Half Yearly Report - Part 2

RNS Number : 0828S

British Land Co PLC

15 November 2011

 



Consolidated Income Statement for the six month period ended 30 September 2011
Year ended 31 March 2011						Six months ended 30 September 2011			Six months ended 30 September 2010
Audited						Unaudited			Unaudited
Underlying	Capital					Underlying	Capital		Underlying	Capital
pre tax*	and  other	Total				pre tax*	and other	Total	pre tax*	and other	Total
£m	£m	£m			Note	£m	£m	£m	£m	£m	£m
298		298	Gross rental and related income		2	162		162	142		142
255		255	Net rental and related income		2	139		139	122		122
15		15	Fees and other income		2	8		8	7		7
	(10)	(10)	Amortisation of intangible assets							(8)	(8)
117	264	381	Joint ventures and funds (see also below)			54	87	141	60	110	170
(61)		(61)	Administrative expenses			(35)		(35)	(28)		(28)
	321	321	Net valuation movement (includes profits & losses on disposals)		2		112	112		102	102
			Net financing costs
29	3	32	- financing income			14	4	18	21		21
(99)	(4)	(103)	- financing charges			(48)	(4)	(52)	(55)	(3)	(58)
(70)	(1)	(71)				(34)		(34)	(34)	(3)	(37)
256	574	830	Profit on ordinary activities before taxation			132	199	331	127	201	328
			Taxation
	(2)	(2)	- current tax expense  2				(1)	(1)		(1)	(1)
	12	12	- deferred tax income		2		2	2		12	12
	10	10			2		1	1		11	11
		840	Profit for the period after taxation attributable to shareholders of the Company					332			339
		95.7p	Earnings per share:		1	basic		37.4p			38.9p
		95.2p			1	diluted		37.2p			38.7p
			Share of results of joint ventures and funds
117		117	Underlying profit before taxation			54		54	60		60
	270	270	Net valuation movement (includes profits & losses on disposals)				90	90		114	114
			Non-recurring items				(2)	(2)		(1)	(1)
	(3)	(3)	Current tax expense				(1)	(1)		(2)	(2)
	(3)	(3)	Deferred tax expense							(1)	(1)
117	264	381			4	54	87	141	60	110	170
*As defined in note 1

Consolidated Income Statement for the three month period ended 30 September 2011
Year ended 31 March 2011						Three months ended 30 September 2011			Three months ended 30 September 2010
Audited						Unaudited			Unaudited
Underlying	Capital					Underlying	Capital		Underlying	Capital
pre tax*	and  other	Total				pre tax*	and  other	Total	pre tax*	and  other	Total
£m	£m	£m			Note	£m	£m	£m	£m	£m	£m
298		298	Gross rental and related income		2	82		82	71		71
255		255	Net rental and related income		2	72		72	61		61
15		15	Fees and other income		2	4		4	4		4
	(10)	(10)	Amortisation of intangible assets							(4)	(4)
117	264	381	Joint ventures and funds (see also below)			27	36	63	29	56	85
(61)		(61)	Administrative expenses			(18)		(18)	(15)		(15)
	321	321	Net valuation movement (includes profits & losses on disposals)		2		29	29		45	45
			Net financing costs
29	3	32	- financing income			7	4	11	4		4
(99)	(4)	(103)	- financing charges			(25)	(3)	(28)	(20)	(3)	(23)
(70)	(1)	(71)				(18)	1	(17)	(16)	(3)	(19)
256	574	830	Profit on ordinary activities before taxation			67	66	133	63	94	157
			Taxation
	(2)	(2)	- current tax expense		2
	12	12	- deferred tax income		2		1	1		10	10
	10	10			2		1	1		10	10
		840	Profit for the period after taxation attributable to shareholders of the Company					134			167
		95.7p	Earnings per share:		1	basic		15.1p			19.1p
		95.2p			1	diluted		15p			19p
			Share of results of joint ventures and funds
117		117	Underlying profit before taxation			27		27	29		29
	270	270	Net valuation movement (includes profits & losses on disposals)				38	38		58	58
			Non-recurring items				(2)	(2)		(1)	(1)
	(3)	(3)	Current tax expense				(1)	(1)		(1)	(1)
	(3)	(3)	Deferred tax (expense) income				1	1
117	264	381			4	27	36	63	29	56	85
*As defined in note 1

