3rd Quarter Results

British Land Co PLC 07 February 2008 7 February 2008 THE BRITISH LAND COMPANY PLC THIRD QUARTER REPORT - TO 31 DECEMBER 2007 Financial highlights: • Portfolio valuation mark-down of -8.9% for quarter, -8.4% for nine months - Like-for-like rental value growth at 5.0% for nine months versus IPD Benchmark 3.4% - Outward yield shift of 53bps overall for the quarter (Offices 51bps, Retail 55bps) - Portfolio equivalent yield now 5.4%, 74bps higher since March 2007 • Net Asset Value(1) per share 1401 pence, down 16.7% for quarter - IFRS Net Assets £7.1 billion - Properties owned or managed £18.4 billion - "Triple Net Asset Value"(2) per share 1437 pence • Underlying pre-tax profit(3) £72 million for quarter, up 12.5% on Q3 2006 - IFRS loss on ordinary activities pre-tax £1,326 million (257 pence per share, after tax) • Underlying earnings per share(3) 14 pence for quarter, up 16.7% on Q3 2006 - Dividend 8.75 pence per share for this quarter, payable May, in addition to 17.5 pence per share for the first half year (and consistent with 35 pence full year target) Business resilient: - Occupancy exceptionally strong, portfolio 99% let(4), 14 years average lease length - £600 million of property sales (gross) since September 2007 at levels supportive of current valuations - Retail and Office developments with completions in 2007 and 2008 74% pre-let, sold or under offer - Debt 100% fixed rate at 5.28% average cost and 12.6 years average maturity - Gearing 45% LTV (49% including JVs/Funds) - £2 billion committed undrawn bank lines available as opportunity arises Investment market conditions: - Outward yield shift of 75bps for IPD Index since March 2007, reflecting investor repricing of risk across the board. Valuation declines largely indiscriminate; should correct for relative value in coming months - Speed of adjustment of valuations augers well for shortened duration of downcycle - Encouraging signs of investor interest in property at these levels; however, sentiment still volatile Chris Gibson-Smith, Chairman comments: "Macro-economic uncertainty and the global credit crunch have depressed property values. However, the worst should now be behind us, though uncertainties remain on timing and extent of the correction. The exceptional quality of prime property cash flow is again representing clear value. We are optimistic about British Land's inherent strengths and ability to create value over the course of the business cycle." (1) EPRA (European Public Real Estate Association) basis - Note 1 to the accounts (2) see Table A (3) see Note 1 (4) includes accommodation subject to asset management initiatives and under offer Review by the Chief Executive, Stephen Hester The broad impact of macro-economic stress and the global 'credit crunch' have been well publicised. There are important signs of markets adjusting to new realities and affected parties taking the resultant pain, although significant uncertainties remain. Property values have been hit largely in response to broader financial market declines though the extent to which economic slowdowns occur and impact future rental growth is still a question. While we had previously warned that property prices (which had risen strongly) were vulnerable to correction, the timing and scale of the turn inevitably was uncertain. Nevertheless British Land successfully sold £2.8 billion (gross) of property in the last 12 months to back our view on markets. In this challenging environment, we see it as important to provide transparency and 'realism' in our portfolio valuations which results in the 8.9% valuation mark-down booked this quarter (10.3% decline since the June peak). We recognise that different valuers will move at differing speeds to reflect current market conditions, a task made difficult by low transaction volumes which make comparisons hazardous in the short term. We believe the market is best served by a rapid adjustment of pricing to allow confidence and 'normal' investment activity to resume. At present, the occupier markets from which our cash flows derive remain in better health than investment markets are discounting. Our 99% occupancy rates and 14 year average lease lengths are exceptionally strong. Reflecting the appeal of our buildings, rental values grew again during the quarter in both Offices and Retail, and leasing activity, especially in Retail, remained good. The uncertainties around financial markets are slowing decision-making for Office occupants in relation to new space needs, though to date enquiry levels remain robust. British Land's strategy is built around long-term customer trends. Our positive view on London Office and Out-of-Town Retail demand trends remains unchanged for the medium term despite short term pressures. We will continue to seek to work our capital harder in these core sectors and to be opportunistic elsewhere in response to clear 'value' situations. Current financial market turbulence leads us to be cautious in terms of taking additional risk whilst very much alive to the future upside inherent in our assets and potentially available elsewhere from market distress. We have substantial available funding to exploit 'value' situations where we find them. Asset values have not yet fully completed their adjustment though recent sales and properties 'under offer' are encouraging and supportive of the value now reflected in our portfolio. In particular, a proper reflection of occupancy and rental growth outlook has still to work its way through relative sector and asset pricing - and in this regard our portfolio, with its high occupancy, long leases and prime nature, should ultimately do well. Portfolio reshaping In the first half of this financial year sales amounted to £1.9 billion gross and since 30 September 2007 we have disposed of further properties at £596 million gross; a total of £2.5 billion since 31 March 2007. Our aim in this activity is to improve future performance by selling lower growth or riskier assets and sectors and managing financial gearing. The transactions are summarised in the table below. Sales Price BL Share Gain (Loss) £m £m %(1) -------------------------------------------------------------------------------- 3 months to 31 December 2007 Retail: Nueva Condomina, Murcia, Spain(2),(3) 105 32 - 7 retail warehouse parks(3),(4) 132 40 14.8 1 High Street shop, Winchester(3) 11 11 (9.3) Office: Ludgate West, London EC4(3),(5) 112 112 15.2 Provincial 6 6 (12.7) Other: 2 industrial properties 54 54 (9.9) -------- -------- --------- 420 255 5.0 Since 31 December 2007 Plantation Place South, EC3(5) 126 126 (10.7) 4 solus retail warehouses (bulky/ secondary) 33 33 (25.7) Baker Street, W1, offices 17 17 33.9 -------------------------------------------------------------------------------- Total 596 431 (2.3) Average yield(6) on disposals 3.1%, 4.6% assuming top up of rent free periods (1) sale price versus latest year end valuation (March 2007) (2) sale by PREF (Pillar Retail Europark Fund) of 41.25% interest (3) completed/due to complete after 31 December 2007 (4) PREF: Belgium, Italy, Switzerland, Spain (5) subject to price deduction at completion to reflect then unexpired rent frees and (for a limited period) remaining vacant space - gain calculated net (6) net initial PREF has sold to HERALD, the Henderson European Retail Property Fund, a portfolio of five European retail parks and one-half of its interest in Nueva Condomina, the regional shopping centre in Murcia. The transaction enables PREF to focus on its core countries (Spain, Portugal, France and Italy) and will enable recycling of its capital into more attractive purchasing opportunities. PREF has also sold two PC City properties in Madrid and Palma. The sale of Ludgate West, our just