Interim Results - Part 3

British Land Co PLC
29 November 2001



PART 3


  Notes to the accounts for the six months ended 30 September 2001 (unaudited)

  1. Basis of preparation                                                     

  The interim accounts are prepared on the basis of the accounting policies   
  set out in the Group's financial statements for the year ended 31 March     
  2001, consistently applied in all material respects, save for the adoption  
  of Financial Reporting Standard 19 'Deferred Tax' (FRS 19) and Urgent       
  Issues Task Force Abstract 28 'Operating Lease Incentives' (UITF 28), which 
  now have effect.                                                            

  The figures for the year ended 31 March 2001 have been extracted from the   
  statutory accounts which have been filed with the Registrar of Companies.   
  The auditors' report on those accounts was unqualified and did not contain  
  any statement under section 237 (2) or (3) of the Companies Act 1985; the   
  comparatives for the year ended 31 March 2001 and six months ended 30       
  September 2000 have been restated to comply with FRS 19 and UITF 28.        

  Deferred Tax                                                                

  Deferred tax assets and liabilities arise from timing differences between   
  the recognition of gains and losses in the financial statements and their   
  recognition in a tax computation. Previously, the Group's accounting policy 
  was only to provide for deferred tax to the extent that liabilities or      
  assets were expected to be payable or receivable in the forseeable future.  
  In accordance with FRS 19, deferred tax is now provided in respect of all   
  timing differences that have originated, but not reversed, at the balance   
  sheet date that may give rise to an obligation to pay more or less tax in   
  the future. Deferred tax is not recognised when fixed assets are revalued   
  unless by the balance sheet date there is a binding agreement to sell the   
  revalued assets and the gain or loss expected to arise on sale has been     
  recognised in the financial statements. Deferred tax is measured on a       
  non-discounted basis.                                                       

  Comparatives have been restated to comply with FRS 19 and the effects of    
  the change in policy are summarised below:                                  

  Year ended                                                                  
    31 March                                                                    
        2001                                                   2001    2000   
          £m                                                     £m      £m     

                               Profit and loss account                        

      (15.3)                   Increase in deferred tax        (3.1)   (6.8)  
                               charge                                         
                               Balance sheet                                  
      (91.7)                   Increase in deferred           (94.8)  (83.2) 
                               tax liability                                  
                                                                              
  Notes to the accounts for the six months ended 30 September 2001 (unaudited)

  1. Basis of preparation (continued)                                         

  Operating Lease Incentives                                                  

  Operating lease incentives include rent free periods and other incentives   
  (such as contributions towards fitting out costs) given to lessees on       
  entering into lease agreements. Previously, the Group's accounting policy   
  was to recognise income as the rent fell due and to capitalise appropriate  
  incentives.                                                                 

  In accordance with UITF 28 rent receivable in the period from lease         
  commencement to the earlier of the first rent review to the prevailing      
  market rate and the lease end date, is now spread evenly over that period.  
  The cost of other incentives is spread on a straight-line basis over a      
  similar period.                                                             

  This has been applied to all lease incentives for leases commencing on or   
  after 1 April 2000.                                                         

  Comparatives have been restated to comply with UITF 28 and the effects of   
  the change in policy are summarised below:                                  

Year ended                                                                  
  31 March                                                                    
      2001                                                  2001     2000   
        £m                                                    £m       £m     

                                 Profit and loss account                      

  1.3                            Increase in rental income    0.1      0.6    
  0.7                            Increase in joint venture    0.5      0.4    
                                 operating profit                             
 (0.8)                           Increase in corporation     (0.3)    (0.4)  
                                 tax charge                                   
  1.2                            Increase in profit on        0.3      0.6    
                                 ordinary activities after                    
                                 taxation                                     

                                 Balance sheet                                
 (4.5)                           Decrease in investment      (5.3)    (2.4)  
                                 properties                                   
  0.5                            Increase in net joint        0.9      0.3    
                                 venture assets                               
  5.8                            Increase in prepayments      6.7      3.0    
                                 and accrued income                           
 (0.6)                           Increase in corporation     (0.8)    (0.3)  
                                 tax payable                                  
  1.2                            Increase in net assets       1.5      0.6    

