development increasing costs.
People
· Inability to attract, retain and develop the right people. · Lack the skills necessary to deliver the business objectives.
Risk description Impact
Environment
· Properties do not comply with legislation or meet customer expectations. · Increased cost base.· Inability to attract or retain customers.· Premature obsolescence and loss of asset value.
Health and safety
· Accidents causing injury to employees, contractors, occupiers and visitors to our properties. · Criminal/civil proceedings and resultant reputational damage.· Delays to building projects and can restrict access to shopping centres.
· Terrorist incident at a property. · Loss of consumer confidence with consequent impact on new lettings, renewal of existing leases and rental growth.· Loss of income.
Statement of directors' responsibilities in respect of the Annual Report and the financial statements
The Annual Report 2015 contains the following statements regarding responsibility for the financial statements and business
reviews included therein.
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
have prepared the Group and Parent Company financial statements in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs). Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit and
loss of the Group and the Company for that period.
In preparing these financial statements the Directors are required to:
· select suitable accounting policies in accordance with IAS 8, 'Accounting Policies, Changes in Accounting Estimates
and Errors' and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
· state that the Group and Company has complied with IFRSs, subject to any material departures disclosed and explained
in the financial statements;
· provide additional disclosures when compliance with the specific requirements of IFRSs is insufficient to enable
users to understand the impact of particular transactions, other events and conditions on the Group and Company's financial
position and performance; and
· prepare the Group and Company's financial statements on a going concern basis, unless it is inappropriate to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and
Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the
Company to enable them to ensure that the Annual Report complies with the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS regulation. They are also responsible for safeguarding the assets of the Group
and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Directors' responsibility statement under the Disclosure and Transparency Rules
Each of the Directors, whose names and functions are listed below, confirm that:
· to the best of their knowledge, the Group financial statements, which have been prepared in accordance with IFRSs,
give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
· to the best of their knowledge, the Company financial statements prepared in accordance with IFRSs give a true and
fair view of the assets, liabilities, financial position, performance and cash flows of the Company; and
· to the best of their knowledge, the Strategic Report contained in the Annual Report includes a fair review of the
development and performance of the business and the position of the Group and the Company, together with a description of
the principal risks and uncertainties faced by the Group and the Company.
Directors' responsibility statement under the UK Corporate Governance Code
Each of the Directors confirm that to the best of their knowledge, the Annual Report taken as a whole, is fair, balanced
and understandable and provides the information necessary for shareholders to assess the Group's and Company's performance,
business model and strategy.
A copy of the financial statements of the Group will be placed on the Company's website. The Directors are responsible for
the maintenance and integrity of statutory and audited information on the Company's website at www.landsecurities.com.
Information published on the internet is accessible in many countries with different legal requirements. Legislation in the
United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
The Directors of Land Securities Group PLC as at the date of this announcement are as set out below:
Dame Alison Carnwath, Chairman*