completed 127,000 sq ft City office development, realised a development surplus. Proceeds will be recycled into our on-going committed development programme. The recent sale of Plantation Place South, our 160,000 sq ft office development completed in 2004, reflected a net initial yield of 4.8%, assuming top up of unexpired rent free periods (and excluding the 18 month top up on the remaining vacant accommodation). This sale will also enable recycling of capital and demonstrates the renewed investment market interest at current valuation levels. Disposals of the industrial properties are in line with our continuing strategy of focusing on sectors with better overall prospects. There have been limited opportunities to make advantageous purchases in the quarter. PREF has acquired a retail park in Portugal for some £13 million, adding to purchases of £426 million (gross) in the first half of the financial year, all made by Funds and Joint Ventures. Expenditure on our development projects in the quarter amounted to £117 million. Proactive asset management British Land's customer-centric focus is helping us to capture rental value growth and support our asset values relative to the property market overall. Good stock selection and development are enhanced by active asset management, such as negotiating lease surrenders, initiating improvements by better design or configuration or planning use, and reletting at enhanced rents. Since 30 September 2007 we have settled 30 retail rent reviews and exchanged agreements for over 60 new retail lettings covering more than 580,000 sq ft. Overall these reviews and lettings were achieved at 4.5% above the external valuer's applicable ERV. Included in these new lettings are four agreements with Marks & Spencer at retail parks in Swindon, Edinburgh, Leeds and Glasgow, overall 120,000 sq ft at £3.8 million per annum. At Glasgow Fort Shopping Centre, HUT (Hercules Unit Trust) has lodged a planning application for a second phase of the scheme, working with the Glasgow East Regeneration Agency to improve the Easterhouse town centre. Rent reviews in respect of 127,000 sq ft of our West End offices let to JP Morgan at Triton Square, Regent's Place, NW1 have been settled recently at an average office rent of £47.50 per sq ft, well ahead of the relevant ERV. The £13 million major refurbishment of three vacant office floors, common services and reception areas at 338 Euston Road, Regent's Place, is progressing as planned, due for completion in summer 2008. We have recently started early marketing. Following the letting during the quarter to Bunzl plc of over 9,000 sq ft of offices in York House, Seymour Street, W1 (British Land's Head Office) the remaining 3,500 sq ft vacant office accommodation is now under offer, at levels which will demonstrate the reversionary potential of this development. The retail units at York House are also now fully let. Accordingly, all accommodation at this development has been taken up, in just over a year since completion. At Broadgate, the only available office accommodation, 8,000 sq ft in 155 Bishopsgate, is now under offer at £57.50 per sq ft resulting in all of the offices at the 4 million sq ft Broadgate Estate being fully let. We have no vacant offices in the City; the only available accommodation is under construction within our development programme. The lettings achieved during this financial year and the sale of Ludgate West together result in 62% of our London office developments scheduled for completion in 2007 and 2008 being pre-let or sold. Retail units at our London office developments have also been letting well, contributing to the amenity of the working environments. In addition to the units at York House, at 10 Exchange Square we have completed a letting to the Piccolino restaurant, its first City position, and at Lime Street (the Willis Building) three of the retail units have been let and the one remaining is under offer. In total these units provide 21,000 sq ft and add over £1 million per annum to our rental income. Development update Good progress continues on our development programme. • Ludgate West, London EC4, completed on schedule in the quarter. Prior to completion, contracts were exchanged for its sale, realising a significant development profit. • At 201 Bishopsgate and The Broadgate Tower, London EC2, construction is well advanced and scheduled for completion in March 2008 and Q3 2008 respectively. • The developments at Ropemaker Place, London EC2, Osnaburgh Street, Regent's Place, London NW1 and The Leadenhall Building, London EC3 are also going to plan. Ropemaker Place in the City is the most advanced of these, due to complete in H2 2009. • At Puerto Venecia, Zaragoza (our 2.2 million sq ft joint venture retail development in Spain), the 900,000 sq ft retail park is over 85% pre-let, pre-sold or under offer. The 300,000 sq ft IKEA store is trading well; the majority of the units, including new lettings to Saloni and Menaje del Hogar, are due to commence trading in May 2008. The pre-letting campaign on the shopping centre is progressing with terms agreed and negotiations taking place with Primark, Inditex and H&M to secure a strong range of major retailers to add to the principal anchor El Corte Ingles. • Construction of Giltbrook Retail Park, our 199,000 sq ft mixed use scheme of retail and industrial space at Nottingham, is progressing on time. The entire retail element is now let or under offer to a good mix of major retailers. British Land received the award of "Sustainable Developer of the Year" as part of the 2007 Building magazine Sustainability Awards for environmental excellence in the construction industry. It was noted that we put sustainability at the heart of our projects, ensuring reductions in water usage, waste to landfill and carbon emissions - factors which also enhance the appeal of our buildings to customers. Portfolio valuation The table below shows the principal valuation movements by sector for the 3 and 9 month periods to 31 December 2007, totalling -8.9% decline for the quarter, -8.4% for 9 months. The capital return from the portfolio at -9.5% for 9 months, as measured by IPD (calculated for our UK assets on average capital employed and excluding capitalised interest) was comparable with the IPD Benchmark at -9.2%. Like for like rental value (ERV) growth for the portfolio was 5.0% over 9 months, ahead of the IPD Benchmark at 3.4%. The net equivalent yield (after notional purchaser's costs) on the portfolio at 5.4% has moved out 53bps over the quarter and 74bps for 9 months. -------------------------------------------------------------------------------- Valuation Group Funds/JVs(1) Total Portfolio Change(2) % by Sector £m £m £m % 3 mths 9 mths -------------------------------------------------------------------------------- Retail Retail warehouses 2,024 1,374 3,398 23.3 (11.0) (11.0) Superstores 1,390 567 1,957 13.4 (11.2) (13.1) Shopping centres(3) 1,834 390 2,224 15.2 (5.6) (9.6) Department Stores 683 131 814 5.6 (9.2) (12.7) High street 185 - 185 1.3 (8.8) (7.8) -------------------------------------------------------------------------------- All retail 6,116 2,462 8,578 58.8 (9.5) (11.1) Offices(4) City(5) 4,451 - 4,451 30.5 (8.9) (5.6) West End(6) 1,106 - 1,106 7.6 (6.5) 0.6 Provincial 85 14 99 0.7 (2.1) (0.9) -------------------------------------------------------------------------------- All offices 5,642 14 5,656 38.8 (8.3) (4.3) Industrial,distribution, leisure, other 310 36 346 2.4 (3.7) (5.6) -------------------------------------------------------------------------------- Total(7) 12,068 2,512 14,580 100.0 (8.9) (8.4) -------------------------------------------------------------------------------- (1) Group's share of properties in Funds