IFRS Accounts
British Land Co PLC
14 July 2005
14th July 2005
INTERNATIONAL FINANCIAL REPORTING STANDARDS
British Land is presenting its unaudited accounts for the year ended 31st March
2005 restated under International Financial Reporting Standards ('IFRS'). The
change to the accounting basis arises from legislation requiring all EU listed
companies to apply IFRS in their financial statements.
The disclosures include guidance as to the effect of IFRS on the Group's
reported results and balance sheet and the comparative figures expected to be
used in the interim statement and final accounts for the 6 months to 30th
September 2005 and 31st March 2006 respectively.
There are no changes in interpretation or methodology from the advance guidance
given by the Company in its presentation on 25th January 2005.
In adopting IFRS no adjustments have been necessary in respect of the
refinancing of Broadgate carried out in March 2005, nor for expensing
share-based incentives, which were already expensed on the basis of their fair
values under the Company's previous accounting policies.
Good progress is being made with other European companies through the industry
body EPRA to define industry standard reporting measures for net assets and
earnings.
Contacts:
The British Land Company PLC
Graham Roberts 020 7467 2948
Lucinda Bell 020 7467 2888
The British Land Company PLC ('British Land')
Adoption of International Financial Reporting Standards ('IFRS')
Results for the year ended 31 March 2005 presented under IFRS
Introduction
On 25 May 2005 British Land reported its financial results for the year ended
31 March 2005, prepared for the last time under UK Generally Accepted
Accounting Practice ('UK GAAP'). Going forward the Group will prepare its
consolidated financial statements in accordance with IFRS as required for all
European Union listed companies. British Land's first IFRS results will be
for the six months to 30 September 2005 and the Group's first annual report
under IFRS will be for the year to 31 March 2006.
The following unaudited IFRS results include comparative information for the
half year to 30 September 2004 and the year ended 31 March 2005.
This announcement describes for investors:
• the key impacts of the conversion from UK GAAP to IFRS on the Group's
results for the year to 31 March 2005;
• the key judgements in making the transition to IFRS; and
• the restated results under IFRS for the half year to 30 September 2004
and the year to 31 March 2005, which are expected to form the comparative
figures for both the interim six months to 30 September 2005 and the year
to 31 March 2006 statements.
Although the impact on the reporting of our results is significant, the
underlying performance of the business and its cash flows remain
unaffected.
The principal changes to British Land's previously reported UK GAAP financial
information are:
• to recognise investment property and other investment revaluation
surpluses in the income statement;
• to provide for deferred tax on property and investment revaluations;
• to recognise certain financial instruments at fair value; and
• to reflect on a single line within income, the Group's share of joint
venture income after revaluation surpluses and current and deferred
taxes.
No adjustment is required on transition to IFRS for the accounting of
share-based incentives or pension costs as the Group took advantage of the
option to adopt similar UK GAAP standards early and has reported its results
for the year to 31 March 2004 and 31 March 2005 in accordance with these
standards. No adjustment is required to the accounting treatment of the
Broadgate refinancing carried out in March 2005.
To assist an understanding of the results, we include on pages 29 and 30
summary financial statements which consolidate on a proportional basis the
Group's share of joint venture income, assets and liabilities.
Key financial highlights
The key financial highlights of adopting IFRS for our 31 March 2005 results are:
IFRS Impact on results
previously disclosed
under UK GAAP
£m
Group and share of joint ventures
Net rental income 584.7 Increased by £12.9m
Profit before tax 779.2 Increased by £757.4m
Underlying profits before tax* 180.9 Increased by £6.1m
Balance sheet net assets 4,782.6 Decreased by £796.7m -
principally due
to recognition
of deferred
taxation
Adjusted diluted net assets** 5,913.2 Increased by £89.6m
Net debt 6,563.1 Increased by £26.9m
Weighted average debt maturity 13.5 yrs Unchanged
Loan to value (debt /property &
investments) 52% Unchanged
Weighted average interest rate 6% Unchanged
* Underlying profits are profits adjusted in line with the industry proposed
earnings measure and adjusted for the exceptional refinancing of Broadgate.
The industry proposed adjusted earnings measure excludes gains on asset
revaluations and disposals and related taxation and the capital allowance
effects of IAS 12 where applicable.
** Adjusted Net Asset Value (NAV) is based on the industry proposed net
asset performance measure. It includes the external valuation
surplus on trading and finance lease properties but excludes the contingent
taxation provision, any related goodwill, the fair value adjustments for
debt and derivatives and capital allowance effects of IAS12.
Contents Page
Overview of impact for the year ended 31 March 2005 3 - 4
Key accounting judgements 5 - 6
Consolidated Income Statement 7
Consolidated Balance Sheet 8
Consolidated Cash Flow Statement 9
Consolidated Statement of Recognised Income and Expense 10
Notes to the accounts 10 - 28
Summary Income Statement and Balance Sheet(Proportionally
Consolidated) 29 - 30
Reconciliations of UK GAAP to International Financial
Reporting Standards 31 - 33
Overview of impact Income statement
Under the industry proposed adjusted earnings measure (earnings before gains on
asset revaluations and disposals), our IFRS diluted earnings per share are
35.5p, as compared with an underlying 34.3p as previously reported under UK
GAAP.
Reconciliation of profit before tax and underlying profit before tax -
31 March 2005
Underlying
PBT PBT*
£m £m
As previously reported - UK GAAP 31 March 2005 21.8 174.8
Revaluations on property and investments included in
income 753.2
Deferred and current taxation of joint ventures now
recognised in pre tax profits (41.6)
Recognition of fair value adjustments on financial
instruments (5.9) (5.9)
Adjustment for timing differences on recognition of
lease incentives 11.0 11.0
Other movements (0.9) 1.0
As restated - IFRS 31 March 2005 737.6 180.9
*Underlying profits are profits adjusted in line with the industry proposed
earnings measure and adjusted for the exceptional refinancing of Broadgate. The
industry proposed adjusted earnings measure excludes gains on asset revaluations
and disposals and related taxation and the capital allowance effects of IAS 12
where applicable.
Diluted earnings per share
Diluted earnings per share and underlying diluted earning per share, which is
calculated after taking account of taxation, is as follows:
EPS Underlying EPS
pence pence
------- -------
UK GAAP 11.3 34.3
IFRS 125.9 35.5
Overview of impact (continued)
Balance Sheet
On an adjusted diluted basis the NAV per share of 1128p (industry proposed
performance measure) is slightly higher than the 1111p that was previously
reported under UK GAAP.
Reconciliation of diluted net assets - 31 March 2005
Adjusted
NAV NAV
£m £m
------- -------
As previously reported - UK GAAP 31 March 2005 5,693.4 5,823.6
Recognition of contingent taxation on revaluation gains (963.5)
Goodwill adjustments* 108.0 33.0
Recognition of financial instruments at fair value net
of deferred taxation (16.6)
Deferred taxation on external surplus on trading &
finance lease properties (17.0)
Final dividend only recognised on approval 56.5 56.5
Other movements (2.2) 0.1
As restated - IFRS 31 March 2005 4,858.6 5,913.2
Diluted NAV per share pence pence
------- -------
UK GAAP 1087 1111
IFRS 927 1128
Adjusted Net Asset Value (Adjusted NAV) is the industry proposed net asset
performance measure. It includes the external valuation surplus on trading and
finance lease properties but excludes the contingent taxation provision, any
related goodwill, the fair value adjustments for debt and derivatives and
capital allowance effects of IAS12 (see note 17).
* The goodwill adjustment primarily relates to some £75 million of deferred
taxation recognised on corporate acquisitions and £33 million of negative
goodwill written back on transition to IFRS.
Key accounting judgements
As the understanding of the application of IFRS is still evolving it is possible
that the treatment of items may change. The following key accounting judgements
have been made as part of the transition to IFRS.
