Final Results - Part 2

British Land Co PLC 25 May 2005 Consolidated Profit & Loss Account for the year ended 31 March 2005 ---------------------------------- Note 2005 2004 Â£m Â£m --- --- Gross rental income 619.9 565.6 Less share of joint ventures 10 (73.4) (78.9) -------- -------- Gross rental income - Group 546.5 486.7 ======== ======== Operating profit 3 462.3 421.8 Share of operating profits of joint ventures 10 67.7 67.5 Disposal of fixed assets - including amounts from joint 4 23.8 32.9 ventures (note 10) -------- -------- Profit on ordinary activities before interest 553.8 522.2 Net interest payable - including amounts from joint ventures 5 (352.0) (336.2) (note 10) Exceptional item 5 (180.0) -------- -------- Profit on ordinary activities before taxation 21.8 186.0 Taxation credit (charge) 6 36.9 (14.5) -------- -------- Profit on ordinary activities after taxation 58.7 171.5 Ordinary dividends 7 (83.9) (70.8) -------- -------- Retained (loss) profit for the year (25.2) 100.7 ======== ======== Basic earnings per share 8 11.5 p 35.1 p ======== ======== Diluted earnings per share 8 11.3 p 34.5 p ======== ======== Adjusted basic earnings per share * 8 39.7 p 37.0 p ======== ======== Adjusted diluted earnings per share * 8 38.9 p 36.3 p ======== ======== Dividend per share 7 15.7 p 14.5 p ======== ======== The results stated above relate to the continuing activities of the Group. * Adjusted to exclude the capital allowance effects of FRS 19 and the post tax impact of the exceptional item disclosed in note 5. Consolidated Balance Sheet as at 31 March 2005 --------------------- Note 2005 2004 Â£m Â£m ---- ---- Fixed assets Investment properties 9 10,981.8 9,251.2 -------- -------- Investments in joint ventures Share of gross assets 10 1,444.9 1,299.8 Share of gross liabilities 10 (640.9) (641.6) -------- -------- 804.0 658.2 -------- -------- Other investments 11 153.1 17.2 Negative goodwill 11 (18.1) (14.1) -------- -------- 11,920.8 9,912.5 -------- -------- Current assets Trading properties 9 35.9 41.6 Debtors 12 121.4 67.8 Cash and deposits 16 150.8 173.7 -------- -------- Total current assets 308.1 283.1 -------- -------- Creditors due within one year 13 (756.6) (869.9) -------- -------- Net current liabilities (448.5) (586.8) -------- -------- Total assets less current liabilities 11,472.3 9,325.7 Creditors due after one year 14 (5,788.7) (4,406.3) Convertible Bonds 16 (149.0) Provisions for liabilities and charges 15 (101.3) (101.1) Pension (liability) asset 25 (3.0) 0.1 -------- -------- Net assets 5,579.3 4,669.4 ======== ======== Capital and reserves Called up share capital 20 129.6 122.0 Share premium 20 1,251.9 1,109.3 Capital redemption reserve 20 8.1 8.1 Other reserves 20 (8.0) (6.1) Revaluation reserve 20 3,395.2 2,615.2 Profit and loss account 20 802.5 820.9 -------- -------- Equity shareholders' funds 5,579.3 4,669.4 ======== ======== Adjusted Net Asset Value per share Basic 19 1118 p 999 p ======== ======== Fully 19 1111 p 966 p diluted ======== ======== (The adjusted Net Asset Value 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 2005 Other Consolidated Primary Statements for the year ended 31 March 2005 ---------------------------------- Note 2005 2004 Â£m Â£m --- ---- --- ---- Statement of total recognised gains and losses Profit on ordinary activities after taxation 58.7 171.5 ------- ------- Unrealised surplus on revaluation: - investment 586.9 396.6 properties - joint ventures 161.5 65.3 - other investments 43.1 0.3 ------- ------- 791.5 462.2 ------- ------- Exchange movements on net investments (0.3) 0.3 Taxation on realisation of prior year revaluations (4.6) Pension scheme movements 25 (2.7) (0.2) Fair value adjustment on consolidation of former joint (8.3) ventures ------- ------- Total recognised gains and losses relating to the financial year 847.2 620.9 ======= ======= 2005 2004 Â£m Â£m --- ---- --- ---- Note of historical cost profits and losses Profit on ordinary activities before 21.8 186.0 taxation Realisation of prior year revaluations 11.5 72.2 ------- ------- Historical cost profit on ordinary 33.3 258.2 activities before taxation Taxation 36.9 (14.5) Taxation on realisation of prior year revaluations (4.6) Ordinary dividends (83.9) (70.8) ------- ------- Historical cost (loss) profit for the year retained after taxation and dividends (13.7) 168.3 ======= ======= Other Consolidated Primary Statements (continued) for the year ended 31 March 2005 ---------------------------------- 2005 2004 Â£m Â£m ---- ---- Reconciliation of movements in shareholders' funds Profit on ordinary activities after taxation 58.7 171.5 Ordinary dividends (83.9) (70.8) -------- -------- Retained (loss) profit for the year (25.2) 100.7 Revaluation of investment properties and 791.5 462.2 investments Exchange movements on net investments (0.3) 0.3 Taxation on realisation of prior year (4.6) revaluations Fair value adjustment on consolidation of (8.3) former joint ventures -------- -------- 766.0 550.3 Shares issued 150.2 1.7 Pension scheme movements (2.7) (0.2) Purchase and cancellation of own shares (5.0) Purchase of ESOP shares (10.9) (6.7) Adjustment for share and share option awards 7.3 6.0 -------- -------- Increase in shareholders' funds 909.9 546.1 -------- -------- Opening shareholders' funds 4,669.4 4,123.3 -------- -------- Closing shareholders' funds 5,579.3 4,669.4 ======== ======== Consolidated Cash Flow Statement for the year ended 31 March 2005 ---------------------------------- Note 2005 2004 Â£m Â£m --- --- --- Net cash inflow from operating activities 18 462.2 381.4 -------- -------- Dividends received from joint ventures 15.8 79.7 -------- -------- Returns on investments and servicing of finance Interest received 9.8 12.9 Interest paid (349.0) (301.5) Dividends received 0.2 -------- -------- (339.2) (288.4) -------- -------- Taxation UK corporation tax paid (10.0) (4.1) Foreign tax paid (3.6) (5.5) -------- -------- (13.6) (9.6) -------- -------- Net cash inflow from operating activities and investments after finance charges and taxation 125.2 163.1 -------- -------- Capital expenditure and financial investment Purchase of investment properties and development (508.9) (316.9) expenditure Purchase of investments (97.9) (10.8) Sale of investment properties 81.3 171.3 