and Joint Ventures (2) change in value for 3 months and 9 months to 31 December 2007, includes valuation movement in developments, purchases and sales, net of capital expenditure (3) Meadowhall Shopping Centre valuation down 5.3% for the quarter to £1,500 million; ERV £84 million; net equivalent yield 5.17% (4) includes Developments in City, West End and provincial: total value £1.3 billion, 8.7% of Portfolio, down 7.5% for the quarter (5) Broadgate valuation down 9.3% for the quarter to £2,798 million; headline ERV range £49 - £57.50 per sq ft (average headline ERV £52 psf); net equivalent yield 5.6% (6) Regent's Place valuation down 6.3% for the quarter to £653 million; headline ERV range £25 - £57.50 per sq ft; net equivalent yield 5.6% (7) annualised net rents £618 million (excluding developments) (net rental income under IFRS differs from annualised net rents which are cash based, due to accounting items such as spreading lease incentives and contracted future rental uplifts, as well as direct property costs); portfolio initial yield (gross to British Land, without notional purchaser's costs) 4.7%; current yield adding back rent frees 5.2%; reversionary yield (gross, five years) 5.7% The main sector impacts on the valuation movements over the quarter were: •London Offices including developments, comprising 38.1% of the portfolio, saw outward yield shift of 51bps on the investments, with the value decline of 8.6% being partially offset by 1.3% ERV growth; •Retail warehouse parks, at 23.3% of the portfolio, saw outward yield shift of 63bps, while their valuation reduced by 11%, in line with the decline on the IPD Benchmark for the segment - ERV growth for the quarter on these investments was 0.6%; •Superstore valuations, which represent 13.4% of the portfolio, reduced by 11.2% (a 66bps outward yield shift), in line with comparable retail warehouse valuations; •Shopping centres, being 15.2% of the portfolio, showed a fall in value of 5.6% (a 33bps outward yield shift) due to several factors including a 30bps outward yield shift on Meadowhall Shopping Centre - relative to its comparables Meadowhall is now at its most conservative yield valuation since purchase in 1999. Trading at Meadowhall continues to be good, reflected in strong occupational demand; •Our investment in Songbird Estates provides a 'look through' 10.8% economic interest in Canary Wharf and was marked down for accounting purposes at 31 December 2007 by 17.8% to £185 million (market value £198 million). Financial Results Despite a continuing increase in underlying pre-tax profit, the overall results for the three months have been dominated by the valuation write down. Highlights for the 3 months ended: December 2007 December 2006 Change ------------------------------------------------------------------------------------- Income Statement £m £m % Underlying pre-tax profit(1) 72 64 +12.5 Net rental income 143 148 -3.4 - proportional basis(2) 167 169 -1.2 Net interest costs 70 80 -12.5 - proportional basis(2) 85 93 -8.6 -------------------------------------------------------------------------- pence pence IFRS diluted earnings per share(1) (257) 285 -190.2 Underlying diluted earnings per share(1) 14 12 +16.7 Dividend per share 8.75 6.5 +34.6 -------------------------------------------------------------------------- As at: December 2007 September 2007 -------------------------------------------------------------------------- Balance Sheet £7,090m £8,621m -17.8 Net Assets EPRA(1) NAV per share 1401 pence 1682 pence -16.7 EPRA(2) NNNAV per share 1437 pence 1745 pence -17.7 ------------------------------------------------------------------------------------- 1 see Note 1 2 see Table A Income Statement (data presented on a proportionally consolidated basis - Table A) Gross rental income for the three months amounted to £174 million, a small reduction against the corresponding period last year (£180 million), with the effect of the significant number of asset sales being substantially offset by rising like-for-like rents. Net rental income was slightly lower at £167 million against £169 million the year before. Reduced administrative expenses of £17 million (2006: £22 million) and lower interest costs of £85 million (2006: £93 million) contributed to the improvement in underlying profit before tax from £64 million to £72 million, an increase of 12.5%. The most significant movement in the income statement during the three months was the valuation reduction of £1,391 million, resulting in an IFRS pre-tax loss for the three months of £1,326 million (proportionally consolidated £1,322 million). Underlying diluted earnings per share amounted to 14 pence for the three months, an increase of 16.7% over the corresponding period in the previous year. The weighted average interest rate at 31 December 2007 was 5.28%, (30 September 2007: 5.30%), with borrowings 100% fixed. The weighted average debt maturity has reduced from 12.7 to 12.6 years. Balance Sheet EPRA net assets at 31 December 2007 totalled £7.23 billion, compared with £8.70 billion at 30 September 2007. This gives a net asset value per share of 1401 pence - 16.7% lower than 30 September 2007 as a result of the valuation mark-down. On a triple net asset value basis (after adjusting debt and derivatives to market value and deducting deferred tax) EPRA net assets amount to 1437 pence per share. Total properties owned at 31 December 2007, including share of funds and joint ventures, were £14.6 billion (30 September 2007: £15.9 billion), or £18.4 billion (30 September 2007: £20.0 billion) including properties under management. At 31 December 2007 net debt totalled £6,131 million (30 September 2007: £5,968 million) resulting in gearing (LTV) of 45% (49% proportionally consolidated). Undrawn committed bank facilities together with cash and short term deposits totalled over £2 billion. Cash Flow Statement The cash flow statement shows a net reduction in cash and cash equivalents of £123 million in the three month period, or £90 million before repayment of bank and other borrowings. The principal contributing elements to the movement were receipts from property sales of £67 million, and £126 million of development and other capital expenditure. In addition £14 million was spent on buying back 1.5 million shares during the quarter at an average of 886 pence per share. Dividend The third quarter dividend of 8.75 pence per share, totalling £45 million, will be payable on 19 May 2008 to shareholders on the register at close of business on 18 April 2008. This compares with a dividend in the corresponding period last year of 6.5 pence per share, and is in addition to the dividends in the first and second quarters of 8.75 pence per share each, making a total of 26.25 pence for the nine months to 31 December 2007 - consistent with the expected total dividend for the financial year of 35 pence. The dividend consists of a property income distribution (PID) of 4.25 pence and a non-PID element of 4.5 pence as explained in note 7 of the accounts. British Land contacts: Laura de Vere - Media 020 7467 2920 / 07739 292920 Amanda Jones - Investors 020 7467 2946 / 07921 884017 Finsbury: Faeth Birch / Gordon Simpson 020 7251 3801 The British Land Company PLC ANNOUNCEMENT OF FINANCIAL RESULTS For the three month and nine month periods ended 31 December 2007 Consolidated Income Statement for the period ended 31 December 2007 Year ended Three months ended Three months ended 31 March 2007 31 December 2007 31 December 2006 Audited Unaudited Unaudited ------------------------------ ----------------------------------------------------------- Under- Under- Under- lying Capital lying Capital lying Capital pre tax* and other Total pre tax* and other Total pre tax* and other Total £m £m £m Note £m £m £m £m £m £m Gross rental and related 649 649 income 2 160 160 174 174 ------------------------------------------------------------------------------------------------------------------------ Net rental and related 561 561 income 2 143 143 148 148 50 33 83 Fees and other income 2 7 7 10 10 (15) (15) Amortisation of intangible assets (3) (3) (3) (3) Funds and joint ventures 37 422 459 (see also below) 8 (236) (228) 6 260 266 (78) (13) (91) Administrative expenses (16) (16) (20) (13) (33) Net valuation movement and 1,167 1,167 gains on disposal 2 (1,159) (1,159) 256 256 (106) (106) Goodwill impairment (106) (106) Net financing costs 41 41 financing income 8 8 7 7 (354) (354) financing charges (78) (78) (87) (87) (305) (305) refinancing charges (77) (77) --------------------------- --------------------------------------------------------- (313) (305) (618) (70) (70) (80) (77) (157) --------------------------- ---------------------------------------------------------- Profit (loss) on ordinary activities 257 1,183 1,440 before taxation 72 (1,398) (1,326) 64 317 381 -------- -------- --------- Taxation (277) REIT conversion charge (277) 1 current tax income 10 1,289 deferred tax income 8 1,375 -------- -------- ------- 1,013 2 8 1,108 ------------------------------------------------------------------------------------------------------------------------ (Loss) profit for the period after taxation attributable to 2,453 shareholders of the Company (1,318) 1,489 ------------------------------------------------------------------------------------------------------------------------ (Loss) earnings 472p per share: basic 1 (257)p 286p ------ -------- ------- 470p diluted 1 (257)p 285p ------ -------- ------- ------------------------------------------------------------------------------------------------------------------------ Share of results of funds and joint ventures 37 37 Underlying profit before taxation 8 8 6 6 Net valuation movement and 257 257 gains on disposal (232) (232) 54 54 (5) (5) Goodwill impairment (48) (48) REIT conversion charge (48) (48) (19) (19) Current tax (1) (1) (12) (12) 237 237 Deferred tax (3) (3) 266 266 ------------------------------------------------------------------------------------------------------------------------ 37 422 459 4 8 (236) (228) 6 260 266 ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ * As defined in note 1 Consolidated Income Statement for the period ended 31 December 2007 Year ended Nine months ended Nine months ended 31 March 2007 31 December 2007 31 December 2006 Audited Unaudited Unaudited ----------------------------- -------------------------------------------------- Under- Under- Under- lying Capital lying Capital lying Capital pre tax* and other Total pre tax* and other Total pre tax* and other Total £m £m £m Note £m £m £m £m £m £m Gross rental and related 649 649 income 2 486 486 489 489 ------------------------------------------------------------------------------------------------------------------------ Net rental and related income 561 561 income 2 425 425 422 422 50 33 83 Fees and other income 2 36 30 66 43 43 (15) (15) Amortisation of intangible (8) (8) (11) (11) assets Funds and joint ventures 37 422 459 (see also below) 27 (288) (261) 28 393 421 (78) (13) (91) Administrative expenses (54) (54) (62) (13) (75) Net valuation movement 1,167 1,167 and gains on disposal 2 (1,310) (1,310) 899 899 (106) (106) Goodwill impairment (106) (106) Net financing costs 41 41 financing income 23 23 35 35 (354) (354) financing charges (242) (242) (272) (272) (305) (305) refinancing charges (305) (305) ------------------------------------------------------------------------------------------------------------------------ (313) (305) (618) (219) (219) (237) (305) (542) ------------------------------------------------------------------------------------------------------------------------ Profit (loss) on ordinary 257 1,183 1,440 activities before taxation 215 (1,576) (1,361) 194 857 1,051 ------- -------- ------- Taxation (277) REIT conversion charge (277) 1 current tax (expense) income (1) 4 1,289 deferred tax income 42 1,289 ----- ------- ------ 1,013 2 41 1,016 ------------------------------------------------------------------------------------------------------------------------ (Loss) profit for the period after taxation attributable to 2,453 shareholders of the Company (1,320) 2,067 ----------------------------------------------------------------------------------------------------------------------- (Loss) earnings 472p per share: basic 1 (256)p 398p ------ -------- ----- 470p diluted 1 (255)p 396p ------ -------- ----- ------------------------------------------------------------------------------------------------------------------------ Share of results of funds and joint ventures 37 37 Underlying profit before taxation 27 27 28 28 Net valuation movement and gains on 257 257 disposal (288) (288) 221 221 Realisation of cash flow hedges (on property disposals) 9 9 (5) (5) Goodwill impairment (2) (2) (2) (2) (48) (48) REIT conversion charge (48) (48) (19) (19) Current tax (4) (4) (14) (14) 237 237 Deferred tax (3) (3) 236 236 ----------------------------------------------------------------------------------------------------------------------- 37 422 459 4 27 (288) (261) 28 393 421 ---------------------------------------------------------------------------------------------------------------------- * As defined in note 1 Consolidated Balance Sheet as at 31 December 2007 31 March 31 December 31 December 30 September 2007 2007 2006 2007 Audited Unaudited Unaudited Unaudited £m Note £m £m £m ---- ---- ---- ---- Assets Non-current assets 12,891 Investment properties 3 11,062 12,945 12,216 1,106 Development properties 3 987 994 961 50 Owner-occupied property 3 54 57 ------- ------------------------------------ 14,047 12,103 13,939 13,234 Other non-current assets 1,610 Investments in funds and joint ventures 4 1,378 1,477 1,614 267 Other investments 196 306 236 50 Intangible assets 46 54 45 ------- ---------------------------------- 15,974 13,723 15,776 15,129 -------- ---------------------------------- Current assets 208 Debtors 152 158 210 198 Cash and short-term deposits 5 330 145 453 ------- ------------------------------------ 406 482 303 663 --------------------------------------------------------------------------------------------------- 16,380 Total assets 14,205 16,079 15,792 --------------------------------------------------------------------------------------------------- Liabilities Current liabilities (54) Short-term borrowings and overdrafts 5 (124) (140) (117) (746) Creditors (493) (785) (484) ------- ------------------------------------ (800) (617) (925) (601) ------- ------------------------------------ Non-current liabilities (6,617) Debentures and loans 5 (6,345) (6,624) (6,385) (37) Other non-current liabilities (41) (34) (42) (179) Deferred tax liabilities (112) (183) (143) ------- ------------------------------------ (6,833) (6,498) (6,841) (6,570) ------- ------------------------------------ (7,633) Total liabilities (7,115) (7,766) (7,171) -------------------------------------------------------------------------------------------------- 8,747 Net assets 7,090 8,313 8,621 --------------------------------------------------------------------------------------------------- Equity 130 Share capital 6 130 130 130 1,263 Share premium 6 1,267 1,259 1,266 532 Other reserves 6 343 461 501 6,822 Retained earnings 6 5,350 6,463 6,724 --------------------------------------------------------------------------------------------------- Total equity attributable to shareholders 8,747 of the Company 7,090 8,313 8,621 --------------------------------------------------------------------------------------------------- 