Deferred taxation - basis of calculation
IFRS requires that deferred tax is recognised where assets are held at values
greater than their tax base cost (usually historical cost). This deferred tax
provision is reversed for the industry proposed performance measures of Adjusted
Net Asset Value and underlying earnings per share.
The basis of calculating this provision varies depending 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.
Deferred taxation and goodwill
Under IFRS corporate acquisitions are treated as either business combinations or
asset acquisitions.
Under business combinations the purchase consideration is compared to the fair
value of the assets and liabilities of the company acquired and any excess is
recognised as goodwill. In property acquisitions it is from time to time common
for less than a full deduction to be made in the purchase price for contingent
CGT, in recognition that contingent CGT may not be crystallised for some time,
if at all. IFRS prohibits any revision of the deferred tax to its fair value and
therefore goodwill may arise on acquisition accounting, equal to the amount of
deferred tax provided and not discounted in the purchase price.
Asset acquisitions arise when an asset, or a group of assets, that does not
constitute a business is acquired. Under the asset acquisition method the assets
and liabilities are treated as though acquired individually even if acquired in
a corporate entity. There is no deferred tax relating to revaluations as the
assets are treated as acquired at cost. Under this method there is no goodwill.
All corporate acquisitions in prior years and in the year to 31 March 2005 have
been treated as business combinations.
Properties - classification as operating leases or finance leases Under IFRS, we
are required to distinguish between properties let under operating leases and
those let under finance leases. This distinction is made at the inception of the
lease and is not re-assessed over the life of the lease unless the lease terms
are varied significantly. Operating leases continue to be shown as a property
interest in the balance sheet, but where a finance lease has been identified,
IFRS requires the value of the cash flows related to the buildings to be shown
as a debtor and the land as a property interest. Income is shown on the building
element on a financial rather than a rental basis.
British Land has worked closely with the British Property Federation ('BPF') on
guidance notes for the application of IFRS in a UK context (see www.bpf.org.uk/
files/resdoc110494339418914-1.pdf). A comprehensive review of the terms of each
of our leases has been undertaken using the approach recommeded by the BPF, this
review has identified only one material finance lease within one joint venture.
British Land uses derivatives to manage its interest rate risk. Under IFRS all
derivatives, including hedges, are held on the balance sheet at fair value. The
default treatment under this standard is for movements in the fair value to be
recognised in the income statement, where they will impact reported profits.
However, if an entity can demonstrate that its derivatives are effective hedges
of specific risks it can choose to adopt hedge accounting. The Group has chosen
to adopt hedge accounting.
Under the transitional rules for IFRS, companies may elect to commence
application of IAS 39 with effect from 1 April 2005. British Land has chosen to
apply IAS 39 in full retrospectively and not use this election.
Derivatives which hedge the Group's floating rate bank debt are classified as
cash flow hedges and movements in their fair value are recognised in the hedging
reserve, which is part of equity reserves.
The mark to market adjustment on financial instruments and related taxation
effects are reversed in calculating Adjusted Net Asset Value.
Consolidated income statement (unaudited)
IFRS Restated
Note Year Six months
ended ended
31 March 30 September
2005 2004
£m £m
------- -------
Gross rental income - 2 557.5 256.7
Group
Service charge income 2 2.8 2.1
less expenses
Property operating 2 (43.3) (21.4)
expenses ------- -------
Net rent and related 517.0 237.4
income
Administrative expenses (48.8) (22.4)
Other income 7.9 2.9
------- -------
Profit from operations 476.1 217.9
Share of net profit of 10 157.9 82.6
joint ventures after ------- -------
tax
Profit from operations including share 634.0 300.5
of joint ventures
Net financing costs
------- -------
financing 26.7 6.8
income
financing (352.4) (167.5)
expenses ------- -------
3 (325.7) (160.7)
Net valuation gains on 4 609.3 306.5
property and
investments
Exceptional item refinancing 5 (180.0)
of
Broadgate
------- -------
Profit on ordinary 737.6 446.3
activities before tax
Taxation credit (expense)
------- -------
current 45.5 (5.7)
deferred (129.6) (68.9)
------- -------
6 (84.1) (74.6)
---------------------------------------------------------------------------
Profit for the year 653.5 371.7
---------------------------------------------------------------------------
Attributable to:
---------------------------------------------------------------------------
Shareholders of the 653.5 371.7
Company
---------------------------------------------------------------------------
Basic earnings per 7 128.3 p 74.3 p
share ------- -------
Diluted earnings per 7 125.9 p 71.6 p
share ------- -------
The results stated above relate to the continuing activities of the Group.
Consolidated Balance Sheet (unaudited)
IFRS Restated
-----------------
Note 31 March 30 September
2005 2004
£m £m
--------- ---------
ASSETS
Properties
Investment properties 8 10,876.7 9,578.5
Development properties 8 212.4 196.2
Trading properties (at cost,
valuation: £92.6m; Sep 2004:
£91.6m) 8 35.9 36.0
--------- ---------
11,125.0 9,810.7
Non-current assets
Investments in joint ventures 10 700.0 671.6
Other investments 9 153.1 113.9
Goodwill 72.7
--------- ---------
12,050.8 10,596.2
--------- ---------
Current assets
Trade and other debtors 12 76.5 54.8
Cash and short-term deposits 15 150.8 128.3
--------- ---------
227.3 183.1
--------- ---------
---------------------------------------------------------------------------
Total assets 12,278.1 10,779.3
---------------------------------------------------------------------------
LIABILITIES
Current liabilities
Short-term borrowings and
overdrafts 15 (407.7) (152.8)
Trade and other creditors 13 (351.5) (382.8)
--------- ---------
(759.2) (535.6)
--------- ---------
Non-current liabilities
Debentures and loans 15 (5,753.7) (4,881.5)
Other non-current liabilities 14 (37.0) (21.7)
Deferred tax liabilities 18 (945.6) (816.7)
--------- ---------
(6,736.3) (5,719.9)
--------- ---------
Total liabilities (7,495.5) (6,255.5)
--------- ---------
---------------------------------------------------------------------------
Net Assets 4,782.6 4,523.8
---------------------------------------------------------------------------
EQUITY
Share capital 20 129.6 129.5
Share premium 20 1,249.3 1,248.8
Other reserves 21 12.2 8.7
Retained earnings 21 3,391.5 3,136.8
---------------------------------------------------------------------------
Total equity attributable to
shareholders of the Company 4,782.6 4,523.8
---------------------------------------------------------------------------
Adjusted NAV per share: Basic 17 1135 p 1065 p
--------- ---------
Fully 17 1128 p 1060 p
diluted --------- ---------
The Adjusted Net Asset Value (Adjusted NAV) per share includes the external
valuation surplus on trading and finance lease properties but excludes the
contingent taxation provision, any related goodwill, the fair value adjustments
for debt and derivatives and capital allowance effects of IAS12.
