Interim Results - 6 Months to 30 Sept 1999, Part 2

British Land Co PLC 29 November 1999 PART 2 Review report to The British Land Company PLC --------------------------------------------- We have reviewed the interim financial information for the six months ended 30 September 1999 set out below which is the responsibility of, and has been approved by, the Company's directors. Our responsibility is to report on the results of our review. Our review was carried out having regard to the Bulletin 'Review of Interim Financial Information' issued by the Auditing Practices Board. This review consisted principally of obtaining an understanding of the process involved in the preparation of the information, applying analytical procedures to the underlying financial data, assessing whether accounting policies have been consistently applied and making inquiries of persons responsible for financial and accounting matters. The review was substantially less in scope, and provides less assurance, than an audit performed in accordance with Auditing Standards. Accordingly, we do not express an audit opinion on the interim financial information. Based on our review: 1. in our opinion the interim financial information has been prepared using accounting policies consistent with those adopted by The British Land Company PLC in its financial statements for the year ended 31 March 1999; and 2. we are not aware of any material modifications that should be made to the interim financial information as presented. Arthur Andersen 29 November 1999 Chartered Accountants 1 Surrey Street London WC2R 2PS Consolidated Profit & Loss Account for the six months ended 30 September 1999 ----------------------------------------------------------------------------- (unaudited) ----------- 1999 1998 Revenue Capital Total Revenue Capital Total Note £m £m £m £m £m £m ------- ------- ----- ------- ------- ----- Gross rental income 208.1 208.1 171.9 171.9 Less share of joint ventures 2 (35.3) (35.3) (29.2) (29.2) ------- ------- ----- ------- ------- ----- Gross rental income - Group 172.8 172.8 142.7 142.7 ======= ======= ===== ======= ======= ===== Net rental income 161.3 161.3 135.1 135.1 Profit on property trading 41.9 41.9 2.1 2.1 Other income 2.8 2.8 2.2 2.2 Administrative expenses (13.5) (13.5) (11.2) (11.2) ------- ------- ----- ------- ------- ----- Operating profit 192.5 192.5 128.2 128.2 Share of operating profits of joint ventures 2 32.3 32.3 29.4 29.4 Disposal of fixed assets - including amounts from joint ventures (note 2) 1.0 1.0 3.6 3.6 ------- ------- ----- ------- ------- ----- Profit before interest 224.8 1.0 225.8 157.6 3.6 161.2 Net interest payable 2,3 (128.4) (128.4) (111.1) (111.1) Exceptional item 3 ------- ------- ----- ------- ------- ----- Profit on ordinary activities before taxation 96.4 1.0 97.4 46.5 3.6 50.1 Taxation 2 (17.9) (0.2) (18.1) (7.9) (0.3) (8.2) ------- ------- ----- ------- ------- ----- Profit after taxation 78.5 0.8 79.3 38.6 3.3 41.9 Minority interest (0.1) (0.1) (0.2) (0.2) ------- ------- ----- ------- ------- ----- Profit attributable to ordinary shareholders 78.4 0.8 79.2 38.4 3.3 41.7 Ordinary dividends 4 (17.6) (17.6) (16.7) (16.7) ------- ------- ----- ------- ------- ----- Retained profit (loss) transferred to (from) reserves 60.8 0.8 61.6 21.7 3.3 25.0 ======= ======= ===== ======= ======= ===== Basic and diluted pre exceptional earnings per share 5 15.1 p 0.2 p 15.3 p 7.4 p 0.7 p 8.1 p ======= ======= ===== ======= ======= ===== Basic and diluted earnings per share 5 15.1 p 0.2 p 15.3 p 7.4 p 0.7 p 8.1 p ======= ======= ===== ======= ======= ===== Dividend per share 4 3.40 p 3.23 p ======= ======= Year ended 31 March 1999 Revenue Capital Total Note £m £m £m ------- ------- ----- Gross rental income 375.6 375.6 Less share of joint ventures 2 (63.7) (63.7) ------- ----- Gross rental income - Group 311.9 311.9 ======= ===== Net rental income 296.5 296.5 Profit on property trading 13.7 13.7 Other income 5.0 5.0 