1682p EPRA NAV per share* 1 1401p 1610p 1682p ------- ------------------------------------ * As defined in note 1 Consolidated Statement of Recognised Income and Expense for the period ended 31 December 2007 Year ended Three months Nine months ended ended 31 March 31 December 31 December 2007 2007 2006 2007 2006 Audited Unaudited Unaudited £m Note £m £m £m £m 2,453 (Loss) profit for the period after taxation (1,318) 1,489 (1,320) 2,067 ----------- ----------------------------------- Valuation movements 184 - on development properties 2 (51) 29 43 136 - on owner-occupied property 2 (3) 4 22 - on other investments 2 (40) 50 (70) 55 ---------- ----------------------------------- 206 (94) 79 (23) 191 (Losses) gains on cash flow hedges 93 - Group (66) 35 (46) 46 21 - Funds and joint ventures (12) 9 (16) 14 8 Actuarial gain on pension scheme 5 8 Fair value adjustment on consolidation (7) of former joint venture (7) 16 Tax on items taken directly to equity 23 57 25 12 ---------- ------------------------------------ 337 Net (loss) gain recognised directly in equity (149) 185 (60) 264 Transferred to the income statement (cash flow hedges) 21 - foreign currency derivatives (2) 7 20 (1) - interest rate derivatives (7) (18) 2 ---------- ------------------------------------- 20 (9) 7 (18) 22 ---------- ------------------------------------- Total recognised income and expense 2,810 for the period (1,476) 1,681 (1,398) 2,353 ------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- Reconciliation of Movements in Shareholders' Funds Year ended Three months Nine months ended ended 31 March 31 December 31 December 2007 2007 2006 2007 2006 Audited Unaudited Unaudited £m £m £m £m £m Capital items 10 - Shares issued 1 4 4 6 (16) - Purchase of ESOP shares (3) (12) (16) - Ordinary shares purchased and held as Treasury shares (14) (139) 18 - Adjustment for share and share option awards 3 4 10 15 (91) - Dividends paid in the period (45) (122) (61) ---------- ------------------------------------ (79) (55) 5 (259) (56) 2,810 Total recognised income and expense for the period (1,476) 1,681 (1,398) 2,353 ---------- ------------------------------------- 2,731 Movement in shareholders' funds for the period (1,531) 1,686 (1,657) 2,297 6,016 Opening equity shareholders' funds 8,621 6,627 8,747 6,016 ----------------------------------------------------------------------------------------------------------------- 8,747 Closing equity shareholders' funds 7,090 8,313 7,090 8,313 ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- Consolidated Cash Flow Statement for the period ended 31 December 2007 Year Three months Nine months ended ended ended 31 March 31 December 31 December 2007* 2007 2006* 2007 2006* Audited Unaudited Unaudited £m £m £m £m £m ---- ---- ---- ---- ---- 568 Rental income received from tenants 132 159 386 419 36 Fees and other income received 4 3 29 33 (110) Operating expenses paid to suppliers and employees (18) (25) (71) (80) -------- ------------------------------- 494 Cash generated from operations 118 137 344 372 -------- ------------------------------- (334) Interest paid (95) (96) (275) (254) 11 Interest received 5 2 15 10 UK corporation tax (paid) received (1) (3) (3) 4 (2) Foreign tax paid (1) 32 Distributions received: funds and joint ventures 4 4 42 27 18 Songbird Estates 16 18 -------- ------------------------------ 219 Net cash inflow from operating activities 31 44 138 177 -------- ------------------------------ Cash flows from investing activities (309) Purchase of investment properties (190) (118) (272) (346) Development and other capital expenditure (126) (101) (343) (256) 711 Sale of investment properties 67 93 1,190 378 REIT conversion charge paid (291) (8) Purchase of investments (4) (4) 10 Sale of investments 2 (15) Indirect taxes in respect of investing activities (11) 32 (12) (203) Investment in and loans to funds and joint ventures (5) (1) (90) (107) 80 Capital distributions received: funds and joint ventures 50 80 33 Songbird Estates 30 6 Sale of shares and loans repaid by funds and joint ventures 5 (13) Purchase of subsidiary companies (net of cash acquired) (4) (16) (4) (12) -------- ------------------------------- (54) Net cash (outflow) inflow from investing activities (68) (230) 458 (200) -------- ------------------------------- Cash flows from financing activities 10 Issue of ordinary shares 1 4 4 6 (16) Purchase of ESOP shares (3) (12) (16) Purchase of Treasury shares (14) (139) (91) Dividends paid (40) (117) (61) 840 Issue of Meadowhall Finance PLC securitised debt 840 840 (897) Redemption of MSC (Funding) PLC securitised debt (897) (897) 263 Issue of British Land debentures 42 263 (240) Amounts paid on exchange of British Land debentures (39) (240) (20) Redemption of British Land debentures (20) (305) Repayment of debt acquired with subsidiary companies (296) 354 (Decrease) increase in bank and other borrowings (33) 186 (196) 458 -------- ------------------------------- (102) Net cash (outflow) inflow from financing activities (86) 133 (460) 37 -------- ------------------------------- 63 Net (decrease) increase in cash and cash equivalents (123) (53) 136 14 128 Opening cash and cash equivalents 450 195 191 128 -------- ---------------------------------- ------------------------------- 191 Closing cash and cash equivalents 327 142 327 142 -------- ---------------------------------- ------------------------------- Cash and cash equivalents consists of: 198 Cash and short-term deposits 330 145 330 145 (7) Overdrafts (3) (3) (3) (3) ----------------------------------------------------------------------------------------------------- 191 327 142 327 142 ----------------------------------------------------------------------------------------------------- * Re-presented under the direct method (note 11). Notes to the accounts (unaudited) 1. Performance measures Year ended Three months ended 31 December Nine months ended 31 December 31 March 2007 2007 2006 2007 2006 ------------------- ------------------------------------------------------------------------------------ Earnings Pence per (Loss)earnings Earnings Pence per Earnings Pence per Earnings Pence per Earnings Pence per £m share per share(diluted) £m share £m share £m share £m share Underlying pre tax profit - income 257 statement 72 64 215 194 Tax charge relating (31) to underlying profit (2) (1) (8) (27) ------------------------------------------------------------------------------------------------------------------------ Underlying earnings 226 43p per share 70 14p 63 12p 207 40p 167 32p ------------------------------------------------------------------------------------------------------------------------ Exceptional item net of tax (54) (214) Refinancing charges and realisation of (305) cash flow hedges 9 58 Tax and other items 1 49 3 51 ------------------------------------------------------------------------------------------------------------------------ EPRA earnings (loss) (21) (4)p per share 71 14p 58 11p 219 42p 4 32p ----------------------------------------------------------------------------------------------------------------------- (Loss) profit for the period after 2,453 470p taxation (1,318) (257)p 1,489 285p (1,320) (255)p 2,067 396p ------------------------------------------------------------------------------------------------------------------------ The European Public Real Estate Association (EPRA) issued Best Practices Policy Recommendations in November 2006, which gives guidelines for performance measures. The EPRA earnings measure excludes investment property revaluations and gains on disposals, intangible asset movements and their related taxation and the REIT conversion charge. Underlying earnings consists of the EPRA earnings measure, with additional company adjustments. Adjustments include reversal of refinancing charges and realisation of cash flow hedges, gains on trading property transactions and their related taxation, costs relating to REIT conversion and prior year tax items. The weighted average number of shares in issue for the nine month period was: basic: 516m (three months ended 31 December 2007: 512m; year ended 31 March 2007: 520m; nine months ended 31 December 2006: 520m; three months ended 31 December 2006: 520m); diluted for the effect of share options: 517m (three months ended 31 December 2007: 512m; year ended 31 March 2007: 522m; nine months ended 31 December 2006: 522m; three months ended 31 December 2006: 523m). Basic earnings per share (undiluted) for the nine month period were (256p) (three months ended 31 December 2007: (257p); year ended 31 March 2007: 472p; nine months ended 31 December 2006: 398p, three months ended 31 December 2006: 286p). 