Consolidated Balance Sheet as at 30 September 2011
31  March			30  September	30  September	30  June
2011			2011	2010	2011
Audited			Unaudited	Unaudited	Unaudited
£m		Note	£m	£m	£m
	Assets
	Non-current assets
4,752	Investment and development properties	3	5,323	4,297	4,965
38	Owner-occupied property	3	39	36	39
4,790			5,362	4,333	5,004
	Other non-current assets
2,066	Investments in joint ventures and funds	4	2,131	1,693	2,121
51	Other investments	5	59	51	51
	Intangible assets			2
6,907			7,552	6,079	7,176
	Current assets
90	Debtors		142	84	139
203	Liquid investments	6	200	206	206
60	Cash and short-term deposits	6	111	223	94
353			453	513	439
7,260	Total assets		8,005	6,592	7,615
	Liabilities
	Current liabilities
(319)	Short-term borrowings and overdrafts	6	(104)	(364)	(389)
(333)	Creditors		(376)	(352)	(364)
(652)			(480)	(716)	(753)
	Non-current liabilities
(1,620)	Debentures and loans	6	(2,402)	(1,382)	(1,752)
(23)	Other non-current liabilities		(26)	(25)	(20)
(35)	Deferred tax liabilities		(33)	(36)	(34)
(1,678)			(2,461)	(1,443)	(1,806)
(2,330)	Total liabilities		(2,941)	(2,159)	(2,559)
4,930	Net assets		5,064	4,433	5,056
	Equity
224	Share capital		224	223	224
1,237	Share premium		1,237	1,238	1,237
(68)	Other reserves		(171)	(143)	(92)
3,537	Retained earnings		3,774	3,115	3,687
	Total equity attributable to shareholders
4,930	of the Company		5,064	4,433	5,056
567p	EPRA NAV per share*	1	591p	525p	583p
* As defined in note 1

Consolidated Statement of Comprehensive Income for the period ended 30 September 2011
Year  ended							Three months ended					Six months ended
31 March							30 September					30 September
2011							2011		2010			2011		2010
Audited							Unaudited		Unaudited			Unaudited		Unaudited
£m							£m		£m			£m		£m
840	Profit for the period after taxation						134		167			332		339
	Other comprehensive income:
	(Losses) gains on cash flow hedges
(13)	- Group						(36)		(20)			(47)		(33)
18	- Joint ventures and funds						(38)		(12)			(55)		(30)
5							(74)		(32)			(102)		(63)
	Transferred (from) to the income statement
	(cash flow hedges)
6	- foreign currency derivatives						(9)		5			(9)		4
14	- interest rate derivatives						4		4			8		6
20							(5)		9			(1)		10
	Exchange differences on translation of foreign operations								(2)					1
(2)	Actuarial loss on pension scheme
23	Other comprehensive (loss) income for the period						(79)		(25)			(103)		(52)
863	Total comprehensive income for the period						55		142			229		287
Consolidated Statement of Cash Flows for the period ended 30 September 2011
Year						Three months				Six months
ended						ended				ended
31 March						30 September				30 September
2011						2011		2010		2011	2010
Audited						Unaudited				Unaudited
£m					Note	£m		£m		£m	£m
227			Rental income received from tenants			71		54		138	110
21			Fees and other income received			6		6		10	8
(66)			Operating expenses paid to suppliers and employees			(19)		(17)		(44)	(37)
182			Cash generated from operations			58		43		104	81
(96)			Interest paid			(39)		(40)		(51)	(50)
19			Interest received			6		11		8	12
105			Distributions received from joint ventures and funds		4	17		23		35	53
210			Net cash inflow from operating activities			42		37		96	96
			Cash flows from investing activities
(62)			Development and other capital expenditure			(31)		(15)		(49)	(32)
(379)			Purchase of investment properties			(237)				(362)	(29)
68			Sale of investment properties			7				7	2
22			Deferred consideration received			9		9		9	22
220			Loans repaid by Broadgate joint venture					220			220
(123)			Investment in and loans to joint ventures and funds			(33)		(21)		(52)	(23)
12			Capital distributions received from joint ventures and funds
2			Indirect taxes in respect of investing activities			(7)				(7)	2
(240)			Net cash (outflow) inflow from investing activities			(292)		193		(454)	162
			Cash flows from financing activities
(139)			Dividends paid			(48)		(32)		(97)	(64)
(14)			Movement in other financial liabilities			5		(7)		(1)	(9)
171			Increase (decrease) in bank and other borrowings			310		(38)		507	(39)
18			Net cash inflow (outflow) from financing activities			267		(77)		409	(112)
(12)			Net increase (decrease) in cash and cash equivalents			17		153		51	146
72			Opening cash and cash equivalents			94		65		60	72
60			Closing cash and cash equivalents			111		218		111	218
			Cash and cash equivalents consists of:
60			Cash and short-term deposits			111		223		111	223
			Overdrafts					(5)			(5)
60						111		218		111	218

