Final Results - Part 2

British Land Co PLC 23 May 2006 PRELIMINARY ANNOUNCEMENT OF FINANCIAL RESULTS For the year ended 31 March 2006 Consolidated Income Statement for the year ended 31 March 2006 2006 - Unaudited 2005 ------------------- ------------------- Capital, Capital Underlying tax and Underlying tax and pre tax * other Total pre tax * other Total Note Â£m Â£m Â£m Â£m Â£m Â£m ---- --- ---- --- ---- --- ---- --- ---- ---- Gross rental and related 3 690 690 604 604 income -------- ------ ------ -------- ------- ----- Net rent and 3 589 589 517 517 related income Fees and other 4 50 50 8 8 income Amortisation 11 (10) (10) of intangible asset Funds and joint ventures 9 39 272 311 31 127 158 (see also below) Administrative (81) (81) (49) (49) expenses Net valuation gains 5 1,462 1,462 610 610 (includes profits on disposals) Goodwill 11 (240) (240) impairment Net financing costs -------- ------ ------ -------- ------- ----- financing 50 50 28 28 income financing (419) (419) (354) (354) expenses refinancing (122) (122) (180) (180) charges -------- ------ ------ -------- ------- ----- 6 (369) (122) (491) (326) (180) (506) -------- ------ ------ -------- ------- ----- Profit on ordinary 228 1,362 1,590 181 557 738 activities before taxation ======== ======== Taxation (expense) ------ ------ ------- ----- credit current (7) (7) 46 46 deferred (334) (334) (130) (130) ------ ------ ------- ----- 7 (341) (341) (84) (84) Profit for the year after taxation ------ ------ ------- ----- attributable to 1,021 1,249 473 654 shareholders of the ====== ====== ======= ===== Company Earnings per basic 2 241 p 129 p share: ======= ====== diluted 2 240 p 126 p ======= ======= underlying 2 36 p 27 p ======= ======= ------------- -------- ----- --- -------- --- ------- --- ------- ---- -------- --- ------- ---- ------- Share of results of funds and joint ventures Underlying 39 39 31 31 profit pre-tax Net valuation gains 378 378 169 169 (includes profits on disposals) Current tax (9) (9) (10) (10) Deferred tax (97) (97) (32) (32) -------- ------- ------- -------- ------- ------- 9 39 272 311 31 127 158 ======== ======= ======= ======== ======= ======= ------------- -------- ----- --- -------- --- ------- --- ------- ---- -------- --- ------- ---- ------- * As defined in note 2 Consolidated Balance Sheet as at 31 March 2006 2006 2005 Unaudited Note Â£m Â£m ---- ---- ASSETS --- --- Non-current assets Investment properties 8 11,081 10,877 Development properties 8 597 212 --------- -------- 11,678 11,089 Other non-current assets Investments in funds and joint ventures 9 1,234 700 Other investments 11 248 153 Intangible assets 11 65 Goodwill 11 73 --------- -------- 13,225 12,015 --------- -------- Current assets Trading properties (at cost) 8 36 36 Debtors 12 118 76 Cash and short-term deposits 15 133 151 --------- -------- 287 263 --------- -------- Total assets 13,512 12,278 --------- -------- LIABILITIES Current liabilities Short-term borrowings and overdrafts 15 (129) (408) Creditors 13 (417) (351) --------- -------- (546) (759) --------- -------- Non-current liabilities Debentures and loans 15 (5,575) (5,754) Other non-current liabilities 14 (44) (37) Deferred tax liabilities 7 (1,331) (945) --------- -------- (6,950) (6,736) --------- -------- Total liabilities (7,496) (7,495) --------- -------- Net assets 6,016 4,783 ========= ======== EQUITY Share capital 130 130 Share premium 1,253 1,249 Other reserves 79 12 Retained earnings 4,554 3,392 --------- -------- Total equity attributable to shareholders of the company 6,016 4,783 ========= ======== EPRA NAV per share 2 1,486 p 1,128 p ========= ======== (The EPRA Net Asset Value (NAV) per share includes the external valuation surplus on trading properties but excludes the fair value adjustments for debt and related derivatives and deferred taxation on revaluations and capital allowances, calculated on a fully diluted basis.) The financial information in this preliminary announcement was approved by the Board on 22 May 2006 Consolidated statement of changes in equity for the year ended 31 March 2006 Unaudited Share Share Other Retained Note capital premium reserves earnings Total Â£m Â£m Â£m Â£m Â£m ---- ---- ---- ---- ---- At 1 April 2005 130 1,249 12 3,392 4,783 ------ ------- ------- ------- ------ Profit for the year after taxation 1,249 1,249 ------ ------- ------- ------- ------ Valuation movements on development properties 5 102 102 Gains (losses) on cash flow hedges (26) (26) Actuarial loss on pension scheme (1) (1) Tax on items taken direct to equity 7 (29) (29) ------ ------- ------- ------- ------ Net income recognised directly in 47 (1) 46 equity Transferred to the Income statement Revaluation of funds and joint 2 2 ventures Foreign currency derivatives (14) (14) Cash flow hedges 32 32 ------ ------- ------- ------- ------ Total recognised income and expense for the period 67 1,248 1,315 Purchase of ESOP shares (10) (10) Dividends paid (final: 2005; 18 (84) (84) interim: 2006) Share issues 4 4 Share option awards 8 8 -------------------------- ---- ------ --- ------- --- ------- --- ------- --- ------ At 31 March 2006 130 1,253 79 4,554 6,016 -------------------------- ---- ------ --- ------- --- ------- --- ------- --- ------ Consolidated Cash Flow Statement for the year ended 31 March 2006 2006 2005 Unaudited Note Â£m Â£m --- ---- ---- Cash generated from operations 16 455 464 Interest paid (392) (351) Interest received 13 10 UK Corporation tax (10) (10) paid Foreign tax paid (3) (3) Dividends received: funds and joint ventures 25 16 other investments 16 -------- -------- Net cash inflow from operating activities 104 126 -------- -------- Cash flows from investing activities Purchase of investment properties and development expenditure (402) (509) Foreign tax paid on property sales (8) (1) Sale of investment properties 1,889 81 Sale of investments 4 Purchase of investments (3) (98) Investment in and loans to funds and joint (21) (23) ventures Capital distributions received from funds and joint ventures 277 Amounts repaid by funds and joint ventures 69 55 Purchase of subsidiary companies (net of cash (815) (36) acquired) -------- -------- Net cash inflow (outflow) from investing 986 (527) activities -------- -------- Cash flows from financing activities Issue of ordinary 4 1 shares Purchase of ESOP shares (10) (11) Dividends paid (84) (77) Issue of BL Superstores Finance PLC securitised 753 debt Redemption of BLSSP (Funding) PLC securitised debt (705) Issue of Broadgate Estate securitised debt 2,081 Redemption of Broadgate Funding PLC securitised (1,439) debt Redemption of 135 Bishopsgate Financing Ltd (138) securitised debt Repayment of debt acquired with subsidiary (398) (649) companies (Decrease) increase in bank and other borrowings (669) 614 -------- -------- Net cash (outflow) inflow from financing (1,109) 382 activities -------- -------- Net decrease in cash and cash equivalents (19) (19) Cash and cash equivalents at 1 April 2005 147 166 -------- -------- Cash and cash equivalents at 31 March 2006 128 147 ======== ======== Cash and cash equivalents consists of: Cash and short-term deposits 133 151 Overdrafts (5) (4) -------- -------- 128 147 ======== ======== Notes to the accounts for the year ended 31 March 2006 1. Basis of preparation The financial statements for the year ended 31 March 2006 have been prepared on the historical cost basis, except for the revaluation of certain properties, investments, intangible