31 March 31 December 31 December 30 September 2007 Net asset value (NAV) 2007 2006 2007 £m £m £m £m 8,747 Balance sheet net assets 7,090 8,313 8,621 Deferred tax arising on revaluation movements, capital allowances and 168 derivatives 107 164 134 Mark to market on effective cash flow (99) hedges and related debt adjustments (21) (48) (108) Surplus arising on trading and finance lease properties 5 46 Dilution effect of share options 53 52 49 ------------------------------------------------------------------------------------------------------------------------ 8,862 EPRA NAV 7,229 8,486 8,696 ------------------------------------------------------------------------------------------------------------------------ 1682p EPRA NAV per share 1401p 1610p 1682p ------------------------------------------------------------------------------------------------------------------------ The EPRA NAV per share excludes the mark to market on effective cash flow hedges and related debt adjustments, deferred taxation on revaluations and is calculated on a fully diluted basis. At 31 December 2007, the number of shares and potential shares in issue (on a fully diluted basis) was 516m (30 September 2007: 517m; 31 March 2007: 527m; 31 December 2006: 527m). Total return per share of (15.3%) represents a reduction in EPRA NAV per share of 281p net of dividends paid of 24p (see note 7) in the nine months to 31 December 2007. Total return per share (before charges for REIT conversion and refinancings) for the year ended 31 March 2007 was 21.3%. 2. Income statement notes Year ended Three months ended Nine months ended 31 March 31 December 31 December 2007 2007 2006 2007 2006 £m £m £m £m £m ---- ---- ---- ---- ---- Gross and net rental income 551 Rent receivable 132 144 408 407 Spreading of tenant incentives and 37 guaranteed rent increases 16 9 37 32 9 Surrender premiums 4 3 9 --------- ------------------------------------- 597 Gross rental income 148 157 448 448 52 Service charge income 12 17 38 41 --------- ------------------------------------- 649 Gross rental and related income 160 174 486 489 (52) Service charge expenses (12) (16) (38) (41) (36) Property operating expenses (5) (10) (23) (26) --------------------------------------------------------------------------------------------- 561 Net rental and related income 143 148 425 422 --------------------------------------------------------------------------------------------- Fees and other income Performance and management fees (from 30 funds and joint ventures) 6 10 16 21 18 Dividend received from Songbird Estates 16 18 2 Other fees and commission 1 4 4 --------- ------------------------------------- 50 Underlying 7 10 36 43 Capital dividend received from 33 Songbird Estates 30 --------------------------------------------------------------------------------------------- 83 7 10 66 43 --------------------------------------------------------------------------------------------- Net revaluation gains on property and investments Income statement 1,053 Revaluation of properties (1,153) 182 (1,340) 785 115 Result on property disposals (4) 74 32 114 (1) Other revaluations and gains (2) (2) --------- ------------------------------------- 1,167 (1,159) 256 (1,310) 899 Share of gains of funds and joint 257 ventures (note 4) (232) 54 (288) 221 --------- ------------------------------------- 1,424 (1,391) 310 (1,598) 1,120 Consolidated Statement Of Recognised Income and Expense 184 Revaluation of development properties (51) 29 43 136 Revaluation of owner-occupied property (3) 4 22 Revaluation of investments (40) 50 (70) 55 --------------------------------------------------------------------------------------------- 1,630 (1,485) 389 (1,621) 1,311 --------------------------------------------------------------------------------------------- Tax expense (income) (8) Current tax: UK Corporation tax (30%) 1 (15) 4 (10) 3 Foreign tax 1 2 --------- ------------------------------------- (5) 1 (14) 4 (8) 4 Adjustments in respect of prior periods (1) 4 (3) 4 --------- ------------------------------------- (1) Total current tax (income) expense (10) 1 (4) 277 REIT conversion charge 277 277 (1,289) Deferred tax on income and revaluations (8) (1,375) (42) (1,289) --------- ------------------------------------- (1,013) Group total taxation (net) (8) (1,108) (41) (1,016) (170) Attributable to funds and joint ventures 4 (206) 7 (174) --------------------------------------------------------------------------------------------- (1,183) Total taxation (4) (1,314) (34) (1,190) --------------------------------------------------------------------------------------------- Tax attributable to underlying profits for the nine months ended 31 December 2007 was £8m (three months to 31 December 2007: £2m, year to 31 March 2007 £31m, nine months to 31 December 2006: £27m, three months to 31 December 2006: £1m). 3. Property Total property interests are £14,580m at 31 December 2007 comprising properties held by the Group of £12,068m, share of properties held by funds of £1,239m and share of properties held by joint ventures of £1,273m. Properties were valued on the basis of market value, supported by market evidence, in accordance with the Appraisal and Valuation Standards published by The Royal Institution of Chartered Surveyors. 31 March 31 December 31 December 30 September 2007 2007 2006 2007 £m £m £m £m 12,891 Investment properties 11,062 12,945 12,216 1,106 Development properties 987 994 961 50 Owner-occupied property 54 57 -------- ----------------------------------- 14,047 Carrying value of properties on balance sheet 12,103 13,939 13,234 (30) Head lease liabilities (35) (31) (35) ------------------------------------------------------------------------------------------------------------------ Total British Land Group property portfolio 14,017 valuation 12,068 13,908 13,199 ----------------------------------------------------------------------------------------------------------------- At 31 December 2007 Group properties valued at £8,473m were subject to a security interest (30 September 2007: £8,762m, 31 March 2007: £9,194m, 31 December 2006: £9,170m) and other properties of non-recourse companies amounted to £10m (30 September 2007: £12m, 31 March 2007: £128m, 31 December 2006: £7m). 