- Part 4: For the preceding part double click ID:nRSR4610Fc
- 5 5
Profit on disposal of investment properties 1 - - - - 4 3 1 4
Profit before tax 87 85 63 102 20 24 191 9 200
Taxation - - (1) - - - (1) - (1)
Post-tax profit 87 85 62 102 20 24 190 9 199
Other comprehensive income - - - - - - - - -
Total comprehensive income 87 85 62 102 20 24 190 9 199
50% 50% 50% 50% 50% 50%
Group share of total comprehensive income 44 42 31 51 10 12 190 9 199
1. Revenue includes gross rental income (before rents payable), service charge income, other property related income,
trading properties disposal proceeds and income from long-term development contracts
2017
Joint ventures 20 Fenchurch Street Limited Partnership Nova, Victoria Metro Shopping Fund Limited Partnership St. David's Limited Partnership Westgate Oxford Alliance Partnership The Oriana Limited Partnership Individually material Other Total
JVs (Group share)
Balance sheet 100% 100% 100% 100% 100% 100% 50% Group share Group share
£m £m £m £m £m £m £m £m £m
Investment properties(1) 1,046 809 376 708 412 93 1,722 41 1,763
Non-current assets 1,046 809 376 708 412 93 1,722 41 1,763
Cash and cash equivalents 16 43 6 4 10 13 46 3 49
Other current assets 93 195 7 21 15 28 180 14 194
Current assets 109 238 13 25 25 41 226 17 243
Total assets 1,155 1,047 389 733 437 134 1,948 58 2,006
Trade and other payables and provisions (100) (173) (39) (12) (32) (2) (179) (5) (184)
Current liabilities (100) (173) (39) (12) (32) (2) (179) (5) (184)
Non-current liabilities - - (142) (16) - (17) (88) - (88)
Non-current liabilities - - (142) (16) - (17) (88) - (88)
Total liabilities (100) (173) (181) (28) (32) (19) (267) (5) (272)
Net assets 1,055 874 208 705 405 115 1,681 53 1,734
Market value of investment properties(1) 1,135 815 379 707 411 93 1,770 42 1,812
Net (debt)/cash 16 43 (166) (12) 10 13 (48) 2 (46)
2016
Joint ventures 20 Fenchurch Street Limited Partnership Nova, Victoria Metro Shopping Fund Limited Partnership St. David's Limited Partnership Westgate Oxford Alliance Partnership The Oriana Limited Partnership Individually material Other Total
JVs (Group share
Balance sheet 100% 100% 100% 100% 100% 100% 50% Group share Group share
£m £m £m £m £m £m £m £m £m
Investment properties(1) 1,008 680 378 716 248 159 1,594 36 1,630
Non-current assets 1,008 680 378 716 248 159 1,594 36 1,630
Cash and cash equivalents 12 12 7 7 9 26 37 6 43
Other current assets 71 259 6 21 1 34 196 40 236
Current assets 83 271 13 28 10 60 233 46 279
Total assets 1,091 951 391 744 258 219 1,827 82 1,909
Trade and other payables and provisions (109) (122) (11) (13) (6) (29) (145) (9) (154)
Current liabilities (109) (122) (11) (13) (6) (29) (145) (9) (154)
Non-current financial liabilities - - (174) - - - (87) - (87)
Non-current liabilities - - (174) - - - (87) - (87)
Total liabilities (109) (122) (185) (13) (6) (29) (232) (9) (241)
Net assets 982 829 206 731 252 190 1,595 73 1,668
Market value of investment properties(1) 1,075 680 381 732 247 159 1,637 36 1,673
Net (debt)/cash 12 12 (167) 7 9 26 (50) 6 (44)
1. The difference between the book value and the market value is the amount recognised in respect of lease incentives,
head leases capitalised and properties treated as finance leases, where applicable.