Robert Noel, Chief Executive
Martin Greenslade, Chief Financial Officer
Kevin O'Byrne, Senior Independent Director*
Chris Bartram*
Simon Palley*
Stacey Rauch*
Cressida Hogg CBE*
Edward Bonham Carter*
*Non-executive Directors
By order of the Board
Michael Arnaouti
Group Company Secretary
18 May 2015
Financial statements
Income statement Year ended 31 March 2015 Year ended 31 March 2014
Revenue Capital and other items Total Revenue Capital andother items Total
profit profit
Notes £m £m £m £m £m £m
Revenue 3 711.2 59.2 770.4 693.4 23.1 716.5
Costs 4 (258.7) (47.9) (306.6) (240.5) (12.8) (253.3)
452.5 11.3 463.8 452.9 10.3 463.2
Profit on disposal of investment properties 2 - 107.1 107.1 - 15.6 15.6
Profit on disposal of investments in joint ventures 2 - 3.3 3.3 - 2.5 2.5
Net surplus on revaluation of investment properties 10 - 1,770.6 1,770.6 - 606.6 606.6
Release of impairment of trading properties 12 - 1.9 1.9 - 5.3 5.3
Operating profit 452.5 1,894.2 2,346.7 452.9 640.3 1,093.2
Share of post-tax profit from joint ventures 11 32.0 293.8 325.8 34.7 160.8 195.5
Interest income 5 29.4 - 29.4 25.2 12.5 37.7
Interest expense 5 (184.8) (64.6) (249.4) (193.2) (23.7) (216.9)
Revaluation of redemption liabilities - (8.5) (8.5) - (5.6) (5.6)
Net gain on business combination 17 - 2.2 2.2 - 5.0 5.0
Impairment of goodwill 17 - (29.7) (29.7) - - -
Profit before tax 329.1 2,087.4 2,416.5 319.6 789.3 1,108.9
Taxation - 0.3 0.3 - 7.7 7.7
Profit for the financial year attributable to owners of the parent 329.1 2,087.7 2,416.8 319.6 797.0 1,116.6
Earnings per share attributable to owners of the parent (pence):
Basic earnings per share 7 306.1 142.3
Diluted earnings per share 7 304.7 141.8
Statement of comprehensive income Year ended 31 March 2015 Year ended 31 March 2014
Total Total
Notes £m £m
Profit for the financial year attributable to owners of the parent 2,416.8 1,116.6
Items that may be subsequently reclassified
to the income statement:
Share of joint ventures' fair value movements on interest- 11 (1.7) 3.5
rate swaps treated as cash flow hedges
Items that will not be subsequently reclassified
to the income statement:
Re-measurement gain/(losses) on defined benefit pension scheme 3.7 (7.8)
Deferred tax on re-measurement gain on defined benefit pension scheme (1.5) -
Other comprehensive income for the financial year attributable to owners of the parent 0.5 (4.3)
Total comprehensive income for the financial year attributable to owners of the parent 2,417.3 1,112.3
Balance sheets
Group Company
2015 2014 2015 2014
Notes £m £m £m £m
Non-current assets
Investment properties 10 12,158.0 9,847.7 - -
Intangible assets 17 34.7 - - -
Other property, plant and equipment 9.6 7.3 - -
Net investment in finance leases 185.1 186.9 - -
Loan investment 49.5 50.0 - -
Investments in joint ventures 11 1,433.5 1,443.3 - -
Investments in subsidiary undertakings - - 6,192.2 6,186.2
Other investments 12.8 - - -
Trade and other receivables 54.0 34.3 - -
Derivative financial instruments - 5.3 - -
Pension surplus 7.0 2.3 - -
Total non-current assets 13,944.2 11,577.1 6,192.2 6,186.2
Current assets
Trading properties and long-term development contracts 12 222.3 192.9 - -
Trade and other receivables 402.7 366.3 14.8 14.2
Monies held in restricted accounts and deposits 15 10.4 14.5 - -
Cash and cash equivalents 16 14.3 20.9 0.1 0.1
Total current assets 649.7 594.6 14.9 14.3
Non-current assets held for sale 18 283.4 - - -
Total assets 14,877.3 12,171.7 6,207.1 6,200.5
Current liabilities
Borrowings 14 (190.7) (513.2) - -
Trade and other payables (367.3) (319.5) (1,108.2) (823.7)
Provisions (2.6) (3.6) - -
Derivative financial instruments (3.8) (5.5) - -
Current tax liabilities (3.7) (2.9) - -
Total current liabilities (568.1) (844.7) (1,108.2) (823.7)
Non-current liabilities
Borrowings 14 (3,593.0) (2,849.0) - -
Trade and other payables (29.6) (23.6) - -
Derivative financial instruments (37.7) (3.5) - -
Redemption liabilities (35.3) (32.6) - -
Deferred tax (7.3) - - -
Total non-current liabilities (3,702.9) (2,908.7) - -
Total liabilities (4,271.0) (3,753.4) (1,108.2) (823.7)
Net assets 10,606.3 8,418.3 5,098.9 5,376.8
Equity
Capital and reserves attributable to the owners of the parent
Ordinary shares 80.1 79.9 80.1 79.9
Share premium 789.4 788.3 789.4 788.3