Consolidated Cash Flow Statement (unaudited)
IFRS Restated
----------------
Note Year Six months
ended ended
31 March 30 September
2005 2004
£m £m
Cash generated from operations 19 479.7 230.1
Interest paid (350.7) (160.7)
Interest received 9.8 2.8
UK Corporation tax paid (10.0) (5.1)
Foreign tax paid (3.6) (1.9)
---------------------------------------------------------------------------
Net cash inflow from operating activities 125.2 65.2
---------------------------------------------------------------------------
Cash flows from investing
activities
Purchase of investment properties
and (508.9) (136.0)
development expenditure
Purchase of investments (97.9) (97.4)
Sale of investment properties 81.3 16.4
Sale of investments 3.7
Investment in and loans to joint
ventures (23.4) (3.1)
Sale of shares in and loans repaid
by 54.8
joint ventures
Purchase of subsidiary companies (net of
cash acquired (note 11)) (36.1)
---------------------------------------------------------------------------
Net cash outflow from investing
activities (526.5) (220.1)
---------------------------------------------------------------------------
Cash flows from financing
activities
Issue of ordinary shares 1.2 0.6
Purchase of ESOP shares (10.9) (7.6)
Dividends paid (76.6) (51.7)
Issue of Broadgate Estate
securitised 2,080.7
debt
Redemption of Broadgate Funding PLC
securitised debt (1,439.7)
Redemption of 135 Bishopsgate
Financing (138.4)
Ltd securitised debt
Repayment of debt acquired with
subsidiary companies (648.6)
Increase in bank and other 614.3 175.4
borrowings
---------------------------------------------------------------------------
Net cash inflow from financing
activities 382.0 116.7
---------------------------------------------------------------------------
Net decrease in cash and cash equivalents (19.3) (38.2)
Cash and cash equivalents at 1 April 2004 166.4 166.4
---------------------------------------------------------------------------
Cash and cash equivalents at 31 March 2005 147.1 128.2
---------------------------------------------------------------------------
Cash and cash equivalents consists of:
Cash and short-term deposits 150.8 128.3
Overdrafts (3.7) (0.1)
---------------------------------------------------------------------------
147.1 128.2
---------------------------------------------------------------------------
Consolidated statement of recognised income and
expense (unaudited)
IFRS Restated
-------------
Year Six months
ended ended
31 March 30 September
2005 2004
£m £m
---------- ----------
Profit for the year
after taxation 653.5 371.7
---------- ----------
Exchange movements on
translation of foreign
subsidiary (0.4) (0.4)
Valuation movements:
- on development 12.5 3.0
properties
- attributable 2.9 5.3
to joint
ventures
- on foreign (14.6) (0.4)
currency
derivatives
- on cash flow (9.9) (3.5)
hedges
Actuarial
gains/(losses) on
defined benefit
pension schemes (3.9)
Tax on items taken
directly to equity 5.7 (0.5)
---------- ----------
Net gain (loss)
recognised directly in
equity (7.7) 3.5
Transferred to the income
statement:
- foreign 4.6 (2.5)
currency
derivatives
- cash flow 10.1 5.1
hedges
---------- ----------
Transfers 14.7 2.6
------------------------------------------------------------------------------
Total recognised income and expense for the year 660.5 377.8
------------------------------------------------------------------------------
Notes to the accounts (unaudited)
1 Basis of preparation
The financial information presented in this document is unaudited and has been
prepared in accordance with International Financial Reporting Standards and
International Accounting Standards ('IFRS' or as applicable 'IAS') and
interpretations adopted by the International Accounting Standards Board (the
'IASB').
IFRS continues to evolve through the development and adoption of new Standards
and Interpretations as well as through the practical experience gained from the
application of IFRS by companies and their auditors. As a result, the financial
information contained in this release may be amended before it is finally
presented as comparative figures in the IFRS accounts to be issued by the Group
for the six months ending 30 September 2005 as well as for the year ending 31
March 2006. Furthermore, the financial information contained in these accounts
does not constitute a complete set of financial statements (including
comparative figures and all relevant and required notes) and therefore does not
purport to show a true and fair view of the Group's financial position and
results of operations in accordance with IFRS for the year to 31 March 2005.
On 19 November 2004, the European Commission endorsed an amended version of IAS
39, "Financial Instruments: Recognition and Measurement" rather than the full
version as previously published by the IASB. In accordance with guidance issued
by the UK Accounting Standards Board, the full version of IAS 39, as issued by
the IASB, has been adopted in the preparation of this financial information.
The financial information has been prepared under the historical cost
convention, except for the revaluation of investment and development properties,
fixed asset investments, certain financial instruments and deferred tax thereon.
The principal accounting policies adopted are set out below.
Consolidation of subsidiaries and joint ventures
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 or joint ventures 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 and joint ventures 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 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. The consolidated income statement incorporates the Group's
share of joint venture 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
Investment Properties Investment properties, including freehold and long
leasehold properties, are independently valued each year on an open market
basis. Any surplus or deficit arising is recognised in the income statement for
the period.
Development properties
Development properties which were not previously investment properties are
independently valued each year on an open market basis. A valuation in excess of
a property's historic cost is credited directly to equity within the revaluation
reserve. Where the value of a property falls below its historic cost, the
surplus or deficit on valuation is recognised in the income statement.
Where an investment property is being redeveloped the property is accounted for
as if it were an investment property and any movement in valuation is recognised
in 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.
Trading properties
Trading properties are stated at the lower of cost and net realisable value.
Property disposals and transfers
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.
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.
Financial instruments
Trade debtors and creditors
Trade debtors and creditors are stated at their nominal value. Trade debtors are
reduced by appropriate allowances for estimated irrecoverable amounts.
Financial Obligations
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.
Hedging instruments
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.
The Group's use of financial derivatives is governed by the Group's financing
policies, details of which are included in the Financing Policy and Risk
Management section of the Annual Report and Accounts.
Net rental income
Rental income is recognised on an accruals basis, exclusive of service charge
recoveries. 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 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 does not enhance the property, it is amortised
on a straight-line basis over the period from the date of lease commencement to
the earliest termination date. Where a rent free period is included in a lease,
the rental income forgone is allocated evenly over the period from the date of
lease commencement to the earliest termination date .
Service charges and other recoveries are credited directly against relevant
expenditure.
Taxation
The tax expense represents the sum of the tax currently arising and deferred tax
for the period.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years, most notably revaluation movements, and it further excludes items that
are never taxable or deductible. The liability is calculated using tax rates
that have been enacted or substantially enacted by the balance sheet date.
Deferred tax assets and liabilities arise from differences between the carrying
amounts of assets and liabilities in the balance sheet and their tax bases
(known as 'temporary differences'), principally due to revaluation movements on
properties held for the long term. Deferred tax is provided in respect of all
taxable temporary differences at the balance sheet date that may give rise to an
obligation to pay more or less tax in the future. Deferred tax is measured on a
non-discounted 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.
Employee costs
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 statement of recognised income and expense.
Contributions to the Group's defined contribution schemes are expensed on the
basis of the contracted annual contribution.
Share-based incentives
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.
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 to
not 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. Revenue and property expenses
IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
---------- ----------
Gross rental
income - Group 557.5 256.7
Service charge
income 47.1 21.1
Other 7.9 2.9
income
Interest
receivable 12.6 3.0
Proceeds on
sale of
trading
properties 6.6 6.6
Gains on
investment
property sales 15.7 1.7
Share of net
profit of
joint ventures
after tax 157.9 82.6
-------------------------------------------------------------------------------
Total Revenue 805.3 374.6
-------------------------------------------------------------------------------
Service charge expense (44.3) (19.0)
Property operating expenses (43.3) (21.4)
-------------------------------------------------------------------------------
Service charge expense and property operating expenses (87.6) (40.4)
-------------------------------------------------------------------------------
3. Net financing costs
IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
---------- ----------
Interest payable
on:
bank loans and overdrafts 83.6 35.2
other loans 261.0 130.2
obligations under finance leases 1.7 0.9
---------- ----------
346.3 166.3
Deduct development cost element (7.8) (2.5)
---------- ----------
338.5 163.8
---------- ----------
Interest
receivable on:
deposits and securities (9.4) (2.7)
loans to joint ventures (3.2) (0.3)
---------- ----------
(12.6) (3.0)
---------- ----------
Other finance (income) costs:
Pension scheme:
Expected return on pension scheme (2.7) (1.3)
assets
Interest on pension scheme 2.5 1.2
liabilities ---------- ----------
(0.2) (0.1)
Fair value hedges:
Valuation movements on fair value 6.8
debt
Valuation movements on fair value (6.8)
derivatives ---------- ----------
Foreign currency hedges:
Valuation movements on translation (4.6) 2.5
of foreign currency debt
Hedging reserve recycling 4.6 (2.5)
---------- ----------
-------------------------------------------------------------------------------
Net financing costs 325.7 160.7
-------------------------------------------------------------------------------
4. Net revaluation gains on property and investments
IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
---------- ----------
Revaluation of
investments (note 9) 43.1 (0.2)
Revaluation of
properties (note 8) 549.9 304.3
Gains on property
disposals 16.3 2.4
------------------------------------------------------------------------------
609.3 306.5
------------------------------------------------------------------------------
5. Exceptional financing item On 2 March 2005 the Group incurred an exceptional
charge of £180m whilst redeeming the securitised debt of Broadgate (Funding) PLC
and 135 Bishopsgate Financing Limited. On the same day Broadgate Financing PLC
issued £2,080m of new securitised debt in respect of the Broadgate Estate (see
note 15). The pre tax exceptional item of £180m (post tax: £126m, after £54m tax
credit) relates mainly to the difference between the redemption value and the
carrying value of the redeemed debt.