Joint ventures 20 Fenchurch Street Limited Partnership Nova, Victoria Metro Shopping Fund Limited Partnership St. David's Limited Partnership Westgate Oxford Alliance Partnership The Oriana Limited Partnership Individually material Other Total
JVs (Group share)
Net investment 50% 50% 50% 50% 50% 50% 50% Group share Group share
£m £m £m £m £m £m £m £m £m
At 1 April 2015 446 272 86 329 54 146 1,333 101 1,434
Total comprehensive income 44 42 31 51 10 12 190 9 199
Cash contributed - - - - 62 - 62 - 62
Loan advances 1 100 1 - - - 102 4 106
Loan repayments - - - (14) - - (14) - (14)
Property and other distributions - - - - - (56) (56) - (56)
Cash distributions - - (15) - - (7) (22) (41) (63)
At 31 March 2016 491 414 103 366 126 95 1,595 73 1,668
Total comprehensive income 28 23 5 3 10 (1) 68 1 69
Cash contributed - - - - 67 - 67 - 67
Loan advances 8 37 - - - - 45 - 45
Loan repayments - (37) (1) (16) - - (54) - (54)
Other distributions - - - - - - - (12) (12)
Cash distributions - - (3) - - (37) (40) (4) (44)
Disposal of investment - - - - - - - (5) (5)
At 31 March 2017 527 437 104 353 203 57 1,681 53 1,734
12. Capital structure
2017 2016
Group Joint ventures Adjustment for non-wholly owned subsidiaries(1) Combined Group Joint Adjustment for non-wholly owned subsidiaries(1) Combined
ventures
£m £m £m £m £m £m £m £m
Property portfolio
Market value of investment properties 12,662 1,812 (35) 14,439 12,832 1,673 (34) 14,471
Trading properties 122 126 - 248 124 156 - 280
Total property portfolio (a) 12,784 1,938 (35) 14,687 12,956 1,829 (34) 14,751
Net debt
Borrowings 2,949 93 - 3,042 2,873 85 - 2,958
Monies held in restricted accounts and deposits (21) - - (21) (19) - - (19)
Cash and cash equivalents (30) (49) - (79) (25) (43) - (68)
Fair value of interest-rate swaps 2 2 - 4 32 2 - 34
Fair value of foreign exchange swaps 5 - - 5 - - - -
Net debt (b) 2,905 46 - 2,951 2,861 44 - 2,905
Less: Fair value of interest-rate swaps (2) (2) - (4) (32) (2) - (34)
Reverse bond exchange de-recognition (note 13) 314 - - 314 368 - - 368
Adjusted net debt (c) 3,217 44 - 3,261 3,197 42 - 3,239
Adjusted total equity
Total equity (d) 11,516 - - 11,516 11,699 - - 11,699
Fair value of interest-rate swaps 2 2 - 4 32 2 - 34
Reverse bond exchange de-recognition (note 13) (314) - - (314) (368) - - (368)