Sale of investments 3.7 20.8 -------- -------- (521.8) (135.6) -------- -------- Acquisitions and disposals Purchase of subsidiary companies * (41.0) (110.2) Cash at bank acquired with interest in subsidiary 4.9 5.8 companies Investment in and loans to joint ventures (23.4) (34.8) Sale of shares in and loans repaid by joint 54.8 89.2 ventures -------- -------- (4.7) (50.0) -------- -------- Equity dividends paid (76.6) (67.0) -------- -------- Net cash outflow before management of liquid resources and financing (477.9) (89.5) -------- -------- Management of liquid resources (Increase) decrease in term deposits (18.6) 11.9 -------- -------- Financing Issue of ordinary shares 1.2 1.7 Purchase and cancellation of own shares (5.0) Purchase of ESOP shares (10.9) (6.7) Issue of Broadgate Estate securitised debt 2,080.7 Redemption of Broadgate Funding PLC securitised (1,439.7) debt Redemption of 135 Bishopsgate securitised debt (138.4) Repayment of debt acquired with subsidiary (648.6) companies * Issue of Meadowhall Shopping Centre securitised 50.7 debt Issue of Sainsbury supermarkets securitised debt 84.0 Redemption of Broadgate Class D Unsecured Notes (73.5) 2014 Increase in bank and other borrowings 614.3 73.4 -------- -------- 458.6 124.6 -------- -------- -------- -------- (Decrease) increase in cash 18 (37.9) 47.0 ======== ======== * Properties of Â£702.2m acquired through corporate structures. Notes to the financial information for the year ended 31 March 2005 ---------------------------------- 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 2004, consistently applied in all material respects. The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 31 March 2005 or 2004, but is derived from those accounts. Statutory accounts for 2004 have been delivered to the Registrar of Companies and those for 2005 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. 2. Proforma information based on proportional consolidation The following proforma information does not form part of the consolidated primary statements or the notes thereto. It shows the results of the group, with joint ventures consolidated on a proportional basis, with development and trading properties shown at external valuation and lease incentive and rent review debtors reclassified to investment properties, and after adding back the capital allowance effects of FRS19. Note 2005 2004 Profit and loss account Â£m Â£m ------------------------- ---- ---- Gross rental income 619.9 565.6 ========== ========== Net rental income 571.8 523.0 Other income 6.2 6.2 Administrative expenses (51.2) (43.6) ---------- ---------- Earnings before interest and property sales 526.8 485.6 Net interest payable 5 (352.0) (336.2) ---------- ---------- Underlying profit before taxation 174.8 149.4 Profit on property trading 3.2 3.7 Disposal of fixed assets 4 23.8 32.9 Exceptional item 5 (180.0) ---------- ---------- Profit on ordinary activities before 21.8 186.0 taxation Taxation 6 36.9 (14.5) Adjustment for capital allowance effects of 8 17.3 9.1 FRS19 ---------- ---------- Profit on ordinary activities after taxation 76.0 180.6 Ordinary dividends 7 (83.9) (70.8) ---------- ---------- Retained (loss) profit for the year (7.9) 109.8 ========== ========== Balance sheet --------------- Assets Total properties at valuation 9 12,506.9 10,639.4 Other investments 11 153.1 17.2 Negative goodwill (35.2) (33.3) ---------- ---------- 12,624.8 10,623.3 ---------- ---------- Debtors and prepayments 77.8 49.8 Cash and deposits 207.3 211.7 ---------- ---------- 285.1 261.5 ---------- ---------- Creditors due within one year (877.1) (909.7) Total assets less current liabilities 12,032.8 9,975.1 Creditors due after one year (6,258.5) (4,952.7) Convertible bonds (149.0) Deferred taxation (108.3) (109.1) Adjustment for capital allowance effects of 6 130.2 112.9 FRS19 Pension (liability) asset (3.0) 0.1 ---------- ---------- Net assets 19 5,793.2 4,877.3 ========== ========== Equity shareholders' funds 5,793.2 4,877.3 ========== ========== 3. Operating profit 2005 2004 Â£m Â£m --- --- Gross rental income 546.5 486.7 Service charge receivable 47.1 37.6 ------- ------- Total income 593.6 524.3 Rents payable (3.1) (3.7) Other property outgoings (86.2) (70.3) ------- ------- Net rental income 504.3 450.3 Profit on property trading (see below) 0.6 6.0 Other income 6.2 6.2 Administrative expenses (48.8) (40.7) ------- ------- Operating profit 462.3 421.8 ======= ======= Profit on property trading Sale proceeds 6.6 11.0 Cost of sales (6.0) (5.0) ------- ------- Profit on property trading 0.6 6.0 ======= ======= Property derivatives The surplus of Â£0.2m arising on the revaluation of property derivatives is included in other income (2004: Â£nil). Net rental income from encumbered assets Net rental income for the year from properties which, at the year end, were subject to a security interest or held by non recourse companies was Â£376.5m (2004: Â£347.0m). 4. Profit on the disposal of fixed assets 2005 2004 Â£m Â£m ---- ---- British Land Group 15.7 25.5 Share of joint ventures 8.1 7.4 ------- ------- 23.8 32.9 ======= ======= Included in the tax charge is a net charge of Â£2.2m (2004: Â£8.7m) attributable to property sales. 5. Net interest payable 2005 2004 Â£m Â£m ---- ---- British Land Group Payable on: bank loans and overdrafts 76.5 52.2 other loans 260.6 263.7 ------- ------- 337.1 315.9 Deduct: development cost element (7.8) (13.3) ------- ------- 329.3 302.6 Receivable on: deposits and securities (9.4) (6.7) loans to joint ventures (3.2) (6.6) Other finance (income) costs: expected return on pension (2.7) (1.7) scheme assets interest on pension scheme 2.5 2.0 liabilities ------- ------- Total British Land Group 316.5 289.6 ------- ------- Share of joint ventures Interest payable on 3.2 6.6 shareholder loans Other interest payable (net) 32.3 40.0 ------- ------- Total share of joint ventures 35.5 46.6 (note 10) ------- ------- Net interest payable 352.0 336.2 ======= ======= Interest on development expenditure is capitalised at a rate of 5.6% (2004: 4.7%). Exceptional item On 2 March 2005 the Group incurred an exceptional 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 16). The pre tax exceptional item of Â£180m (post tax: Â£126m, after Â£54m tax credit) relates mainly to the