6. Income tax expense
IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
---------- ----------
Current tax
UK corporation tax
(30%) (2.5) 10.0
Foreign tax 2.1 1.3
---------- ----------
(0.4) 11.3
Adjustments in
respect of prior
years (45.1) (5.6)
---------- ----------
Total current tax
(credit) charge (45.5) 5.7
---------- ----------
Deferred tax
Origination and
reversal of timing
differences 129.8 68.9
Tax associated with
pension movements (0.2)
---------- ----------
Total deferred tax
charge 129.6 68.9
---------- ----------
Group total taxation
(net) 84.1 74.6
Tax reconciliation
Profit on ordinary
activities before
taxation 737.6 446.3
Less - Share of
profit of joint
ventures (157.9) (82.6)
---------- ----------
Group profit on
ordinary activities
before taxation 579.7 363.7
---------- ----------
Tax on group profit on ordinary activities at
UK corporation tax
rate of 30% (2004:
30%) 173.9 109.1
Effects of:
Valuation gains on
investment
properties (177.9) (91.2)
Capital allowances (9.3) (3.4)
Tax losses and other
timing differences 11.0 (5.4)
Expenses not
deductible for tax
purposes 1.9 2.2
Adjustments in
respect of prior
years (45.1) (5.6)
------------------------------------------------------------------------------
Group current tax (credit) charge (45.5) 5.7
------------------------------------------------------------------------------
7. Basic and diluted earnings per share
IFRS Restated
-------------
Weighted Underlying
average number earnings per Earnings per
of shares share* share
m £m £m
-------------- -------------- --------------
Basic earnings per
share
Profit for the
year as shown
on income
statement 509.2 653.5 653.5
Exceptional
item 180.0
Share of joint
ventures: Valuation gains (160.2)
Property disposals (8.8)
-----------
(169.0)
Net valuation
gains on: Investments (43.1)
Property (549.9)
Property disposals (16.3)
-----------
(609.3)
Taxation on
the above: Current (32.6)
Deferred 161.5
-----------
128.9
--------------------------------------------------------------------------------------------------
Earnings
attributable
to ordinary
shares 184.1 653.5
--------------------------------------------------------------------------------------------------
At 31 March
2005 36.2 p 128.3 p
--------------------------------------------------------------------------------------------------
Diluted earnings per
share
Earnings
attributable
to ordinary
shares 509.2 184.1 653.5
Adjust to
diluted on
exercise of
share options 10.0
--------------------------------------------------------------------------------------------------
Earnings
attributable
to ordinary
shares 519.2 184.1 653.5
--------------------------------------------------------------------------------------------------
At 31 March
2005 35.5 p 125.9 p
--------------------------------------------------------------------------------------------------
* Underlying profits are profits adjusted in line with the industry proposed
earnings measure and adjusted for the exceptional refinancing of Broadgate.
The industry proposed adjusted earnings measure excludes gains on asset
revaluations and disposals and related taxation and the capital allowance
effects of IAS 12 where applicable.
8. Investment, development and trading properties
Investment, development and trading properties were valued, at the relevant
companies year end, by external valuers on the basis of open market value,
supported by market evidence, in accordance with the Appraisal and Valuation
Manual published by The Royal Institution of Chartered Surveyors:
IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
---------- ----------
United
Kingdom: ATIS REAL 10,801.7 9,547.1
Weatheralls
FPD Savills 282.6 246.5
Republic of
Ireland: Jones Lang 68.6 49.8
LaSalle
Netherlands: CB Richard 1.0 1.0
Ellis B.V.
--------------------------------------------------------------------------------------------
Total Group property portfolio valuation 11,153.9 9,844.4
--------------------------------------------------------------------------------------------
Represented by:
Investment
properties 10,876.7 9,578.5
Development
properties 212.4 196.2
Trading
properties at
cost 35.9 36.0
---------- ----------
Carrying value
of properties
on Balance
Sheet 11,125.0 9,810.7
External
valuation
surplus on
trading
properties 56.7 55.6
Head lease
liabilities (27.8) (21.9)
--------------------------------------------------------------------------------------------
Total Group property portfolio valuation 11,153.9 9,844.4
--------------------------------------------------------------------------------------------
Properties valued at £7,051.9m (September 2004: £6,513.3m) were subject to a
security interest and other properties of non-recourse companies amounted to
£41.9m (September 2004: £40.4m).
Total property valuations including
share of joint ventures
£m £m
--------- ---------
British Land Group
As disclosed 11,153.9 9,844.4
above
Share of joint
ventures
Investment 1,321.3 1,191.9
properties
Development 3.6 0.3
properties
Trading 25.3 26.5
properties at
cost
Finance lease 7.6 7.6
properties
External valuation surplus on 2.4 2.7
trading properties
External valuation surplus on 3.5 3.2
finance lease properties
Head lease (10.7) (10.7)
liabilities --------- ---------
1,353.0 1,221.5
--------------------------------------------------------------------------------------------
Total property portfolio valuation 12,506.9 11,065.9
--------------------------------------------------------------------------------------------
8. Investment, development and trading properties (continued)
IFRS Restated
-------------
Freehold Leasehold * Total
£m £m £m
--------- --------- ---------
Investment properties (including
properties being redeveloped)
Carrying value
1 April 2004 8,765.8 416.4 9,182.2
Additions - corporate 655.9 52.2 708.1
acquisitions
- purchases 278.4 94.6 373.0
- capital 78.3 11.8 90.1
expenditure
Disposals (69.0) 0.1 (68.9)
Reallocation (21.7) 21.7
Transfer from 1.5 1.5
development
properties
Exchange 1.0 1.0
fluctuations
Revaluations 528.8 21.1 549.9
Lease incentive and minimum 39.8 39.8
guaranteed rent
review debtor movement
--------------------------------------------------------------------------------------------
Investment properties - carrying value
31 March 2005 10,258.8 617.9 10,876.7
--------------------------------------------------------------------------------------------
Development properties
Valuation 1
April 2004 156.3 156.3
Additions 45.1 45.1
Transfer to (1.5) (1.5)
investment
properties
Revaluations 12.5 12.5
--------------------------------------------------------------------------------------------
Valuation 31
March 2005 212.4 212.4
--------------------------------------------------------------------------------------------
Trading properties
At lower of cost and net
realisable value
31 March 2005 27.2 8.7 35.9
--------------------------------------------------------------------------------------------
11,125.0
External
valuation
surplus on
trading
properties 56.7
Head lease
liabilities (27.8)
--------------------------------------------------------------------------------------------
Total Group
property
portfolio
valuation 11,153.9
--------------------------------------------------------------------------------------------
* Includes short leasehold properties (1 April 2004 7.7m; 31 March 2005: £8.8m).
