Final Results - Part 2
British Land Co PLC
25 May 2004
PRELIMINARY ANNOUNCEMENT OF FINANCIAL RESULTS
For the year ended 31 March 2004
Consolidated Profit & Loss Account
for the year ended 31 March 2004
Note 2004 2003
Restated+
£m £m
Gross rental income 565.6 551.6
Less share of joint ventures 9 (78.9) (102.2)
Gross rental income - Group 486.7 449.4
Operating profit 2 421.8 382.0
Share of operating profits of joint ventures 9 67.5 92.3
Disposal of fixed assets - 3 32.9 26.1
including amounts from joint ventures (note 9)
Profit on ordinary activities before interest 522.2 500.4
Net interest payable 4 (336.2) (326.1)
Profit on ordinary activities before taxation 186.0 174.3
Taxation 5 (14.5) (33.7)
Profit on ordinary activities after taxation 171.5 140.6
Ordinary dividends 6 (70.8) (65.9)
Retained profit for the year 100.7 74.7
Basic earnings per share 7 35.1 p 27.4 p
Diluted earnings per share 7 34.5 p 27.1 p
Adjusted basic earnings per share * 7 37.0 p 27.6 p
Adjusted diluted earnings per share * 7 36.3 p 27.3 p
Dividend per share 6 14.5 p 13.4 p
The results stated above relate to the continuing activities of the Group.
* Adjusted to exclude the capital allowance effects of FRS 19.
+ Restated as in note 1.
Consolidated Balance Sheet
as at 31 March 2004
Note 2004 2003
Restated+
£m £m
Fixed assets
Investment properties 8 9,251.2 8,085.2
Investments in joint ventures
Share of gross assets 9 1,299.8 1,470.3
Share of gross liabilities 9 (641.6) (770.1)
658.2 700.2
Other investments 10 17.2 26.6
Negative goodwill 10 (14.1) (9.2)
9,912.5 8,802.8
Current assets
Trading properties 8 41.6 46.2
Debtors 11 67.8 55.6
Cash and deposits 15 173.7 139.7
Total current assets 283.1 241.5
Creditors due within one year 12 (869.9) (555.9)
Net current liabilities (586.8) (314.4)
Total assets less current liabilities 9,325.7 8,488.4
Creditors due after one year 13 (4,406.3) (4,119.6)
Convertible bonds 15 (149.0) (146.8)
Provisions for liabilities and charges 14 (101.1) (92.7)
Pension asset (liability) 23 0.1 (6.0)
Net Assets 4,669.4 4,123.3
Capital and reserves
Called up share capital 19 122.0 122.1
Share premium 19 1,109.3 1,107.7
Capital redemption reserve 19 8.1 7.9
Other reserves 19 (6.1) (8.0)
Revaluation reserve 19 2,615.2 2,225.9
Profit and loss account 19 820.9 667.7
Equity shareholders' funds 4,669.4 4,123.3
Adjusted Net Asset Value (NAV) per share Basic 18 999 p 883 p
Fully 18 966 p 859 p
diluted
(The NAV per share includes the external valuation
surplus on development and trading properties but
excludes the capital allowance effects of FRS 19.)
Approved by the Board on 24 May 2004
+ Restated as in note 1.
Other Consolidated Primary Statements
for the year ended 31 March 2004
2004 2003
Restated+
£m £m
Statement of total recognised gains and losses
Profit on ordinary activities after taxation 171.5 140.6
Unrealised surplus on revaluation:
- investment properties 396.6 12.6
- joint ventures 65.3 63.4
- other investments 0.3 (0.1)
462.2 75.9
Exchange movements on net investments 0.3 0.6
Taxation on realisation of prior year revaluations (4.6)
(4.3) 0.6
Pension scheme movements
- actual return less expected return on assets 3.8 (4.4)
- experience gains and losses on liabilities 0.8 (1.7)
- changes in assumptions underlying the
present value of the scheme liabilities (4.9) (5.8)
- deferred tax attributable to pension movements 0.1 3.6
(0.2) (8.3)
Fair value adjustment on consolidation of former joint ventures (8.3)
Total recognised gains and losses relating to the financial year 620.9 208.8
Prior year adjustment (note 1) (6.0)
Total recognised gains and losses since the last annual report 614.9 208.8
2004 2003
Restated+
£m £m
Note of historical cost profits and losses
Profit on ordinary activities before taxation 186.0 174.3
Realisation of prior year revaluations 72.2 17.7
Historical cost profit on ordinary activities before taxation 258.2 192.0
Historical cost profit for the year retained after
taxation and dividends 168.3 92.4
+ Restated as in note 1.
Other Consolidated Primary Statements (continued)
for the year ended 31 March 2004
2004 2003
Restated+
£m £m
Reconciliation of movements in
shareholders' funds
Profit on ordinary activities after taxation 171.5 140.6
Ordinary dividends (70.8) (65.9)
Retained profit for the year 100.7 74.7
Revaluation of investment properties and investments 462.2 75.9
Exchange movements on net investments 0.3 0.6
Taxation on realisation of prior year revaluations (4.6)
Fair value adjustment on consolidation of former joint ventures (8.3)
550.3 151.2
Shares issued 1.7 1.6
Pension scheme movements (0.2) (8.3)
Purchase and cancellation of own shares (5.0) (130.1)
Purchase of ESOP shares (6.7)
Adjustment for share and share option awards 6.0
Increase in shareholders' funds 546.1 14.4
Opening shareholders' funds as previously stated 4,129.3 4,107.9
Prior year adjustment (see note 1) (6.0) 1.0
Opening shareholders' funds as restated 4,123.3 4,108.9
Closing shareholders' funds 4,669.4 4,123.3
+ Restated as in note 1.