assets and financial instruments. The financial statements have also been prepared, for the first time, in accordance with International Financial Reporting Standards (IFRSs) as adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation. The principal impacts of adopting IFRS and the Group's IFRS accounting policies, along with comparatives for the year ended 31 March 2005 contained within this report, were published in a press release on 14 July 2005. Further details and reconciliations explaining the transition to IFRS are available on the Group's website, www.britishland.com. These accounting policies have been applied consistently in all material respects throughout the year and the comparative figures in respect of 2005 have been restated to reflect IFRS adjustments. ----------------------------------------------------------------------------------------------------------- Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRSs, this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in June 2006. Therefore the financial information set out herein does not constitute the Group's statutory accounts for the years ended 31 March 2006 or 2005. The financial information for the year ended 31 March 2005 has been derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under section 237 (2) or 237 (3) of the Companies Act 1985. These accounts were subsequently restated for IFRS, as noted above. The statutory accounts for the year ended 31 March 2006 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement, and will be delivered to the Registrar of Companies following the Company's annual general meeting. Subsidiaries, joint ventures and associates (including funds) The consolidated accounts include the accounts of The British Land Company PLC and all subsidiaries (entities controlled by British Land). Control is assumed where British Land has the power to govern the financial and operating policies of an investee entity so as to gain benefits from its activities. The results of subsidiaries, joint ventures or associates acquired or disposed of during the year are included from the effective date of acquisition or to the effective date of disposal. Accounting practices of subsidiaries, joint ventures or associates which differ from Group accounting policies are adjusted on consolidation. Business combinations are accounted for under the acquisition method. Any excess of the purchase price of business combinations over the fair value of the assets, liabilities and contingent liabilities acquired and resulting deferred tax thereon is recognised as goodwill. Any discount received is credited to the income statement in the period of acquisition. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Joint ventures and associates, including funds, are accounted for under the equity method, whereby the consolidated Balance Sheet incorporates the Group's share of the net assets of its joint ventures and associates. The consolidated income statement incorporates the Group's share of joint venture and associate profits after tax. Their profits include revaluation movements on investment properties. Other investments Other investments are shown at fair value. Any surplus or deficit arising on revaluation is recognised directly in the income statement. Properties Properties are externally valued on an open market basis at the balance sheet date. Investment and development properties are recorded at valuation; trading properties at the lower of cost and valuation. Any surplus or deficit arising on revaluing investment properties is recognised in the income statement for the year. Where an investment property is being redeveloped, any movement in valuation is recognised in the income statement. Valuation surpluses arising on other development properties, those not previously investment properties, are reflected in the revaluation reserve, unless a deficit reduces the value below cost, in which case the deficit is charged to the income statement. The cost of properties in the course of development includes attributable interest and other associated outgoings. Interest is calculated on the development expenditure by reference to specific borrowings where relevant and otherwise on the average rate applicable to short-term loans. Interest is not capitalised where no development activity is taking place. A property ceases to be treated as a development property on practical completion. Disposals are recognised on completion: profits and losses arising are recognised through the income statement, the profit on disposal is determined as the difference between the sales proceeds and the carrying amount of the asset at the commencement of the accounting period plus additions in the period. In determining whether leases and related properties represent operating or finance leases consideration is given to whether the tenant or landlord bears the risks and rewards of ownership. Properties acquired in corporate vehicles are generally treated as business not asset acquisitions resulting in any contingent capital gains liabilities assumed being reflected in the acquisition balance sheet rather than recorded as contingencies. In adopting this policy the directors place value on transparency and consistency, even though the liabilities are recorded under IFRS on a full provision basis, significantly above their fair value. Head leases Where an investment property is held under a head lease it is initially recognised as an asset as the sum of the premium paid on acquisition and the present value of minimum ground rent payments. The corresponding rent liability to the head leaseholder is included in the Balance Sheet as a finance lease obligation. Intangible assets Intangible assets, such as customer contracts, acquired through business combinations, are measured initially at fair value and are amortised on a straight line basis over their estimated useful lives, and are subject to regular reviews for impairment. Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of the subsidiary, associate or jointly controlled entity at the time of acquisition. Goodwill normally arises as a result of deferred tax being provided on a full provision basis on acquisition of property companies, without regard to the fair value of the tax liabilities absorbed. Goodwill is recognised as an asset and reviewed for impairment annually. Any impairment is recognised immediately in the Income statement and is not subsequently reversed. Financial instruments Financial obligations and cash Debt instruments are stated at their net proceeds on issue. Finance charges including premiums payable on settlement or redemption and direct issue costs are spread over the period to redemption, using the effective interest method. As defined by IAS39, cash flow hedges are carried at fair value in the Balance Sheet. Changes in the fair value of derivatives that are designated and qualify as effective cash flow hedges are recognised directly in the hedging reserve and any ineffective portion is recognised in the income statement. Fair value hedges are carried at fair value in the Balance Sheet. Changes in the fair value of derivatives that are designated and qualify as effective fair value hedges, are recorded in the income statement, along with any changes in the fair value of the hedged item that is attributable to the hedged risk. Any ineffective portion is also recognised in the income statement. Cash equivalents