  Summary                                                                     

  The combined effect of complying with FRS 19 and UITF 28 is summarised      
  below:                                                                      

Year ended                                                                  
  31 March                                                                    
      2001                                                    2001     2000   
        £m                                                      £m       £m     

                                 Profit and loss account                      

  (14.1)                         Decrease in profit after     (2.8)    (6.2)  
                                 taxation                                     

                                 Balance sheet                                

  (90.5)                         Decrease in net assets      (93.3)   (82.6) 
                                                                              

  2. Other income                                                             

  Other income in the six months ended 30 September 2000 included £15.3       
  million capital profit, net of costs, received from Standard Bank of South  
  Africa when Standard Bank bought out the Group's rights to acquire a 29.7%  
  stake in Liberty International PLC.                                         

  3. Disposal of fixed assets                                                 

  The profit for the year ended 31 March 2001 included £14.6                  
  million arising on the disposal of Selfridges shares.                       

  4. Net interest payable                                                     

Year ended                                                                  
  31 March                                                                    
      2001                                                      2001    2000  
        £m                                                        £m      £m    

                        British Land Group                                    

   52.9                 Payable on:         bank loans and       28.7    26.3  
                                            overdrafts                        
  222.4                                     other loans         108.5   110.3 
  275.3                                                         137.2   136.6 
   (4.0)                Deduct:             development cost     (2.0)         
                                            element                           
  271.3                                                         135.2   136.6 
   (5.7)                 Receivable on:     deposits and         (3.1)   (2.9) 
                                            securities                        
  (16.0)                                    loans to joint       (7.9)   (7.4) 
                                            ventures                          
  249.6                 Total British                           124.2   126.3 
                        Land Group                                            

                        Share of joint                                        
                        ventures                                              

  16.0                  Interest payable                          7.9     7.4   
                        on shareholder                                        
                        loans                                                 
  45.7                  Other interest                           25.3    21.1  
                        payable (net)                                         
  61.7                  Total share of                           33.2    28.5  
                        joint ventures                                        
                        (note 9)                                              
 311.3                  Net interest payable                    157.4   154.8 
  83.6                  Exceptional item (see below)                          

  On 30 March 2001 the company announced the decision to repurchase the £150m 
  12.5% Bonds 2016 and the £150m 8.875% Bonds 2023, which was completed on 1  
  May 2001. Inclusive of costs, the pre-tax exceptional charge was £83.6m     
  (post tax charge: £74.6m).                                                  
                                                                              
  5. Taxation                                                                 

  Year ended                                                                  
    31 March                                                                    
        2001                                                   2001         2000
  (restated)                                                          (restated)
         £m                                                     £m           £m 
 

                       Profit on                                              
                       ordinary                                               
                       activities                                             
                       before taxation                                        

  14.5                 British Land       Corporation tax    4.5          15.6 
                       Group:                                                 
   6.5                                    Deferred tax       9.3           6.8  
   4.3                 Share of joint     Corporation tax    4.4           1.4  
                       ventures (note                                         
                       9):                                                    
   1.0                                    Deferred tax      (1.5)          0.4  
  26.3                                                      16.7          24.2 

  6. Interim dividend                                                         

  The interim dividend of 3.8 pence will be paid on 20 February 2002 to       
  shareholders on the register at the close of business on 25 January 2002.   

  7. Earnings per share                                                       

  Basic and diluted earnings per share are calculated on the profit on        
  ordinary activities after taxation of £63.3m (March 2001 restated £61.2m;   
  September 2000 restated £60.3m) and on the weighted average number of       
  shares in issue during the period of 518.3m (March 2001 - 518.2m; September 
  2000 - 518.0m).                                                             
  Adjusted earnings per share are calculated by excluding the post tax profit 
  adjustment of £2.8m (March 2001 - £14.1m; September 2000 - £6.2m) which is  
  the combined effect of adopting both FRS 19 and UITF 28, as described in    
  Note 1.                                                                     
                                                                              
  8. Investment, development and trading properties                             
   
                                            Leasehold                         
                               Freehold          Long       Short      Total
                                     £m           £m           £m         £m  
                                                                              