Administrative expenses (24.3) (24.3) ------- ----- Operating profit 290.9 290.9 Share of operating profits of joint ventures 2 64.5 64.5 Disposal of fixed assets - including amounts from joint ventures (note 2) 0.8 0.8 ------- ------- ----- Profit before interest 355.4 0.8 356.2 Net interest payable 2,3 (232.9) (232.9) Exceptional item 3 (68.0) (68.0) ------- ------- ----- Profit on ordinary activities before taxation 122.5 (67.2) 55.3 Taxation 2 (15.7) 13.1 (2.6) ------- ------- ----- Profit after taxation 106.8 (54.1) 52.7 Minority interest (0.5) (0.5) ------- ------- ----- Profit attributable to ordinary shareholders 106.3 (54.1) 52.2 Ordinary dividends 4 (53.4) (53.4) ------- ------- ----- Retained profit (loss) transferred to (from) reserves 52.9 (54.1) (1.2) ======= ======= ===== Basic and diluted pre exceptional earnings per share 5 20.6 p 20.6 p ======= ======= ===== Basic and diluted earnings per share 5 20.6 p (10.5)p 10.1 p ======= ======= ===== Dividend per share 4 10.30 p ======= Group Balance Sheet as at 30 September 1999 (unaudited) -------------------------------------------------------- 31 March 1999 1999 1998 £m Note £m £m -------- ------- ------- Fixed assets 5,289.5 Investment properties 6 6,500.7 4,876.5 ======== ======= ======= Investments in joint ventures 1,046.8 share of gross assets 1,184.9 975.5 (451.6) share of gross liabilities (535.7) (364.8) -------- ------- ------- 595.2 7 649.2 610.7 -------- ------- ------- 101.8 Other investments 119.5 45.3 -------- ------- ------- 5,986.5 7,269.4 5,532.5 -------- ------- ------- Current assets 147.8 Trading properties 6 71.0 189.5 33.1 Debtors 73.0 48.7 120.2 Cash and deposits 271.3 59.1 -------- ------- ------- 301.1 Total current assets 415.3 297.3 (435.7) Creditors due within one year (962.4) (354.6) -------- ------- ------- (134.6) Net current liabilities (547.1) (57.3) -------- ------- ------- 5,851.9 Total assets less current liabilities 6,722.3 5,475.2 (2,271.7) Creditors due after one year 8 (3,080.0)(2,042.8) (462.4) Convertible bonds 8 (462.7) (462.1) -------- ------- ------- 3,117.8 3,179.6 2,970.3 ======== ======= ======= Capital and reserves 129.5 Called up share capital 129.5 129.5 1,104.5 Share premium 1,104.6 1,104.4 (7.9) Other reserves (5.6) (8.8) 1,369.0 Revaluation reserve 1,368.7 1,266.9 522.7 Profit and loss account 582.4 478.3 -------- ------- ------- 3,117.8 Shareholders' funds 3,179.6 2,970.3 ======== ======= ======= Group Cash Flow Statement for the six months ended 30 September 1999 (unaudited) ------------------------------------------------------ Year ended 31 March 1999 1999 1998 £m Note £m £m ---------- ------- ------- Net cash inflow 345.1 from operating activities 10 268.4 131.1 ---------- ------- ------- 4.2 Dividends received from joint ventures ---------- ------- ------- Return on investments and servicing of finance 19.0 Interest received 16.7 9.6 Interest paid (211.7) (including derivative close out costs) (180.9) (98.7) 0.6 Dividends received 0.7 0.3 ---------- ------- ------- (192.1) (163.5) (88.8) ---------- ------- ------- (1.9) Taxation received (paid) 0.5 (0.7) ---------- Net cash inflow from operating activities ------- ------- 155.3 and investments after finance charges 105.4 41.6 ---------- and taxation ------- ------- Capital expenditure and financial investment (589.5) Purchase of investment properties and plant (116.6) (319.5) (31.0) Purchase of investments (34.4) (21.0) 219.9 Sale of investment properties and plant 67.1 48.0 44.5 Sale of investments 21.0 43.6 ---------- ------- ------- (356.1) (62.9) (248.9) ---------- ------- ------- Acquisitions and disposals (231.5) Purchase of shares in subsidiary companies (100.8) (125.6) Investment in and loans to joint ventures (66.8) (64.6) 6.8 Sale of a subsidiary company Sale of shares in and loans 147.3 repaid by joint ventures 22.4 24.0 ---------- ------- ------- (203.0) (145.2) (40.6) ---------- ------- ------- Equity dividends paid 11 (74.7) ---------- ------- ------- Net