are limited to instruments with a maturity of less than three months. Net rental income Rental income is recognised on an accruals basis. A rent adjustment based on open market estimated rental value is recognised from the rent review date in relation to unsettled rent reviews. Where a rent free period is included in a lease, the rental income foregone is allocated evenly over the period from the date of lease commencement to the earliest termination date. Rental income from fixed and minimum guaranteed rent reviews is recognised on a straight line basis over the shorter of the entire lease term or the period to the first break option. Where such rental income is recognised ahead of the related cash flow, an adjustment is made to ensure the carrying value of the related property including the accrued rent does not exceed the external valuation. Initial direct costs incurred in negotiating and arranging a new lease are amortised on a straight-line basis over the period from the date of lease commencement to the earliest termination date. Where a lease incentive payment, including surrender premiums paid, does not enhance the value of a property, it is amortised on a straight-line basis over the period from the date of lease commencement to the earliest termination date. Upon receipt of a surrender premium for the early determination of a lease, the profit, net of dilapidations and non-recoverable outgoings relating to the lease concerned is immediately reflected in income. Management and performance fees Management and performance fees receivable are recognised in the period to which they relate, except for performance fee retentions subject to clawback, which are recognised over the clawback performance period. In assessing the risk of clawback, account is taken of the unpredictability of future relative performance against the benchmark. Taxation Current tax is based on taxable profit for the year and is calculated using tax rates that have been enacted or substantially enacted. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense, that are never taxable (or tax deductible) or will be taxable at a later date - temporary differences. Temporary differences principally arise from using different balance sheet values for assets and liabilities than their respective tax base values. Deferred tax is provided in respect of all these taxable temporary differences at the balance sheet date on an undiscounted basis. A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted. On business combinations, the deferred tax effect of fair value adjustments is incorporated in the consolidated balance sheet. Current and prior year tax payable and the recoverability of tax losses are estimated. The basis of calculating deferred tax depends on whether value is expected to be achieved through sales or retention in the business. As British Land has a proven record of portfolio recycling through sales and a committed strategy to recycle its capital, the deferred tax provision is calculated on the basis that assets will be sold and takes account of available loss relief including indexation, but does not assume any mitigation that could be achieved through tax structuring. Employee costs 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 by a Black-Scholes pricing model. Compensation linked to performance fees accrued by the Group is amortised over the vesting period. Defined benefit pension scheme assets are measured using fair values; pension scheme liabilities are measured using the projected unit credit 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 sheet. Any asset resulting from the calculation is limited to past service costs plus the present value of available refunds and reductions in future contributions to the plan. The current service cost and gains and losses on settlement and curtailments are charged to operating profit. Past service costs are recognised in the income statement if the benefits have vested or, if they have not vested, are amortised on a straight line basis over the period until vesting occurs. Actuarial gains and losses are recognised in full in the period in which they occur and are presented in the consolidated statement of changes in equity. Contributions to the Group's defined contribution schemes are expensed on the basis of the contracted annual contribution. IFRS transitional arrangements When preparing the Group's IFRS balance sheet at 1 April 2004, the date of transition, the following material optional exemptions from full retrospective application of IFRS accounting policies have been adopted: (i) Business combinations - the provisions of IFRS 3 'Business combinations' have been applied prospectively from 1 April 2004. The Group has chosen not to restate business combinations that took place before the date of transition; and (ii) Employee benefits - the accumulated actuarial gains and losses in respect of employee defined benefit plans have been recognised in full through reserves. Financial Instruments - the Group has applied IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39 'Financial Instruments: Recognition and Measurement' for all periods presented and has therefore not taken advantage of the option that would enable the Group to only apply these standards from 1 April 2005. 2. Performance measures 2006 2005 ------------- ------------- Earnings per share (diluted) Earnings Pence Earnings Pence per per share share Â£m Â£m ---- --- ---- Underlying pre-tax profit - Income 228 181 statement Tax charge relating to underlying profit: (43) (42) ------- ------- Underlying earnings per share 185 36 139 27 Include: debt refinancings (net of tax) (85) (126) Prior year tax movements 8 45 Other items (1) 4 ------- ------- EPRA earnings per share 107 21 62 12 ======= ====== ======= ======= Profit for the year after taxation 1,249 240 654 126 ======= ======= ======= ======= The European Public Real Estate Association (EPRA) measure, published, in January 2006, guidelines for calculating earnings and net asset value performance measures. The EPRA earnings measure excludes gains on property disposals and investment revaluations and their related taxation, intangible asset movements and the capital allowance effects of IAS 12 where applicable, less taxation arising on these items. Underlying earnings consists of the EPRA earnings measure, with additional company adjustments. Adjustments have been made to reverse the effects of the refinancing charges (note 6) arising in the current (Â£85m) and prior years (Â£126m) respectively and prior year tax items. The weighted average number of shares in issue for the year was: basic: 519m (31 March 2005: 509m); diluted: 521m (31 March 2005: 519m). Basic earnings per share for the year were 241p (2005: 129p). Net asset value (NAV) - diluted 2006 2005 Â£m Â£m ---- ---- Balance sheet net assets 6,016 4,783 Addback: Deferred tax arising on revaluation movements capital allowances and derivatives 1,636 1,013 Mark to market on interest rate swaps 33 24 Add: Surplus arising on trading properties 74 63 Dilution effect - options 43 30 --------- ------- EPRA net assets 7,802 5,913 ========= ======= EPRA NAV 1,486 p 1,128 p ======= ======= The EPRA NAV per share includes the external valuation surplus on trading properties but excludes the fair value adjustments for debt and related derivatives and deferred taxation on revaluations and capital allowances, calculated on a fully diluted basis. The prior year deferred tax is net of the related goodwill. At 31 March 2006, the number of shares in issue was: basic: 519m (2005: 518m); diluted: 525m (2005: 524m). Total return per share (excluding re-financing charges) of 34.6% represents the growth per share in diluted EPRA NAV (358p) plus dividends paid of 16p (see note 18), excluding current year re-financing charges of 16p. 3. Gross and net rental income 2006 2005 Â£m Â£m ---- ---- Rent receivable 571 509 Spreading of tenant incentives and guaranteed rent 54 40 increases Surrender premiums 10 8 Service charge income 55 47 ------- ------- Gross rental and related income 690 604 Service charge expenses (57) (44) Property operating expenses (44) (43) ------- ------- Net rental and related income 589 517 ======= ======= Net rental income for the year ended 31 March 2006 from properties which were subject to a security interest or held by non recourse companies was Â£388m (2005: Â£374m). Property operating expenses relating to investment properties that did not generate any rental income were Â£7m (2005: Â£6m). 