4. Funds and joint ventures Summary of British Land's share of investments in funds and joint ventures at 31 December 2007 Underlying Underlying profit profit (three (nine Net Gross Gross months) months) Investment assets liabilities £m £m £m £m £m ---- ---- ---- ---- ---- Share of funds 4 13 751 1,281 (530) Share of joint ventures 4 14 627 1,407 (780) ------------------------------------------------------------------------------------------------------------------- Total share of investments 8 27 1,378 2,688 (1,310) ------------------------------------------------------------------------------------------------------------------- The total investment in joint ventures is £634m, which also incorporates £7m being City of London Office Unit Trust (CLOUT) and its associated ventures, which is included within share of funds. Amounts owed to joint ventures at 31 December 2007 were £29m (30 September 2007: £28m, 31 March 2007: £32m, 31 December 2006: £32m). British Land's share of the results of funds and joint ventures Year ended Three months ended Nine months ended 31 March 31 December 31 December 2007 2007 2006 2007 2006 £m £m £m £m £m 109 Gross rental income 26 23 81 85 ------------------------------------------------------------------------------------------------------------------- 100 Net rental income 24 21 76 77 (6) Other income and expenditure (1) (2) (4) (5) (57) Net financing costs (15) (13) (45) (44) -------- ----------------------------------------------------------- 37 Underlying profit before taxation 8 6 27 28 257 Net valuation and disposal movements (232) 54 (288) 221 Realisation of cash flow hedges (on property disposals) 9 (5) Goodwill impairment (2) (2) -------- ----------------------------------------------------------- (Loss) profit on ordinary activities 289 before taxation (224) 60 (254) 247 (48) REIT conversion charge (48) (48) (19) Current tax (1) (12) (4) (14) 237 Deferred tax (3) 266 (3) 236 ------------------------------------------------------------------------------------------------------------------- (Loss) profit on ordinary activities 459 after taxation (228) 266 (261) 421 ------------------------------------------------------------------------------------------------------------------- 5. Net Debt 31 March 31 December 31 December 30 September 2007 2007 2006 2007 £m £m £m £m 3,632 Securitisations 3,600 3,640 3,612 1,175 Debentures 1,173 1,178 1,175 1,425 Bank loans and overdrafts 1,260 1,523 1,279 439 Other bonds and loan notes 436 423 436 -------- ----------------------------------- 6,671 Gross debt 6,469 6,764 6,502 -------- ----------------------------------- Interest rate and currency derivative 19 liabilities 30 40 22 (88) Interest rate and currency derivative assets (38) (48) (103) -------- ----------------------------------- 6,602 6,461 6,756 6,421 (198) Cash and short-term deposits (330) (145) (453) ------------------------------------------------------------------------------------------------- 6,404 Net debt 6,131 6,611 5,968 ------------------------------------------------------------------------------------------------- Gross debt includes £124m due within one year at 31 December 2007 (30 September 2007: £117m; 31 March 2007: £54m; 31 December 2006: £140m). The principal amount of gross debt at 31 December 2007 was £6,484m. Included in this, the principal amount of secured borrowings and other borrowings of non-recourse companies was £5,029m. Cash and short term deposits not subject to a security interest at 31 December 2007 amount to £164m (30 September 2007: £90m; 31 March 2007: £27m; 31 December 2006: £27m). Undrawn committed bank facilities amounted to £1,972m (30 September 2007: £1,855m; 31 March 2007: £1,657m; 31 December 2006: £1,612m). 6. Reserves Share Share Other Retained capital premium reserves earnings Total £m £m £m £m £m At 1 April 2006 130 1,253 176 4,457 6,016 Total recognised income and expense 98 574 672 Share issues 2 2 Purchase of ESOP shares (13) (13) Adjustment for share and share option awards 11 11 Dividends paid in the period (61) (61) ------------------------------------------------------------------------------------------------- At 30 September 2006 130 1,255 274 4,968 6,627 Total recognised income and expense 187 1,494 1,681 Share issues 4 4 Purchase of ESOP shares (3) (3) Adjustment for share and share option awards 4 4 ------------------------------------------------------------------------------------------------- Movement in nine months to 31 December 2006 6 285 2,006 2,297 ------------------------------------------------------------------------------------------------- At 31 December 2006 130 1,259 461 6,463 8,313 Total recognised income and expense 71 386 457 Share issues 4 4 Adjustment for share and share option awards 3 3 Dividends paid in the period (30) (30) ------------------------------------------------------------------------------------------------- Movement in year to 31 March 2007 10 356 2,365 2,731 ------------------------------------------------------------------------------------------------- At 31 March 2007 130 1,263 532 6,822 8,747 Total recognised income and expense (31) 109 78 Share issues 3 3 Purchase of ESOP shares (12) (12) Ordinary shares purchased and held as Treasury shares (125) (125) Adjustment for share and share option awards 7 7 Dividends paid in the period (77) (77) ------------------------------------------------------------------------------------------------- At 30 September 2007 130 1,266 501 6,724 8,621 Total recognised income and expense (158) (1,318) (1,476) Share issues 1 1 Ordinary shares purchased and held as Treasury shares (14) (14) Adjustment for share and share option awards 3 3 Dividends paid in the period (45) (45) ------------------------------------------------------------------------------------------------- Movement in nine months to 31 December 2007 4 (189) (1,472) (1,657) ------------------------------------------------------------------------------------------------- At 31 December 2007 130 1,267 343 5,350 7,090 ------------------------------------------------------------------------------------------------- At 31 December 2007, of the issued 25p ordinary shares, 3m shares were held in the ESOP Trust (30 September 2007: 3m, 31 March 2007: 3m, 31 December 2006: 3m), 11m shares were held as Treasury shares (30 September 2007: 10m, 31 March 2007: nil, 31 December 2006: nil) and 508m shares were in free issue (30 September 2007: 509m, 31 March 2007: 518m, 31 December 2006: 518m). All issued shares are fully paid. 7. Dividends The proposed third 2008 interim dividend of 8.75 pence per share, totalling £45m, was approved by the Board on 6 February 2008 and is payable on 19 May 2008 to shareholders on the register at the close of business on 18 April 2008. The dividend will consist of two components: a property income distribution (PID) as required by REIT legislation of 4.25 pence per share and a non-PID of 4.50 pence per share. The PID element of the dividend may vary over time and is paid after deduction of withholding tax at the basic rate (22% for 2007/2008 and 20% for 2008/2009). However, certain classes of shareholder may be able to claim exemption from deduction of withholding tax. Please refer to our website (www.britishland.com) for details. The non-PID element will be treated as a normal dividend. The second 2008 interim dividend of 8.75 pence per share, totalling £45m, is payable on 15 February 2008. The reconciliation of movements in shareholders' funds shows total dividends paid in the nine month period to 31 December 2007 of £122m being the second 2007 interim dividend of £34m (6.5 pence per share) paid on 18 May 2007, the 2007 final dividend of £43m (8.25 pence per share) paid on 17 August 2007 and the first 2008 interim dividend of £45m (8.75 pence per share) paid on 16 November 2007. The Company offers shareholders the option to reinvest their cash dividends automatically in the Company's shares through the Dividend Reinvestment Plan (DRIP). The DRIP will apply to both the PID and non-PID elements of the dividend for those shareholders who have elected to participate in the plan. Further details of the DRIP can be found on the Company's website (www.britishland.com) or by calling Equiniti's DRIP helpline on 0870 241 3018. 