cash outflow before management of 403.8 liquid resources and financing (177.4) (247.9) ---------- ------- ------- Management of liquid resources and financing Issue of ordinary shares 0.1 Issue of Broadgate securitised debt 1,528.9 (Decrease)increase in bank 410.7 and other borrowings (1,200.3) 191.4 27.7 (Increase)decrease in term deposits (136.4) 47.0 ---------- ------- ------- 438.4 192.3 238.4 ---------- ------- ------- ---------- ------- ------- 34.6 Increase (decrease) in cash 12,13 14.9 (9.5) ========== ======= ======= Notes to the accounts for the six months ended 30 September 1999 (unaudited) ---------------------------------------------------------------------------- 1. Basis of preparation The interim accounts are prepared on the basis of the accounting policies set out in the Group's statutory accounts for the year ended 31 March 1999, consistently applied in all material respects. The interim results include the consolidated results of Meadowhall Holdings Limited from 8 July 1999, the date of acquisition. The interim results do not incorporate any adjustment for the revaluation of properties or investments held at 30 September 1999. The figures for the year to 31 March 1999 are abridged from those accounts which received an unqualified auditors' report and have been filed with the Registrar of Companies. 2. British Land's share of profits of joint ventures Year ended 31 March 1999 1999 1998 £m £m £m ---------- ------- ------- 63.7 Gross rental income * 35.3 29.2 ========== ======= ======= 60.0 Net rental income 33.6 27.5 6.4 Profit on property trading 2.6 (1.9) Administrative expenses (1.3) (0.7) ---------- ------- ------- 64.5 Operating profit * 32.3 29.4 2.4 Disposal of fixed assets * 0.8 1.0 ---------- ------- ------- 66.9 33.1 30.4 ---------- ------- ------- (25.8) Net interest payable to third parties (15.2) (11.5) (19.3) Interest payable to British Land (8.0) (10.3) ---------- ------- ------- (45.1) Net interest payable (note 3) * (23.2) (21.8) ---------- ------- ------- 21.8 Profit before taxation 9.9 8.6 (3.1) Taxation * (2.1) (2.2) ---------- ------- ------- 18.7 Profit after taxation 7.8 6.4 ========== ======= ======= * Recognised at the relevant point in the consolidated profit and loss account. 3. Net interest payable Year ended 31 March 1999 1999 1998 £m £m £m ---------- ------- ------- British Land Group 207.1 Interest payable (net) 113.2 99.6 (19.3) Interest receivable from joint ventures (8.0) (10.3) ---------- ------- ------- 187.8 Total British Land Group 105.2 89.3 ---------- ------- ------- Share of joint ventures 19.3 Interest payable on shareholder loans 8.0 10.3 25.8 Other interest payable (net) 15.2 11.5 ---------- ------- ------- 45.1 Total share of joint ventures (note 2) 23.2 21.8 ---------- ------- ------- 232.9 Net interest payable 128.4 111.1 ========== ======= ======= 68.0 Exceptional item ========== ======= ======= The 31 March 1999 exceptional item relates to the termination of derivatives no longer required as a result of the £1,540 million Broadgate (Funding) PLC issue. The cost was provided for in the accounts for the year ended 31 March 1999 and has been settled during the six month period ended 30 September 1999. 4. Interim dividend The interim dividend of 3.4 pence will be paid on 22 February 2000 to shareholders on the register at the close of business on 14 January 2000. 5. Earnings per share Basic and diluted earnings per share are based on the profit attributable to ordinary shareholders and on the weighted average of 518.0 million shares in issue (March 1999 - 517.2 million, September 1998 - 516.5 million). 