4. Fees and other income 2006 2005 Â£m Â£m ---- ---- Performance and management fees 29 2 Dividend received from Songbird Estates PLC 16 Other fees and commission 5 6 ------- ------- 50 8 ======= ======= The Â£29m performance and management fees comprise Â£20m performance fees and Â£9m management fees from funds and joint ventures. The Â£48m HUT performance fee due to British Land for the year to 31 December 2005 is reduced to Â£32m after eliminating British Land's share. Â£18m has been recognised in the current period, the remaining Â£14m is deferred to later years as it is potentially subject to clawback, depending on performance. If there is no clawback, 50% of the undistributed performance fee is payable in each subsequent year. The Â£2m HIF performance fee due to British Land for the year to 31 December 2005 is reduced to Â£1m after eliminating British Land's share, all of which has been recognised in the current year. 5. Net revaluation gains on property and investments 2006 2005 Â£m Â£m ---- ---- In income statement --- --- Revaluation of investments (note 11) 92 43 Revaluation of properties 1,203 550 Gains on property disposals 167 17 ------- ------- 1,462 610 In consolidated statement of changes in equity Revaluation of properties 102 15 ------- ------- 1,564 625 ======= ======= Included above is a property derivative gain of Â£4m of which Â£2m is realised and Â£2m is included in revaluation of properties of Â£1,203m, increasing the net revaluation of Â£1,201m (note 8) attributable to properties, which is taken to the income statement. Included in the tax charge is Â£16m (2005: Â£Nil) attributable to gain on property disposals. 6. Net financing costs 2006 2005 Â£m Â£m ---- ---- Interest payable on: bank loans and overdrafts 115 84 other loans 274 261 loans from joint ventures 1 obligations under finance leases 2 2 ------- -------- 392 347 Deduct: capitalisation of development cost element (12) (8) ------- -------- 380 339 ------- -------- Interest receivable on: deposits and securities (11) (10) loans to joint ventures (3) ------- -------- (11) (13) Other finance (income) costs: Expected return on pension scheme assets (3) (3) Interest on pension scheme liabilities 3 3 Valuation movements on fair value debt 22 7 Valuation movements on fair value derivatives (22) (7) Valuation movements on translation of foreign 14 (5) currency debt Hedging reserve (14) 5 recycling ------- -------- Net financing expenses 369 326 ------- -------- Refinancing charges Sainsburys Superstores securitisation 99 Derivative close-out costs 23 Broadgate 180 securitisation ------- -------- 122 180 ------- -------- Net financing costs 491 506 ======= ======== Total financing (50) (28) income Total financing 541 534 expenses ------- -------- Net financing costs 491 506 ======= ======== On 28 February 2006 the Group incurred a pre tax refinancing charge of Â£99m whilst redeeming the debt of its securitised Sainsbury's Superstore portfolio, borrowed by BLSSP (Funding) PLC. On the same day British Land Superstores Finance PLC issued Â£753m of new securitised debt (see note 15). In addition, and after significant recent property disposals and the repayment of bank loans, derivatives have been closed out to maintain, in line with Group interest rate policy, an appropriate balance of fixed and floating rate debt resulting in the realisation from equity to the income statement of a Â£23m charge. On 2 March 2005 the Group incurred a pre tax refinancing charge of Â£180m whilst redeeming the securitised debt of Broadgate (Funding) PLC and 135 Bishopsgate Financing Limited. On the same day Broadgate Financing PLC issued Â£2,080m of new securitised debt in respect of the Broadgate estate (see note 15). 7. Taxation 2006 2005 Â£m Â£m ---- ---- Tax charge Current tax UK corporation tax (30%) (3) (3) Foreign tax 11 2 -------- -------- 8 (1) Adjustments in respect of prior years (1) (45) -------- -------- Total current tax charge (credit) 7 (46) Deferred tax on income and revaluations 334 130 -------- -------- Group total taxation (net) 341 84 ======== ======== Tax reconciliation Profit on ordinary activities before taxation 1,590 738 Less: profit attributable to funds and joint ventures (311) (158) -------- -------- Group profit on ordinary activities before taxation 1,279 580 -------- -------- Tax on profit on ordinary activities at UK corporation tax rate of 30% (2005: 30%) 384 174 Effects of: Indexation relief on investment properties (18) (48) Goodwill impairment 72 Capital allowances (8) (10) Tax losses and other timing differences (77) 11 Expenses not deductible for tax purposes (11) 2 Adjustments in respect of prior years (1) (45) -------- -------- Group total taxation 341 84 ======== ======== Tax attributable to underlying profits for the year ended 31 March 2006 is Â£43m (2005: Â£42m). Balance sheet tax items Corporation tax receivable at 31 March 2006 was Â£8m (2005: Â£22m) as shown in note 12. The net deferred tax provision is set out below: Deferred tax 2006 2005 Â£m Â£m ---- ---- Capital allowances 124 123 Property and investment revaluations 1,216 851 Other timing differences (29) (29) Intangible assets 20 -------- -------- 1,331 945 ======== ======== Deferred tax movements arising from: 1 April 2005 945 746 Charge to income statement 334 130 Charge (credit) to equity 29 (6) Acquisitions 23 75 -------- -------- 31 March 2006 1,331 945 ======== ======== 8. Investment, development and trading properties Investment Development Trading Total Â£m Â£m Â£m Â£m ---- ---- ---- ---- Carrying value at 1 April 2005 10,877 212 36 11,125 ---------- --------- ------- -------- Additions: corporate acquisitions 495 495 property purchases 34 134 168 other capital 196 114 310 expenditure ---------- --------- ------- -------- 725 248 973 ---------- --------- ------- -------- Disposals (1,722) (1,722) Property transfer 7 (7) Exchange 1 1 fluctuations Revaluations: included in Income statement 1,159 42 1,201 included in Consolidated statement of changes in equity 102 102 Increase in tenant incentives and guaranteed rent uplift balances 34 34 ---------- --------- ------- -------- Carrying value of properties on balance sheet 11,081 597 36 11,714 ---------- --------- ------- -------- External valuation surplus on trading 67 properties Head lease (28) liabilities -------- Total Group property portfolio valuation 11,753 ======== At 31 March 2006, the Group book value of properties of Â£11,714m (2005: Â£11,125m) comprises freeholds of Â£11,017m (2005: Â£10,402m), virtual freeholds of Â£109m (2005: Â£96m); long leaseholds of Â£577m (Â£618m) and short leaseholds of Â£11m (2005: Â£9m). Investment, development and trading properties were valued by external valuers other than where stated on the basis of open market value in accordance with the Appraisal and Valuation Manual published by The Royal Institution of Chartered Surveyors: 2006 2005 Â£m Â£m ---- ---- Knight Frank 11,750 ATIS REAL Weatheralls 10,802 FPD Savills 2 282 Jones Lang LaSalle (Republic of Ireland) 69 CB Richard Ellis B.V. (Netherlands) 1 1 ------- -------- Total Group property portfolio valuation 11,753 11,154 ======= ======== Properties valued at Â£7,709m (2005: Â£7,052m) were subject to a security interest and other properties of non-recourse companies amounted to Â£196m (2005: Â£42m). 