Capital redemption reserve 30.5 30.5 30.5 30.5
Merger reserve - - 373.6 373.6
Share-based payments 8.7 6.3 8.7 6.3
Retained earnings 9,708.7 7,522.5 3,816.6 4,098.2
Own shares (11.1) (9.2) - -
Total equity 10,606.3 8,418.3 5,098.9 5,376.8
The financial statements were approved by the Board of Directors on 18 May 2015 and were signed on its behalf by:
R M Noel M F Greenslade
Directors
Statement of changes in equity Group
Attributable to owners of the parent
Ordinary shares Share premium Capital redemption reserve Share-based payments Retained earnings Own Total
shares equity
£m £m £m £m £m £m £m
At 1 April 2013 79.2 787.6 30.5 6.8 6,590.3 (7.7) 7,486.7
Total comprehensive income for the year ended 31 March 2014 - - - - 1,112.3 - 1,112.3
Transactions with owners:
Exercise of options - 1.4 - - - - 1.4
Dividends to owners of the parent 0.7 (0.7) - - (175.4) - (175.4)
Fair value of share-based payments - - - 5.5 - - 5.5
Release on exercise of share options - - - (6.0) 6.0 - -
Settlement and transfer of shares to employees on exercise of share options, net of proceeds - - - - (10.3) 14.8 4.5
Acquisition of own shares and treasury shares - - - - (0.4) (16.3) (16.7)
Total transactions with owners of the parent 0.7 0.7 - (0.5) (180.1) (1.5) (180.7)
At 1 April 2014 79.9 788.3 30.5 6.3 7,522.5 (9.2) 8,418.3
Total comprehensive income for the year ended 31 March 2015 - - - - 2,417.3 - 2,417.3
Transactions with owners:
Exercise of options - 1.3 - - - - 1.3
Dividends to owners of the parent 0.2 (0.2) - - (229.8) - (229.8)
Fair value of share-based payments - - - 6.0 - - 6.0
Release on exercise of share options - - - (3.6) 3.6 - -
Settlement and transfer of shares to employees on exercise of share options, net of proceeds - - - - (4.7) 9.9 5.2
Acquisition of own shares - - - - (0.2) (11.8) (12.0)
Total transactions with owners of the parent 0.2 1.1 - 2.4 (231.1) (1.9) (229.3)
At 31 March 2015 80.1 789.4 30.5 8.7 9,708.7 (11.1) 10,606.3
Statement of changes in equity Company
Ordinary shares Share premium Capital redemption reserve Merger reserve Share-based payments Retained earnings Total
equity
£m £m £m £m £m £m £m
At 1 April 2013 79.2 787.6 30.5 373.6 6.8 4,315.6 5,593.3
Loss for the year ended 31 March 2014 - - - - - (47.7) (47.7)
Exercise of options - 1.4 - - - - 1.4
Dividends paid to owners of the parent 0.7 (0.7) - - - (175.4) (175.4)
Fair value of share-based payments - - - - 5.5 - 5.5
Release on exercise of share options - - - - (6.0) 6.0 -
Purchase of treasury shares - - - - - (0.3) (0.3)
At 1 April 2014 79.9 788.3 30.5 373.6 6.3 4,098.2 5,376.8
Loss for the year ended 31 March 2015 - - - - - (55.4) (55.4)
Exercise of options - 1.3 - - - - 1.3
Dividends paid to owners of the parent 0.2 (0.2) - - - (229.8) (229.8)
Fair value of share-based payments - - - - 6.0 - 6.0
Release on exercise of share options - - - - (3.6) 3.6 -
At 31 March 2015 80.1 789.4 30.5 373.6 8.7 3,816.6 5,098.9
Statement of cash flows for the year ended 31 March 2015 Group Company
2015 2014 2015 2014
Notes £m £m £m £m
Cash flows from operating activities
Net cash generated from operations 9 447.5 430.6 - -
Interest received 8.1 9.1 - -
Interest paid (198.3) (251.4) - -
Employer contributions to defined benefit pension scheme (1.9) (4.8) - -
Capital expenditure on trading properties (50.7) (32.7) - -
Disposal of trading properties 28.8 21.7 - -
Corporation tax paid - (13.9) - -
Net cash inflow from operating activities 233.5 158.6 - -
Cash flows from investing activities
Investment property development expenditure (196.2) (86.6) - -
Acquisition of investment properties and other investments (105.7) (3.7) - -
Acquisitions treated as business combinations (net of cash acquired) (699.3) - - -
Other investment property related expenditure (74.1) (135.5) - -
Disposal of investment properties 466.7 679.1 - -
Expenditure on non-property related non-current assets (4.4) (1.6) - -
Disposal of joint ventures 275.2 142.8 - -
Cash contributed to joint ventures 11 (16.7) (4.7) - -
Loan advances to joint ventures 11 (153.9) (117.1) - -
Loan repayments by joint ventures 11 37.0 10.9 - -
Distributions from joint ventures 11 59.7 27.4 - -
Net cash (outflow)/inflow from investing activities (411.7) 511.0 - -
Cash flows from financing activities