9. Other investments
IFRS
Restated
£m
--------
At 1 April
2004 17.2
Additions 97.9
Disposals/depr
eciation/write
down in value (5.1)
Revaluations 43.1
--------------------------------------------------------------------------------------------
At 31 March 2005 153.1
--------------------------------------------------------------------------------------------
Listed investments are held at market value. 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 £140m as at 31 March 2005.
10. Joint ventures
British Land's share of profits of joint ventures
IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
Gross rental
income 73.1 35.6
-------- ---------
Net rental
income 67.7 33.3
Other
expenditure (3.5) (1.5)
Other income 1.0 0.6
-------- ---------
Operating
profit 65.2 32.4
Net financing
costs (34.7) (16.6)
-------- ---------
Net underlying
profit before
tax 30.5 15.8
Profits on
property
trading and
disposal of
fixed asset
investments 8.8 3.9
Net valuation
gains on
investment
property 160.2 85.6
-------- ---------
Profit on
ordinary
activities
before
taxation 199.5 105.3
Taxation
(current and
deferred) (41.6) (22.7)
--------------------------------------------------------------------------------------------
Profit for the year after tax 157.9 82.6
--------------------------------------------------------------------------------------------
The movement for the period:
Equity Loans Total
£m £m £m
-------- -------- --------
At 1 April 2004 515.8 71.6 587.4
Additions 23.4 23.4
Disposals (54.8) (54.8)
Share of
profit after
taxation
attributable
to joint
ventures 157.9 157.9
Dividends
received from
joint ventures (15.8) (15.8)
Hedging
reserve
movements 2.0 2.0
Revaluation of
development
properties (0.1) (0.1)
--------------------------------------------------------------------------------------------
At 31 March 2005 659.8 40.2 700.0
--------------------------------------------------------------------------------------------
Summary of British Land's share in joint ventures
Net rental Profit for Gross Gross Net
income the period assets liabilities investment
£m £m £m £m £m
--------- --------- --------- --------- ---------
BL Fraser
Limited 7.1 11.8 147.0 (101.3) 45.7
BLT Properties
Limited 7.3 10.7 154.9 (112.9) 42.0
The Tesco British Land
Property Partnership 4.7 8.9 80.9 (58.7) 22.2
Tesco BL
Holdings
Limited 12.7 29.6 256.2 (186.7) 69.5
BL Davidson
Limited 12.5 49.4 319.3 (179.1) 140.2
BL West 8.1 11.8 106.0 (57.8) 48.2
The Scottish Retail
Property Limited Partnership 14.8 32.1 320.6 (35.9) 284.7
BL Rosemound 0.0 (0.3) 19.1 (11.7) 7.4
Other joint
ventures 0.5 3.9 46.2 (6.1) 40.1
--------------------------------------------------------------------------------------------
Total 67.7 157.9 1,450.2 (750.2) 700.0
--------------------------------------------------------------------------------------------
11. Acquisition of subsidiary undertakings - IFRS Restated
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 £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 £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 £32.3m.
Book value acquired
-------------------
Tweed
Spirit BF Premier Accounting
Wisley Properties group of policy Fair value
Limited (No.4) Limited companies alignment adjustment
£m £m £m £m £m £m
-------- -------- -------- -------- -------- --------
Properties 174.0 499.2 28.0 0.8 6.1 708.1
Other 0.1 6.8 6.9
assets
Cash 4.9 4.9
Creditors (2.1) (9.9) (1.1) (13.1)
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
Deferred
taxation (27.0) (43.2) (2.7) (0.2) (1.9) (75.0)
Goodwill 72.7
Negative
goodwill -
recognised in
income
statement (2.3)
--------
48.6
--------
Satisfied by:
Cash paid 14.5 0.5 26.0 41.0
Non cash
consideration 5.8 5.8
Acquisition
accruals 1.3 0.5 1.8
-------- -------- -------- --------
Total
consideration 14.5 1.8 32.3 48.6
Repayment of
shareholder
loans 125.1 125.1
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
BF Properties (No. 4) Limited. The fair value adjustment is required to show the
properties at fair value (BF Properties (No. 4) Limited: £0.9m; Tweed Premier
group: £5.2m), with the related deferred tax adjustment.
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.
Deferred taxation is calculated on the difference between the accounting and tax
base costs of assets and liabilities and is not adjusted to reflect the fair
value of contingent tax liabilities in entities acquired. As a result of this
accounting requirement goodwill arises.
12. Trade and other debtors
IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
-------- --------
Trade debtors 39.4 40.8
Prepayments and accrued income 4.8 5.3
Corporation tax 22.3
Interest rate derivatives* 10.0 8.7
------------------------------------------------------------------------------
76.5 54.8
------------------------------------------------------------------------------
13. Trade and other creditors
IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
-------- --------
Trade creditors 38.3 53.3
Amounts owed to joint ventures 27.9 38.5
Corporation tax 35.4
Other taxation and social security 13.5 6.3
Accruals and deferred income 211.7 200.3
Interest rate derivatives* 60.0 48.9
Obligations under finance leases
(note 16) 0.1 0.1
------------------------------------------------------------------------------
351.5 382.8
------------------------------------------------------------------------------
14. Other non-current creditors
IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
-------- --------
Obligations under finance leases
(note 16) 27.7 21.8
Minority interest 5.0
Retirement benefit obligations 4.3 (0.1)
------------------------------------------------------------------------------
37.0 21.7
------------------------------------------------------------------------------
* Includes amounts due with a maturity greater than one year.
15. Net Debt
IFRS Restated
-------------
31 March 30 September
2005 2004
Secured on the assets of the Group Footnote £m £m
------------------------------------------------------------------------------------------------------
Class A4 4.821% Bonds 2036 1.1, 2 395.9
6.5055% Secured Notes 2038 1.2, 3 97.4
5.920% Secured Notes 2035 1.3 59.1 57.9
Class C2 5.098% Bonds 2035 1.1, 2 215.0
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% First Mortgage Debenture Bonds 2035 246.7 246.7
9% First Mortgage Debenture Stock 2028 197.3 197.3
101/2% First Mortgage Debenture Stock 2019/24 12.6 12.6
11% First Mortgage Debenture Stock 2019/24 20.4 20.4
63/4% First Mortgage Debenture Bonds 2020 1.6 205.6 205.9
63/4% First Mortgage Debenture Bonds 2011 1.6 103.0 103.2
Bank loan 1.7 44.7 44.9
-------- ---------
2,981.0 1,015.0
-------- ---------
Unsecured
---------
Class A1 5.260% Unsecured Notes 2035 1.3 572.5 567.9
Class B 5.793% Unsecured Notes 2035 1.3 99.2 99.1
Class C Fixed Rate Unsecured Notes 2035 1.3 84.2 83.4
Class C2 6.4515% Unsecured Notes 2032 1.2, 3 73.5
Class B 6.0875% Unsecured Notes 2031 1.2, 3 220.3
Class A3 5.7125% Unsecured Notes 2031 1.2, 3 146.8
Class A2 5.67% Unsecured Notes 2029 1.2, 3 281.1
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, 3 321.5
5.66% 135 Bishopsgate Securitisation 2018 1.5, 3 21.7
8.49% 135 Bishopsgate Securitisation 2018 1.5, 3 86.7
Class A1 6.389% Unsecured Notes 2016 1.4 79.8 82.2
Class B1 7.017% Unsecured Notes 2016 1.4 79.6 82.9
Class C1 6.7446% Unsecured Notes 2014 1.2, 3 140.3
Class A2 5.555% Unsecured Notes 2013 1.3 39.7 42.2
-------- ---------
1,393.8 2,688.2
6.30% Senior US Dollar Notes 2015 4 81.1 84.6
101/4% Bonds 2012 1.7 1.7
7.35% Senior US Dollar Notes 2007 4 84.8 88.4
Guaranteed Floating Rate Unsecured Loan Notes 2005 0.3 0.5
Bank loans and overdrafts 1,618.7 1,155.9
-------- ---------
3,180.4 4,019.3
-------- ---------
Gross Debt 5 6,161.4 5,034.3
-------- ---------
Interest rate
derivatives
(liabilities) 60.0 48.9
Interest rate
derivatives
(assets) (10.0) (8.7)
-------- ---------
6,211.4 5,074.5
Cash and
short-term
deposits 6 (150.8) (128.3)
------------------------------------------------------------------------------------------------------
Net debt 6,060.6 4,946.2
------------------------------------------------------------------------------------------------------
1 These borrowings are obligations of ringfenced, special purpose companies,
with no recourse to other companies or assets in the Group.