9. Funds and joint ventures British Land's summary share of profits of funds and joint ventures 2006 2005 Â£m Â£m ---- ---- Gross rental income 123 73 ======== ======== Net rental income 112 68 Other income and (6) (3) expenditure Net financing costs (67) (34) -------- -------- Net underlying profit 39 31 before tax Net valuation gains on property and investments 378 169 -------- -------- Profit on ordinary activities before taxation 417 200 Current tax (9) (10) Deferred tax (97) (32) -------- -------- Profit on ordinary activities after taxation 311 158 ======== ======== Summary movement for the year of the investments in funds and joint ventures Equity Loans Total Â£m Â£m Â£m ---- ---- ---- At 1 April 2005 660 40 700 Acquired with Pillar Property PLC 594 5 599 Additions 1 11 12 Disposals (50) (38) (88) Share of profit after taxation 311 311 Distributions and dividends: capital (277) (277) revenue (25) (25) Hedging movements 2 2 -------- -------- -------- At 31 March 2006 1,216 18 1,234 ======== ======== ======== At 31 March 2006, the total investment in funds and joint ventures of Â£1,234m comprises Â£599m of investment in funds being HUT, HIF and PREF and Â£635m investment in joint ventures, being the total of Â£589m and CLOUT of Â£46m. At 31 March 2005, there were no investments in funds. Distributions in the year include Â£65m (Â£59m capital) received from HUT; Â£31m (Â£28m capital) received from CLOUT and Â£190m received from The Scottish Retail Property Limited Partnership. With regard to funds and joint ventures, at 31 March 2006 the Group's share of: (i) their properties, including finance and trading lease surpluses is Â£2,661m (2005: Â£1,353m). (ii) their external net debt is Â£1,124m (2005: Â£502m). (iii) the market value of their debt was Â£2m more than the Group's share of the book value (2005: Â£4m). All fund and joint venture results have been shown for the period ended 31 March 2006. In the case of some joint ventures this period exceeds 12 months as the Group has aligned all period ends as a consequence of moving to quarterly reporting. The effect is not considered material to the current and prior year financial statements. 9. Funds and joint ventures continued: Funds' summary financial statements Pillar City of British Hercules Retail London Land All disclosures have been restated Hercules Income Europark Office share to British Land accounting policies Unit Fund Fund Unit under IFRS including deferred tax Trust Trust and excluding performance and management fees. ------- ------ ------ ------ ------- Percentage interest 34.64% 26.12% 34.16% 35.94% Date established 22 Sep 16 Sep 17 Mar 6 Nov 2000 2004 2004 2000 Accounting period 8 months 8 months 5 months 8 months ended ended ended ended 31 Mar 31 Mar 31 Dec 31 Mar 2006 2006 2005 2006 Summarised profit and loss accounts Â£m Â£m Â£m Â£m Â£m ---- ---- ---- ---- ---- Gross rental income 70 6 6 20 35 ========= ========= ========= ======== ======= Net rent and related income 68 5 5 19 34 Other income and expenditure (3) (1) (1) (2) Profit (loss) on property trading --------- --------- --------- -------- ------- Operating profit 65 5 4 18 32 Surplus (deficit) on revaluation 445 22 8 15 169 Disposal of fixed assets 2 1 13 6 --------- --------- --------- -------- ------- Net interest - external (42) (2) (12) (20) - shareholders --------- --------- --------- -------- ------- Net interest (payable) receivable (42) (2) (12) (20) --------- --------- --------- -------- ------- Profit (loss) before tax 470 28 10 34 187 Corporation tax (7) (1) (1) (1) (4) Deferred tax (89) (5) (8) (6) (37) --------- --------- --------- -------- ------- Profit (loss) after tax 374 22 1 27 146 ========= ========= ========= ======== ======= Summarised balance sheets --- --- --- --- --- Investment properties at valuation 3,113 157 202 102 1,225 Development and trading properties at cost Assets held under finance leases --------- --------- --------- -------- ------- Total properties 3,113 157 202 102 1,225 Current assets 33 6 14 123 71 Cash and deposits 32 3 6 12 20 --------- --------- --------- -------- ------- Gross assets 3,178 166 222 237 1,316 --------- --------- --------- -------- ------- Current liabilities (44) (5) (10) (71) (54) Bank debt falling due within one (25) (7) year Bank debt falling due after one (298) (117) (38) (156) year Securitised debt (957) (332) Debentures Other non-current liabilities Deferred tax (337) (5) (15) (122) --------- --------- --------- -------- ------- Gross liabilities (1,636) (35) (142) (109) (671) --------- --------- --------- -------- ------- Net external assets 1,542 131 80 128 645 ========= ========= ========= ======== ======= Represented by: Shareholder loans Investors' capital 1,542 131 80 128 645 --------- --------- --------- -------- ------- Total investment 1,542 131 80 128 645 ========= ========= ========= ======== ======= Capital commitments 42 14 ========= ========= ========= ======== ======= 9. Funds and joint ventures continued: Joint ventures' summary financial statements The Scottish All disclosures have Retail The Tesco been restated to Property BL BLT British Tesco British Land accounting Limited Davidson Properties Land Property BL Holdings policies under IFRS. Partnership Ltd Ltd Partnership Ltd -------- ---------- ---------- ---------- ---------- All joint ventures are held equally on a 50:50 basis Land Manny Partners Securities Davidson, Group PLC his family Tesco plc Tesco plc Tesco plc & trusts Date established March 2004 September November February November 2001 1996 1998 1999 Accounting period Year ended 15 months 15 months 15 months 15 months ended ended ended ended 31 Mar 2006 31 Mar 2006 31 Mar 2006 31 Mar 2006 31 Mar 2006 Summarised profit and loss accounts Â£m Â£m Â£m Â£m Â£m ---- ---- ---- ---- ---- Gross rent and related 50 41 19 12 34 income ======== ========== ========== ========== ========== Net rent and related 34 39 18 11 33 income Other income and (2) (3) (1) (1) expenditure Profit (loss) on 1 property trading -------- ---------- ---------- ---------- ---------- Operating profit 32 37 18 10 32 Surplus (deficit) on 41 99 61 28 128 revaluation Disposal of fixed (1) assets -------- ---------- ---------- ---------- ---------- Net interest - external (22) (20) (13) (5) (22) - shareholders 1 -------- ---------- ---------- ---------- ---------- Net interest (payable) (22) (20) (12) (5) (22) receivable -------- ---------- ---------- ---------- ---------- Profit (loss) before 51 115 67 33 138 tax Corporation tax (3) (5) (1) 13 (3) Deferred tax (29) (28) (18) (8) (36) -------- ---------- ---------- ---------- ---------- Profit (loss) after tax 19 82 48 38 99 ======== ========== ========== ========== ========== Summarised balance sheets --- --- --- --- --- Investment properties 665 698 344 181 630 at valuation Development and trading 8 properties at cost Assets held under finance leases -------- ---------- ---------- ---------- ---------- Total properties 665 706 344 181 630 Current assets 31 18 3 6 20 Upstream loans to joint 17 venture shareholders Cash and deposits 16 16 12 5 18 -------- ---------- ---------- ---------- ---------- Gross assets 712 740 376 192 668 -------- ---------- ---------- ---------- ---------- Current liabilities (41) (31) (11) (18) (33) Bank debt falling due within one (30) year Bank debt falling due after one (83) (185) (87) (315) year Securitised debt (427) Debentures (114) Other non-current (10) (4) liabilities Deferred tax (69) (115) (48) (17) (80) -------- ---------- ---------- ---------- ---------- Gross liabilities (547) (377) (244) (122) (428) -------- ---------- ---------- ---------- ---------- Net external assets 165 363 132 70 240 ======== ========== ========== ========== ========== Represented by: Shareholder loans Ordinary shareholders' 165 363 132 70 240 funds / Partners' -------- ---------- ---------- ---------- ---------- capital Total investment 165 363 132 70 240 ======== ========== ========== ========== ========== Capital commitments 32 17 1 ======== ========== ========== ========== ========== 9. Funds and joint ventures continued: Joint ventures' summary financial statements BL Other British British Land share All disclosures have been restated Fraser Joint Land 2,005 to British Land accounting policies under IFRS. Ltd Ventures share Comparative ----------- ------- ------ ---------- All joint ventures are held equally on a 50:50 basis House of Partners Fraser plc Date established July 1999 Accounting period 14 months ended 31 Mar 2006 Summarised profit and loss accounts Â£m Â£m Â£m Â£m ---- ---- ---- ---- Gross rent and related income 16 3 88 73 =========== ======= ====== ========== Net rent and related income 16 5 78 68 Other income and expenditure (1) (4) (3) Profit (loss) on property trading 17 9 3 ----------- ------- ------- ---------- Operating profit 15 22 83 68 Surplus (deficit) on revaluation 26 5 194 160 Disposal of fixed assets 1 6 ----------- ------- ------- ---------- Net interest - external (10) (4) (48) (31) - shareholders 1 1 (3) ----------- ------- ------- ---------- Net interest (payable) receivable (10) (3) (47) (34) ----------- ------- ------- ---------- Profit (loss) before tax 32 24 230 200 Corporation tax (4) (7) (5) (10) Deferred tax (1) (60) (32) ----------- ------- ------- ---------- Profit (loss) after tax 28 16 165 158 =========== ======= ======= ========== Summarised balance sheets --- --- --- --- Investment properties at valuation 286 32 1,418 1,325 Development and trading properties 4 25 at cost Assets held under finance leases 14 7 8 ----------- ------- ------- ---------- Total properties 286 46 1,429 1,358 Current assets 3 49 65 12 Upstream loans to joint venture 31 24 26 shareholders Cash and deposits 7 20 47 56 ----------- ------- ------- ---------- Gross assets 296 146 1,565 1,452 ----------- ------- ------- ---------- Current liabilities (11) (52) (98) (73) Bank debt falling due within one (4) (17) (81) year Bank debt falling due after one year (130) (2) (401) (412) Securitised debt (214) Debentures (57) (57) Other non-current liabilities (2) (8) (11) Deferred tax (29) (4) (181) (118) ----------- ------- ------- ---------- Gross liabilities (176) (58) (976) (752) ----------- ------- ------- ---------- Net external assets 120 88 589 700 =========== ======= ======= ========== Represented by: Shareholder loans 1 35 18 40 Ordinary shareholders' funds / 119 53 571 660 Partners' capital ----------- ------- ------- ---------- Total investment 120 88 589 700 =========== ======= ======= ========== Capital commitments 16 33 33 =========== ======= ======= ========== 10. Pillar Acquisition On 28 July 2005 the Group acquired 100% of the issued share capital of Pillar Property PLC; the fair value of the consideration was Â£816m. An adjustment of Â£75m has been recognised to reflect the value of the fund management contracts (note 11). Deferred tax arising on this intangible asset is calculated to show the difference between its accounting and tax base costs and is recognised in the Group on acquisition. On 18 April 2005 the Group purchased the remaining 50% of the issued share capital of the BL West companies. The fair value of the consideration was Â£50m and there was no goodwill arising on acquisition. Book value acquired --------- --------- Pillar Accounting Fair value Fair value Property policy adjustment to Group PLC adjustment Â£m Â£m Â£m Â£m Properties 311 311 Investment in unit 682 3 685 trusts Intangible asset - fund management 75 75 contracts Other assets 53 (7) 46 Cash 24 24 Creditors (88) (88) Borrowings (283) (283) Loan notes (12) (12) --------- --------- --------- --------- 687 (4) 75 758 Deferred tax (on units and intangible assets) (86) (23) (109) Goodwill 167 --------- 816 ========= Satisfied by: Cash paid 816 Non cash consideration --------- Total 816 consideration Repayment of: borrowings 283 loan notes 7 --------- Total amounts payable 1,106 ========= 11. Other non-current assets Other Intangible investments assets Goodwill Â£m Â£m Â£m ---- ---- ---- At 1 April 2005 153 73 Additions 3 On corporate acquisition (Note 10) 75 167 Revaluation 92 Amortisation (10) Impaired in the year (240) --------- --------- -------- At 31 March 2006 248 65 ========= ========= ======== Other investments includes British Land's investment in Songbird Estates PLC which was acquired for Â£98m in June 2004 and valued by a major independent firm of Chartered Accountants on the basis of market value at Â£233m as at 31 March 2006 (2005: Â£140m). Intangible assets relate to fund management contracts which are amortised over the expected remaining life of each contract. Goodwill has been tested for impairment by comparing the carrying value of the cash generating unit including goodwill to its recoverable amount. For the purpose of impairment testing, the Spirit portfolio, Debenhams portfolio and the investment in HUT, are each regarded as cash-generating units. The recoverable amount of each cash-generating unit is based on the fair value less costs to sell, with fair value being determined in the light of external property values. As a result of these impairment tests, a non-cash impairment charge of Â£240m has been recognised to write off goodwill in full. The Board's in principle decision to become a REIT will result in the derecognition of deferred tax provisions in the foreseeable future. Further, there has been a substantial rise in the values of the acquired assets. These two factors have given rise to the goodwill impairment. 12. Debtors 2006 2005 Â£m Â£m ---- ---- Trade and other debtors 72 39 Prepayments and accrued income 12 5 Corporation tax 8 22 Interest rate derivatives 26 10 * --------- -------- 118 76 ========= ======== 13. Creditors 2006 2005 Â£m Â£m ---- ---- Trade creditors 67 38 Amounts owed to joint 26 28 ventures Other taxation and social security 7 13 Accruals and deferred 269 212 income Interest rate derivatives* 48 60 --------- -------- 417 351 ========= ======== * Includes contracted cash flow with a maturity greater than one year at fair value. 