  Investment                                                                    
  and development                                                               
  properties                                                                    

  Valuation                    6,965.9      184.5                    7,150.4
  and cost                                                                
  1 April 2000                                                                  
           Adjustment for         (4.5)                                 (4.5)
           UITF 28                                                         
  Restated                     6,961.4      184.5                    7,145.9
                                                                
  Valuation                                                                     
  and cost                                                                      
  1 April 2000                                                                  
           Additions             283.7       80.5                      364.2
           Disposals            (140.8)                               (140.8)
           Exchange               (0.4)                                 (0.4)
           fluctuations                                                  
           Revaluations           35.3       (1.1)                      34.2
  Valuation                    7,139.2      263.9                    7,403.1
  and cost                                                             
  30 September 2001                                                             
  Trading                                                                     
  properties                                                                    
                                                                 
  At lower of                                                                   
  cost and net                                                                  
  realisable                                                                    
  value                                                                       
  30 September 2001                43.3       8.0             2.0       53.3
  External valuation surplus                                           127.7
  on development and trading                                                
  properties                                                                  
  Total investment,                                                  7,584.1
  development and trading                                                 
  properties                                                             
     
  Investment, development and trading properties were valued by external      
  valuers on the basis of open market value in accordance with the Appraisal  
  and Valuation Manual published by The Royal Institution of Chartered        
  Surveyors.                                                                  
                                                                  £m          
  On an open                                                                  
  market basis -                                                              
  External                                                                    
  valuations:                                                                 
                     United    ATIS Real Weatheralls         7,524.3          
                     Kingdom:                                                 
                     Republic  Jones Lang LaSalle               63.9            
                     of Ireland:                                                
                     Netherlands CB Richard Ellis B.V.           1.2            
  Adjustment for                                                (5.3)           
  UITF 28 (see                                                                
  Note 1)                                                                     
  Total                                                      7,584.1            
  investment,                                                                 
  development and                                                             
  trading properties       
                                                                   £m           
        
  Total external valuation                                                    
  surplus on development and                                                  
  trading properties                                                          
  British Land Group                                            127.7           
                     
  Share of joint ventures                                         2.7           
           
                                                                130.4           
         
                                                                             
  9. Joint ventures                                                           

  British Land's share of profits of joint                                    
  ventures                                                                    

  Year ended                                                                  
  31 March                                                                    
      2001                                       2001              2000       
 (restated)                                                   (restated) 
    £m                                             £m                £m         

  85.5          Gross rental income              46.9              38.6       
  79.5          Net rental income                43.4              36.1       
                Profit on property trading        0.5                          
  (3.0)         Administrative expenses          (1.1)             (1.0)      
  76.5          Operating profit                 42.8              35.1       
   3.7          Disposal of fixed assets         (1.3)              1.0        
  80.2                                           41.5              36.1       
 (45.7)         Net interest payable to third   (25.3)            (21.1)     
                parties                                                       
 (16.0)         Interest payable to British      (7.9)             (7.4)      
                Land                                                          
 (61.7)         Net interest payable (note 4)   (33.2)            (28.5)     
  18.5          Profit before taxation            8.3               7.6        
  (5.3)         Taxation                         (2.9)             (1.8)      
  13.2          Profit after taxation             5.4               5.8        

  The amounts relating to captions shown in bold are recognised at the        
  relevant point in the consolidated profit and loss account.                 

  The movement for the period:                                                

                                Equity  Loans             Total               
                                   £m      £m                £m                 

  At 1 April                    390.8   321.9             712.7               
  2001                                                                        

  Prior year adjustment         (12.6)                    (12.6)              
  Restated at 1 April 2001      378.2   321.9             700.1               
  Additions                      67.3    92.1             159.4               
  Purchase of remaining         (30.3)                    (30.3)              
  partnership interest                                                        
  Repayment of loans                    (26.3)            (26.3)              
  Share of profit                 6.2                       6.2                 
  attributable to joint                                                       
  ventures (net of dividend)                                                  
  Revaluations                   13.6                      13.6                
  Adjustments for UITF 28 and    (0.9)                     (0.9)               
  FRS 19                                                                      
  At 30 September 2001          434.1   387.7             821.8               
                                                                              