31 March 30 September
2005 2004
£m £m
-------- --------
1.1 Broadgate Financing PLC 2,071.9
1.2 Broadgate (Funding) PLC 1,280.9
1.3 MSC (Funding) PLC 854.7 850.5
1.4 BLSSP (Funding) PLC 617.9 623.4
1.5 135 Bishopsgate Financing Ltd 117.4
1.6 BL Universal PLC 308.6 309.1
1.7 BLU Nybil Ltd 44.7 44.9
2 A total of £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 Principal and interest on these borrowings were fully hedged into Sterling
at the time of issue.
5 The principal amount of gross debt at 31 March 2005 was £6,208.8m
(Sept 2004:£5,096.1m). Included in this, the principal amount of secured
borrowings and other borrowings of non-recourse companies was £4,392.5m
(Sept 2004: £3,742.3m).
6 Cash and short-term deposits not subject to a security interest amount to
£54.4m (Sept 2004: £42.3m).
Comparison of market values and book values at 31 March 2005
Market Book
Value Value Difference
£m £m £m
-------- -------- --------
Securitisations 3,581.1 3,544.5 36.6
Debentures and unsecured bonds 1,190.5 953.2 237.3
Bank debt and other floating rate debt 1,663.7 1,663.7
Cash and short-term deposits (150.8) (150.8)
-------- -------- --------
6,284.5 6,010.6 273.9
-------- -------- --------
Other financial (assets) liabilities
- interest rate derivative assets (10.0) (10.0)
- interest rate derivative liabilities 60.0 60.0
-------- -------- --------
50.0 50.0
-------- -------- --------
------------------------------------------------------------------------------------------------------
Total 6,334.5 6,060.6 273.9
------------------------------------------------------------------------------------------------------
The differences are shown before any tax
relief.
Maturity analysis of net debt - excluding finance lease liabilities IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
-------- ---------
Repayable: within one year and on 407.7 152.8
demand -------- ---------
between: one and two years 259.0 382.3
two and five years 1,327.6 1,023.5
five and ten years 532.6 539.1
ten and fifteen years 795.2 545.8
fifteen and twenty years 580.5 753.1
twenty and twenty five years 948.1 752.0
twenty five and thirty years 1,000.7 579.0
thirty and thirty five years 310.0 306.7
-------- ---------
5,753.7 4,881.5
-------- ---------
Gross debt 6,161.4 5,034.3
-------- ---------
Interest rate
derivatives 50.0 40.2
Cash and
short-term
deposits (150.8) (128.3)
------------------------------------------------------------------------------------------------------
Net debt 6,060.6 4,946.2
------------------------------------------------------------------------------------------------------
Maturity of committed undrawn borrowing facilities IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
-------- ---------
Expiring: within one year 114.0 32.3
between: one and two years 95.0 20.4
two and three years 10.0 25.0
three and four years 441.9 286.0
four and five years 132.1 672.1
over five years 25.0
------------------------------------------------------------------------------------------------------
Total 818.0 1,035.8
------------------------------------------------------------------------------------------------------
Interest rate profile - including effect of derivatives IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
-------- ---------
Fixed rate 5,359.4 4,053.7
Capped rate 100.0 100.0
Variable rate (net of cash) 601.2 792.5
------------------------------------------------------------------------------------------------------
Net debt 6,060.6 4,946.2
------------------------------------------------------------------------------------------------------
16. Finance lease liabilities
Finance lease liabilities are payable as follows, no contingent rents are
payable in either period:
IFRS Restated IFRS Restated
31 March 2005 30 September 2004
------------- -----------------
Minimum Minimum
lease lease
payments Interest Principal payments Interest Principal
£m £m £m £m £m £m
-------- -------- -------- -------- -------- --------
Less than one
year (note 13) 2.2 2.1 0.1 1.8 1.7 0.1
Between one
and five years 8.8 8.2 0.6 7.3 6.7 0.6
More than five
years 158.8 131.7 27.1 135.8 114.6 21.2
------------------------------------------------------------------------------------------------------
169.8 142.0 27.8 144.9 123.0 21.9
------------------------------------------------------------------------------------------------------
17. Net Asset Value per share
IFRS Restated
-------------
Adjusted
Net Net
Shares Assets Assets
m £m £m
------- ------- -------
Net Asset Value (undiluted)
Shareholders' funds as
shown on balance sheet 518.3 4,782.6 4,782.6
IAS12 capital allowance effects:
British Land Group 123.2
Share of joint ventures 7.0
--------
130.2
Contingent taxes on revaluation
gains:
British Land Group 851.3
Share of joint ventures 112.2
--------
963.5
Goodwill (72.7)
Fair value adjustments for debt and
derivatives, net of deferred tax:
British Land Group 11.6
Share of joint ventures 5.0
--------
16.6
Total external valuation
surplus on trading &
finance lease properties 62.6 62.6
Deferred taxation on
external surplus on trading
& finance lease properties (17.0)
-------------------------------------------------------------------------
Net assets attributable to
ordinary shares 5,882.8 4,828.2
-------------------------------------------------------------------------
At 31 March 2005 1135 p 932 p
-------- --------
Fully diluted Net Asset Value
Net assets attributable to
ordinary shares 518.3 5,882.8 4,828.2
Adjust to fully diluted on
exercise of share options 5.7 30.4 30.4
-------------------------------------------------------------------------
Net assets attributable to
fully diluted ordinary
shares 524.0 5,913.2 4,858.6
-------------------------------------------------------------------------
At 31 March 2005 1128 p 927 p
-------- --------
The adjusted NAV includes the external valuation surplus on trading and finance
lease properties but excludes the contingent taxation provision, any related
goodwill, the fair value adjustments for debt and derivatives and capital
allowance effects of IAS12.
18. Deferred tax liabilities
IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
-------- --------
Capital
allowances 123.2 106.4
Other timing
differences (28.9) (0.3)
Property and
investment
revaluations 851.3 710.6
------------------------------------------------------------------------------
945.6 816.7
------------------------------------------------------------------------------
19. Notes to the cash flow statement
Reconciliation of profit on ordinary activities before tax to cash generated
from operations
IFRS Restated
-------------
31 March 30 September
2005 2004
£m £m
-------- --------
Profit on
ordinary
activities
before tax 737.6 446.3
Depreciation 0.9 0.5
Negative goodwill (2.3)
Net valuation gains on investment (549.9) (304.3)
property
Net valuation loss on investments (43.1) 0.2
Gain on disposal of fixed assets (15.7) (1.7)
Share of profits after tax of joint (157.9) (82.6)
ventures
Dividends received from joint ventures 15.8 6.8
Share options, share awards and pension 8.0 3.7
funding
Net financing costs (including valuation 325.7 160.7
movements on debt & derivatives)
Exceptional item (as disclosed in note 5) 180.0
Decrease in trading properties 5.7 5.6
Increase in debtors (36.3) (11.8)
Increase in creditors 11.2 6.7
-------- ---------
(257.9) (216.2)
-------------------------------------------------------------------------------
Cash generated from operations 479.7 230.1
-------------------------------------------------------------------------------
Cash acquired with interest in subsidiary companies amounted to £4.9m
(September 2004: £Nil).