difference between the redemption value and the carrying value of the redeemed debt. 6. Taxation 2005 2004 Â£m Â£m ---- ---- Current tax UK corporation tax (30%) (2.5) 13.4 Foreign tax 2.1 4.1 ------- ------- (0.4) 17.5 Adjustments in respect of prior years (45.1) (17.9) ------- ------- Total current tax credit (45.5) (0.4) ------- ------- Deferred tax Origination and reversal of timing differences 0.2 3.0 Tax associated with pension movements (0.2) 2.7 ------- ------- Total deferred tax charge 5.7 ------- ------- Group total taxation (45.5) 5.3 Attributable to joint ventures 8.6 9.2 ------- ------- Total taxation - effective tax rate: -169.3% (pre-exceptional: (36.9) 14.5 8.5%) (2004: 7.8%) ======= ======= Pre-exceptional tax charge 17.1 14.5 Exceptional tax credit (note 5) (54.0) ------- ------- Total tax credit (36.9) 14.5 ======= ======= Tax reconciliation Profit on ordinary activities before taxation 21.8 186.0 Less - Share of profit of joint ventures (40.3) (28.3) ------- ------- Group (loss) profit on ordinary activities before taxation (18.5) 157.7 ------- ------- Tax on group profit on ordinary activities at UK corporation tax rate of 30% (2004: 30%) (5.6) 47.3 Effects of: Capital allowances (9.3) (6.8) Tax losses and other timing differences 11.0 (29.3) Expenses not deductible for tax purposes 3.5 6.3 Adjustments in respect of prior years (45.1) (17.9) ------- ------- Group current tax credit (45.5) (0.4) ======= ======= 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. Where a deferred tax asset is recognised for losses carried forward there will be a deferred tax charge when those losses are used. 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 unprovided tax, in relation to equity shareholders' funds of Â£5,579.3m, which would arise on the disposal of British Land Group properties, investments in joint ventures and other investments, at valuation, after available loss relief, but without recourse to tax structuring is in the region of Â£780m (2004: Â£570m). Adjusted net assets are Â£5,793.2m and are stated after adding back the FRS19 provision of Â£130.2m (2004: Â£112.9) and the surplus on development and trading properties of Â£83.7m. The unprovided tax, in relation to adjusted net assets, which would arise on the disposal of British Land Group properties, other investments, and share of properties held in joint ventures, at valuation, after available loss relief, but without recourse to tax structuring, is in the region of Â£920m (2004: Â£680m). 7. Ordinary dividends 2005 2004 2005 2004 pence pence Â£m Â£m ------- ------- ---- ---- Interim 4.80 4.43 27.4 21.6 Proposed final 10.90 10.07 56.5 49.2 ------- ------- ------- ------- Total for year 15.70 14.50 83.9 70.8 ======= ======= ======= ======= The final dividend of 10.90 pence will be paid on 19 August 2005 to shareholders on the register at the close of business on 22 July 2005. The ex-dividend date is 20 July 2005. The interim dividend was paid on 18 February 2005. 8. 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: 2005 2004 -------------- -------------- Weighted Weighted average Profit average Profit number after number after of taxation of taxation shares shares m Â£m m Â£m --- --- --- --- --- --- Earnings per share Basic 509.2 58.7 488.1 171.5 Diluted 519.2 58.7 519.0 179.3 ======= ======= ======= ======= Adjusted earnings per share Basic 509.2 202.0 488.1 180.6 Diluted 519.2 202.0 519.0 188.4 ======= ======= ======= ======= Underlying earnings per share Basic 509.2 178.0 488.1 154.3 Diluted 519.2 178.0 519.0 162.1 ======= ======= ======= ======= The basic weighted average number of shares has changed as a result of the conversion on or before 30 July 2004 of the 6% Irredeemable Convertible Bonds. Adjusted earnings per share are calculated by excluding the post tax profit adjustment of Â£17.3m (2004: Â£9.1m) which is the capital allowance effect of FRS 19 which is not expected to arise, as described in note 15, in addition to the post tax effect of Â£126m of the exceptional item described in note 5. Underlying earnings per share is calculated by taking the underlying profit before taxation (disclosed in note 2) and adjusting for related taxation (2005: credit Â£3.2m; 2004: credit Â£4.9m). 9. Investment, development and trading properties Leasehold ----------- --- Freehold Long Short Total Â£m Â£m Â£m Â£m ---- ---- ---- ---- Investment and development properties Valuation and cost 1 April 2004 8,857.0 386.5 7.7 9,251.2 Additions - purchases and capital 1,059.1 152.5 1,211.6 expenditure Disposals (69.0) 0.1 (68.9) Reallocation (21.7) 21.8 (0.1) Exchange 1.0 1.0 fluctuations Revaluations 565.7 20.1 1.1 586.9 ------- ------ ------ ------- Valuation and cost 31 10,392.1 580.9 8.8 10,981.8 March 2005 ======= ====== ====== ======= Trading properties At lower of cost and net realisable value 31 March 2005 27.2 8.4 0.3 35.9 ------- ------- ------- ------- External valuation surplus on development and trading properties 81.3 Adjustment for lease incentive and minimum guaranteed rent review debtors 54.9 ------- Total investment, development and trading 11,153.9 properties ======= 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. Â£m ---- On an open market basis - External valuations: United ATIS REAL Weatheralls 10,801.7 Kingdom: United FPD Savills 282.6 Kingdom: Republic of Jones Lang LaSalle 68.6 Ireland: Netherlands: CB Richard Ellis B.V. 1.0 ------- Total investment, development and trading 11,153.9 properties ======= Total external valuation surplus on development and trading properties Â£m ---- British Land Group 81.3 Share of joint 2.4 ventures ------- 83.7 ======= Properties valued at Â£7,051.9m (2004: Â£6,672.8m) were subject to a security interest and other properties of non-recourse companies amounted to Â£41.9m (2004: Â£84.3m). 