Consolidated Cash Flow Statement
for the year ended 31 March 2004
Note 2004 2003
£m £m
Net cash inflow from operating activities 17 381.4 373.6
Dividends received from joint ventures 79.7 22.6
Returns on investments and servicing of finance
Interest received 12.9 20.9
Interest paid (301.5) (303.6)
Dividends received 0.2 0.3
(288.4) (282.4)
Taxation
UK corporation tax paid (4.1) (6.1)
Foreign tax paid (5.5) (12.7)
(9.6) (18.8)
Net cash inflow from operating activities and
investments after finance charges and taxation 163.1 95.0
Capital expenditure and financial investment
Purchase of investment properties and development expenditure (316.9) (371.0)
Purchase of investments (10.8) (15.4)
Sale of investment properties 171.3 76.6
Sale of investments 20.8
(135.6) (309.8)
Acquisitions and disposals
Purchase of interest in subsidiary companies (110.2) (42.7)
Cash at bank acquired with interest in subsidiary companies 5.8 5.8
Investment in and loans to joint ventures (34.8) (14.9)
Sale of shares in and loans repaid by joint ventures 89.2 91.0
(50.0) 39.2
Equity dividends paid (67.0) (65.1)
Net cash outflow before management
of liquid resources and financing (89.5) (240.7)
Management of liquid resources
Decrease in term deposits 11.9 254.8
Financing
Issue of ordinary shares 1.7 1.3
Purchase and cancellation of own shares (5.0) (130.1)
Purchase of ESOP shares (6.7)
Repurchase of 6.5% Convertible Bonds 2007 (322.7)
Redemption of Broadgate Class D Unsecured Notes 2014 (73.5)
Issue of Sainsbury supermarkets securitised debt 84.0
Issue of Meadowhall Shopping Centre securitised debt 50.7
Increase in bank and other borrowings 73.4 463.2
124.6 11.7
Increase in cash 17 47.0 25.8
Notes to the financial information
for the year ended 31 March 2004
1. Basis of preparation
The financial information is prepared on the basis of the accounting policies set out in
the Group's financial statements for the year ended 31 March 2003, save as set out
below:
The Group has adopted Financial Reporting Standard 17 'Retirement Benefits' (FRS17).
Under FRS17 defined benefit pension scheme assets are measured using fair values;
pension scheme liabilities are measured using the projected unit method and discounted
at the rate of return of a high quality corporate bond of equivalent term to the scheme
liabilities. The net surplus or deficit is recognised in full in the consolidated
balance sheets. The current service cost and gains and losses on settlement and
curtailments are charged to operating profit. Past service costs are recognised in the
profit and loss account if the benefits have vested or, if they have not vested, over
the period until vesting occurs. The interest cost and the expected return on assets
are included as other finance income or interest payable. Actuarial gains and losses
are recognised in the statement of total recognised gains and losses.
Additionally, the Group has adopted early Financial Reporting Standard 20 'Share-based
Payment' (FRS20) and Urgent Issues Task Force Abstract 38 'Accounting for ESOP Trusts'
(UITF38). Under FRS20 the fair value of equity-settled share-based payments to
employees is determined at the date of grant and is expensed on a straight-line basis
over the vesting period based on the Group's estimate of shares or options that will
eventually vest. In the case of options granted, fair value is measured using a
Black-Scholes pricing model. No restatement of the prior year is necessary as the
effect in respect of the current and prior years is not considered material. Further
details are set out in note 22.
The financial information set out in the announcement does not constitute the company's
statutory accounts for the years ended 31 March 2004 or 2003, but is derived from those
accounts. Statutory accounts for 2003 have been delivered to the Registrar of Companies
and those for 2004 will be delivered following the company's annual general meeting. The
auditors have reported on those accounts; their reports were unqualified and did not
contain statements under s237(2) or (3) Companies Act 1985.
1. Basis of preparation (continued)
Restatement of comparatives
The adoption of FRS17 'Retirement Benefits' has required full
consolidation of the fair value of assets and liabilities arising from
retirement benefit obligations. As a result of this change in accounting
policy, the comparatives have been restated as follows:
Profit and loss account Balance sheet
Other Prepayments
finance and Pension
Operating (costs) accrued asset Shareholders'
profit income Taxation income (liability) funds
£m £m £m £m £m £m
Year ended
31 March 2004
Excluding effect
of FRS17 422.5 (11.8) 40.2 4,679.3
Adoption of
FRS17 (0.7) (0.3) (2.7) (10.0) 0.1 (9.9)
As stated 421.8 (0.3) (14.5) 30.2 0.1 4,669.4
Year ended
31 March 2003
As previously
stated 380.4 (33.1) 18.6 4,129.3
Adoption of
FRS17 1.6 0.3 (0.6) (6.0) (6.0)
As restated 382.0 0.3 (33.7) 18.6 (6.0) 4,123.3
2. Operating profit 2004 2003
Restated
£m £m
Gross rental income 486.7 449.4
Rents payable (3.7) (2.1)
Other property outgoings (32.7) (28.7)
Net rental income 450.3 418.6
Profit on property trading (see below) 6.0 0.6
Other income 6.2 4.2
Administrative expenses (40.7) (41.4)
Operating profit 421.8 382.0
Profit on property trading
Sale proceeds 11.0 2.1
Cost of sales (5.0) (1.5)
Profit on property trading 6.0 0.6
3. Profit on the disposal of fixed assets
2004 2003
£m £m
British Land Group 25.5 5.7
Share of joint ventures 7.4 20.4
32.9 26.1
Included in the tax charge is a net charge of £8.7m (2003 - £6.2m) attributable to property sales.
4. Net interest payable
2004 2003
Restated
£m £m
British Land Group
Payable on: bank loans and overdrafts 52.2 35.2
other loans 263.7 254.1
315.9 289.3
Deduct: development cost element (13.3) (8.1)
302.6 281.2
Receivable on: deposits and securities (6.7) (11.2)
loans to joint ventures (6.6) (8.9)
Other finance
(income) costs: expected return on pension scheme assets (1.7) (1.9)
interest on pension scheme liabilities 2.0 1.6
Total British Land Group 289.6 260.8
Share of joint ventures
Interest payable on shareholder loans 6.6 8.9
Other interest payable (net) 40.0 56.4
Total share of joint ventures (note 9) 46.6 65.3
Net interest payable 336.2 326.1
5. Taxation 2004 2003
Restated
£m £m
Current tax
UK corporation tax (30%) 13.4 10.8
Foreign tax 4.1 1.6
17.5 12.4
Adjustments in respect of prior years (17.9) 7.0
Total current tax (credit) charge (0.4) 19.4
Deferred tax
Origination and reversal of timing differences 3.0 3.1
Tax associated with pension movements 2.7 0.6
Total deferred tax charge 5.7 3.7
Group total taxation 5.3 23.1
Attributable to joint ventures 9.2 10.6
Total taxation - effective tax rate - 7.8% (2003 - 19.3%) 14.5 33.7
Tax reconciliation
Profit on ordinary activities before taxation 186.0 174.3
Less - Share of profit of joint ventures (28.3) (47.4)
Group profit on ordinary activities before taxation 157.7 126.9
Tax on group profit on ordinary activities at
UK corporation tax rate of 30% (2003 - 30%) 47.3 38.1
Effects of:
Capital allowances (6.8) (6.0)
Tax losses and other timing differences (29.3) (23.0)
Expenses not deductible for tax purposes 6.3 3.3
Adjustments in respect of prior years (17.9) 7.0
Group current tax (credit) charge (0.4) 19.4
Factors affecting future tax rate
Capital allowances and losses which are available will reduce the current tax charge below
30%. Capital allowances are claimed on eligible investment assets. Chargeable gains
arising when investment assets are sold may be reduced by available capital losses.