20. Share Capital
Number of Ordinary Share
shares shares premium Total
£m £m £m
-------- -------- -------- --------
At 1 April
2004 487,999,692 122.0 1,109.3 1,231.3
Shares issued 30,307,328 7.6 140.0 147.6
---------------------------------------------------------------------------
At 31 March 2005 518,307,020 129.6 1,249.3 1,378.9
---------------------------------------------------------------------------
The total authorised number of ordinary shares is 799,200,000 with a par
value of 25p per share. All issued shares are fully paid.
21. Reserves - IFRS Restated
Other Equity Retained
reserves reserve earnings Total
£m £m £m £m
At 1 April
2004 2.6 46.3 2,820.8 2,869.7
Total
recognised
income and
expense 9.6 650.9 660.5
Adjustment for
share and
share option
awards 7.3 7.3
Purchase of
ESOP shares (10.9) (10.9)
Dividends paid (76.7) (76.7)
Shares issued
- conversion
of Convertible
Bonds (46.3) 0.1 (46.2)
-------------------------------------------------------------------------------
At 31 March
2005 12.2 3,391.5 3,403.7
-------------------------------------------------------------------------------
Retained earnings
Retained earnings includes revaluation surpluses in the current and prior
years that are recognised as income under IFRS.
Equity reserve
The equity reserve represented the equity component of the irredeemable
convertible bonds which converted during the year, net of the related
deferred tax asset.
Other reserves
Other reserves comprises the following reserve accounts:
(i) Hedging reserve
The hedging reserve comprises the effective portion of the cumulative
net change in the fair value of cash flow and foreign currency
hedging instruments.
(ii) Translation reserve
The translation reserve comprises all foreign exchange differences
arising from the translation of the financial statements of foreign
operations as well as the translation of the liabilities that hedge
the Company's net investment in a foreign subsidiary.
(iii) Revaluation reserve
The revaluation reserve relates to development properties and other
investments.
22. Contingent Liabilities
Contingent liabilities of the Parent for guarantees to third parties amounted to
£Nil (30 September 2004: £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 £43.6m (30 September 2004: £43.6m) and recourse is only to the
partnership assets.
23. Post balance sheet events - IFRS Restated
On 18 April 2005 the Group obtained 100% ownership of the BLWest joint
venture companies by buying for £50m the equity owned by the other joint
shareholders. Immediately following the acquisition, the £108m debt was
repaid.
On 22 April 2005 the Scottish Retail Property Limited Partnership joint
venture raised £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 £811m.
On 25 May 2005 a final dividend of 10.9 pence per ordinary share (£56.5m) was
proposed by the directors and is subject to approval by shareholders at the
Annual General Meeting on 15 July 2005. (Under IFRS proposed dividends are
not recognised as liabilities until approved).
The final dividend will be paid on 19 August 2005 to shareholders on the
register at the close of business on 22 July 2005.
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 shows the results of the group, with
joint ventures consolidated on a proportional basis.
IFRS restated
-------------
Year Six months
ended ended
31 March 30 September
2005 2004
Unaudited Unaudited
£m £m
--------- ---------
Gross rental income 630.6 292.3
Service charge income less expenses 3.2 1.7
Property operating expenses (49.1) (23.3)
--------- ---------
Net rent and related income 584.7 270.7
Administrative expenses (52.3) (23.9)
Other income 8.9 3.5
--------- ---------
Profit from operations 541.3 250.3
Net financing costs (360.4) (177.3)
Net valuation gains on property and
investments 778.3 396.0
Exceptional item - Refinancing of
Broadgate (180.0)
--------- ---------
Profit on ordinary activities
before 779.2 469.0
tax
Taxation expense - Current 35.8 (10.3)
- Deferred (161.5) (87.0)
Profit for the year 653.5 371.7
-----------------------------------------------------------------------------------------
Earnings per share - Basic 128.3 p 74.3 p
---------- ----------
- Diluted 125.9 p 71.6 p
---------- ----------
Underlying earnings per share* - Basic 36.2 p 12.1 p
---------- ----------
- Diluted 35.5 p 11.7 p
---------- ----------
* Underlying profits are profits adjusted in line with the industry proposed
earnings measure and adjusted for the exceptional refinancing of Broadgate.
The industry proposed adjusted earnings measure excludes gains on asset
revaluations and disposals and related taxation and the capital allowance
effects of IAS 12 where applicable.
Summary balance sheet based on proportional consolidation
The following pro forma 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 trading and finance
lease properties shown at valuation.
IFRS restated
-------------
31 March 30 September
2005 2004
Unaudited Unaudited
£m £m
ASSETS --------- ---------
Properties
Investment properties 12,159.5 10,737.8
Development properties 216.0 196.5
Trading and finance lease
properties at valuation 131.4 131.6
ASSETS --------- ---------
12,506.9 11,065.9
Non-current assets
Other investments 153.1 113.9
Goodwill 72.7
ASSETS --------- ---------
12,732.7 11,179.8
ASSETS --------- ---------
Current assets
Trade and other debtors 114.0 107.6
Cash and short-term deposits 207.2 182.4
ASSETS --------- ---------
321.2 290.0
--------------------------------------------------------------------------------
Total assets 13,053.9 11,469.8
--------------------------------------------------------------------------------
LIABILITIES
Current liabilities
Short-term borrowings and
overdrafts (488.9) (171.0)
Trade and other creditors (424.2) (437.3)
---------- ----------
(913.1) (608.3)
Non-current liabilities
Debentures and loans (6,223.6) (5,354.7)
Other non-current liabilities (9.3) 0.1
Deferred tax liabilities (1,062.7) (921.5)
---------- ----------
(7,295.6) (6,276.1)
Total liabilities (8,208.7) (6,884.4)
--------------------------------------------------------------------------------
Net assets 4,845.2 4,585.4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total equity attributable to
shareholders of the Company 4,845.2 4,585.4
--------------------------------------------------------------------------------
Adjusted NAV per share: Basic 1135 p 1065 p
---------- ----------
Fully diluted 1128 p 1060 p
---------- ----------
Adjusted Net Asset Value (Adjusted NAV) is the industry proposed net asset
performance measure. It includes the external valuation surplus on trading and
finance lease properties but excludes the contingent taxation provision, any
related goodwill, the fair value adjustments for debt and derivatives and
capital allowance effects of IAS12 (see note 17).