Consolidated Statement of Changes in Equity
for the period ended 30 September 2011									Hedging & translation
						Share	Share				Revaluation		Retained
						capital*	premium		reserve		reserve		earnings	Total
						£m	£m		£m		£m		£m	£m
Six month movements in Equity
Balance at 1 April 2011						224	1,237		(34)		(34)		3,537	4,930
Total comprehensive income for the period									(48)		(55)		332	229
Adjustment for share and share option awards													2	2
Dividends payable in the six month period													(115)	(115)
Adjustment for scrip dividend element													18	18
Balance at 30 September 2011						224	1,237		(82)		(89)		3,774	5,064
Balance at 1 April 2010						220	1,241		(38)		(52)		2,837	4,208
Total comprehensive income for the period									(23)		(29)		339	287
Adjustment for share and share option awards													2	2
De-designation of cash flow hedges									(1)				1
Dividends payable in the six month period													(113)	(113)
Adjustment for scrip dividend element						3	(3)						49	49
Balance at 30 September 2010						223	1,238		(62)		(81)		3,115	4,433
Three month movements in Equity
Balance at 1 July 2011						224	1,237		(41)		(51)		3,687	5,056
Total comprehensive income for the period									(41)		(38)		134	55
Adjustment for share and share option awards
Dividends payable in the three month period													(57)	(57)
Adjustment for scrip dividend element													10	10
Balance at 30 September 2011						224	1,237		(82)		(89)		3,774	5,064
Balance at 1 July 2010						221	1,240		(50)		(67)		2,978	4,322
Total comprehensive income for the period									(11)		(14)		167	142
Adjustment for share and share option awards													1	1
De-designation of cash flow hedges									(1)				1
Dividends payable in the three month period						2	(2)						(57)	(57)
Adjustment for scrip dividend element													25	25
Balance at 30 September 2010						223	1,238		(62)		(81)		3,115	4,433
Prior year movements in Equity
Balance at 1 April 2010						220	1,241		(38)		(52)		2,837	4,208
Total comprehensive income for the period									4		18		841	863
Share issues						4	(4)
Adjustment for share and share option awards													6	6
Dividends payable in the year													(228)	(228)
Adjustment for scrip dividend element													81	81
Balance at 31 March 2011						224	1,237		(34)		(34)		3,537	4,930
* See note 11 for a summary of the number of shares in issue
Notes to the accounts (unaudited)
1.     Performance measures
Year ended					Six months ended						Six months ended
31 March 2011					30 September 2011						30 September 2010
Earnings	Pence per share	Earnings per share (diluted)			Earnings			Pence per share			Earnings	Pence per share
£m					£m						£m
256		Underlying pre tax profit - income statement			132						127
(5)		Tax charge relating to underlying profit			(2)						(3)
251	28.5p	Underlying earnings per share			130			14.6p			124	14.2p
8		Mark to market on liquid investments (held for trading assets)			(3)						6
(4)		Non-recurring items *			(2)						(4)
255	28.9p	EPRA earnings per share (diluted)			125			14.0p			126	14.4p
840	95.2p	Profit for the period after taxation			332			37.2p			339	38.7p
Year ended					Three months ended						Three months ended
31 March 2011					30 September 2011						30 September 2010
Earnings	Pence per share	Earnings per share (diluted)			Earnings			Pence per share			Earnings	Pence per share
£m					£m						£m
256		Underlying pre tax profit - income statement			67						63
(5)		Tax charge relating to underlying profit			(1)						(1)
251	28.5p	Underlying earnings per share			66			7.4p			62	7.1p
8		Mark to market on liquid investments (held			(6)						1
		for trading assets)
(4)		Non-recurring items*			(2)						(4)
255	28.9p	EPRA earnings per share (diluted)			58			6.5p			59	6.7p
840	95.2p	Profit for the period after taxation			134			15.0p			167	19.0p
*Non-recurring items for the six months ended 30 September 2011 of £2m relate to the debt break costs in HUT and for the year ended 31 March 2011 £4m relate to fair value adjustments on the buy back of Group debentures.
The European Public Real Estate Association (EPRA) issued Best Practices Recommendations most recently in October 2010, which gives guidelines for performance measures.  The 30 September 2010 comparatives have been presented to be in line with these recommendations.  The EPRA earnings (diluted) measure excludes investment property revaluations and gains or losses on disposals, intangible asset movements and their related taxation.  A summary of the EPRA Performance Measures is provided in table B within the Supplementary Disclosures.
Underlying earnings consists of the EPRA earnings (diluted) measure, with additional company adjustments.  Adjustments include mark to market adjustments on held for trading assets, fair value adjustments on the buy back of debentures and debt break costs.
The weighted average number of shares in issue for the three month period was: basic: 887m (six months ended 30 September 2011: 887m; year ended 31 March 2011: 878m; three months ended 30 September 2010: 875m; six months ended 30 September 2010: 872m); diluted for the effect of share options: 893m (six months ended 30 September 2011: 893m; year ended 31 March 2011: 882m; three months ended 30 September 2010: 879m; six months ended 30 September 2010: 876m).  Basic undiluted earnings per share for the three month period was 15.1p (six months ended 30 September 2011: 37.4p; year ended 31 March 2011: 95.7p; three months ended 30 September 2010: 19.1p; six months ended 30 September 2010: 38.9p). Earnings per share shown in the table above are diluted.
31  March								30 September			30 September	30 June
2011		Net asset value (NAV)						2011			2010	2011
£m								£m			£m	£m
4,930		Balance sheet net assets						5,064			4,433	5,056
37		Deferred tax arising on revaluation movements						33			33	37
89		Mark to market on effective cash flow hedges and related debt adjustments						193			173	116
45		Dilution effect of share options						53			44	53
5,101		EPRA NAV						5,343			4,683	5,262
567p		EPRA NAV per share						591p			525p	583p
The EPRA NAV per share excludes the mark to market on effective cash flow hedges and related debt adjustments, deferred taxation on revaluations, surplus on trading properties and is calculated on a fully diluted basis.
At 30 September 2011, the number of shares in issue was: basic: 888m (31 March 2011: 885m; 30 September 2010: 878m; 30 June 2011: 886m); diluted for the effect of share options: 904m (31 March 2011: 899m; 30 September 2010: 892m; 30 June 2011: 902m).
REIT total return per share for the six months ended 30 September 2011 of 6.5% includes dividends paid of 6.5p (see note 7) in addition to the increase in EPRA NAV of 24p. Total return per share for the three months ended 30 September 2011 was 2.5% and the year ended 31 March 2011 was 17.7%.