Adjusted total equity (e) 11,204 2 - 11,206 11,363 2 - 11,365
Gearing (b/d) 25.2% 25.6% 24.5% 24.8%
Adjusted gearing (c/e) 28.7% 29.1% 28.1% 28.5%
Group LTV (c/a) 25.2% 22.2% 24.7% 22.0%
Security Group LTV 28.3% 23.4%
Weighted average cost of debt 4.2% 4.2% 4.9% 4.9%
1. This represents the interest in X-Leisure which we do not own, but which is consolidated in the Group numbers.
13. Borrowings
31 March 2017 31 March 2016
Secured/ Fixed/ Effective Nominal/ notional value£m Fair Book value£m Nominal/ notional value£m Fair Book value£m
unsecured floating interest rate% value£m value£m
Current borrowings
Sterling
5.253% QAG Bond Secured Fixed 5.3 18 22 18 17 20 17
Commercial paper
Sterling Unsecured Floating LIBOR + margin 3 3 3 2 2 2
Euro Unsecured Floating LIBOR + margin 261 261 261 - - -
Swiss Franc Unsecured Floating LIBOR + margin 28 28 28 - - -
US Dollar Unsecured Floating LIBOR + margin 94 94 94 - - -
Total current borrowings 404 408 404 19 22 19
Non-current borrowings
Sterling
A3 5.425% MTN due 2022 Secured Fixed 5.5 46 53 46 255 291 255
A10 4.875% MTN due 2025 Secured Fixed 5.0 28 34 28 300 351 298
A12 1.974% MTN due 2026 Secured Fixed 2.0 400 411 399 - - -
A4 5.391% MTN due 2026 Secured Fixed 5.4 27 33 27 211 254 210
A5 5.391% MTN due 2027 Secured Fixed 5.4 585 749 583 608 749 606
A6 5.376% MTN due 2029 Secured Fixed 5.4 318 420 317 318 398 317
A13 2.399% MTN due 2031 Secured Fixed 2.4 300 314 299 - - -
A7 5.396% MTN due 2032 Secured Fixed 5.4 321 441 320 323 410 321
A11 5.125% MTN due 2036 Secured Fixed 5.1 500 689 499 500 624 499
Bond exchange de-recognition adjustment (314) (368)
2,525 3,144 2,204 2,515 3,077 2,138
5.253% QAG Bond Secured Fixed 5.3 255 310 255 272 327 272
Syndicated bank debt Secured Floating LIBOR + margin 55 55 55 430 430 430
Amounts payable under finance leases Unsecured Fixed 5.7 31 42 31 14 18 14
Total non-current borrowings 2,866 3,551 2,545 3,231 3,852 2,854
Total borrowings 3,270 3,959 2,949 3,250 3,874 2,873
Reconciliation of the movement in borrowings
2017 2016
£m £m
At the beginning of the year 2,873 3,784
Proceeds from new borrowings 361 249
Repayment of borrowings (391) (806)
Redemption of medium term notes (690) (400)
Issue of medium term notes (net of finance fees) 698 -
Amortisation of bond exchange de-recognition adjustment 24 23
Bond exchange de-recognition adjustment on redemption of medium term notes 30 -
Foreign exchange movement on non-GBP borrowings 23 23
Other 21 -
At 31 March 2,949 2,873
Medium term notes (MTNs)
The MTNs are secured on the fixed and floating pool of assets of the Security Group. Debt investors benefit from security
over a pool of investment properties, development properties and the Group's investment in Westgate Oxford Alliance Limited
Partnership, Nova, Victoria, the St. David's Limited Partnership and 20 Fenchurch Street Limited Partnership, in total
valued at £12.9bn at 31 March 2017 (31 March 2016: £12.6bn). The secured debt structure has a tiered operating covenant
regime which gives the Group substantial flexibility when the loan-to-value and interest cover in the Security Group are
less than 65% and more than 1.45 times respectively. If these limits are exceeded, the operating environment becomes more
restrictive with provisions to encourage a reduction in gearing. The interest rate is fixed until the expected maturity,
being two years before the legal maturity date for each MTN, whereupon the interest rate for the last two years may either
become LIBOR plus an increased margin (relative to that at the time of issue), or subject to a fixed coupon uplift,
depending on the terms and conditions of the specific notes.
The effective interest rate is based on the coupon paid and includes the amortisation of issue costs. The MTNs are listed
on the Irish Stock Exchange and their fair values are based on their respective market prices.
On 8 February 2017, the Group purchased £635m of MTNs for a premium of £124m. The Group purchased £206m of its A3 MTN due
in 2022, £265m of its A10 MTN due in 2025 and £164m of its A4 MTN due in 2026. On the same date, the Group issued a £400m
1.974% MTN due in 2026 and a £300m 2.399% MTN due in 2031. Costs associated with the issues of the new MTNs of £2m have
been capitalised within non-current borrowings.
Earlier in the year, the Group also purchased a further £55m of MTNs for a premium of £13m. The Group purchased £3m of its
A3 MTN due in 2022, £7m of its A10 MTN due in 2025, £20m of its A4 MTN due in 2026, £23m of its A5 MTN due in 2027 and £2m
of its A7 MTN due in 2032. The table below summarises the aggregate purchases, together with the premiums paid.