  9. Joint ventures (continued)                                                 
               

  Summary of British                                                          
  Land's share in joint                                                       
  ventures                                                                    
                       Operating          Gross        Gross         Net       
                         profits         assets  liabilities   investment
                              £m             £m           £m           £m       
  The Public House           3.3            98.3        (43.6)       54.7      
  Company Ltd                                                                 
  BL Universal PLC          13.4           464.1       (229.4)      234.7     
  BL Rank Properties Ltd     2.6            66.9        (49.3)       17.6      
  Cherrywood Properties      0.9            40.8        (12.9)       27.9      
  Ltd (Republic of                                                            
  Ireland)                                                                    
  BL Fraser Ltd              3.5           101.6        (73.7)       27.9      
  BLT Properties Ltd         3.7           117.7        (72.8)       44.9      
  Tesco BL Holdings Ltd      5.2           167.9       (109.2)       58.7      
  BL West                    5.7           194.2       (139.2)       55.0      
  London & Henley            1.7            92.0        (61.8)       30.2      
  Holdings Ltd                                                                
  BL Davidson Ltd            0.0           248.4       (100.5)      147.9     
  Other joint ventures       2.8           145.6        (23.3)      122.3     
  Total                     42.8         1,737.5       (915.7)      821.8     

  The Group's share of joint venture external net debt is £741.7m (31 March   
  2001 - £735.5 m). The amount guaranteed by British Land is £33.0m (31 March 
  2001 - £33.0m).                                                             

  The Group's share of the market value of the debt and derivatives as at 30  
  September 2001 was £18.0m more than the Group's share of the book value (31 
  March 2001 - £18.4m).                                                       

  The Group's share of joint venture properties as at 30 September 2001 was   
  £1,648.8m (31 March 2001 - £1,506.8m).                                      

  All companies are property investment companies registered in England and   
  Wales unless otherwise stated.                                              

  10. Other investments                      £m                                 

  At 1 April                               73.7                               
  2001                                                                        
  Additions                                 4.4                                
  Disposals                                (0.9)                              
  Revaluations                             (4.0)                              
                                                               
  At 30 September 2001                     73.2                               

  11. Debtors                                                                 

  31 March                                                                    
      2001                           2001  2000                                
(restated)                              (restated)                         
     £m                                £m    £m                                 

  97.1         Trade debtors         52.8  35.5                               
  20.0         Amounts owed by       27.6  15.6                               
               joint ventures                                                 
  31.2         Prepayments and       12.4   7.4                                
               accrued income                                                 
 148.3                               92.8  58.5                               
                                                                              
12. Creditors due within one year                                          

 31 March                                                                    
     2001                                                2001      2000       
(restated)                                                    (restated) 
   £m                                                      £m        £m         
  35.8                        Debentures and loans       42.1      35.0       
                              (note 15)                                       
   6.0                        Overdrafts (note 15)        2.6       4.6        
 248.0                        Bank loans (note 15)      292.5     230.0      
  57.1                        Trade creditors            65.9      61.8       
  36.7                        Corporation tax            49.2      52.2       
  12.7                        Other taxation and         12.8       6.4        
                              social security                                 
 268.8                        Accruals and deferred     184.4     168.4      
                              income                                          
  40.9                        Proposed dividend          19.7      18.7       
 706.0                                                  669.2     577.1      


  13. Creditors due after one year                                            

  31 March                                                                    
      2001                                                 2001      2000       
        £m                                                   £m        £m       
 
  2,417.1                     Debentures and loans       2,661.3   2,435.4    
                              (note 15)                                       
    640.2                     Bank loans (note 15)         716.3     795.4      
  3,057.3                                                3,377.6   3,230.8    

  14. Provisions for liabilities and charges                                  

  31 March                                                                    
     2001                                                   2001      2000      
(restated)                                                      (restated) 
       £m                                                     £m        £m      
  

    73.8                      Deferred tax                  83.1      74.1      

  The deferred tax liability relates primarily to capital allowances claimed  
  on plant and machinery within investment properties. When a property is     
  sold and the agreed disposal value for this plant and machinery is less     
  than original cost, there is a release of the excess provision.             
                                                                              

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