Cash received on issue of shares arising from exercise of share options 6.5 6.0 - -
Purchase of own shares and treasury shares (12.0) (16.0) - -
Increase in investment in subsidiary undertaking (X-Leisure) - (119.7) - -
Proceeds from new loans (net of finance fees) 14 419.9 496.9 - -
Repayment of loans 14 (13.6) (911.3) - -
Recapitalisation of non-wholly owned subsidiary - 15.0 - -
Decrease in monies held in restricted accounts and deposits 15 4.1 16.4 - -
Decrease in finance leases payable (1.4) (0.1) - -
Dividends paid to owners of the parent 8 (229.4) (175.6) - -
Distributions paid by non-wholly owned subsidiaries (2.5) (2.0) - -
Net cash inflow/(outflow) from financing activities 171.6 (690.4) - -
Decrease in cash and cash equivalents for the year (6.6) (20.8) - -
Cash and cash equivalents at the beginning of the year 20.9 41.7 0.1 0.1
Cash and cash equivalents at the end of the year 16 14.3 20.9 0.1 0.1
The Company cash flow statement excludes transactions, including the payment of dividends, which are settled on the
Company's behalf by other Group undertakings.
Notes to the financial statements
1. Basis of preparation and consolidation
Basis of preparation
These financial statements have been prepared on a going concern basis and in accordance with International Financial
Reporting Standards as adopted by the EU (IFRSs), IFRIC Interpretations and the Companies Act 2006 applicable to companies
reporting under IFRSs. The financial statements have been prepared in Pounds Sterling (rounded to the nearest hundred
thousand), which is the presentation currency of the Group (Land Securities Group PLC and all of its subsidiary
undertakings), and under the historical cost convention as modified by the revaluation of investment property,
available-for-sale investments, derivative financial instruments and pension assets.
The preparation of financial statements in conformity with generally accepted accounting practice (GAAP) requires the use
of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those
estimates.
The accounting policies are consistent with those applied in the year ended 31 March 2014, as amended to reflect the
adoption of the new Standards, Amendments to Standards and Interpretations which are mandatory for the year ended 31 March
2015.
The following accounting standards or interpretations were adopted for the year ended 31 March 2015 but have not had a
material impact on the Group:
· IFRS 10 'Consolidated Financial Statements'
· IFRS 11 'Joint Arrangements'
· IFRS 12 'Disclosure of Interests in Other Entities'
· IAS 27 (revised) 'Separate Financial Statements'
· IAS 28 (revised) 'Investments in Associates and Joint Ventures'
· IAS 32 (amendment) 'Financial instruments: Presentation' - Offsetting financial assets and financial liabilities
· IAS 36 (amendment) 'Impairment of Assets' - Recoverable amount disclosures for non-financial assets
· IAS 39 (amendment) 'Financial Instruments: Recognition and Measurement' - Novation of derivatives and continuation
of hedge accounting
· IFRIC 21 'Levies'
On 18 May 2015, the consolidated financial statements of the Group and this preliminary announcement were authorised for
issue in accordance with a resolution of the Directors and will be delivered to the Registrar of Companies following the
Group's Annual General Meeting. Statutory accounts for the year ended 31 March 2014 have been filed unqualified and do not
contain any statement under Section 498(2) or Section 498(3) of the Companies Act 2006. The annual financial information
presented in this preliminary announcement for the year ended 31 March 2015 is based on, and consistent with, the financial
information in the Group's audited financial statements for the year ended 31 March 2015. The audit report on these
financial statements is unqualified and did not contain a statement under Section 498(2) or 498(3) of the Companies Act
2006. This preliminary announcement does not constitute statutory financial statements of the Group within the meaning of
Section 235 of the Companies Act 2006. Whilst the information included in this preliminary announcement has been prepared
in accordance with the recognition and measurement criteria of IFRSs, this announcement does not itself contain sufficient
information to comply with IFRSs.