MTN purchases
31 March 2017 31 March 2016
Purchases£m Premium£m Purchases£m Premium£m
A8 4.875% MTN due 2019 - - 400 26
A3 5.425% MTN due 2022 209 29 - -
A10 4.875% MTN due 2025 272 57 - -
A4 5.391% MTN due 2026 184 44 - -
A5 5.391% MTN due 2027 23 6 - -
A7 5.396% MTN due 2032 2 1 - -
690 137 400 26
Syndicated and bilateral bank debt
Maturity as at Authorised Drawn Undrawn
31 March 2017
2017 2016 2017 2016 2017 2016
£m £m £m £m £m £m
Syndicated debt 2021-22 1,815 1,380 55 430 1,760 950
Bilateral debt 2021 125 485 - - 125 485
1,940 1,865 55 430 1,885 1,435
At 31 March 2017, our committed revolving facilities totalled £1,940m (31 March 2016: £1,865m). The £75m increase in
committed facilities is the result of a £435m syndicated debt facility being arranged on 14 June 2016, and a £125m
bilateral debt facility being arranged on 31 January 2017, offset by the cancellation of £350m of bilateral facilities on
14 June 2016 and the cancellation of a £135m bilateral facility on 24 November 2016.
All syndicated and bilateral facilities are committed and secured on the assets of the Security Group. In the year ended 31
March 2017, the amounts drawn under the Group's bilateral facilities and syndicated bank debt decreased by £375m.
The terms of the Security Group funding arrangements require undrawn facilities to be reserved where syndicated and
bilateral facilities mature within one year, or where commercial paper has been issued. Accordingly, the Group's available
undrawn facilities at 31 March 2017 were £1,499m (31 March 2016: £1,433m), compared with undrawn facilities of £1,885m (31
March 2016: £1,435m).
Queen Anne's Gate Bond
On 29 July 2009, the Group issued a £360m bond secured on the rental cash flows from the commercial lease with the UK
Government over Queen Anne's Gate (QAG). The QAG Bond is a fully amortising bond with a final maturity in February 2027 and
a fixed interest rate of 5.253% per annum. At 31 March 2017, the bond had an amortised book value of £273m (31 March 2016:
£289m). Since 31 March 2017, the Group has redeemed the QAG bond in its entirety, for a premium to nominal value of £63m.
Fair values
The fair values of any floating rate financial liabilities are assumed to be equal to their nominal value, but adjusted for
the effect of exit fees payable on redemption. The fair values of the MTNs and the QAG Bond fall within Level 1, the
syndicated, bilateral facilities, commercial paper, interest-rate swaps and foreign exchange swaps fall within Level 2, and
the amounts payable under finance leases fall within Level 3, as defined by IFRS 13. The fair value of the amounts payable
under finance leases is determined using a discount rate of 4.2% (31 March 2016: 4.9%).
Bond exchange de-recognition
On 3 November 2004, a debt refinancing was completed resulting in the Group exchanging all of its outstanding bond and
debenture debt for new MTNs with higher nominal values. The new MTNs did not meet the IAS 39 conditions to be considered
substantially different from the debt that they replaced. Consequently, the book value of the new debt is reduced to the
book value of the original debt by the 'bond exchange de-recognition' adjustment which is then amortised to zero over the
life of the new MTNs. The amortisation is included in finance expense in the income statement.
14. Monies held in restricted accounts and deposits
2017 2016
£m £m
Cash at bank and in hand 12 11
Short-term deposits 9 8
21 19
The credit quality of monies held in restricted accounts and deposits can be assessed by reference to external credit
ratings of the counterparty where the account or deposit is placed.
2017 2016
£m £m
Counterparties with external credit ratings
A 13 11
BBB+ 8 8
21 19
15. Cash and cash equivalents
2017 2016
£m £m
Cash at bank and in hand 21 24
Short-term deposits 9 1
30 25
Short-term deposits
The credit quality of cash and cash equivalents can be assessed by reference to external credit ratings of the counterparty
where the account or deposit is placed.
2017 2016
£m £m
Counterparties with external credit ratings
A 29 24
BBB+ 1 1
30 25
16. Events after the reporting period
On 13 April 2017, the Group's joint arrangement, The Metro Shopping Fund Limited Partnership, completed the sale of
ShopStop, Clapham Junction to DV4 (a fund owned by Delancey Real Estate Asset Management Limited (Delancey)). On the same
date Delancey sold its stake in Metro to Invesco Real Estate European Fund. The partnership was subsequently renamed The
Southside Limited Partnership and the £85m third-party debt in the fund was repaid in full.