Deferred tax provisions for capital allowances are expected to be released on sale.
Contingent tax
The tax which would arise on the disposal of properties and investments at the amount at
which they are carried in the balance sheet and including trading and development surpluses,
is estimated at £570m (2003 - £470m) after taking account of available losses and
provisions. This unprovided taxation is stated after taking account of the FRS 19 capital
allowance deferred tax provision of £105m (2003 - £86m) recorded in the Balance Sheet,
which, as described in note 14, would be expected to be released on sale.
6. Ordinary dividends
2004 2003 2004 2003
pence pence £m £m
Interim 4.43 4.10 21.6 20.5
Proposed final 10.07 9.30 49.2 45.4
Total for year 14.50 13.40 70.8 65.9
The final dividend of 10.07 pence will be paid on 20 August 2004 to shareholders on the
register at the close of business on 23 July 2004. The ex-dividend date is 21 July 2004. The
interim dividend was paid on 20 February 2004.
7. Basic and diluted earnings per share
Basic and diluted earnings per share are calculated on the profit on ordinary activities after
taxation and on the weighted average number of shares in issue during the year as shown below:
2004 2003
Weighted Weighted Profit
average Profit average after
number after number taxation
of shares taxation of Restated
shares
m £m m £m
Earnings per share
Basic 488.1 171.5 512.5 140.6
Diluted 519.0 179.3 554.0 150.3
Weighted Weighted Profit
average Profit average after
number after number taxation
of shares taxation of Restated
shares
m £m m £m
Adjusted earnings per share
Basic 488.1 180.6 512.5 141.7
Diluted 519.0 188.4 554.0 151.4
The weighted average number of shares used for calculating diluted earnings per share includes
the dilutive effect of convertible bonds and share options, and totals 30.9m (2003 - 41.5m).
Diluted earnings per share reflects the £7.8m (2003 - £9.7m) post tax profit adjustment
arising from assuming the conversion of the Subordinated Irredeemable Convertible Bonds.
Adjusted earnings per share are calculated by excluding the post tax profit adjustment of
£9.1m (2003 - £1.1m) which is the capital allowance effect of FRS 19 which is not expected to
arise, as described in note 14.
8. Investment, development and trading
properties
Leasehold
Freehold Long Short Total
£m £m £m £m
Investment and development properties
Valuation and cost 1 April 2003 7,737.4 347.8 8,085.2
Additions - purchases and capital expenditure 302.4 20.3 322.7
- former joint ventures 721.2 100.5 6.6 828.3
Disposals (231.3) (148.0) (379.3)
Reallocation (49.5) 49.5
Exchange fluctuations (2.3) (2.3)
Revaluations 379.1 16.4 1.1 396.6
Valuation and cost 31 March 2004 8,857.0 386.5 7.7 9,251.2
Trading properties
At lower of cost and net realisable value
31 March 2004 32.5 8.4 0.7 41.6
External valuation surplus on development and trading properties 92.7
Total investment, development and trading properties 9,385.5
Investment, development and trading properties were valued by external valuers on the basis of open market value
in accordance with the Appraisal and Valuation Manual published by The Royal Institution of Chartered Surveyors.
£m
On an open market basis - External valuations:
United Kingdom: ATIS REAL Weatheralls 9,153.7
United Kingdom: FPD Savills 217.6
Republic of Ireland: Jones Lang LaSalle 40.8
Netherlands: CB Richard Ellis B.V. 1.0
9,413.1
Adjustment for UITF 28 - lease incentives debtors (27.6)
Total investment, development and trading properties 9,385.5
Total external valuation surplus on development and trading properties
£m
British Land Group 92.7
Share of joint ventures 2.3
95.0
8. Investment, development and trading properties (continued)
Total property valuations including share of joint ventures
2004 2003
£m £m
British Land Group
Investment and development properties 9,251.2 8,085.2
Trading properties 41.6 46.2
External valuation surplus on development and
trading properties 92.7 87.9
Adjustment for UITF 28 - lease incentive debtors 27.6 16.3
9,413.1 8,235.6
Share of joint ventures
Properties 1,221.8 1,404.8
External valuation surplus on development and
trading properties 2.3 1.4
Adjustment for UITF 28 - lease incentive debtors 2.2 3.8
1,226.3 1,410.0
Total property portfolio valuation 10,639.4 9,645.6
9. Joint ventures' summary financial statements
The Tesco
BL BLT British Land Tesco BL
Fraser Properties Property BL West
Ltd Ltd Partnership Holdings Ltd companies
All joint ventures are held equally on a 50:50 basis
Partners House of Tesco plc Tesco plc Tesco plc West LB,
Fraser plc WestImmo,
and
Provinzial
Date established July 1999 Nov 1996 Feb 1998 Nov 1999 Sep 2000
Accounting year end 31 Jan 31 Dec 31 Dec 31 Dec 31 Dec
Summarised profit and loss accounts £m £m £m £m £m
Gross rental income 14.1 15.0 7.3 23.3 25.6
Net rental income 13.8 15.0 6.4 22.7 24.6
Other expenditure (0.4) (0.5) (0.3) (0.4) (0.5)