9. Investment, development and trading properties (continued) Total property valuations including share of joint ventures 2005 2004 Â£m Â£m ---- ---- British Land Group Investment and development properties 10,981.8 9,251.2 Trading properties 35.9 41.6 External valuation surplus on development and trading properties 81.3 92.7 Lease incentive and minimum guaranteed rent review 54.9 27.6 debtors ------- ------- 11,153.9 9,413.1 Share of joint ventures Properties 1,347.8 1,221.8 External valuation surplus on development and trading properties 2.4 2.3 Lease incentive and minimum guaranteed rent review 2.8 2.2 debtors ------- ------- 1,353.0 1,226.3 ------- ------- Total property portfolio valuation 12,506.9 10,639.4 ======= ======= The valuation of the BL Davidson portfolio included within joint ventures has been agreed by the directors of the joint venture at 31 December 2004, and is derived from an open market valuation by FPD Savills at 30 June 2004, with adjustments made to reflect movements on property valuation to the year end date. 10. Joint ventures' summary financial statements The Tesco Tesco BL BL BLT British BL Rosemound BL Land Fraser Properties Property Holdings Limited West Ltd Ltd Partnership Ltd Partnership companies ------- -------- -------- -------- --------- -------- All joint ventures are held equally on a 50: West LB, 50 basis Rosemound WestImmo, Partners House Developments and of Fraser Tesco plc Tesco plc Tesco Ltd Provinzial plc plc Date established July November February November March September 1999 1996 1998 1999 2004 2000 Accounting year end 29 Jan 31 Dec 31 Dec 31 Dec 31 March 31 Dec Summarised profit and Â£m Â£m Â£m Â£m Â£m Â£m loss accounts ---- ---- ---- ---- ---- ---- Gross rental income 14.3 15.3 10.1 26.6 17.1 ======= ======== ======== ======== ========= ======== Net rental income 14.0 14.7 9.7 25.2 16.1 Other expenditure (0.4) (0.4) (0.3) (0.4) (0.3) Profit (loss) on 0.4 property trading ------- -------- -------- -------- --------- -------- Operating profit 13.6 14.3 9.4 24.8 0.4 15.8 ------- -------- -------- -------- --------- -------- Disposal of fixed assets (1.4) ------- -------- -------- -------- --------- -------- Net interest - external (9.0) (10.9) (3.6) (13.7) (1.2) (11.2) - share holders (1.5) 0.8 (6.0) ------- -------- -------- -------- --------- -------- Net interest (payable) (10.5) (10.1) (3.6) (19.7) (1.2) (11.2) receivable ------- -------- -------- -------- --------- -------- Profit (loss) before tax 3.1 4.2 5.8 5.1 (0.8) 3.2 Tax (0.5) (1.3) (2.1) (0.9) 0.2 0.2 ------- -------- -------- -------- --------- -------- Profit (loss) after tax 2.6 2.9 3.7 4.2 (0.6) 3.4 ======= ======== ======== ======== ========= ======== Summarised statements of total Recognised gains and losses Profit (loss) retained 2.6 2.9 3.7 4.2 (0.6) 3.4 for the year Unrealised surplus (deficit) on revaluation 29.9 26.1 18.7 74.8 18.0 Total recognised gains and losses ------- -------- -------- -------- --------- -------- relating to the financial year 32.5 29.0 22.4 79.0 (0.6) 21.4 ======= ======== ======== ======== ========= ======== Summarised balance sheets Investment properties at 285.6 282.5 148.0 490.6 181.0 valuation Development and trading properties at cost 36.6 ------- -------- -------- -------- --------- -------- Total properties 285.6 282.5 148.0 490.6 36.6 181.0 Current assets 0.9 0.9 2.0 4.0 1.1 0.2 Upstream loans to joint venture shareholders 17.1 Cash and deposits 5.9 9.3 11.8 17.9 0.5 30.5 ------- -------- -------- -------- --------- -------- Gross assets 292.4 309.8 161.8 512.5 38.2 211.7 ------- -------- -------- -------- --------- -------- Current liabilities (5.0) (7.4) (21.6) (12.1) (2.6) (6.3) Bank debt falling due (4.0) (10.8) (108.0) within one year Bank debt falling due (133.7) (184.6) (86.8) (314.0) (10.0) after one year Debentures Deferred tax (5.0) (1.0) (1.2) (3.0) ------- -------- -------- -------- --------- -------- Gross liabilities (147.7) (193.0) (109.6) (329.1) (23.4) (114.3) ------- -------- -------- -------- --------- -------- Net external assets 144.7 116.8 52.2 183.4 14.8 97.4 ======= ======== ======== ======== ========= ======== Represented by: Shareholder loans 27.1 16.6 Ordinary shareholders' funds / Partners' capital 117.6 116.8 52.2 183.4 (1.8) 97.4 ------- -------- -------- -------- --------- -------- Total investment 144.7 116.8 52.2 183.4 14.8 97.4 ======= ======== ======== ======== ========= ======== Capital commitments 24.1 2.5 2.6 32.6 0.4 ======= ======== ======== ======== ========= ======== Contingent tax 24.9 30.4 8.0 40.6 ======= ======== ======== ======== ========= ======== 10. Joint ventures' summary financial statements (continued) The Scottish Retail BL Property Other British Davidson * Limited Joint Land 2004 Ltd Partnership Ventures Share Comparative -------- -------- ------- ------- --------- All joint ventures are held equally on a 50:50 basis Partners Manny Davidson, Land his Securities family & trusts Group PLC Date established September March 2001 2004 Accounting year end 31 31 March December Summarised profit and loss Â£m Â£m Â£m Â£m Â£m accounts ---- ---- ---- ---- ---- Gross rental income 28.1 33.1 2.2 73.4 78.9 ======== ======== ======= ======= ========= Net rental income 25.0 28.4 1.9 67.5 72.7 Other expenditure (1.5) (1.3) (0.2) (2.4) (2.9) Profit (loss) on property trading 4.7 0.1 2.6 (2.3) -------- -------- ------- ------- --------- Operating profit 28.2 27.1 1.8 67.7 67.5 -------- -------- ------- ------- --------- Disposal of fixed assets 15.7 1.9 8.1 7.4 -------- -------- ------- ------- --------- Net interest - external (15.0) 0.3 (0.3) (32.3) (40.0) - shareholders (0.2) 0.5 (3.2) (6.6) -------- -------- ------- ------- --------- Net interest (payable) receivable (15.2) 0.3 0.2 (35.5) (46.6) -------- -------- ------- ------- --------- Profit (loss) before tax 28.7 27.4 3.9 40.3 28.3 Tax (4.6) (8.2) (8.6) (9.2) -------- -------- ------- ------- --------- Profit (loss) after tax 24.1 19.2 3.9 31.7 19.1 ======== ======== ======= ======= ========= Summarised statements of total recognised gains and losses Profit (loss) retained for the 24.1 19.2 3.9 31.7 19.1 year Unrealised surplus (deficit) on 109.0 39.5 7.0 161.5 65.3 revaluation Total recognised gains and losses -------- -------- ------- ------- --------- relating to the financial year 133.1 58.7 10.9 193.2 84.4 ======== ======== ======= ======= ========= Summarised balance sheets Investment properties at valuation 589.4 604.5 51.8 1,316.7 1,190.3 Development and trading properties 19.2 6.4 31.1 31.5 at cost -------- -------- ------- ------- --------- Total properties 608.6 604.5 58.2 1,347.8 1,221.8 Current assets 10.8 5.6 2.9 14.2 11.8 Upstream loans to joint venture 35.8 26.5 28.2 shareholders Cash and deposits 18.6 15.4 2.9 56.4 38.0 -------- -------- ------- ------- --------- Gross assets 638.0 625.5 99.8 1,444.9 1,299.8 -------- -------- ------- ------- --------- Current liabilities (52.9) (23.1) (32.7) (81.9) (65.8) Bank debt falling due within one (41.5) (0.1) (82.2) (21.4) year Bank debt falling due after one (93.8) (1.9) (412.4) (484.4) year Debentures (114.8) (57.4) (62.0) Deferred tax (3.7) (0.1) (7.0) (8.0) -------- -------- ------- ------- --------- Gross liabilities (306.7) (23.1) (34.8) (640.9) (641.6) -------- -------- ------- ------- --------- Net external assets 331.3 602.4 65.0 804.0 658.2 ======== ======== ======= ======= ========= Represented by: Shareholder loans 39.8 (3.1) 40.2 71.6 Ordinary shareholders' funds / 331.3 562.6 68.1 763.8 586.6 Partners' capital -------- -------- ------- ------- --------- Total investment 331.3 602.4 65.0 804.0 658.2 ======== ======== ======= ======= ========= Capital commitments 0.5 2.5 32.6 12.9 ======== ======== ======= ======= ========= Contingent tax 84.5 33.2 4.0 112.8 81.5 ======== ======== ======= ======= ========= * British Land's share of negative goodwill is included in Current Liabilities, and amounts in total to Â£17.1m (2004 - Â£19.2m). 10. Joint ventures (continued) The movement for the year: Equity Loans Total Â£m Â£m Â£m --- --- --- At 1 April 2004 586.6 71.6 658.2 Additions (0.2) 23.4 23.2 Repayment of loans (54.8) (54.8) Share of profit attributable to joint ventures 31.7 31.7 Dividends from joint ventures (15.8) (15.8) Revaluation 161.5 161.5 --------- --------- --------- At 31 March 2005 763.8 40.2 804.0 ========= ========= ========= The Group's share of joint venture external net debt as at 31 March 2005 was Â£495.6m (2004: Â£529.8m). The Group's share of the market value of the joint venture debt and derivatives as at 31 March 2005 was Â£8.5m more than the Group's share of the book value (2004: Â£14.9m). The Group's share of joint venture properties as at 31 March 2005 was Â£1,347.8m (2004: Â£1,221.8m). All companies are property investment companies registered in England and Wales unless otherwise stated. 11. Other investments and negative goodwill Other investments Â£m --- At 1 April 2004 17.2 Additions 97.9 Disposals (5.1) Revaluations 43.1 ----------- At 31 March 2005 153.1 =========== For the year ended 31 March 2005 dividends and interest from other investments amounted to Â£0.7m (2004: Â£1.1m). British Land's investment in Songbird Estates PLC was valued by a major, independent firm of Chartered Accountants on the basis of open market value at Â£140m as at 31 March 2005. Negative goodwill Â£m ---- At 1 April 2004 (14.1) Additions - see note 17 (4.6) Release on sales 0.6 ----------- At 31 March 2005 (18.1) =========== Negative goodwill arises on purchases of corporate entities with contingent tax liabilities. Any discount received is recognised as negative goodwill, which is released on subsequent sale of the related properties. 12. Debtors 2005 2004 Â£m Â£m --- --- Trade debtors 38.6 37.3 Amounts owed by joint ventures 0.8 0.3 Corporation tax 22.3 Prepayments and accrued income 59.7 30.2 ----------- ----------- 121.4 67.8 =========== =========== Included in Prepayments and accrued income is an amount of Â£54.9m (2004: Â£27.6m), relating to lease incentives which are amortised over the period to the next open market rent review, as well as fixed and minimum guaranteed rent reviews which are spread over the lease term. 13. Creditors due within one year 2005 2004 Â£m Â£m --- --- Debentures and loans * 27.3 38.5 Overdrafts * 3.7 7.3 Bank loans * 376.7 439.4 Trade creditors 38.3 65.2 Amounts owed to joint ventures 27.9 28.2 Corporation tax 36.7 Other taxation and social security 13.5 7.7 Accruals and deferred income 212.7 197.7 Proposed final dividend 56.5 49.2 --------- --------- 756.6 869.9 ========= ========= * See maturity analysis of net debt - note 16. 14. Creditors due after one year 2005 2004 Â£m Â£m --- --- Debentures and loans * 4,500.7 3,842.0 Bank loans * 1,283.0 564.3 Minority interest - see note 17 5.0 --------- --------- 5,788.7 4,406.3 ========= ========= * See maturity analysis of net debt - note 16. 15. Provisions for liabilities and charges 2005 2004 Â£m Â£m ---- ---- At 1 April 2004 101.1 92.7 Liabilities assumed on consolidation of 5.4 former joint ventures Charged to profit and loss account 0.2 3.0 --------- --------- At 31 March 2005 101.3 101.1 ========= ========= Deferred tax is provided as follows: Capital allowances 123.2 104.9 Other timing differences (21.9) (3.8) --------- --------- 101.3 101.1 ========= ========= 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. 16. Net debt Footnote 2005 2004 Â£m Â£m ---- ---- Secured on the assets of the Group ------------------------------------ Class A4 4.821% Bonds 2036 1.1, 2 395.9 6.5055% Secured Notes 2038 1.2, 3 97.8 5.920% Secured Notes 2035 1.3 59.2 59.2 Class C2 5.098% Bonds 2035 1.1, 2 214.3 Class B 4.999% Bonds 2033 1.1, 2 364.6 Class A3 4.851% Bonds 2033 1.1, 2 174.4 Class A1 Floating Rate Bonds 2032 1.1, 2 224.3 Class A2 4.949% Bonds 2031 1.1, 2 314.0 Class D Floating Rate Bonds 2025 1.1, 2 149.5 7.743% Secured Notes 2025 1.4 19.7 19.7 Class C1 Floating Rate Bonds 2022 1.1, 2 234.2 5.66% 135 Bishopsgate Securitisation 2018 1.5, 3 1.9 8.49% 135 Bishopsgate Securitisation 2018 1.5, 3 7.1 8.875% First Mortgage Debenture Bonds 2035 246.7 246.7 9.375% First Mortgage Debenture Stock 2028 197.3 197.3 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 1.6 205.6 206.0 6.75% First Mortgage Debenture Bonds 2011 1.6 103.0 103.5 Bank loan 1.7 44.7 45.0 -------- -------- 2,980.4 1,017.2 -------- -------- Unsecured ----------- Class A1 5.260% Unsecured Notes 2035 1.3 573.7 573.4 Class B 5.793% Unsecured Notes 2035 1.3 99.2 99.1 Class C Fixed Rate Unsecured Notes 2035 1.3 84.3 83.8 Class C2 6.4515% Unsecured Notes 2032 1.2, 3 73.4 Class B 6.0875% Unsecured Notes 2031 1.2, 3 220.2 Class A3 5.7125% Unsecured Notes 2031 1.2, 3 146.8 Class A2 5.67% Unsecured Notes 2029 1.2, 3 283.4 Class A2 (C) 6.457% Unsecured Notes 2025 1.4 212.2 212.3 Class B2 6.998% Unsecured Notes 2025 1.4 206.0 205.8 Class B3 7.243% Unsecured Notes 2025 1.4 20.6 20.5 Class A1 Fixed Rate Unsecured Notes 2024 1.2, 3 319.1 5.66% 135 Bishopsgate Securitisation 2018 1.5, 3 22.3 8.49% 135 Bishopsgate Securitisation 2018 1.5, 3 88.4 Class A1 6.389% Unsecured Notes 2016 1.4 79.8 84.3 Class B1 7.017% Unsecured Notes 2016 1.4 79.6 85.9 Class C1 6.7446% Unsecured Notes 2014 1.2, 3 147.4 Class A2 5.555% Unsecured Notes 2013 1.3 39.7 44.6 -------- -------- 1,395.1 2,710.7 6.30% Senior US Dollar Notes 2015 4 97.4 97.4 10.25% Bonds 2012 1.7 1.7 7.35% Senior US Dollar Notes 2007 4 97.8 97.8 Guaranteed Floating Rate Unsecured Loan Notes 2005 0.3 0.7 Bank loans and overdrafts 1,618.7 966.0 -------- -------- 3,211.0 3,874.3 -------- -------- 6% Subordinated Irredeemable Convertible Bonds 5 149.0 -------- -------- Gross debt 6,191.4 5,040.5 Cash and deposits 6 (150.8) (173.7) -------- -------- Net debt 6,040.6 4,866.8 ======== ======== 1 These borrowings are obligations of ringfenced, special purpose companies, with no recourse to other companies or assets in the Group. 