A copy of the Group's Annual Report for the year ended 31 March 2014 can be found at www.landsecurities.com/investors.
Land Securities Group PLC has not presented its own statement of comprehensive income (and separate income statement), as
permitted by Section 408 of Companies Act 2006. The loss for the year of the Company, dealt with in its financial
statements, was £55.4m (2014: a loss of £47.7m). The merger reserve arose on 6 September 2002 when the Company acquired
100% of the issued share capital of Land Securities PLC. The merger reserve represents the excess of the cost of
acquisition over the nominal value of the shares issued by the Company to acquire Land Securities PLC. The merger reserve
does not represent a realised or distributable profit. The capital redemption reserve represents the nominal value of
cancelled shares.
Basis of consolidation
The consolidated financial statements for the year ended 31 March 2015 incorporate the financial statements of Land
Securities Group PLC (the Company) and all its subsidiary undertakings (the Group). Subsidiary undertakings are those
entities controlled by the Company. Control exists where an entity is exposed to variable returns and has the ability to
affect those returns through its power over the investee.
The results of subsidiaries and joint ventures acquired or disposed of during the year are included from the effective date
of acquisition or to the effective date of disposal. Accounting practices of subsidiaries and joint ventures which differ
from Group accounting policies are adjusted on consolidation.
Business combinations are accounted for under the acquisition method. Any excess of the purchase price of business
combinations over the fair value of the assets, liabilities and contingent liabilities acquired and resulting deferred tax
thereon is recognised as goodwill. Any discount received is credited to the income statement in the year of acquisition as
a 'gain on business combination'. The Group recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the
recognised amounts of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred. If the
business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity
interest in the acquiree is re-measured to fair value at the acquisition date and any gains or losses arising from such
re-measurement are recognised in the income statement.
Joint arrangements are those entities over whose activities the Group has joint control, established by contractual
agreement. Interests in joint arrangements are accounted for as either a joint venture or a joint operation as permitted by
IFRS 11 'Joint Arrangements'. A joint arrangement is accounted for as a joint venture when the Group, along with the other
parties that have joint control of the arrangement, have rights to the net assets of the arrangement. Joint ventures are
equity accounted in accordance with IAS 28 (revised). The equity method requires the Group's share of the joint venture's
post-tax profit or loss for the year to be presented separately in the income statement and the Group's share of the joint
venture's net assets to be presented separately in the balance sheet. Joint ventures with net liabilities are carried at
zero value in the balance sheet where there is no commitment to fund the deficit and any distributions are included in the
consolidated income statement for the year.
A joint arrangement is accounted for as a joint operation when the Group, along with the parties that have joint control of
the arrangement, have rights to the assets and obligations for the liabilities relating to the arrangement. Joint
operations are accounted for by including the Group's share of the assets, liabilities, income and expenses on a
line-by-line basis.
Intra-group balances and any unrealised gains and losses arising from intra-group transactions are eliminated in preparing
the consolidated financial statements. Unrealised gains arising from transactions with joint ventures are eliminated to the
extent of the Group's interest in the joint venture concerned. Unrealised losses are eliminated in the same way, but only
to the extent that there is no evidence of impairment.
A number of the financial measures used internally by the Group to measure performance include the results of partly-owned
subsidiaries and joint ventures on a proportionate basis. Measures that are described as being on a proportionate basis
include the Group's share of joint ventures on a line by line basis and are adjusted to exclude the non-owned elements of
our subsidiaries. This is in contrast to the Group's statutory financial statements, where the Group applies equity
accounting to its interest in joint ventures, presenting its interest as one line on the income statement and balance
sheet, and consolidating all subsidiaries at 100% with any non-owned element being adjusted as a non-controlling interest
or redemption liability as appropriate. Measures described as being prepared on a proportionate basis are non-GAAP measures
and therefore not presented in accordance with IFRSs.
Revenue profit is the Group's measure of underlying pre-tax profit, which is used by senior management to assess the
Group's income performance. It excludes all items of a capital nature, such as valuation movements and profits and losses
on the disposal of investment properties, as well as one-off items. A full definition of revenue profit is given in the
glossary. The components of revenue profit are presented on a proportionate basis in note 2. Revenue profit is a non-GAAP
measure.