Profit (loss) on property trading
Operating profit 13.4 14.5 6.1 22.3 24.1
Disposal of fixed assets 2.1 (4.4)
Net interest - external (8.8) (7.4) 0.1 (14.3) (18.1)
- shareholders (2.9) (1.1)
Net interest (payable) receivable (11.7) (8.5) 0.1 (14.3) (18.1)
Profit (loss) before tax 3.8 6.0 6.2 8.0 1.6
Tax (0.3) (1.7) (3.1) (3.2) (1.8)
Profit (loss) after tax 3.5 4.3 3.1 4.8 (0.2)
Summarised statements of total recognised gains and losses
Profit (loss) retained for the year 3.5 4.3 3.1 4.8 (0.2)
Unrealised surplus (deficit) on revaluation 35.5 10.5 19.4 45.4 (17.8)
Total recognised gains and losses relating to the 39.0 14.8 22.5 50.2 (18.0)
financial year
Summarised balance sheets
Investment properties at valuation 255.7 254.1 127.8 414.5 314.0
Development and trading properties at cost
Total properties 255.7 254.1 127.8 414.5 314.0
Current assets 0.3 0.2 2.5 2.5 0.4
Upstream loans to joint venture shareholders 17.1
Cash and deposits 5.6 7.8 6.1 11.6 9.4
Gross assets 261.6 279.2 136.4 428.6 323.8
Current liabilities (4.9) (6.0) (18.5) (11.4) (11.7)
Bank debt falling due within one year (2.0) (0.2) (10.0)
Bank debt falling due after one year (137.2) (184.5) (87.1) (199.8) (234.6)
Debentures
Deferred tax (5.2) (0.6) (1.0) (1.5) (1.5)
Gross liabilities (149.3) (191.3) (106.6) (222.7) (247.8)
Net external assets 112.3 87.9 29.8 205.9 76.0
Represented by:
Shareholder loans 27.1 83.5
Ordinary shareholders' funds / Partners' capital 85.2 87.9 29.8 122.4 76.0
Total investment 112.3 87.9 29.8 205.9 76.0
Capital commitments 2.2 4.2
Contingent tax 18.0 23.0 3.6 21.8
9. Joint ventures' summary financial statements (continued)
The
Scottish
* Retail
BL Property Other British
Davidson Limited Joint Land 2003
Ltd Partnership Ventures Share Comparative
All joint ventures are held equally on a 50:50 basis
Partners Manny Davidson, Land
his family & Securities
trusts Group PLC
Date established September 2001 March 2004
Accounting year end 31 December 31 March
Summarised profit and loss accounts £m £m £m £m £m
Gross rental income 28.2 1.2 43.1 78.9 102.2
Net rental income 23.8 1.1 38.0 72.7 95.1
Other expenditure (2.6) (0.1) (1.0) (2.9) (3.0)
Profit (loss) on property trading (1.2) (3.3) (2.3) 0.2
Operating profit 20.0 1.0 33.7 67.5 92.3
Disposal of fixed assets 1.4 15.7 7.4 20.4
Net interest - external (15.3) (16.2) (40.0) (56.4)
- shareholders (0.7) (8.5) (6.6) (8.9)
Net interest (payable) receivable (16.0) (24.7) (46.6) (65.3)
Profit (loss) before tax 5.4 1.0 24.7 28.3 47.4
Tax (1.5) (0.3) (6.5) (9.2) (10.6)
Profit (loss) after tax 3.9 0.7 18.2 19.1 36.8
Summarised statements of total recognised gains and losses
Profit (loss) retained for the year 3.9 0.7 18.2 19.1 36.8
Unrealised surplus (deficit) on revaluation 33.2 3.6 0.8 65.3 63.4
Total recognised gains and losses relating 37.1 4.3 19.0 84.4 100.2
to the financial year
Summarised balance sheets
Investment properties at valuation 480.0 486.8 47.7 1,190.3 1,336.2
Development and trading properties at cost 15.7 47.2 31.5 68.6
Total properties 495.7 486.8 94.9 1,221.8 1,404.8
Current assets 11.4 0.2 6.1 11.8 16.2
Upstream loans to joint venture shareholders 17.5 21.8 28.2
Cash and deposits 18.8 9.8 6.9 38.0 49.3
Gross assets 525.9 514.3 129.7 1,299.8 1,470.3
Current liabilities (56.2) (10.3) (12.8) (65.8) (81.6)
Bank debt falling due within one year (30.5) (21.4) (63.3)
Bank debt falling due after one year (103.8) (21.8) (484.4) (405.2)
Debentures (123.9) (62.0) (210.2)
Deferred tax (5.4) (0.7) (8.0) (9.8)
Gross liabilities (319.8) (10.3) (35.3) (641.6) (770.1)
Net external assets 206.1 504.0 94.4 658.2 700.2
Represented by:
Shareholder loans 32.6 71.6 209.0
Ordinary shareholders' funds / Partners' 206.1 504.0 61.8 586.6 491.2
capital
Total investment 206.1 504.0 94.4 658.2 700.2
Capital commitments 11.2 8.2 12.9 17.5
Contingent tax 55.0 37.5 4.0 81.5 76.9
* British Land's share of negative goodwill is included in Current
Liabilities, and amounts in total to £19.2m (2003 - £19.6m).
9. Joint ventures (continued)
The movement for the year
Equity Loans Total
£m £m £m
At 1 April 2003 491.2 209.0 700.2
Additions 259.1 34.1 293.2
Repayment of loans (55.6) (55.6)
Share of profit attributable to joint 19.1 19.1
ventures
Dividends from joint ventures (154.2) (154.2)
Disposals (15.0) (15.0)
Transfers to subsidiaries (78.9) (115.9) (194.8)
Revaluation 65.3 65.3
At 31 March 2004 586.6 71.6 658.2
The Group's share of the market value of the debt and derivatives as at 31 March 2004 was £14.9m more
than the Group's share of the book value (2003 - £40.6m).
The Group's share of joint venture external net debt as at 31 March 2004 was £529.8m (2003 - £632.0m).
The amount guaranteed by British Land was £nil (2003 - £12.0m).
The Group's share of joint venture properties as at 31 March 2004 was £1,221.8m (2003 - £1,404.8m).
All companies are property investment companies registered in England and Wales unless otherwise
stated.