2.     Income statement notes
Year  ended							Three months ended			Six months ended
31 March							30 September			30 September
2011							2011	2010		2011		2010
£m							£m	£m		£m		£m
			Gross and net rental income
227			Rent receivable				66	56		126		113
32			Spreading of tenant incentives and guaranteed rent increases				10	7		20		14
3			Surrender premia
262			Gross rental income				76	63		146		127
36			Service charge income				6	8		16		15
298			Gross rental and related income				82	71		162		142
(36)			Service charge expenses				(6)	(8)		(16)		(15)
(7)			Property operating expenses				(4)	(2)		(7)		(5)
255			Net rental and related income				72	61		139		122
			Fees and other income
11			Performance & management fees (from joint ventures & funds)				2	2		6		5
4			Other fees and commission				2	2		2		2
15							4	4		8		7
			Net revaluation movements on property and investments
297			Revaluation of properties				38	44		118		97
20			Result on property disposals				(3)			(3)		(1)
8			Revaluation of investments				(6)	1		(3)		6
(4)			Other revaluation movements
321							29	45		112		102
270			Share of valuation movements of joint ventures and funds (note 4)				38	58		90		114
591							67	103		202		216
			Tax (expense) income
(1)			Current tax:		UK corporation tax (30 September 2011: 26%; 30 September 2010: 28%)					(1)		(1)
(1)					Foreign tax
(2)										(1)		(1)
(2)			Total current tax expense							(1)		(1)
12			Deferred tax on revaluations				1	10		2		12
10			Group total taxation (net)				1	10		1		11
(6)			Attributable to joint ventures and funds				1	(1)				(3)
4			Total taxation				2	9		1		8
Tax expense attributable to underlying profits for the three months ended 30 September 2011 was £1m (six months ended 30 September 2011: £2m; year ended 31 March 2011: £5m; three months ended 30 September 2010: £1m; six months ended 30 September 2010: £3m).
The deferred tax charge for the three months ended 30 September 2011 includes a credit of £1m to mainly reflect reduced deferred tax liabilities arising from the forthcoming reduction in the UK corporation tax rate to 25% (effective from 1 April 2012).
3.     Property
Total property interests are £10,163m at 30 September 2011 comprising properties held by the Group of £5,342m, share of properties held by funds of £842m and share of properties held by joint ventures of £3,979m. Properties were valued on the basis of market value, supported by market evidence, in accordance with the Appraisal and Valuation Standards published by The Royal Institution of Chartered Surveyors.
31 March						30  September			30  September		30 June
2011						2011			2010		2011
£m						£m			£m		£m
4,752	Investment properties					5,323			4,297		4,965
38	Owner-occupied property					39			36		39
4,790	Carrying value of properties on balance sheet					5,362			4,333		5,004
(7)	Head lease liabilities					(20)			(7)		(7)
4,783	Total British Land Group property portfolio valuation					5,342			4,326		4,997
At 30 September 2011 Group properties valued at £1,911m were subject to a security interest (31 March 2011: £2,850m; 30 September 2010: £2,708m) and other properties of non-recourse companies amounted to £115m.
Interest capitalised on development expenditure for the three months ended 30 September 2011 was £2m (six months ended 30 September 2011: £3m; year ended 31 March 2011: £3m; three months ended 30 September 2010: £1m; six months ended 30 September 2010: £2m).
4.     Joint ventures and funds
Summary of British Land's share of investments in joint ventures and funds at 30 September 2011
		Underlying		Underlying
		profit		profit
		(six		(three	Net	Property			Other		Gross
		months)		months)	Investment	assets			assets		liabilities
		£m		£m	£m	£m			£m		£m
Share of funds		11		5	494	842			93		(441)
Share of joint ventures		43		22	1,637	3,979			178		(2,520)
Total		54		27	2,131	4,821			271		(2,961)
PREF, a fund owning a portfolio of retail property in Europe (in which British Land has a net investment of £106 million), has a €173 million syndicated bank loan which matures on 17 November 2011, having been extended from its August 2011 maturity date.  Discussions are ongoing with a number of banks, including the existing lenders, in relation to its refinancing or extension and other alternatives are being explored.  The PREF borrowings are non-recourse to the Group.  A market uncertainty clause is included in the valuation report of the Portuguese properties within PREF, due to a lack of transactional evidence and uncertainty over the economic situation in that market.
At 30 September 2011 the investment in Joint Ventures included within the total net investment in joint ventures and funds was £1,640m (31 March 2011: £1,573m; 30 September 2010: £1,221m).
Amounts owed to joint ventures at 30 September 2011 were £47m (31 March 2011: £55m; 30 September 2010: £50m).
British Land's share of the results of joint ventures and funds
Year					Three months	Three months			Six months		Six  months
ended					ended	ended			ended		ended
31 March					30 September	30  September			30  September		30 September
2011					2011	2010			2011		2010
£m					£m	£m			£m		£m
279	Gross rental income				69	69			137		140
263	Net rental and related income				65	66			130		133
(4)	Other income and expenditure				(1)	(1)			(3)		(2)
(142)	Net financing costs				(37)	(36)			(73)		(71)
117	Underlying profit before taxation				27	29			54		60
270	Net valuation and disposal movements				38	58			90		114
	Non-recurring items				(2)	(1)			(2)		(1)
387	Profit on ordinary activities before taxation				63	86			142		173
(3)	Current tax expense				(1)	(1)			(1)		(2)
(3)	Deferred tax income (expense)				1						(1)
381	Profit on ordinary activities after taxation				63	85			141		170
Where a joint venture has net liabilities, as required under IFRS, the Group does not account for its share of the deficit in its total share of joint venture results.