1.1 Broadgate Financing PLC 2,071.2 1.2 Broadgate (Funding) PLC 1,288.1 1.3 MSC (Funding) PLC 856.1 860.1 1.4 BLSSP (Funding) PLC 617.9 628.5 1.5 135 Bishopsgate Financing Ltd 119.7 1.6 BL Universal PLC 308.6 309.5 1.7 BLU Nybil Ltd 44.7 45.0 2 A total of Â£2,080m Bonds were issued by Broadgate Financing PLC on 2 March 2005. 3 All the outstanding Notes of Broadgate (Funding) PLC and external loans of 135 Bishopsgate Financing Ltd were redeemed on 2 March 2005. 4 These borrowings have been hedged into Sterling from the date of issue. 5 All the outstanding 6% Subordinated Irredeemable Convertible Bonds were converted into ordinary shares on or before 30 July 2004. 6 Cash and deposits not subject to a security interest amount to Â£54.4m (2004: Â£82.5m). Following the April Interest Payment Date total cash and deposits held within the securitisation structures were reduced to some Â£22m (2004: Â£23m). 16. Net debt (continued) Interest rate profile - including effect of 2005 2004 derivatives Â£m Â£m ---- ---- Fixed rate 5,339.8 3,985.7 Capped rate 100.0 100.0 Variable rate (net of cash) 600.8 781.1 -------- ------- Net debt 6,040.6 4,866.8 ======== ======= All the above debt is effectively Sterling except for Â£84.2m (2004: Â£64.6m) of Euro debt of which Â£46.0m (2004: Â£31.8m) is fixed and the balance floating. At 31 March 2005 the weighted average interest rate of the Sterling fixed rate debt is 6.08% (2004: 6.72%). The weighted average period for which the rate is fixed is 16.1 years (2004: 17.9 years), the reduction is primarily due to the conversion of the Irredeemable Convertible Bond which was treated as having a life of 100 years for this calculation. The weighted average interest rate for the Euro fixed rate debt is 3.87% (2004: 4.25%) and the weighted average period for which the rate is fixed is 5.0 years (2004: 1.4 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 Â£3,064.0m (2004: Â£3,266.6m). 2005 2004 Â£m Â£m ---- ---- Maturity analysis of net debt Repayable: within one year and on demand 407.7 485.2 between: one and two years 272.0 345.1 two and five years 1,327.6 488.6 five and ten years 532.6 572.6 ten and fifteen years 811.5 556.6 fifteen and twenty years 580.5 710.5 twenty and twenty five 948.8 791.2 years twenty five and thirty 1,000.7 635.0 years thirty and thirty five 310.0 306.7 years Irredeemable 149.0 -------- ------- Gross debt 6,191.4 5,040.5 -------- ------- Cash (54.7) (96.2) Term deposits (96.1) (77.5) -------- ------- Total cash and (150.8) (173.7) deposits -------- ------- Net debt 6,040.6 4,866.8 ======== ======= Maturity of committed undrawn borrowing facilities Expiring: within one year 114.0 45.0 between: one and two years 95.0 150.0 two and three years 10.0 165.0 three and four years 441.9 four and five years 132.1 604.9 over five years 25.0 -------- ------- Total 818.0 964.9 ======== ======= The above facilities are those freely available to be drawn for Group purposes. There is an additional undrawn 364 day revolving liquidity facility totalling Â£185m which is only available for requirements of the Broadgate securitisation. 16. Net debt (continued) Comparison of market values and book values at 31 March 2005 2005 2004 -------------------- ------------------- Market Book Market Book Value Value Difference Value Value Difference Â£m Â£m Â£m Â£m Â£m Â£m ---- --- ---- ---- --- ---- --- ---- ---- Securitisations 3,581.1 3,545.2 35.9 3,122.8 2,896.4 226.4 Debentures and unsecured bonds 1,190.5 982.5 208.0 1,160.3 983.4 176.9 Convertible 195.2 149.0 46.2 Bonds Bank debt and other floating rate 1,663.7 1,663.7 1,011.7 1,011.7 debt Cash and (150.8) (150.8) (173.7) (173.7) deposits ------- ------- -------- ------ ------- -------- 6,284.5 6,040.6 243.9 5,316.3 4,866.8 449.5 ------- ------- -------- ------ ------- -------- Derivatives - unrecognised (10.0) (10.0) (12.3) (12.3) gains - unrecognised 60.0 60.0 47.1 47.1 losses ------- ------- -------- ------ ------- -------- 50.0 50.0 34.8 34.8 ------- ------- -------- ------ ------- -------- Total 6,334.5 6,040.6 293.9 5,351.1 4,866.8 484.3 ======= ======= ======== ====== ======= ======== The Differences are shown before any tax relief. In accordance with Accounting Standards the book value of debt is par value net of unamortised issue costs, except for debt assumed on corporate acquisitions where the book value is the fair value of the debt at the date of acquisition. Short term debtors and creditors have been excluded from the disclosures (other than the currency disclosures). The valuations of the Broadgate Bonds (see borrowings of Broadgate Finance PLC shown as footnote 1.1 above) and Meadowhall Notes (see borrowings of MSC (Funding) PLC shown as footnote 1.3 above) have been undertaken by Morgan Stanley. The valuation of the 6.30% Senior US Dollar Notes 2015 has been undertaken by Barclays Capital. 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 2005, Â£nil gains and Â£0.2m of losses are expected to be realised in the next financial year (2004: Â£0.2m gains; Â£1.8m losses) and the balance in subsequent years. Net costs of Â£0.7m (2004 costs: Â£5.7m) were recognised in the current year, comprising receipts of Â£16.5m (2004: Â£10.1m) and costs of Â£17.2m (2004: Â£15.8m). 