Other Joint Ventures
Other Joint Ventures includes the following entities:
Bank
Profit debt
Gross Operating (loss) falling
rental profit before due Net
after
income (loss) tax one year investment
£m £m £m £m £m
BL Universal PLC (pre-acquisition 35.3 31.0 12.4
results)
BVP Group (pre-acquisition results) 2.6 2.2 0.7
The Public House Company Ltd 2.8 2.5 9.2 21.6
Blythe Valley Innovation Centre Ltd 0.1 0.1 (2.1) 1.3
BL Rosemound Ltd Partnership (1.3) (1.3) (19.7) 6.9
10. Other investments and negative goodwill
Other
investments
£m
At 1 April 2003 26.6
Additions 10.8
Disposals (20.5)
Revaluations 0.3
At 31 March 2004 17.2
For the year ended 31 March 2004 dividends and interest from other investments amounted
to £1.1m (2003 - £0.3m).
Negative
goodwill
£m
At 1 April 2003 (9.2)
Additions (6.4)
Release on sales 1.5
At 31 March 2004 (14.1)
11. Debtors
2004 2003
£m £m
Trade debtors 37.3 36.1
Amounts owed by joint ventures 0.3 0.9
Prepayments and accrued income 30.2 18.6
67.8 55.6
Included in Prepayments and accrued income is an amount of £27.6m (2003 - £16.3m),
relating to lease incentives which are amortised over the period to the next open market
rent review.
12. Other creditors due within one year
2004 2003
£m £m
Debentures and loans * 38.5 57.8
Overdrafts * 7.3 8.4
Bank loans * 439.4 168.5
Trade creditors 65.2 58.6
Amounts owed to joint ventures 28.2
Corporation tax 36.7 33.7
Other taxation and social security 7.7 13.9
Accruals and deferred income 197.7 169.6
Proposed final dividend 49.2 45.4
869.9 555.9
* See maturity analysis of net debt - note 15.
13. Creditors due after one year
2004 2003
£m £m
Debentures and loans * 3,842.0 3,397.5
Bank loans * 564.3 722.1
4,406.3 4,119.6
* See maturity analysis of net debt - note 15.
14. Provisions for liabilities and charges
2004 2003
£m £m
At 1 April 2003 92.7 89.6
Liabilities assumed on consolidation of former joint ventures 5.4
Charged to profit and loss account 3.0 3.1
At 31 March 2004 101.1 92.7
Deferred tax is provided as follows:
Capital allowances 104.9 90.1
Other timing differences (3.8) 2.6
101.1 92.7
The deferred tax liability relates primarily to capital allowances claimed on plant and
machinery within investment properties. When a property is sold and the agreed disposal
value for this plant and machinery is less than original cost, there is a release of the
surplus part of the provision. The entire amount of the capital allowance provision would
be expected to be released on sale.
15. Net debt
Footnote 2004 2003
£m £m
Secured on the assets of the Group
6.5055% Secured Notes 2038 1.1 97.8 97.7
5.920% Secured Notes 2035 1.2 59.2 59.2
7.743% Secured Notes 2025 1.3 19.7 19.7
5.66% 135 Bishopsgate Securitisation 2018 1.4 1.9 1.9
8.49% 135 Bishopsgate Securitisation 2018 1.4 7.1 7.1
8.875% First Mortgage Debenture Bonds 2035 246.7 246.6
9.375% First Mortgage Debenture Stock 2028 197.3 197.2
10.5% First Mortgage Debenture Stock 2019/24 12.6 12.6
11.375% First Mortgage Debenture Stock 2019/24 20.4 20.4
6.75% First Mortgage Debenture Bonds 2020 1.5 206.0
6.75% First Mortgage Debenture Bonds 2011 1.5 103.5
Bank loan 1.6 45.0
1,017.2 662.4
Unsecured
Class A1 5.260% Unsecured Notes 2035 1.2, 2 573.4 543.0
Class B 5.793% Unsecured Notes 2035 1.2, 2 99.1 88.9
Class C Fixed Rate Unsecured Notes 2035 1.2, 2 83.8 74.0
Class C2 6.4515% Unsecured Notes 2032 1.1 73.4 73.4
Class B 6.0875% Unsecured Notes 2031 1.1 220.2 220.0
Class A3 5.7125% Unsecured Notes 2031 1.1 146.8 146.6
Class A2 5.67% Unsecured Notes 2029 1.1 283.4 287.8
Class A2 (C) 6.457% Unsecured Notes 2025 1.3, 3 212.3 157.0
Class B2 6.998% Unsecured Notes 2025 1.3 205.8 205.6
Class B3 7.243% Unsecured Notes 2025 1.3 20.5 20.5
Class A1 Fixed Rate Unsecured Notes 2024 1.1 319.1 318.6
5.66% 135 Bishopsgate Securitisation 2018 1.4 22.3 23.3
8.49% 135 Bishopsgate Securitisation 2018 1.4 88.4 91.6
Class A1 6.389% Unsecured Notes 2016 1.3, 3 84.3 60.9
Class B1 7.017% Unsecured Notes 2016 1.3 85.9 91.6
Class C1 6.7446% Unsecured Notes 2014 1.1 147.4 161.6
Class D Fixed / Floating Rate Unsecured Notes 2014 1.1, 4 78.7
Class A2 5.555% Unsecured Notes 2013 1.2 44.6 49.5
2,710.7 2,692.6
6.30% Senior US Dollar Notes 2015 5, 6 97.4
10.25% Bonds 2012 1.7 1.7
7.35% Senior US Dollar Notes 2007 6 97.8 97.8
Guaranteed Floating Rate Unsecured Loan Notes 2005 0.7 0.8
Bank loans and overdrafts 966.0 899.0
3,874.3 3,691.9
Convertible Bonds
6% Subordinated Irredeemable Convertible Bonds 149.0 146.8
Gross debt 5,040.5 4,501.1
Cash and deposits 7 (173.7) (139.7)
Net debt 4,866.8 4,361.4
1 These borrowings are obligations of ringfenced, special purpose companies,
with no recourse to other companies or assets in the Group.