4.     Joint ventures and funds (continued)
Operating cash flows of joint ventures and funds
Year		Three  months	Three months	Six months	Six months
ended		ended	ended	ended	ended
31 March		30  September	30 September	30 September	30 September
2011		2011	2010	2011	2010
£m		£m	£m	£m	£m
280	Rental income received from tenants	71	70	143	136
3	Fees and other income received		1		2
(30)	Operating expenses paid to suppliers and employees	(6)	(6)	(20)	(14)
253	Cash generated from operations	65	65	123	124
(147)	Interest paid	(38)	(35)	(74)	(72)
(5)	UK corporation tax paid	(3)	(1)	(5)	(2)
101	Cash inflow from operating activities	24	29	44	50
	Cash inflow from operating activities deployed as:
(4)	Surplus cash (distributed by) retained	7	6	9	(3)
	within joint ventures and funds
105	Total distributed to British Land	17	23	35	53
101		24	29	44	50
5.     Other investments
Other investments include the investment in the HUT convertible bond of £43m (31 March 2011: £43m;  30 September 2010: £43m) and a £9m loan to Eurofund Investments Zaragoza S.L. At 30 June 2010 there was a £209m secured commercial loan to the Bluebutton joint venture; this was repaid during the three months ended 30 September 2010.

6.     Net Debt
31 March										30 September						30 September					30 June
2011										2011						2010					2011
£m										£m						£m					£m
1,012						Debentures				1,051						1,109					1,017
472						Bank loans and overdrafts				926						181					669
455						Other bonds and loan notes				529						456					455
1,939						Gross debt				2,506						1,746					2,141
49						Interest rate and currency derivative liabilities				93						78					69
(11)						Interest rate and currency derivative assets				(81)						(17)					(30)
1,977										2,518						1,807					2,180
(203)						Liquid investments				(200)						(206)					(206)
(60)						Cash and short-term deposits				(111)						(223)					(94)
1,714						Net debt				2,207						1,378					1,880
Gross debt includes £104m due within one year at 30 September 2011 (31 March 2011: £319m; 30 September 2010: £364m; 30 June 2011: £389m).
Undrawn committed bank facilities at 30 September 2011 amounted to £1,584m.
The two financial covenants applicable to the Group unsecured debt are:
Net Borrowings not to exceed 175% of Adjusted Capital and Reserves.
At 30 September 2011 the ratio is 43%
i. Net Borrowings are £2,406m, being the principal amount of gross debt of £2,440m plus amounts owed to joint ventures of £47m (see note 4) plus TPP Investments Ltd of £30m (see note 9), less the cash and short-term deposits of £111m; and
ii. Adjusted Capital and Reserves are £5,635m, being share capital and reserves of £5,064m (see Consolidated Statement of Changes in Equity), adjusted for £33m of deferred tax (see note 1), £345m exceptional refinancing charges (see below) and £193m mark to market on interest rate swaps (see note 1).
Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets.
At 30 September 2011 the ratio is 34%
i. Net Unsecured Borrowings are £1,368m, being the principal amount of gross debt of £2,440m plus amounts owed to joint ventures of £47m less cash and deposits not subject to a security interest of £106m less the principal amount of secured and non-recourse borrowings of £1,013m; and
ii. Unencumbered Assets are £4,066m being properties of £5,342m (see note 3) plus investments in joint ventures and funds of £2,131m (see note 4) and other investments of £259m (see balance sheet: liquid investments of £200m and other investments of £59m) less investments in joint ventures of £1,640m (see note 4) and encumbered assets of £2,026m (see note 3).
In calculating Adjusted Capital and Reserves for the purpose of the unsecured debt financial covenants, there is an adjustment of £345m to reflect the cumulative net amortised exceptional items relating to the refinancings in the years ended 31 March 2005, 2006 and 2007.
The Group Loan to Value (LTV) ratio at 30 September 2011 is 28%, being principal value of gross debt of £2,440m less cash, short-term deposits and liquid investments of £311m, divided by total Group property of £5,342m (see note 3) plus investments in joint ventures and funds of £2,131m (balance sheet) and other investments of £59m (balance sheet).
7.     Dividends
The 2012 second quarter dividend of 6.5 pence per share, totalling £58m, is payable on 17 February 2012 to shareholders on the register at close of business on 13 January 2012.
The Board will announce the availability of the Scrip Dividend Alternative via the Regulatory News Service and on its website (www.britishland.com), no later than 48 hours before the ex-dividend date of 11 January 2012.  The Board expects to announce the split between PID and non-PID income at that time. A Scrip Dividend Alternative will not be enhanced.  PID dividends are paid, as required by REIT legislation, after deduction of withholding tax at the basic rate (currently 20%), where appropriate.  Certain classes of shareholders may be able to elect to receive dividends gross.  Please refer to our website (www.britishland.com) for details.