16. Net debt (continued) 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, as detailed below: 2005 2004 Â£m Â£m --- --- Securitised debt 19.6 37.8 Debentures 9.5 9.8 US Dollar Notes 0.4 0.5 Convertible Bonds 1.0 ------- ------ 29.5 49.1 ======= ====== 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 2005 the balance of the fair value adjustment arising on the Group's acquisition of the remaining 50% interest in BL Universal PLC was Â£12.1m (2004: Â£13.3m). This has the effect of increasing the carrying value of the Group's secured debt in the balance sheet. 17. Acquisition of subsidiary undertakings On 15 October 2004, the Group acquired 100% of the issued share capital of Spirit Wisley Limited, which owned 65 public houses; the fair value of the consideration was Â£14.5m. On 22 February 2005 the Group subscribed for 100% of the 'B' ordinary shares in BF Properties (No. 4) Limited and gained control over the company and its subsidiaries, which owned 23 Debenhams department stores; the fair value of the consideration was Â£1.8m. On 22 February 2005 the Group subscribed for 100% of the issued share capital of the Tweed Premier group of companies, which owned a residential property portfolio; the fair value of the consideration was Â£32.3m. Book value acquired --------------------- Spirit BF Tweed Accounting Fair value Fair Wisley Properties Premier policy adjustment value Limited (No. 4) group of alignment to Limited companies Group Â£m Â£m Â£m Â£m Â£m Â£m ------ -------- -------- -------- -------- ------- Properties 174.0 493.3 28.0 0.8 6.1 702.2 Other assets 0.1 6.8 6.9 Cash 4.9 4.9 Creditors (2.1) (4.0) (1.1) (7.2) Shareholder loans (125.1) (125.1) Bank loans (158.1) (365.4) (523.5) Minority interest (5.0) (5.0) ------ -------- -------- -------- -------- ------- 13.8 (1.2) 33.7 0.8 6.1 53.2 Negative goodwill (4.6) ------- 48.6 ======= Satisfied by: Cash payable 14.5 1.8 26.5 42.8 Non cash consideration 5.8 5.8 ------ -------- -------- ------- Total consideration 14.5 1.8 32.3 48.6 Repayment of shareholder 125.1 125.1 loans Repayment of bank loans 158.1 365.4 523.5 ------ -------- -------- ------- Total amounts payable 172.6 492.3 32.3 697.2 ====== ======== ======== ======= The accounting policy alignment reverses the depreciation previously charged in BL Properties (No. 4) Limited. The fair value adjustment is required to show the properties at fair value (BF Properties (No. 4) Limited: Â£0.9m; Tweed Premier group: Â£5.2m). The BF Properties (No. 4) Limited group earned a profit after taxation of Â£4.7m for the period from incorporation on 26 October 2004 to 21 February 2005. The fair values of the assets and liabilities acquired have been determined on a provisional basis as the Group is currently in the process of finalising the balance sheets as at the acquisition date. 18. Notes to the cash flow statement Reconciliation of operating profit to net cash inflow from operating activities 2005 2004 Â£m Â£m --- --- --- Operating profit 462.3 421.8 Dividends received (0.2) Depreciation and release of negative 0.3 (0.9) goodwill Adjustment for share options, share awards and pension 8.0 (3.3) funding Decrease in trading properties 5.7 4.6 (Increase) decrease in debtors (25.3) 15.1 Increase (decrease) in 11.2 (55.7) creditors -------- ------- Net cash inflow from operating 462.2 381.4 activities ======== ======= Analysis of Group net debt 1 April Exceptional Cash Non cash 31 March 2004 item + Acquisitions * flow movements 2005 Â£m Â£m Â£m Â£m Â£m Â£m ---- ---- --- ---- ---- ---- ---- Cash at bank (96.2) 41.5 (54.7) Overdraft 7.3 (3.6) 3.7 ------- -------- -------- ------ -------- ------- Net cash per cash flow statement (88.9) 37.9 (51.0) Term debt 4,884.2 158.2 648.6 468.3 28.4 + 6,187.7 Convertible Bonds 149.0 (149.0) Term deposits (77.5) (18.6) (96.1) ------- -------- -------- ------ -------- ------- Group net debt 4,866.8 158.2 648.6 487.6 (120.6) 6,040.6 ======= ======== ======== ====== ======== ======= + The cash impact of the exceptional item, described in note 5, was Â£158.2m. The remaining Â£21.8m is in respect of unamortised issue costs written off and is included in non cash movements. * Excluding cash and overdrafts Reconciliation of net cash flow to movement in Group net debt 2005 2004 Â£m Â£m --- --- --- Brought forward 4,866.8 4,361.4 -------- ------- Decrease (increase) 37.9 (47.0) in cash Cash inflow from movement in 468.3 134.6 debt Cash (outflow) inflow from term (18.6) 11.9 deposits -------- ------- Changes resulting from cash 487.6 99.5 flows Non cash movements including acquisitions 528.0 405.9 Exceptional item 158.2 -------- ------- Movement in net debt in the 1,173.8 505.4 year -------- ------- Carried forward 6,040.6 4,866.8 ======== ======= 19. Net Asset Value per share 31 March 31 March 2005 2004 ----------------------------- -------------------------------- Adjusted Adjusted Net Net Net Net Shares Assets Assets Shares Assets Assets m Â£m Â£m m Â£m Â£m --- --- --- --- --- --- --- Net Asset Value (undiluted) Shareholders' funds as shown on balance sheet 518.3 5,579.3 5,579.3 488.0 4,669.4 4,669.4 ======= ====== FRS 19 capital - British Land 123.2 104.9 allowance effects Group - Share of joint 7.0 8.0 ventures ------- ------- 130.2 112.9 ------- ------- Total external valuation surplus on development and trading properties (note 9) 83.7 83.7 95.0 95.0 ------- ------ ------- ------ Net assets attributable to ordinary 5,793.2 5,663.0 4,877.3 4,764.4 shares ======= ====== ======= ====== Net Asset Value per share (undiluted) 1118 p 1093 p 999 p 976 p ======= ======= ======= ======= Fully diluted Net Asset Value Net assets attributable to ordinary 518.3 5,793.2 5,663.0 488.0 4,877.3 4,764.4 shares Adjust to fully diluted on conversion of: 6% Subordinated Irredeemable Convertible Bonds 30.0 149.0 149.0 Dilution re share options and share awards 5.7 30.4 30.4 3.3 9.1 9.1 ------- ------- ------- ------- ------- ------- Dilutive effect of share options and conversion of Convertible Bonds 5.7 30.4 30.4 33.3 158.1 158.1 Net assets attributable to fully diluted ------- ------- ------- ------- ------- ------- ordinary shares 524.0 5,823.6 5,693.4 521.3 5,035.4 4,922.5 ======= ======= ======= ======= ======= ======= Fully diluted Net Asset Value per 1111 p 1087 p 966 p 944 p share ======= ======= ======= ======= The adjusted Net Asset Value includes the surplus before tax 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 15) which is not expected to arise. 