1.1 Broadgate (Funding) PLC 1,288.1 1,384.4
1.2 MSC (Funding) PLC 860.1 814.6
1.3 BLSSP (Funding) PLC 628.5 555.3
1.4 135 Bishopsgate Financing Ltd 119.7 123.9
1.5 BL Universal PLC 309.5
1.6 BLU Nybil Ltd 45.0
2 A total of £50m Notes were issued on 14 April 2003.
3 A total of £75.5m Notes were issued on 6 October 2003.
4 These Notes were redeemed and cancelled on 7 July 2003.
5 A total of $154m Notes were issued on 3 October 2003.
6 These borrowings have been hedged into Sterling from the date of issue.
7 Cash and deposits not subject to a security interest amount to £82.5m (2003
- £45.9m)
15. Net debt (continued)
Interest rate profile - including effect of derivatives 2004 2003
£m £m
Fixed rate 3,985.7 3,543.8
Capped rate 100.0 100.0
Variable rate (net of cash) 781.1 717.6
Net debt 4,866.8 4,361.4
All the above debt is effectively Sterling except for £64.6m (2003 - £120.7m) of Euro debt
of which £31.8m (2003 - £57.4m) is fixed and the balance floating. At 31 March 2004 the
weighted average interest rate of the Sterling fixed rate debt is 6.72% (2003 - 6.78%).
The weighted average period for which the rate is fixed is 17.9 years (2003 - 19.3 years).
The Irredeemable Convertible Bond is treated as having a life of 100 years for this
calculation. The weighted average interest rate for the Euro fixed rate debt is 4.25%
(2003 - 4.00%) and the weighted average period for which the rate is fixed is 1.4 years
(2003 - 1.9 years). The floating rate debt is set for periods of the Company's choosing
at the relevant LIBOR (or similar) rate.
Total borrowings where any instalments are due after five years is £3,266.6m (2003 -
£2,866.3m).
2004 2003
£m £m
Maturity analysis of net debt
Repayable:
within one year and on demand 485.2 234.7
between: one and two years 345.1 459.6
two and five years 488.6 543.6
five and ten years 572.6 431.1
ten and fifteen years 556.6 430.8
fifteen and twenty years 710.5 469.9
twenty and twenty five 791.2 789.0
years
twenty five and thirty 635.0 666.8
years
thirty and thirty five 306.7 328.8
years
Irredeemable 149.0 146.8
Gross debt 5,040.5 4,501.1
Cash (96.2) (50.3)
Term deposits (77.5) (89.4)
Total cash and deposits (173.7) (139.7)
Net debt 4,866.8 4,361.4
Maturity of committed undrawn borrowing facilities
Expiring:
within one year 45.0 133.1
between: one and two years 150.0 30.0
two and three years 165.0 255.0
three and four years 170.0
four and five years 604.9
over five years 8.6
Total 964.9 596.7
15. Net debt (continued)
Comparison of market values and book values
2004 2003
Market Book Market Book
Value Value Difference Value Value Difference
£m £m £m £m £m £m
Fixed rate debt
Securitisations 3,122.8 2,896.4 226.4 3,153.6 2,878.2 275.4
Debentures and
unsecured bonds 1,160.3 983.4 176.9 756.9 576.3 180.6
Convertible bonds 195.2 149.0 46.2 154.0 146.8 7.2
Bank debt 1,011.7 1,011.7 899.8 899.8
Cash and deposits (173.7) (173.7) (139.7) (139.7)
5,316.3 4,866.8 449.5 4,824.6 4,361.4 463.2
Derivatives
- unrecognised gains (12.3) (12.3) (17.5) (17.5)
- unrecognised 47.1 47.1 41.0 41.0
losses
34.8 34.8 23.5 23.5
Total 5,351.1 4,866.8 484.3 4,848.1 4,361.4 486.7
The Differences are shown before any tax relief. The difference between book value and
market value on the convertible bonds arises principally from the British Land share price.
In accordance with Accounting Standards the book value of debt is par value net of amortised
issue costs, except for debt assumed on corporate acquisitions where the book value is the
fair value of the debt. Short term debtors and creditors have been excluded from the
disclosures (other than the currency disclosures). The valuations of the Broadgate and
Meadowhall Notes have been undertaken by Morgan Stanley. The valuations of 135 Bishopsgate
Securitisations 2018 have been undertaken by The Royal Bank of Scotland. The valuations of
other fixed rate debt and convertible debt have been undertaken by UBS. The bank debt has
been valued assuming it could be renegotiated at contracted margins. The derivatives have
been valued by the independent treasury advisor, Record Currency Management.
The Group uses interest rate swaps to manage its interest rate profile. Changes in the fair
value of instruments used as hedges are not recognised in the financial statements until the
hedged position matures. Of the unrecognised amount at 31 March 2004, £0.2m gains and £1.8m
of losses are expected to be realised in the next financial year (2003 - £nil gains; £nil
losses) and the balance in subsequent years. Net costs of £5.7m (2003 costs - £6.5m) were
recognised in the current year, comprising receipts of £10.1m (2003 - £7.0m) and costs of
£15.8m (2003 - £13.5m).
15. Net debt (continued)
6% Subordinated Irredeemable Convertible Bonds
The £150 million 6% Subordinated Irredeemable Convertible Bonds carry a Bondholder conversion right
exercisable at any time into Ordinary Shares of the Company at 500p (2003 - 500p) per share. The Company
has the right to redeem, at its discretion, the Bonds at par if after 9 April 2001 the average ordinary
share price attains 130% of the conversion price for a 30 day period and after 9th April 2008 without
conditions. The Company has the right to redeem the remaining Bonds where 75% of the Bonds have been
converted or purchased or cancelled. If the Company elects to redeem the Bonds, Bondholders have the
right to convert into the underlying Ordinary Shares. The Company has an option to exchange the Bonds for
6% Convertible Preference Shares with the same conversion terms. The Company has a further option to
exchange the preference shares back to Convertible Bonds after these preference shares have been in issue
for six months. On conversion of the entire issue into Ordinary Shares of the Company 30.0 million
Ordinary Shares would be issued.