The 2012 first quarter PID dividend of 6.5 pence per share, totalling £58m, was paid on 11 November 2011.
In respect of the 2011 fourth quarter PID dividend of 6.5 pence per share, totalling £58m which was paid on 12 August 2011, 19% of shareholders opted for the Scrip Dividend Alternative.  The total cash paid by the Group was £48m, being £39m paid to shareholders and £9m of withholding tax.  A cash saving of £10m resulted from settling the balance by issuing of shares.
The Consolidated Statement of Changes in Equity shows total dividends in the six month to 30 September of £115m, £58m being the third quarter 2011 dividend of 6.5 pence per share paid on 13 May 2011.
8.     Segment information
The Group allocates resources to investment and asset management according to the sectors it expects to perform over the medium term. Its two principal sectors are currently offices and retail. The relevant revenue, net rental income, assets and capital expenditure, being the measure of profit or loss and total assets used by the management of the business, are set out below:
												Offices					Retail						Other			Total
												2011			2010		2011				2010		2011		2010	2011			2010
												£m			£m		£m				£m		£m		£m	£m			£m
Six months ended 30 September
Revenue												49			48		105				91		16		10	170			149
Net rental income												38			37		87				78		14		7	139			122
Segment assets												2,979			1,963		4,017				3,842		1,009		787	8,005			6,592
Capital expenditure												85			51		23				6		326		1	434			58
Three months ended 30 September
Revenue												23			24		54				47		9		4	86			75
Net rental income												19			20		43				39		10		2	72			61
Capital expenditure												51			15		9				3		250		1	310			19
Revenue is derived from the rental of buildings, fund management and performance fees and investments. Corporate costs, including administrative and interest expenses, are not allocated to the segments shown, therefore a sectoral profit or loss is not disclosed. Segment assets include the Group's investment in joint ventures and funds. No customer exceeds 10% of the Group's revenues.
Segment assets include the Group's investment in joint ventures and funds of £2,131m (31 March 2011: £2,066m; 30 September 2010: £1,693m), property assets of £5,362m (31 March 2011: £4,790m; 30 September 2010: £4,333m), intangible assets of £nil (31 March 2011: £nil; 30 September 2010: £2m), other investments of £59m (31 March 2011: £51m; 30 September 2010: £51m), debtors of £142m (31 March 2011: £90m; 30 September 2010: £84m), liquid investments of £200m (31 March 2011: £203m; 30 September 2010: £206m) and cash of £111m (31 March 2011: £60m; 30 September 2010: £223m).
9.     Contingent liabilities
TPP Investments Limited, a wholly owned ring-fenced special purpose subsidiary, is a partner in The Tesco British Land Property Partnership and, in that capacity, has entered into a secured bank loan under which its liability is limited to £30m (31 March 2011: £30m, 30 September 2010: £23m) and recourse is only to the partnership assets.
10.     Related party transactions
Details of transactions with joint ventures and funds are given in notes 2 and 9. Amounts owed to joint ventures are detailed in note 4.
There have been no material changes in the related party transactions described in the last annual report.
11.     Note to the Consolidated Statement of Changes in Equity
At 30 September 2011, of the issued 25p ordinary shares, 1m were held in the ESOP Trust (31 March 2011: 1m; 30 September 2010: 1m), 11m were held as Treasury shares (31 March 2011: 11m; 30 September 2010: 11m) and 900m shares were in free issue (31 March 2011: 885m; 30 September 2010: 878m). All shares are fully paid.
12.     Basis of preparation
The financial information for the year ended 31 March 2011 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor report on those accounts was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section 498(2) or (3) of the Companies Act 2006.
The financial information included in this announcement has been prepared on a going concern basis using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with IAS 34 'Interim Financial Reporting'. The same accounting policies, estimates, presentation and methods of computation are followed in the quarterly report as applied in the Group's latest annual audited financial statements. The current period financial information presented in this document is unaudited.
The Group's business activities, financial position, cash flows, liquidity position and financing structure are discussed on pages 8 to 21. The Directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.