6. Investment and trading properties Leasehold Freehold Long Short Total £m £m £m £m ------- ------- ------- ------- Investment properties 1 April 1999 4,534.0 755.5 5,289.5 Purchase of Meadowhall Shopping Centre 1,170.0 1,170.0 Additions 116.7 1.6 118.3 Disposals (64.6) (8.8) (73.4) Exchange fluctuations (3.7) (3.7) Reallocations 512.3 (512.3) ------- ------- ------- ------- 30 September 1999 6,264.7 236.0 6,500.7 ======= ======= ======= ======= Trading properties At lower of cost and net realisable value 30 September 1999 57.0 11.3 2.7 71.0 ======= ======= ======= ======= External valuation surplus On development and trading properties 95.8 ------- Total investment and trading properties 6,667.5 ======= A revaluation of the property portfolio has not been undertaken at 30 September 1999. 7. Joint ventures Equity Loans Total £m £m £m ------- ------- ------- 1 April 1999 399.2 196.0 595.2 Additions 16.1 52.5 68.6 Repayment of loans (22.4) (22.4) Share of profit attributable to joint ventures (net of dividend) 7.8 7.8 ------- ------- ------- 30 September 1999 423.1 226.1 649.2 ======= ======= ======= Date established The Public House Company Limited April 1995 42.3 BLT Properties Limited November 1996 36.6 BL Universal PLC February 1997 262.3 BL Rank Properties Limited August 1997 26.0 The Tesco British Land Property Partnership February 1998 189.3 Peacocks Centre Partnership June 1998 33.5 Cherrywood Properties Limited (Republic of Ireland) April 1999 30.5 BVP Developments Limited June 1999 5.5 BL Fraser Limited July 1999 22.4 Other joint ventures 0.8 Tesco BL Holdings Limited November 1999 ------- Total investment in joint ventures 649.2 ======= 8. Net debt Year ended 31 March 1999 Proforma* 1999 1998 £m £m £m £m ---------- ------- ------- ------- Maturity analysis of net debt Repayable: 106.3 within one year and on demand 55.1 55.1 127.8 258.6 between: one and two years 155.5 155.5 113.7 943.0 two and five years 655.2 222.7 865.2 522.3 five and ten years 700.6 675.6 504.5 32.4 ten and fifteen years 287.3 287.3 31.2 195.3 fifteen and twenty years 636.3 636.3 194.8 147.6 twenty and twenty five years 364.7 364.7 151.7 229.9 twenty five and thirty years 456.0 456.0 229.9 thirty and thirty five years 329.4 329.4 246.5 thirty five and forty years 268.7 268.7 246.5 146.5 Irredeemable 146.5 146.5 146.5 ---------- ------- ------- ------- 2,828.4 Gross debt 4,055.3 3,597.8 2,611.8 (120.2) Less cash and deposits (233.4) (271.3) (59.1) ---------- ------- ------- ------- 2,708.2 Net debt 3,821.9 3,326.5 2,552.7 ========== ======= ======= ======= Net debt comprises: Due within one year 1.7 Debentures and loans 37.4 37.4 2.3 1.5 Overdrafts 1.3 1.3 0.5 103.1 Bank loans 16.4 16.4 125.0 ---------- ------- ------- ------- 106.3 55.1 55.1 127.8 ---------- ------- ------- ------- Due after one year 984.4 Debentures and loans 2,469.6 2,469.6 985.5 1,275.3 Bank loans 699.1 241.6 1,036.4 Finance lease obligations 368.8 368.8 ---------- ------- ------- ------- 2,259.7 3,537.5 3,080.0 2,021.9 ---------- ------- ------- ------- 2,366.0 Debt before Convertible Bonds 3,592.6 3,135.1 2,149.7 462.4 Convertible Bonds 462.7 462.7 462.1 ---------- ------- ------- ------- 2,828.4 Gross debt 4,055.3 3,597.8 2,611.8 ---------- ------- ------- ------- (81.9) Cash (96.6) (96.6) (36.8) (38.3) Term deposits (136.8) (174.7) (22.3) ---------- ------- ------- ------- (120.2) (233.4) (271.3) (59.1) ---------- ------- ------- ------- 2,708.2 Net debt 3,821.9 3,326.5 2,552.7 ========== ======= ======= ======= * Proforma figures are presented to show the effect of completion of the Meadowhall Shopping Centre purchase on 1 November 1999 (note 9) and the £104.6 million received from the Tesco BL Holdings refinancing on 19 November 1999. Year ended 31 March 1999 Proforma* 1999 1998 £m £m £m £m ---------- ------- ------- ------- Maturity of committed undrawn borrowing facilities Expiring: 110.9 within one year 107.3 107.3 70.9 177.9 between: one and two years 422.1 422.1 32.1 108.0 two and three years 203.0 455.5 296.4 40.0 three and four years 315.0 447.5 98.0 59.0 four and five years 29.0 76.5 256.0 123.4 over five years 135.2 160.2 84.1 ---------- ------- ------- ------- 619.2 Total 1,211.6 1,669.1 837.5 ========== ======= ======= ======= Interest rate profile - including effect of derivatives 2,046.1 Fixed rate 3,288.3 