Balance sheet adjustments
In accordance with Financial Reporting Standard 4 'Capital Instruments', debt issue costs, less premiums
received, have been deducted from the principal amount of debt in arriving at balance sheet values. At
31 March 2004 the total amount of the adjustment was £49.1m (2003 - £57.5m), as detailed below:
2004 2003
£m £m
Securitised debt 37.8 48.1
Debentures 9.8 6.2
US Dollar Notes 0.5
Convertible Bonds 1.0 3.2
49.1 57.5
In accordance with Financial Reporting Standard 7 'Fair Values In Acquisition Accounting', on a corporate
acquisition, debt is recorded in the balance sheet at fair value. At 31 March 2004 the total amount of
the fair value adjustment arising on the group's acquisition of the remaining 50% interest in BL
Universal PLC was £13.3m (2003 - £nil). The adjustment increases secured debt.
16. Acquisition of subsidiary undertakings
On 17 November 2003 the Group acquired the remaining 50% interest in BL Universal PLC; the fair value of the
consideration was £60.4m. On 29 November 2003 the Group subscribed for an additional 49.99% of the issued share
capital of BVP Developments Limited; taking its total investment to 99.99%, the fair value of the consideration
was £0.1m.
Total book value Book value acquired
BL Universal BVP Developments BL Universal BVP Fair value Fair value
Developments
PLC Ltd PLC Ltd adjustment to Group
£m £m £m £m £m £m
Investment and 727.4 100.9 363.7 50.5 414.2
development
properties
Other assets 4.1 2.1 2.1
Cash 3.8 2.0 1.9 1.0 2.9
Creditors (155.1) (43.0) (77.6) (21.5) (99.1)
Shareholder loans (86.9) (12.9) (43.5) (6.5) (50.0)
Borrowings (341.0) (47.7) (170.5) (23.9) (8.8) (203.2)
148.2 3.4 74.0 1.7 (8.8) 66.9
Negative Goodwill (6.4)
60.5
Satisfied by:
Cash paid 60.4 0.1 60.5
Total consideration 60.5
Repayment of shareholder loans 43.4 6.5 49.9
Total cash payable 103.8 6.6 110.4
The fair value adjustment increases to market value BL Universal's debenture and derivatives (£7.2m) and BVP
Development's bank loans and related derivatives (£1.6m).
17. Notes to the cash flow statement
Reconciliation of operating profit to net cash inflow from operating activities
2004 2003
Restated
£m £m
Operating profit 421.8 382.0
Dividends received (0.2) (0.3)
Depreciation and release of negative goodwill (0.9) 0.6
Adjustment for share options, share awards and pension funding (3.3) (1.6)
Decrease in trading properties 4.6 1.3
Decrease (increase) in debtors 15.1 (17.2)
(Decrease) increase in creditors (55.7) 8.8
Net cash inflow from operating activities 381.4 373.6
Analysis of Group net debt
1 April Cash Non cash 31 March
2003 Acquisitions * flow movements 2004
£m £m £m £m £m
Cash at bank (50.3) (45.9) (96.2)
Overdraft 8.4 (1.1) 7.3
Net cash per cash flow
statement (41.9) (47.0) (88.9)
Term debt 4,345.9 402.7 134.6 1.0 4,884.2
Convertible Bonds 146.8 2.2 149.0
Term deposits (89.4) 11.9 (77.5)
Group net debt 4,361.4 402.7 99.5 3.2 4,866.8
* Excluding cash and overdrafts
Reconciliation of net cash flow to movement in Group net debt
2004 2003
£m £m
Brought forward 4,361.4 3,840.4
Movement in net debt in the year
Increase in cash (47.0) (25.8)
Cash inflow from movement in debt 134.6 463.2
Cash outflow to repurchase Convertible (322.7)
Bonds
Cash inflow from term deposits 11.9 254.8
Changes resulting from cash flows 99.5 369.5
Non cash movements including acquisitions 405.9 151.5
505.4 521.0
Carried forward 4,866.8 4,361.4
18. Net Asset Value per share
31 March 31 March 31 March 31 March
2004 2004 2003 2003
Restated
Adjusted Adjusted Restated
Net Net Net Net
Shares Assets Assets Shares Assets Assets
m £m £m m £m £m
Net Asset Value (undiluted)
Shareholders' funds as shown on balance sheet 488.0 4,669.4 4,669.4 488.6 4,123.3 4,123.3
FRS 19 capital allowance effects - British Land Group 104.9 90.1
- Share of joint 8.0 9.8
ventures
112.9 99.9
Total external valuation surplus on development
and trading properties 95.0 95.0 89.3 89.3
(note 8)
Net assets attributable to ordinary shares 4,877.3 4,764.4 4,312.5 4,212.6
Net Asset Value per share 999 p 976 p 883 p 862 p
(undiluted)
Fully diluted Net Asset Value
Net assets attributable to ordinary shares 488.0 4,877.3 4,764.4 488.6 4,312.5 4,212.6
Adjust to fully diluted on
conversion of:
6% Subordinated Irredeemable Convertible 30.0 149.0 149.0 30.0 146.8 146.8
Bonds
Dilution re share options and share 3.3 9.1 9.1 1.5 5.9 5.9
awards
Dilutive effect of share options and conversion 33.3 158.1 158.1 31.5 152.7 152.7
of Convertible Bonds
Net assets attributable to fully
diluted ordinary shares 521.3 5,035.4 4,922.5 520.1 4,465.2 4,365.3
Fully diluted Net Asset Value per share 966 p 944 p 859 p 839 p
The adjusted Net Asset Value includes the surplus of the external valuation over the book value of both development
and trading properties after adding back the FRS 19 deferred tax capital allowance provision (as described in note
14) which is not expected to arise.
19. Share capital and reserves
Capital
Share Share redemption Other Revaluation Profit Total
capital premium reserve reserves reserve and loss
account
£m £m £m £m £m £m £m
At 1 April 2003 (as previously 122.1 1,107.7 7.9 (8.0) 2,225.9 673.7 4,129.3
stated)
Prior year adjustment (see note 1) (6.0) (6.0)
At 1 April 2003 (as restated) 122.1 1,107.7 7.9 (8.0) 2,225.9 667.7 4,123.3
Issues 0.1 1.6 1.7
Purchase and cancellation of own (0.2) 0.2 (5.0) (5.0)
shares
Purchase of ESOP shares (6.7) (6.7)
Adjustment for share and share option awards 6.0 6.0
Pension scheme movements (0.2) (0.2)
Retained profit for the year 100.7 100.7
Fair value adjustment on consolidation of
former joint ventures (8.3) (8.3)
Realisation of prior year (72.2) 72.2
revaluations
Taxation on realisation of prior year (4.6) (4.6)
revaluations
Current year revaluation 462.2 462.2
Exchange movements on net investments 1.9 (0.7) (0.9) 0.3
At 31 March 2004 122.0 1,109.3 8.1 (6.1) 2,615.2 820.9 4,669.4
20. Contingent and other liabilities
TPP Investments Limited, a wholly owned ringfenced 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 £43.6m and recourse is only to the partnership
assets. Details of this Partnership are set out in the Joint Venture
Review.