The interim financial information was approved by the Board on 14 November 2011.
Supplementary Disclosures
Table A: REIT Income and Capital Return
Summary income statement based on proportional consolidation for the period ended 30 September 2011
The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto.  It presents the results of the Group, with its share of the results of joint ventures and funds included on a line by line, i.e. proportional basis.  The underlying profit before taxation and total profit after taxation are the same as presented in the consolidated income statement.
Year ended 31 March 2011								Six months ended 30 September 2011								Six months ended 30 September 2010
Group	JVs &		Prop					Group			JVs &			Prop		Group			JVs &			Prop
	funds		Consol								funds			Consol					funds			Consol
£m	£m		£m					£m			£m			£m		£m			£m			£m
262	279		541		Gross rental income			146			137			283		127			140			267
(7)	(16)		(23)		Property operating expenses			(7)			(7)			(14)		(5)			(7)			(12)
255	263		518		Net rental income			139			130			269		122			133			255
(61)	(7)		(68)		Administrative expenses			(35)			(3)			(38)		(28)			(4)			(32)
15	3		18		Fees & other income			8						8		7			2			9
209	259		468		Profit before interest and tax			112			127			239		101			131			232
(70)	(142)		(212)		Net  interest			(34)			(73)			(107)		(34)			(71)			(105)
139	117		256		Underlying profit before tax			78			54			132		67			60			127
			28.5p		Underlying earnings per share - diluted basis									14.6p								14.2p
The underlying earnings per share is calculated on underlying profit before taxation of £132m, tax attributable to underlying profits of £2m and 893m shares on a diluted basis, for the six months ended 30 September 2011.
Half Yearly Summary
Year ended																Six months ended						Six months ended
31  March																30 September						30 September
2011																2011						2010
£m																£m						£m
	REIT Income Return
541	Gross rental income															283						267
(23)	Property operating expenses															(14)						(12)
518	Net rental income															269						255
(68)	Administrative expenses															(38)						(32)
18	Fees and other income															8						9
468	Ungeared income return															239						232
(212)	Net interest															(107)						(105)
256	Underlying profit before taxation															132						127
(5)	Underlying tax															(2)						(3)
251	REIT income return															130						124
	REIT Capital Return
591	Valuation movement															202						216
(1)	Other capital & tax (net)*															7
590	REIT capital return															209						216
841	REIT total return															339						340
*includes other comprehensive income, movement in dilution of share options and the movement in items excluded for EPRA NAV.
Table A (continued): EPRA Net Assets
Summary balance sheet based on proportional consolidation as at 30 September 2011
The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto.  It presents the composition of the EPRA net assets of the Group, with its share of the net assets of the joint venture and fund assets and liabilities included on a line by line, i.e. proportional basis and assuming full dilution.
EPRA Net assets 31 March 2011					Group		Share of joint ventures & funds			Share options			Deferred tax		Mark to Market of interest rate swaps			Head Leases		EPRA Net assets 30 September 2011				EPRA Net assets 30 September 2010
£m					£m		£m			£m			£m		£m			£m		£m				£m
6,295		Retail properties			2,969		3,325											(11)		6,283				5,726
3,077		Office properties			1,918		1,498											(6)		3,410				2,928
200		Other properties			475		6											(11)		470				203
9,572		Total properties			5,362		4,829											(28)		10,163				8,857
		Investments in joint			2,131		(2,131)
		ventures and funds
51		Other investments			59		(4)													55				51
		Intangible assets																						2
(205)		Other net (liabilities)			(281)		(63)			53			33					28		(230)				(237)
		assets
(4,317)		Net debt			(2,207)		(2,631)								193					(4,645)				(3,990)
5,101		Net assets			5,064					53			33		193					5,343				4,683
567p		EPRA NAV per share (note 1)																		591p				525p
EPRA Net Assets Movement
Year ended															Six months ended					Six months ended
31 March 2011															30 September 2011					30 September 2010
£m		Pence per share													£m			Pence per share		£m				Pence per share
4,407		504p		Opening EPRA NAV											5,101			567p		4,407				504p
251		29p		REIT income return											130			14p		124				14p
590		60p		REIT capital return											209			23p		216				20p
(147)		(26)p		Dividend paid											(97)			(13)p		(64)				(13)p
																		`
5,101		567p		Closing EPRA NAV											5,343			591p		4,683				525p