3,288.3 2,023.0 250.0 Capped rate 250.0 38.2 250.0 412.1 Variable rate 283.6 279.7 ---------- ------- ------- ------- 2,708.2 Net debt 3,821.9 3,326.5 2,552.7 ========== ======= ======= ======= Comparison of market values and book values at 30 September 1999 1999 ----------------------- Market Book Diff Value Value -erence £m £m £m ------- ------- ------- Long term fixed rate debt 2,711.3 2,507.0 204.3 Convertible debt 480.9 462.7 18.2 Finance leases 355.2 368.8 (13.6) Derivatives (16.8) (16.8) Cash net of bank debt (12.0) (12.0) ------- ------- ------- Net debt 3,518.6 3,326.5 192.1 ======= ======= ======= The market value and difference are shown before any tax relief. * Proforma figures are presented to show the effect of completion of the Meadowhall Shopping Centre purchase on 1 November 1999 (note 9) and the £104.6 million received from the Tesco BL Holdings refinancing on 19 November 1999. 9. Purchase of Meadowhall Shopping Centre On 8 July 1999, the Group acquired Meadowhall Shopping Centre, Sheffield for £1,170 million. This acquisition was structured as an option to purchase the entire share capital of Meadowhall Holdings Limited for a payment on 8 July 1999 of £100 million with a completion payment of a further £600 million on 1 November 1999 following exercise of the option. This purchase was funded from existing cash and bank facilities. This acquisition has been consolidated as a subsidiary in these accounts since 8 July 1999, the effective date on which control of the company was acquired. The amounts included in the 30 September 1999 balance sheet relating to Meadowhall are: £m ------- Meadowhall Shopping Centre 1,170 Net debt assumed (441) Sundry net liabilities (29) ------- Net assets acquired 700 ======= 10. Reconciliation of operating profit to net cash inflow from operating activities Year ended 31 March 1999 1999 1998 £m £m £m ---------- ------- ------- 290.9 Operating profit 192.5 128.2 (0.8) Dividends receivable (0.7) (0.3) 0.8 Depreciation 0.2 0.5 39.1 Decrease (increase) in trading properties 76.8 (2.6) 12.7 (Increase) decrease in debtors (14.4) (1.9) 2.4 Increase in creditors 14.0 7.2 ---------- ------- ------- 345.1 Net cash inflow from operating activities 268.4 131.1 ========== ======= ======= 11. Cash flow statement - Equity dividends paid Following the abolition of Advance Corporation Tax on 5 April 1999, dividends were paid during the six month period ended 30 September 1999 relating to the years ending 31 March 1998 and 1999. 12. Analysis of Group net debt 1 Other 30 30 April Cash non cash September September 1999 flow movements 1999 1998 £m £m £m £m £m ------- ------- ---------- ---------- ---------- Cash at bank (81.9) (14.7) (96.6) (36.8) Overdraft 1.5 (0.2) 1.3 0.5 ------- ------- ---------- ---------- ---------- Net cash (80.4) (14.9) (95.3) (36.3) Term debt 2,364.5 328.6 440.7 3,133.8 2,149.2 Convertible Bonds 462.4 0.3 462.7 462.1 Term deposits (38.3) (136.4) (174.7) (22.3) ------- ------- ---------- ---------- ---------- Group net debt 2,708.2 177.3 441.0 3,326.5 2,552.7 ======= ======= ========== ========== ========== 13. Reconciliation of net cash flow to movement in Group net debt Year ended 31 March 1999 1999 1998 £m £m £m ---------- ------- ------- Group net debt 2,297.7 Brought forward 2,708.2 2,297.7 ---------- ------- ------- Movement in net debt in the year (34.6) (Increase) decrease in cash (14.9) 9.5 410.7 Cash inflow from movement in debt 328.6 191.4 Cash (outflow) inflow 27.7 in term deposits (136.4) 47.0 ---------- ------- ------- 403.8 Changes resulting from cash flows 177.3 247.9 ---------- ------- ------- Term debt acquired with Meadowhall Shopping Centre 450.6 6.7 Other non cash movements (9.6) 7.1 ---------- ------- ------- 6.7 Changes resulting from non cash flows 441.0 7.1 ---------- ------- ------- 410.5 618.3 255.0 ---------- ------- ------- 2,708.2 Carried forward 3,326.5 2,552.7 ========== ======= =======

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