In addition to contingent tax, as described in note 5, contingent
liabilities of the Parent for guarantees to third parties amounted to £nil
(2003 - £12.0m).
21. Capital commitments
2004 2003
£m £m
British Land 309.9 279.2
Share of joint ventures (note 9) 12.9 17.5
322.8 296.7
22. Staff costs (including Directors)
2004 2003
Restated
£m £m
Wages and salaries 23.0 21.3
Social security costs 2.4 2.2
Pension costs 2.9 1.9
Equity-settled share-based payments
- Incentive schemes (RSP, SIP, 7.0 5.4
LTIP)
- Sharesave schemes (SAYE) 0.1
35.4 30.8
The average number of employees of the Group during the year was 713 (2003 - 697) of which
some 546 (2003 - 537) were employed directly at the Group's properties and their costs
recharged to tenants.
The Group's equity-settled share-based payments comprise the Restricted Share Plan (RSP),
the Long Term Incentive Plan (LTIP), the Share Incentive Plan (SIP), and various Sharesave
Plans. The RSP was used for the last time in June 2003. The company expenses an estimate
of how many shares are likely to vest based on the market price at the date of grant,
taking account of expected performance against the net asset value per share growth target
and the three year service period. Under the SIP the company gives eligible employees free
shares of up to £3,000 a year. They can also purchase partnership shares for up to £1,500
a year that are matched 2 for 1 by the company. The free and matching shares are purchased
at fair value in the market and expensed at the time of allocation.
At the 2003 AGM the shareholders approved the LTIP whereby the company may award employees
a combination of performance shares and options. Both components have the same performance
targets based on net asset value per share growth and a three year service period.
Performance shares are valued at the market value at the date of the award. The options
are valued using a Black-Scholes model adjusted for dividends according to the table
below:
Long-term incentive plan: 2003 Awards 25 12
September December
Share price at grant 502p 552p
date
Exercise price 502p 552p
Option life in years (maximum 10) 7 7
Risk free rate 5.04% 5.04%
Expected volatility 28% 28%
Expected dividend yield 3.25% 3.25%
Value per option 134p 147p
For both LTIP components the company estimates the number of shares or options likely to
vest and expenses that value over the relevant period. Volatility has been estimated by
taking the historical volatility in the company's share price over a four year period and
adjusting where there are known factors that may affect future volatility. Vesting
estimates take account of the company's high staff retention rate.
Under the Sharesave Plans eligible employees can save up to £250 a month over a three or
five year period and use the savings to exercise an option granted at the outset at a 20%
discount to the then prevailing share price. The fair value of the various options is
expensed over the service period, based on a Black-Scholes model, assuming a risk-free
rate of between 4.86% and 4.96%, expected volatility of 28% and an expected dividend yield
of 3.25%. The values per option for the different schemes range from 131 pence to 186
pence. There are no performance measures. An estimated 5% of the three year options and 7%
of the five year options are assumed to lapse as employees leave the company prior to the
minimum service period.
23. Pensions
The British Land Group of Companies Pension Scheme ("the scheme") is the principal pension
scheme in the Group. It is a defined benefit scheme which is externally funded and which is
not contracted out of SERPS. The assets of the scheme are held in a trustee-administered
fund and kept separate from those of the company. The Group has five other small pension
schemes. The total pension cost charged for the year was £2.9m (2003 - £1.9m).
A full actuarial valuation of the scheme was carried out at 31 March 2003 and updated to 31
March 2004 by consulting actuaries Hewitt Bacon & Woodrow. The employer's contributions will
be paid in the future at the rate recommended by the actuary of 38.5% pa of basic salaries.
The major assumptions used for the actuarial valuation were:
2004 2003 2002
% pa % pa % pa
Discount rate 5.50 5.50 6.00
Salary inflation 5.10 4.80 4.75
Pensions increase 2.90 2.50 2.50
Price inflation 2.90 2.60 2.50
The assets and liabilities of the scheme at 31 March 2003 and the expected return on assets
over the following year were as follows:
2004/5 2003/4 2002/3
Expected Expected Expected
return return return
% £m % £m % £m
Bonds 4.5 17.0 4.5 9.9 5.0 5.5
Equities 7.0 26.8 7.0 15.3 7.0 22.9
Other 4.0 0.6 4.0 3.0 4.5 0.2
Total assets 44.4 28.2 28.6
Liabilities (44.3) (36.8) (27.2)
Surplus (deficit) in scheme 0.1 (8.6) 1.4
Related deferred
tax asset 2.6 (0.4)
(liability)
Net pension asset 0.1 (6.0) 1.0
(liability)
The movement in the (deficit) surplus during the year is analysed 2004 2003
below:
£m £m
Opening (deficit) surplus in the scheme (8.6) 1.4
Current service cost (2.1) (1.4)
Past service cost (0.3)
Employer contributions 11.7 3.0
Other finance (cost) income (0.3) 0.3
Actuarial loss (0.3) (11.9)
Closing surplus (deficit) in the scheme 0.1 (8.6)
23. Pensions (continued)
History of experience gains and losses 2004 2003
% pa % pa
Difference between the expected and actual return on scheme assets:
Amount (£m) 3.8 (4.4)
Percentage of scheme assets 8.6% 15.5%
Experience gain and losses on scheme liabilities:
Amount (£m) 0.8 (1.7)
Percentage of the present value of scheme liabilities 1.9% 4.5%
Total actuarial loss recognised in the
statement of total recognised gains and losses:
Amount (£m) (0.3) (11.9)
Percentage of the present value of scheme liabilities 0.8% 32.4%
This information is provided by RNS
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