Since 31 March 2017, the Group has redeemed the £273m Queen Anne's Gate bond in its entirety at a premium of £63m. The
redemption was financed through existing Group facilities.
On 15 May 2017, the Group acquired three retail outlet centres from Britel Fund Trustees Limited (as trustee of the BT
Pension Scheme). The three assets, Freeport, Braintree, Clarks Village, Street and Junction 32, Castleford, were acquired
for a total consideration of £333m.
Business analysis
Table 15: Alternative performance measures
The Group has applied the European Securities and Markets Authority (ESMA) 'Guidelines on Alternative Performance Measures'
in these annual results. In the context of these results, an alternative performance measure (APM) is a financial measure
of historical or future financial performance, position or cash flows of the Group which is not a measure defined or
specified in IFRS.
The table below summarises the APMs included in these annual results, where the definitions and reconciliations of these
measures can be found, as well where further discussion is included. The definitions of all APMs are included in the
Glossary and further discussion of these measures can be found in the financial review.
Nearest IFRS measure Reconciliation
Revenue profit Profit before tax Note 2
Adjusted earnings Profit attributable to owners of the parent Note 3
Adjusted earnings per share Basic earnings per share Note 3
Adjusted diluted earnings per share Diluted earnings per share Note 3
Adjusted net assets Net assets attributable to owners of the parent Note 3
Adjusted net assets per share Net assets attributable to owners of the parent Note 3
Adjusted diluted net assets per share Net assets attributable to owners of the parent Note 3
Total business return n/a Note 3
Combined Portfolio Investment properties Note 9
Valuation surplus/deficit Net surplus/deficit on revaluation of investment properties Note 9
Adjusted net debt Borrowings Note 12
Group LTV n/a Note 12
Table 16: EPRA performance measures
31 March 2017
Definition for EPRA measure Notes Land Securitiesmeasure EPRAmeasure
Adjusted earnings Recurring earnings from core operational activity(1) 3 £382m £359m
Adjusted earnings per share Adjusted earnings per weighted number of ordinary shares(1) 3 48.4p 45.4p
Adjusted diluted earnings per share Adjusted diluted earnings per weighted number of ordinary 3 48.3p 45.4p
shares(1)
Adjusted net assets Net assets adjusted to exclude fair value movements on interest-rate swaps(2) 3 £11,206m £11,520m
Adjusted diluted net assets per share Adjusted diluted net assets per share(2) 3 1,417p 1,456p
Triple net assets Adjusted net assets amended to include the fair value of financial instruments and debt n/a £10,502m
Diluted triple net assets per share Diluted triple net assets per share n/a 1,328p
Net initial yield (NIY) Annualised rental income less non-recoverable costs as a % of market value plus assumed purchasers' costs(3) 3.6% 4.2%
Topped-up NIY NIY adjusted for rent free periods(3) 4.2% 4.4%
Voids/vacancy rate ERV of vacant space as a % of ERV of Combined Portfolio excluding the development programme(4) 4.6% 4.0%
Cost ratio Total costs as a percentage of gross rental income (including direct vacancy costs)(5) 17.9% 18.1%
Total costs as a percentage of gross rental income (excluding direct vacancy costs)(5) n/a 16.2%
1. EPRA adjusted earnings and EPRA adjusted earnings per share include the amortisation of bond exchange de-recognition
of £24m and the net head office relocation credit of £1m.
2. EPRA adjusted net assets and adjusted diluted net assets per share include the bond exchange de-recognition
adjustment of £314m.
3. Our NIY and Topped-up NIY relate to the Combined Portfolio, excluding properties in the development programme that
have not yet reached practical completion, and are calculated by our external valuer. EPRA NIY and EPRA Topped-up NIY
calculations are consistent with ours, but excludes all developments.
4. Our measure reflects voids in our like-for-like portfolio only. The EPRA measure reflects voids in the Combined
Portfolio excluding only the development programme.
5. The EPRA cost ratio is calculated based on gross rental income after rents payable, whereas our measure is based on
gross rental income before rents payable. We do not calculate a cost ratio excluding direct vacancy costs as we do not
consider this to be helpful.