The British Land Company PLC
Reconciliations of UK GAAP to International Financial Reporting Standards
Income Statement for the year ended 31 March 2005
UK Property
GAAP Plant
Results and Operating
in Income Equip- Investment Leases - Financial
IFRS Taxes ment Leases Property Incentives Instruments
Format IAS 12 IAS 16 IAS 17 IAS 40 SIC 15 IAS32/39 Other IFRS
£m £m £m £m £m £m £m £m £m
Gross rental
income - Group 546.5 11.0 557.5
Service charge
income less
expenses 2.8 2.8
Property
operating
expenses (45.0) 1.7 (43.3)
------- ------ ------- ------- -------- -------- --------- ------ ------
Net rental and
related income 504.3 1.7 11.0 517.0
Administrative
expenses (48.8) (48.8)
Other income 6.2 1.7 7.9
------- ------ ------- ------- -------- -------- --------- ------ ------
Profit from
operations 461.7 1.7 11.0 1.7 476.1
Share of net
profit of
Joint Ventures 31.7 (33.0) 159.7 1.6 (2.1) 157.9
------- ------ ------- ------- -------- -------- --------- ------ ------
Profit from
operations
including
share of joint
ventures 493.4 (33.0) 1.7 159.7 11.0 1.6 (0.4) 634.0
Net financing
costs (316.5) (1.7) (7.5) (325.7)
Net valuation
gains on
property and
investment 16.3 (0.1) 604.0 (10.9) 609.3
Exceptional
item -
Refinancing of
Broadgate (180.0) (180.0)
------- ------ ------- ------- -------- -------- --------- ------ -------
Profit on
ordinary
activities
before tax 13.2 (33.0) (0.1) 763.7 0.1 (5.9) (0.4) 737.6
Taxation
expense 45.5 (129.6) (84.1)
------------- ------- ------ ------- ------- -------- -------- --------- ------ -------
Profit for the
year 58.7 (162.6) (0.1) 763.7 0.1 (5.9) (0.4) 653.5
------------- ------- ------- ------- ------- -------- -------- --------- ------ -------
The British Land Company PLC
Reconciliations of UK GAAP to International Financial Reporting Standards
Opening Balance Sheet as at 1 April 2004
Prop- Events
UK erty, After
GAAP Plant the
Balances and Invest- Business Balance Financial
in Equip- ment Comb- Sheet Instr- Income
IFRS ment Property inations Leases Date* uments Taxes
Format IAS 16 IAS 40 IFRS 3 IAS 17 IAS 10 IAS32/39 IAS 12 Other IFRS
£m £m £m £m £m £m £m £m £m
ASSETS
Properties
Investment
properties 9,278.8 (138.1) 19.8 21.7 9,182.2
Development
properties 156.3 156.3
Trading
properties 41.6 41.6
------- ------- ------- ------- ------- ------- -------- ------ ------ -------
9,320.4 18.2 19.8 21.7 9,380.1
Non-current
assets
Investments in
joint ventures 658.2 0.2 19.2 (11.7) (76.3) (2.1) 587.5
Other
investments 3.1 14.1 17.2
------- ------- ------- ------- ------- ------- -------- ------ ------ -------
9,981.7 18.2 20.0 33.3 21.7 (11.7) (76.3) (2.1) 9,984.8
------- ------- ------- ------- ------- ------- -------- ------ ------ -------
Current
assets
Trade and
other debtors 40.2 40.2
Cash and
short-term
deposits 173.7 173.7
------- ------- ------- ------- ------- ------- -------- ------ ------ -------
213.9 213.9
----------------------------------------------------------------------------------------------------------------
Total assets 10,195.6 18.2 20.0 33.3 21.7 (11.7) (76.3) (2.1) 10,198.7
----------------------------------------------------------------------------------------------------------------
LIABILITIES
Current
liabilities
Short term
borrowings and
overdrafts (485.2) (485.2)
Trade and
other
creditors (384.7) 49.2 1.4 (334.1)
----------------------------------------------------------------------------------------------------------------
(869.9) 49.2 1.4 (819.3)
Non-current
liabilities
Debentures and
loans (4,406.3) (3.0) (4,409.3)
Convertible
Bonds (149.0) 68.7 (80.3)
Other
non-current
liabilities 0.1 (21.7) (21.6)
Deferred tax
liabilities (101.1) (666.1) (767.2)
----------------------------------------------------------------------------------------------------------------
(4,656.3) (21.7) 65.7 (666.1) (5,278.4)
----------------------------------------------------------------------------------------------------------------
Total
liabilities (5,526.2) (21.7) 49.2 67.1 (666.1) (6,097.7)
----------------------------------------------------------------------------------------------------------------
Net assets 4,669.4 18.2 20.0 33.3 49.2 55.4 (742.4) (2.1) 4,101.0
----------------------------------------------------------------------------------------------------------------
EQUITY
Share capital 122.0 122.0
Share premium
account 1,109.3 1,109.3
Other reserves 2,617.2 71.3 (2,667.7) 49.2 (20.6) (0.5) 48.9
Retained
earnings 820.9 (53.1) 2,687.7 33.3 49.2 6.2 (721.8) (1.6) 2,820.8
----------------------------------------------------------------------------------------------------------------
Total equity
shareholders'
funds 4,669.4 18.2 20.0 33.3 49.2 55.4 (742.4) (2.1) 4,101.0
----------------------------------------------------------------------------------------------------------------
* proposed dividend recognised when approved
The British Land Company PLC
Reconciliations of UK GAAP to International Financial Reporting Standards
Closing Balance Sheet as at 31 March 2005
Prop-
UK Opening erties
GAAP balance Plant
Balances sheet and Financial Invest- Business
in adjust- Income Equip- Instru- ment combin-
IFRS ment taxes ment Leases ments property ations
Format IAS 12 IAS 16 IAS 17 IAS 32/39 IAS 40 IFRS 3 Other* IFRS
£m £m £m £m £m £m £m £m £m £m
ASSETS
Properties
Investment
properties 11,036.7 (96.6) (53.0) 6.1 (16.5) 10,876.7
Development
properties 156.3 56.1 212.4
Trading
properties 35.9 35.9
------------------------------------------------------------------------------------------------------------------------
11,072.6 59.7 3.1 6.1 (16.5) 11,125.0
Non-current
assets
Investments in
joint ventures 804.0 (70.7) (33.9) (1.4) 4.5 (0.5) (2.0) 700.0
Other
investments 153.1 153.1
Goodwill (18.1) 14.1 76.7 72.7
------------------------------------------------------------------------------------------------------------------------
12,011.6 3.1 (33.9) 3.1 4.7 4.5 (17.0) 74.7 12,050.8
------------------------------------------------------------------------------------------------------------------------
Current
assets
Trade and
other debtors 66.5 10.0 76.5
Cash and
short-term
deposits 150.8 150.8
------------------------------------------------------------------------------------------------------------------------
217.3 10.0 227.3
------------------------------------------------------------------------------------------------------------------------
Total assets 12,228.9 3.1 (33.9) 3.1 4.7 14.5 (17.0) 74.7 12,278.1
------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Current
liabilities
Short term
borrowings and
overdrafts (407.7) (407.7)
Trade and
other
creditors (348.9) 50.6 (0.1) (60.4) 7.3 (351.5)
------------------------------------------------------------------------------------------------------------------------
(756.6) 50.6 (0.1) (60.4) 7.3 (759.2)
Non-current
liabilities
Debentures and
loans (5,783.7) (3.0) 33.0 (5,753.7)
Convertible
Bonds 68.7 (68.7)
Other
non-current
liabilities (8.0) (21.7) (6.0) (1.3) (37.0)
Deferred tax
liabilities (101.3) (666.1) (104.5) (75.0) 1.3 (945.6)
------------------------------------------------------------------------------------------------------------------------
(5,893.0) (622.1) (104.5) (6.0) 33.0 (75.0) (68.7)(6,736.3)
------------------------------------------------------------------------------------------------------------------------
Total
liabilities (6,649.6) (571.5) (104.5) (6.1) (27.4) (75.0) (61.4)(7,495.5)
------------------------------------------------------------------------------------------------------------------------
Net assets 5,579.3 (568.4) (138.4) 3.1 (1.4) (12.9) (17.0) (0.3) (61.4) 4,782.6
------------------------------------------------------------------------------------------------------------------------
EQUITY
Share capital 129.6 129.6
Share premium
account 1,251.9 (2.6) 1,249.3
Other reserves 3,395.3 (2,568.4) 24.3 3.0 (1.4) (5.3) (768.5) (2.1) (64.7) 12.2
Retained
earnings 802.5 2,000.0 (162.7) 0.1 (7.6) 751.5 1.8 5.9 3,391.5
------------------------------------------------------------------------------------------------------------------------
Total equity
shareholders'
funds 5,579.3 (568.4) (138.4) 3.1 (1.4) (12.9) (17.0) (0.3) (61.4) 4,782.6
------------------------------------------------------------------------------------------------------------------------
* Other includes the incremental adjustment for dividends not recognised until approved
This information is provided by RNS
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