14. Other non-current liabilities 2006 2005 Â£m Â£m ---- ---- Obligations under finance leases 28 28 Minority interest 5 5 Retirement benefit 11 4 obligations --------- -------- 44 37 ========= ======== 15. Net debt Footnote 2006 2005 Â£m Â£m ---- ---- Secured on the assets of the Group ------------------------------------ Class A4 4.821% Bonds 2036 1.1 396 396 5.920% Secured Notes 2035 1.2 62 59 Class C2 5.098% Bonds 2035 1.1 217 215 Class B 4.999% Bonds 2033 1.1 365 365 Class A3 4.851% Bonds 2033 1.1 175 174 Class A1 Floating Rate Bonds 2032 1.1 224 224 Class A2 4.949% Bonds 2031 1.1 308 314 Class A2 4.482% Bonds 2030 1.3, 2 257 Class M1 Floating Rate Bonds 2030 1.3, 2 83 Class B2 5.270% Bonds 2030 1.3, 2 239 Class B3 5.578% Bonds 2030 1.3, 2 49 Class C1 Floating Rate Bonds 2030 1.3, 2 69 Class D1 Floating Rate Bonds 2030 1.3, 2 53 Class D Floating Rate Bonds 2025 1.1 147 149 7.743% Secured Notes 2025 1.4, 3 20 Class C1 Floating Rate Bonds 2022 1.1 234 234 8.875% First Mortgage Debenture Bonds 247 247 2035 9.375% First Mortgage Debenture Stock 197 197 2028 10.5% First Mortgage Debenture Stock 13 13 2019/24 11.375% First Mortgage Debenture Stock 20 20 2019/24 6.75% First Mortgage Debenture Bonds 1.5 205 206 2020 6.75% First Mortgage Debenture Bonds 1.5 103 103 2011 Bank loan 1.6, 4 45 Loan notes 5 --------- -------- 3,668 2,981 --------- -------- Unsecured ----------- Class A1 5.260% Unsecured Notes 2035 1.2 586 572 Class B 5.793% Unsecured Notes 2035 1.2 97 99 Class C Fixed Rate Unsecured Notes 1.2 87 84 2035 Class A2 (C) 6.457% Unsecured Notes 1.4, 3 212 2025 Class B2 6.998% Unsecured Notes 2025 1.4, 3 206 Class B3 7.243% Unsecured Notes 2025 1.4, 3 21 Class A1 6.389% Unsecured Notes 2016 1.4, 3 80 Class B1 7.017% Unsecured Notes 2016 1.4, 3 80 Class A2 5.555% Unsecured Notes 2013 1.2 35 40 --------- -------- 805 1,394 6.30% Senior US Dollar Notes 2015 5 88 81 10.25% Bonds 2012 2 2 7.35% Senior US Dollar Notes 2007 5 92 85 Bank loans and overdrafts 1,049 1,619 --------- -------- 2,036 3,181 --------- -------- Gross debt 6 5,704 6,162 --------- -------- Interest rate derivatives: liabilities 48 60 Interest rate derivatives: assets (26) (10) --------- -------- 5,726 6,212 Cash and short term deposits 7 (133) (151) --------- -------- Net debt 5,593 6,061 ========= ======== 15. Net debt (continued) 2006 2005 Â£m Â£m ---- ---- 1 These borrowings are obligations of ring-fenced, special purpose companies, with no recourse to other companies or assets in the Group. --- 1.1 Broadgate Financing PLC 2,066 2,071 1.2 MSC (Funding) PLC 867 854 1.3 BL Superstores Finance PLC 750 1.4 BLSSP (Funding) PLC 619 1.5 BL Universal PLC 308 309 1.6 BLU Nybil Ltd 45 2 A total of Â£753m Bonds were issued by BL Superstores Finance PLC on 28 February 2006. 3 All the outstanding Notes of BLSSP (Funding) PLC were redeemed on 28 February 2006. 4 The outstanding balance drawn under the BLU Nybil Ltd Term Loan was repaid on 31 March 2006. 5 Principal and interest on these borrowings were fully hedged into Sterling at the time of issue. 6 The principal amount of gross debt at 31 March 2006 was Â£5,716m (2005: Â£6,209m). Included in this, the principal amount of secured borrowings and other borrowings of non-recourse companies was Â£4,470m (2005: Â£4,393m). 7 Cash and deposits not subject to a security interest amount to Â£36m (2005: Â£54m). Maturity analysis of net debt 2006 2005 Â£m Â£m ---- ---- Repayable: within one year and on demand 129 408 -------- -------- between: one and two years 64 259 two and five years 1,348 1,328 five and ten years 576 533 ten and fifteen years 746 795 fifteen and twenty years 835 580 twenty and twenty five years 854 948 twenty five and thirty years 1,152 1,001 thirty and thirty five years 310 -------- -------- 5,575 5,754 -------- -------- Gross debt 5,704 6,162 -------- -------- Interest rate derivatives 22 50 Cash and short term deposits (133) (151) -------- -------- Net debt 5,593 6,061 ======== ======== 15. Net debt (continued) Maturity of committed undrawn borrowing facilities 2006 2005 Â£m Â£m ---- ---- Expiring: within one year 822 114 between: one and two years 25 95 two and three years 554 10 three and four years 118 442 four and five years 763 132 over five years 25 --------- --------- Total 2,282 818 ========= ========= Interest rate profile - including effect of derivatives 2006 2005 Â£m Â£m ---- ---- Fixed rate 5,203 5,360 Capped rate 100 100 Variable rate (net of cash) 290 601 --------- --------- Net debt 5,593 6,061 ========= ========= Comparison of market values and book values at 31 March 2006 Market Book Value Value Difference Â£m Â£m Â£m ---- --- ---- ---- Securitisations 3,765 3,683 82 Debentures and unsecured bonds 1,269 967 302 Bank debt and other floating rate debt 1,054 1,054 Cash and short-term deposits (133) (133) -------- --------- --------- 5,955 5,571 384 ======== ========= ========= Other financial (assets) liabilities: interest rate derivative assets (26) (26) interest rate derivative liabilities 48 48 -------- --------- --------- 22 22 -------- --------- --------- Total 5,977 5,593 384 ======== ========= ========= The differences are shown before any tax relief. 16. Notes to the cash flow statement Reconciliation of profit on ordinary activities before tax to cash generated from operations 2006 2005 Â£m Â£m --- ---- ---- Profit on ordinary activities before tax 1,590 738 Non-cash movements: Net valuation gains on investment properties and investments Revaluation of properties (1,203) (550) Revaluation of investments (92) (43) Gains on investment property disposals and (166) (16) property derivatives -------- ------- (1,461) (609) -------- ------- Share of profits after tax of funds and joint ventures (311) (158) Spreading of tenant incentives, guaranteed rent uplifts and (55) (38) letting fees Impairment of goodwill 240 Negative goodwill (2) Depreciation and amortisation 11 1 Share options, share awards and pension funding 20 8 -------- ------- (1,556) (798) -------- ------- Changes to working capital and other cash movements: Net financing costs 369 326 Refinancing charges (as described in note 6) 122 180 Dividends received (16) Share options, share awards and pension funding (6) Decrease in trading properties 6 (Increase) decrease in debtors (9) 1 (Decrease) increase in creditors (39) 11 -------- ------- 421 524 -------- ------- Cash generated from operations 455 464 ======== ======= 17. Share capital 2006 2005 m m --- --- Actual shares in issue At 1 April 2005 518 488 Conversion of convertible bonds 30 Other issues 1 -------- ------- At 31 March 2006 519 518 -------- ------- Adjustment for fully diluted (NAV basis) Dilution for share options 6 6 -------- ------- Fully diluted shares 525 524 ======== ======= Weighted average number of shares in issue for the year 519 509 Dilution for Convertible bonds to date of conversion 9 Share options 2 1 -------- ------- Fully diluted shares for the year 521 519 ======== ======= 18. Dividend The proposed final dividend of 11.8 pence per share, totalling Â£61m (2005: 10.9 pence per share, totalling Â£57m) was approved by the Board on 22 May 2006 and is payable on 18 August 2006 to shareholders on the register at the close of business on 21 July 2006. The consolidated statement of changes in equity shows total dividends paid per share of 16.1p comprising the 2006 interim dividend of Â£27 million, representing 5.2 pence per share, that was paid on 17 February 2006, as well as the 2005 final dividend, that was paid on 19 August 2005. 