Table 17: Top 12 occupiers at 31 March 2017
% of Group rent(1)
Deloitte 5.2
Accor 5.1
Central Government 5.1
Mizuho Bank 1.7
Boots 1.5
Sainsbury's 1.3
Taylor Wessing 1.2
H&M 1.2
K&L Gates 1.2
M&S 1.1
Cineworld 1.1
Telecity Group 1.1
26.8
1. On a proportionate basis.
Table 18: Development pipeline and trading property development schemes at 31 March 2017
Development pipeline
Developments after practical completion
The Zig Zag Building, SW1(1) Office 100 192,700 89 382 17 Nov 2015 182 182
Retail 38,700 89
20 Eastbourne Terrace, W2 Office 100 92,800 90 130 6 May 2016 67 67
Developments approved or in progress
Nova, Victoria, SW1 Office 50 481,400 42 396 21 Apr 2017 259 259
Retail 79,200 93
Oriana, W1 - Phase II Retail 50 30,700 100 47 2 Jul 2017 19 20
Westgate Oxford Retail 50 793,000 68 183 14 Oct 2017 148 211
Proposed developments
Selly Oak, Birmingham Retail 50 200,000 n/a n/a n/a 2019 n/a n/a
Residential 89,000 n/a n/a n/a 2019 n/a n/a
Developments let and transferred or sold
1 New Street Square, EC4 Office 100 274,800 100 n/a(3) 16 Oct 2016 168 168
1 & 2 New Ludgate, EC4 Office 100 355,300 100 n/a(3) 24 Apr 2015 248 248
Retail 26,700 100
Oriana, W1 - Phase II(2) Retail 50 41,800 100 n/a(3) n/a n/a n/a n/a
Oriana, W1 - Phase II(2)
Retail
50
41,800
100
n/a(3)
n/a
n/a
n/a
n/a
1. Includes retail within Kings Gate, SW1.
2. This represents the disposal of 28-32 Oxford Street, W1.
3. Once properties are transferred from the development pipeline, we do not report on their individual value.
Where the property is not 100% owned, floor areas and letting status shown above represent the full scheme whereas all
other figures represent our proportionate share. Letting % is measured by ERV and shows letting status at 31 March 2017.
Trading property development schemes are excluded from the development pipeline.
Total development cost
Refer to glossary for definition. Of the properties in the development pipeline at 31 March 2017, the only properties on
which interest was capitalised on the land cost were Westgate Oxford and Nova, Victoria, SW1.
Net income/ERV
Net income/ERV represents headline annual rent on let units plus ERV at 31 March 2017 on unlet units, both after rents
payable.
Trading property development schemes
Kings Gate, SW1 Residential 100 108,600 100 95 Oct 2015 163 163
Nova, Victoria, SW1 Residential 50 166,800 170 87 Apr 2017 146 146
Oriana, W1 - Phase II Residential 50 20,200 18 22 Jul 2017 14 15
Westgate Oxford Residential 50 36,700 59 - Jul 2017 7 10
Westgate Oxford
Residential
50
36,700
59
-
Jul 2017
7
10
Table 19: Combined Portfolio value by location at 31 March 2017
Shopping centres and shops Retail parks Offices Hotels, leisure, residential Total
& other
% % % % %
Central, inner and outer London 14.6 0.2 46.7 3.4 64.9
South East and East 10.4 3.5 - 0.9 14.8
Midlands - 0.6 - 0.4 1.0
Wales and South West 2.5 0.5 - 4.5 7.5
North, North West, Yorkshire and Humberside 7.1 0.9 0.1 0.5 8.6
Scotland and Northern Ireland 2.7 0.3 - 0.2 3.2
Total 37.3 6.0 46.8 9.9 100.0
% figures calculated by reference to the Combined Portfolio value of £14.4bn.
Table 20: Combined Portfolio performance relative to IPD
Total property returns - year ended 31 March 2017
Land Securities IPD (1)
% %
Retail - Shopping centres 3.6 1.1
- Retail parks 1.3 1.3 (2)
Central London shops 9.8 8.6
Central London offices 2.0 2.6
Total
- More to follow, for following part double click ID:nRSR4610Fe