8. Segment information Since the UK is the predominant location of the Group's property portfolio, these financial statements and related notes represent the results and financial position of the Group's primary business segment. The secondary reporting format by property use is shown below: Offices Retail Other Total 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m ---------------------------------------------------------------------------------------------------------------------- Nine months ended 31 December Net rental income 173 172 237 230 15 20 425 422 Capital expenditure 447 309 87 476 17 17 551 802 Segment assets 5,656 5,990 7,495 8,951 1,054 1,138 14,205 16,079 Three months ended 31 December Net rental income 61 56 80 84 2 8 143 148 Capital expenditure 105 171 27 177 1 133 348 ---------------------------------------------------------------------------------------------------------------------- Segment assets include the Group's investment in funds and joint ventures. 9. Contingent liabilities TPP Investments Limited, a wholly owned ring-fenced special purpose subsidiary, is a partner in The Tesco British Land Property Partnership and, in that capacity, has entered into a secured bank loan under which its liability is limited to £23m (30 September 2007, 31 March 2007, 31 December 2006: £23m) and recourse is only to the partnership assets. 10. Related party transactions Details of transactions with funds and joint ventures including debt guarantees by the Company are given in notes 2 and 9. Amounts owed to joint ventures are detailed in note 4. There have been no material changes in the related party transactions described in the last annual report. 11. Basis of preparation The financial information for the year ended 31 March 2007 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The financial information included in this announcement has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with IAS 34 'Interim Financial Reporting'. The same accounting policies, estimates, presentation and methods of computation are followed in the quarterly report as applied in the Group's latest annual audited financial statements, with the exception of the cash flow statement which is now presented under the direct method. This is regarded by the IASB as the preferred method of presenting cash flows and has been adopted for improved transparency. The prior year audited figures have been re-presented on a consistent basis. The current period financial information presented in this document is unaudited. The interim financial information was approved by the Board on 6 February 2008. Table A --------- Summary income statement based on proportional consolidation for the period ended 31 December 2007 The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. It presents the results of the Group, with its share of the results of funds and joint ventures included on a line by line, i.e. proportional basis. The underlying profit before taxation and total profit after taxation are the same as presented in the consolidated income statement. Year ended Three months ended Nine months ended 31 March 31 December 30 September 30 June 31 December 2007 2007 2007 2007 2007 2006 £m £m £m £m £m £m 706 Gross rental income 174 175 180 529 533 ------- ---------------------------------------------------- 661 Net rental income 167 167 167 501 499 51 Fees and other income 7 7 22 36 44 (85) Administrative expenses (17) (19) (22) (58) (68) (370) Net interest costs (85) (88) (91) (264) (281) ------- ---------------------------------------------------- 257 Underlying profit before taxation 72 67 76 215 194 (305) Debt refinancing items 9 9 (305) 1,424 Net valuation movement and gains on disposal (1,391) (365) 158 (1,598) 1,120 (15) Amortisation of intangible assets (3) (1) (4) (8) (11) 33 Songbird Estates dividend (capital) 30 30 (111) Goodwill impairment (2) (2) (108) (13) REIT conversion costs (13) ------- ---------------------------------------------------- (Loss) profit on ordinary activities 1,270 before taxation (1,322) (299) 267 (1,354) 877 (31) Tax charge relating to underlying profit (2) (3) (3) (8) (27) (325) REIT conversion charge (325) 1,673 Deferred tax benefit 5 24 10 39 1,673 (134) Other taxation 1 1 1 3 (131) --------------------------------------------------------------------------------------------------------------- 2,453 (Loss) profit for the period after taxation (1,318) (277) 275 (1,320) 2,067 --------------------------------------------------------------------------------------------------------------- 43p Underlying earnings per share - diluted basis 14p 12p 14p 40p 32p --------------------------------------------------------------------------------------------------------------- The underlying earnings per share is calculated on underlying profit before taxation of £215m, tax attributable to underlying profits of £8m and 517m shares on a diluted basis, for the nine months ended 31 December 2007 and underlying profit before taxation of £72m, tax attributable to underlying profits of £2m and 512m shares on a diluted basis, for the three months ended 31 December 2007. Table A (continued) --------------------- Summary balance sheet based on proportional consolidation as at 31 December 2007 The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. It presents the composition of the EPRA net assets of the Group, with its share of the net assets of funds and joint ventures included on a line by line, i.e. proportional basis and assuming full dilution. 31 March 31 December 31 December 30 September 2007 2007 2006 2007 £m £m £m £m 10,173 Retail properties 8,578 9,948 9,429 6,165 Office properties 5,656 5,974 6,067 565 Other properties 346 516 414 ------- ------------------------------------ 16,903 Total properties 14,580 16,438 15,910 267 Other investments 197 307 237 50 Intangible assets 46 54 45 (617) Other net liabilities (379) (650) (373) (7,741) Net debt (7,215) (7,663) (7,123) ---------------------------------------------------------------------------------------------------- 8,862 EPRA NAV (note 1) 7,229 8,486 8,696 ---------------------------------------------------------------------------------------------------- 1682p EPRA NAV per share (note 1) 1401p 1610p 1682p ---------------------------------------------------------------------------------------------------- Total property valuations including share of funds and joint ventures 14,017 British Land Group 12,068 13,908 13,199 Share of funds and joint ventures 2,815 Investment properties 2,412 2,438 2,630 77 Development properties 106 85 87 Trading and finance lease properties at valuation 13 (6) Head lease liabilities (6) (6) (6) ------- ------------------------------------ 2,886 2,512 2,530 2,711 ---------------------------------------------------------------------------------------------------- 16,903 Total property portfolio valuation 14,580 16,438 15,910 ---------------------------------------------------------------------------------------------------- Calculation of EPRA NNNAV per share 8,862 EPRA NAV 7,229 8,486 8,696 (168) Deferred tax arising on revaluation movements (107) (164) (134) 99 Mark to market on interest rate swaps 21 48 108 75 Mark to market on debt 274 (10) 350 ---------------------------------------------------------------------------------------------------- 8,868 EPRA NNNAV 7,417 8,360 9,020 ---------------------------------------------------------------------------------------------------- 1683p EPRA NNNAV per share 1437p 1586p 1745p ---------------------------------------------------------------------------------------------------- EPRA NNNAV is the EPRA NAV adjusted to reflect the fair value of the debt and derivatives and to include the deferred taxation on revaluations. 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