Table B: EPRA Performance Measures
EPRA Performance measures summary table
					Six months			Six months
Year ended					ended			ended
31 March 2011					30 September 2011			30 September 2010
£m	Pence per share					£m	Pence per share	£m		Pence per share
255	28.9p			EPRA Earnings (diluted)		125	14.0p	126		14.4p
5,101	567p			EPRA NAV		5,343	591p	4,683		525p
5,117	569p			EPRA NNNAV		5,124	567p	4,523		507p
	5.2%			EPRA Net Initial Yield			5.2%
	5.8%			EPRA 'topped-up' Net Initial Yield			5.8%
	2.7%			EPRA Vacancy Rate			2.5%
Calculation of EPRA earnings (diluted) per share
					Six months			Six months
Year ended					ended			ended
31 March 2011					30 September 2011			30 September 2010
£m	Pence per share					£m	Pence per share	£m		Pence per share
840	95.2p			Profit for the period after taxation		332	37.2p	339		38.7p
				Exclude
				Group - non-underlying current tax
(12)	(1.4)p			Group - deferred tax		(2)	(0.2)p	(12)		(1.4)p
				JVs & Funds - non-underlying current tax
3	0.3p			JVs & Funds - deferred tax				1		0.1p
(313)	(35.4)p			Group - net valuation movement (including result on disposals)		(115)	(12.9)p	(96)		(11)p
(270)	(30.6)p			Joint ventures and funds - net valuation movement (including result on disposals)		(90)	(10.1)p	(114)		(12.9)p
10	1.1p			Amortisation of intangible assets				8		0.9p
(3)	-0.3p			Fair value movement on non-hedge accounted derivatives
255	28.9p			EPRA Earnings (diluted) per Share (EPS)		125	14.0p	126		14.4p
Calculation of EPRA NNNAV per share
Year								Six months		Six months
ended								ended		ended
31 March								30 September		30 September
2011								2011		2010
£m								£m		£m
5,101				EPRA NAV				5,343		4,683
(37)				Deferred tax arising on revaluation movements				(33)		(33)
(89)				Mark to market on effective cash flow hedges and related debt adjustments				(193)		(173)
142				Mark to market on debt				7		46
5,117				EPRA NNNAV				5,124		4,523
569p				EPRA NNNAV per share				567p		507p
EPRA NNNAV is the EPRA NAV adjusted to reflect the fair value of the debt and derivatives and to include the deferred taxation on revaluations.
Table B (continued): EPRA Performance Measures
EPRA Net Initial Yield and 'topped-up' Net Initial Yield
Year ended								Six months ended			Three months ended
31 March 2011								30 September 2011			30 June 2011
£m								£m			£m
4,783			Investment property - wholly owned					5,342			4,997
4,789			Investment property - share of joint ventures and funds					4,821			4,860
(407)			Less developments					(695)			(500)
9,165			Completed property portfolio					9,468			9,357
499			Allowance for estimated purchasers' costs					519			509
9,664			Gross up completed property portfolio valuation					9,987			9,866
512			Annualised cash passing rental income					528			518
(8)			Property outgoings					(11)			(8)
504			Annualised net rents					517			510
60			Rent expiration of rent free periods and fixed uplifts*					58			58
564			'Topped-up' net annualised rent					575			568
5.2		%	EPRA Net Initial Yield					5.2		%	5.2	%
5.8		%	EPRA 'topped-up' Net Initial Yield					5.8		%	5.8	%
21			Including fixed/minimum uplifts received in lieu of rental growth					31			24
585			Total 'topped-up' net rents					606			592
6.1		%	Overall 'topped-up' Net Initial Yield					6.1		%	6.0	%
564			'Topped-up' net annualised rent					575			568
15			ERV vacant space					15			15
(21)			Reversions					(19)			(17)
558			Total ERV					571			566
5.8		%	Net Reversionary Yield					5.7		%	5.7	%
* The period over which rent free periods expire is 2.3 years (30 June 2011: 2.5 years; 31 March 2011: 3 years)
EPRA Vacancy Rate
Year ended								Six months ended			Three months ended
31 March 2011								30 September 2011			30 June 2011
£m								£m			£m
15			Annualised potential rental value of vacant premises					15			15
558			Annualised potential rental value for the completed property portfolio					571			566
2.7		%	EPRA Vacancy Rate					2.5		%	2.7	%
Table C: Calculation of gross rental income
Year ended								Six months ended			Six months ended
31 March								30 September			30 September
2011								2011			2010
£m								£m			£m
505			Rent receivable					263			245
32			Spreading of tenant incentives and guaranteed rent increases					19			21
4			Surrender premia					1			1
541			Gross rental income					283			267

INDEPENDENT REVIEW REPORT TO THE BRITISH LAND COMPANY PLC
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2011 which comprises the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity, and related notes 1 to 12. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 12, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
14 November 2011

 

END

 

 

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