20. Share capital and reserves Capital Profit Share Share redemption Other Revaluation and loss capital premium reserve reserves reserve account Total Â£m Â£m Â£m Â£m Â£m Â£m Â£m ---- ---- ---- ---- ---- ---- ---- At 1 April 2004 122.0 1,109.3 8.1 (6.1) 2,615.2 820.9 4,669.4 Share issues 7.6 142.6 150.2 Purchase of ESOP (10.9) (10.9) shares Adjustment for share and share option awards 7.3 7.3 Pension scheme (2.7) (2.7) movements Retained profit for (25.2) (25.2) the year Realisation of prior year (11.5) 11.5 revaluations Current year 791.5 791.5 revaluation Exchange movements on net (1.9) 1.6 (0.3) investments ------ ------- -------- ------- -------- ------- ------ At 31 March 2005 129.6 1,251.9 8.1 (8.0) 3,395.2 802.5 5,579.3 ====== ======= ======== ======= ======== ======= ====== 21. Contingent and other liabilities At 31 March 2005 the Parent had no contingent liabilities for guarantees to third parties (2004: Â£nil). 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 Â£43.6m (2004: Â£43.6m) and recourse is only to the partnership assets. Details of this Partnership are set out in the Joint Venture Review. 22. Capital commitments 2005 2004 Â£m Â£m ---- --- ---- --- --- --- British Land 535.7 309.9 Share of joint ventures (note 10) 32.6 12.9 ------- ------- 568.3 322.8 ======= ======= 23. Post balance sheet events On 18 April 2005 the Group obtained 100% ownership of the BL West joint venture companies by buying for Â£50m the equity owned by the other joint venture shareholders. Immediately following the acquisition, the Â£108m debt was repaid. On 22 April 2005 the Scottish Retail Property Limited Partnership joint venture raised Â£430m by way of a seven year securitisation. The majority of the funds raised were returned to the joint venture partners. On 23 May 2005 the Group and Pillar Property PLC announced the terms of recommended proposals under which the Group would acquire the entire issued and to be issued ordinary share capital of Pillar Property at a valuation of approximately Â£811m. 24. Staff costs (including Directors) 2005 2004 Â£m Â£m --- --- --- Wages and salaries 23.0 23.0 Social security costs 3.2 2.4 Pension costs 3.7 2.9 Equity-settled share-based payments - Incentive schemes (RSP, SIP, LTIP, RAA, CISP) 8.4 7.0 - Sharesave schemes (SAYE) 0.1 0.1 --------- --------- 38.4 35.4 ========= ========= The average number of employees of the Group during the year was 715 (2004: 713) of which some 540 (2004: 546) 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), various Sharesave Plans and two recruitment schemes relating to the new Chief Executive, the Recruitment Award Agreement (RAA) and the Co-Investment Share Plan (CISP). 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 Â£3,000 a year. They can also purchase partnership shares for up to Â£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: 2004 Awards 28 29 May November Share price at grant date 663p 796p Exercise price 663p 796p Option life in years (maximum 10) 7 5 Risk free rate 5.10% 4.50% Expected volatility 30% 30% Expected dividend yield 3.00% 2.00% Value per option 194p 223p 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 Â£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, for the grants during the current year, a risk-free rate of 4.50%, expected volatility of 30% and an expected dividend yield of 2.00%. The values per option for these schemes range from 259 pence to 294 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. Awards under the RAA and CISP are valued at the fair value of the shares at the date of grant and expensed over one year for the RAA, three years for the CISP. 25. 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 Â£3.7m (2004: Â£2.9m). A full actuarial valuation of the scheme was carried out at 31 March 2003 and updated to 31 March 2004 and to 31 March 2005 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: 2005 2004 2003 % pa % pa % pa ------ ------- ------ Discount rate 5.30 5.50 5.50 Salary inflation 5.10 5.10 4.80 Pensions increase 2.90 2.90 2.50 Price inflation 2.90 2.90 2.60 ------ ------- ------ The assets and liabilities of the scheme at 31 March 2005 and the expected return on assets over the following year were as follows: 2005/6 2004/5 2003/4 ------------ ----------- ------------ Expected Expected Expected return return return % Â£m % Â£m % Â£m ---- ----- ---- ----- ---- ----- Bonds 4.5 19.1 4.5 17.0 4.5 9.9 Equities 7.0 31.4 7.0 26.8 7.0 15.3 Other 4.5 0.4 4.0 0.6 4.0 3.0 ------- ------- ------- ------ ------- ------ Total assets 50.9 44.4 28.2 Liabilities (55.2) (44.3) (36.8) ------- ------- ------- ------ ------- ------ (Deficit) surplus in scheme (4.3) 0.1 (8.6) Related deferred tax asset 1.3 2.6 ------- ------- ------- ------ ------- ------ Net pension (liability) asset (3.0) 0.1 (6.0) ------- ------- ------- ------ ------- ------ The movement in the surplus (deficit) during the year is 2005 2004 analysed below: Â£m Â£m ------- ------ Opening surplus (deficit) in the scheme 0.1 (8.6) Current service cost (2.7) (2.1) Past service cost (0.7) (0.3) Employer contributions 2.7 11.7 Other finance income (cost) 0.2 (0.3) Actuarial loss (3.9) (0.3) ------- ------ Closing (deficit) surplus in the scheme (4.3) 0.1 ------- ------ 25. Pensions (continued) History of experience gains and losses 2005 2004 2003 Â£m Â£m Â£m ------ ------- ------- Difference between the expected and actual return on scheme assets: Amount 2.4 3.8 (4.4) Percentage of scheme assets 4.7% 8.6% 15.5% Experience gain and losses on scheme liabilities: Amount (1.0) 0.8 (1.7) Percentage of the present value of scheme 1.8% 1.9% 4.5% liabilities Changes in assumptions underlying the present value of scheme liabilities (5.3) (4.9) (5.8) ------ ------- ------- Total actuarial loss recognised in the statement of total recognised gains and losses: Amount (3.9) (0.3) (11.9) Percentage of the present value of scheme 7.1% 0.8% 32.4% liabilities Deferred taxation attributable to pension 1.2 0.1 3.6 movements ------ ------- ------- Pension scheme movement for the year (2.7) (0.2) (8.3) ====== ======= ======= This information is provided by RNS The company news service from the London Stock Exchange

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British Land Company (BLND)

Wednesday, 4th December 2024

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