2. Segmental information
The Group's operations are organised into two operating segments, being the Retail Portfolio and the London Portfolio. The
London Portfolio includes all our London offices and central London shops and the Retail Portfolio includes all our
shopping centres and shops (excluding central London shops), hotels and leisure assets and retail warehouse properties. All
of the Group's operations are in the UK.
Management has determined the Group's operating segments based on the information reviewed by senior management to make
strategic decisions. During the year, the chief operating decision maker was the Executive Committee (ExecCom), which
comprised the Executive Directors, the managing directors of the Retail and London portfolios, the Group General Counsel
and Company Secretary, and the Group HR Director. The information presented to ExecCom includes reports from all functions
of the business as well as strategy, financial planning, succession planning, organisational development and Group-wide
policies.
The Group's primary measure of underlying profit before tax is revenue profit. However, segment profit is the lowest level
to which the profit arising from the on-going operations of the Group is analysed between the two segments. The Group
manages its financing structure, with the exception of joint ventures, on a pooled basis and, as such, debt facilities and
interest charges (other than those relating to joint ventures) are not specific to a particular segment. Unallocated income
and expenses (Group services) are items incurred centrally which are neither directly attributable nor can be reasonably
allocated to individual segments.
The Group's financial performance is not impacted by seasonal fluctuations.
Year ended 31 March 2015
Retail Portfolio London Portfolio Total
Revenue profit Group£m Joint ventures£m Total£m Group£m Joint ventures£m Total£m Group(1)£m Joint ventures£m Total£m
Rental income 327.8 49.1 376.9 244.9 21.5 266.4 572.7 70.6 643.3
Finance lease interest 1.4 0.1 1.5 8.9 - 8.9 10.3 0.1 10.4
Gross rental income (before rents payable) 329.2 49.2 378.4 253.8 21.5 275.3 583.0 70.7 653.7
Rents payable(2) (9.1) (1.6) (10.7) (2.2) - (2.2) (11.3) (1.6) (12.9)
Gross rental income (after rents payable) 320.1 47.6 367.7 251.6 21.5 273.1 571.7 69.1 640.8
Service charge income 49.6 7.1 56.7 40.1 2.6 42.7 89.7 9.7 99.4
Service charge expense (51.6) (7.9) (59.5) (39.0) (3.1) (42.1) (90.6) (11.0) (101.6)
Net service charge (expense)/income (2.0) (0.8) (2.8) 1.1 (0.5) 0.6 (0.9) (1.3) (2.2)
Other property related income 18.5 1.1 19.6 15.9 0.7 16.6 34.4 1.8 36.2
Direct property expenditure (37.4) (7.5) (44.9) (27.3) (3.1) (30.4) (64.7) (10.6) (75.3)
Net rental income 299.2 40.4 339.6 241.3 18.6 259.9 540.5 59.0 599.5
Indirect property expenditure (27.6) (1.8) (29.4) (19.9) (0.9) (20.8) (47.5) (2.7) (50.2)
Depreciation (0.3) - (0.3) (0.8) - (0.8) (1.1) - (1.1)
Segment profit before interest 271.3 38.6 309.9 220.6 17.7 238.3 491.9 56.3 548.2
Joint venture net interest expense - (6.8) (6.8) - (17.5) (17.5) - (24.3) (24.3)
Segment profit 271.3 31.8 303.1 220.6 0.2 220.8 491.9 32.0 523.9
Group services - other income 4.1 - 4.1
- expense (43.5) - (43.5)
Interest income 29.4 - 29.4
Interest expense (184.8) - (184.8)
Revenue profit 297.1 32.0 329.1
1. Group income figures shown in this column are included in note 3 and agree to the revenue figure included in the
revenue profit column in the income statement.
2. Included within rents payable is finance lease interest payable of £1.2m and £0.4m for the Retail and London
portfolios, respectively.
Reconciliation of revenue profit to profit before tax Total
Group£m Joint ventures£m Total£m
Revenue profit 297.1 32.0 329.1
Capital and other items
Impairment of long-term development contracts (11.3) - (11.3)
Profit on disposal of trading properties 29.8 1.7 31.5
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