19. Contingent liabilities There were no contingent liabilities of the Parent for guarantees to third parties at 31 March 2006 (2005: Â£Nil). 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 Â£44m (2005: Â£44m) and recourse is only to the partnership assets. Table A --------- Summary income statement based on proportional consolidation The following pro forma information does not form part of the consolidated primary statements or the notes thereto. It presents the results of the group, with funds and joint ventures consolidated on a line by line, ie proportional basis. The underlying profit before tax (Â£228m) and total profit after tax (Â£1,249m) are the same as presented in the financial statements. Year Year ended ended 31 March 31 March 2006 2005 Â£m Â£m ---- ---- --- --- Gross rental income 751 630 ---------- ---------- Net rental income 701 585 Fees and other income 51 9 Administrative expenses (88) (53) Net interest costs (436) (360) ---------- ---------- Underlying profit before tax 228 181 Debt refinancing costs (122) (180) Revaluation of properties and investments 1,658 753 Gains on property disposals 182 26 Amortisation of intangible asset (10) Impairment of goodwill (240) ---------- ---------- Profit on ordinary activities before tax 1,696 780 Tax (charge) credit relating to underlying (43) (42) profit Other tax arising (404) (84) ---------- ---------- (447) (126) ---------- ---------- Profit for the year after taxation 1,249 654 ========== ========== Underlying earnings per share - diluted 36 p 27 p basis ========== ========== The underlying earnings per share is calculated on pre tax profit of Â£228m (2005: Â£181m), tax attributable to underlying profits of Â£43m (2005: Â£42m) and fully diluted shares numbering 521m (2005: 519m). Gross rental income excludes service charge receivable. Table B --------- Pro-forma summary balance sheets based on proportional consolidation The following pro forma information 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 share of funds and joint venture assets and liabilities incuded on a line by line ie proportional basis and assuming full dilution. 2006 2005 Â£m Â£m --- ---- --- ---- Retail properties 8,775 6,879 Office properties 5,200 4,849 Other properties 439 779 -------- -------- Total properties 14,414 12,507 Other investments 250 153 Intangible assets 65 Other net liabilities (243) (209) Net debt (6,684) (6,538) -------- -------- EPRA net assets 7,802 5,913 ======== ======== ------------------------------------------ -------- ---- -------- EPRA NAV per share 1,486 p 1,128 p ------------------------------------------ -------- ---- -------- Calculation of EPRA NNNAV per share 2006 2005 Â£m Â£m ---- --- ---- EPRA net assets 7,802 5,913 Less: Deferred tax arising on revaluation movements (1,530) (963) Mark-to-market on interest rate swaps (33) (24) Mark-to-market on debt (386) (278) Tax relief arising thereon 125 90 -------- -------- EPRA net net net asset value 5,978 4,738 ======== ======== EPRA NNNAV per share 1,139 p 904 p ======== ======== Total property valuations including share of funds and joint ventures 2006 2005 Â£m Â£m ---- ---- British Land Group 11,753 11,154 Share of funds and joint ventures Investment properties 2,651 1,321 Development properties 4 Trading properties at cost 4 25 Finance lease properties 7 8 External valuation surplus on trading properties 3 2 External valuation surplus on finance lease properties 4 4 Head lease liabilities (8) (11) -------- -------- 2,661 1,353 -------- -------- Total property portfolio valuation 14,414 12,507 ======== ======== Table B --------- Pro-forma summary balance sheets based on proportional consolidation and assuming full dilution Mark to Surplus EPRA EPRA Share Share of market of on Dilution Net Net of joint Deferred interest trading effect of Head assets assets Group funds ventures tax rate properties options lease 2006 2005 swaps Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m --- ---- ---- ---- ---- ---- ---- ---- ---- --- ---- --- ---- ASSETS Total 11,714 1,225 1,429 74 (28) 14,414 12,507 properties Investment 1,234 (645) (589) in funds and jvs Other 248 248 153 investments Intangible 65 65 assets Other net (1,652) (105) (191) 1,636 43 28 (241) (209) liabilities Net debt (5,593) (475) (649) 33 (6,684) (6,538) ------ ------ ------- ------- -------- -------- ------ ----- --- ------ ------ Net assets 6,016 1,636 33 74 43 7,802 5,913 ====== ====== ======= ======= ======== ======== ====== ===== === ====== ====== -------------- ------- ------- ------- -------- -------- ------- ------ ----- ------- ---- ------- EPRA NAV per share 1,486 p 1,128 p -------------- ------- ------- ------- -------- -------- ------- ------ ----- ------- ---- ------- Detailed Consolidated Income Statement for the year ended 31 March 2006 Year ended Year Six months ended Three months ended Three months ended 31 ended March 31 30 September 2005 31 December 2005 31 March 2006 2006 March ------------ ------------ ------------ ------ 2005 Under Capital, Under Capital, Under Capital, -lying tax -lying tax -lying tax pre tax and pre tax and pre tax and * other * other * other Â£m Note Â£m Â£m Â£m Â£m Â£m Â£m Â£m ---- ---- --- ---- --- ---- --- ---- --- ---- --- ---- --- ---- 604 Gross rental 3 340 180 170 690 ------ and related ------ ------ ------ ------ ------ ------ ----- income 517 Net rent and 3 305 147 137 589 related income 8 Fees and other 4 9 25 16 50 income Amortisation of 11 (3) (3) (4) (10) intangible asset 158 Funds and joint 9 14 66 11 129 14 77 311 ventures (see also below) (49) Administrative (36) (18) (27) (81) expenses 610 Net valuation 5 596 420 446 1,462 gains (includes profits on disposals) Goodwill 11 (240) (240) impairment Net financing costs ------ ------ ------ ------ ------ ------ ------ ----- 28 financing 35 26 (11) 50 income (354) financing (225) (120) (74) (419) expenses (180) refinancing (122) (122) ------ charges ------ ------ ------ ------ ------ ------ ------ (506) 6 (190) (94) (207) (491) ------ ------ ------ ------ ------ ------ ------ ------ 738 Profit on 102 659 71 546 (67) 279 1,590 ordinary activities before taxation ====== ====== ====== Taxation credit (expense) ------ ------ ------ ------ ------ 46 current (11) 3 1 (7) (130) deferred (135) (112) (87) (334) ------ ------ ------ ------ ------ (84) 7 (146) (109) (86) (341) Profit for the ------ period after taxation ------ ------ ------ ----- 654 attributable to 615 508 126 1,249 ====== shareholders of the ====== ====== ====== ===== company 27 p Earnings per 2 15 p 12 p 9 p 36 p ======= share: ======= ======= ======= ===== underlying diluted * ------- ---- --- ---------- ----- --- ------- --- ------- ---- ------- --- ------- ---- ------- --- ------- ---- Share of results of funds and joint ventures 31 Operating 14 11 14 39 profit pre-tax 169 Net valuation 82 184 112 378 gains on property and investments (10) Current tax (4) (4) (1) (9) (32) Deferred tax (12) (51) (34) (97) ------- ------- ------- ------- ------- ------- ------- ------ 158 9 14 66 11 129 14 77 311 ======= ======= ======= ======= ======= ======= ======= ==== ------- ---- --- ---------- ----- --- ------- --- ------- ---- ------- --- ------- ---- ------- --- ------- ---- * As defined in note 2 This information is provided by RNS The company news service from the London Stock Exchange

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