3rd Quarter Results

RNS Number : 2269B
British Land Co PLC
15 February 2011
 



                 

                                               

 

THE BRITISH LAND COMPANY PLC

THIRD QUARTER RESULTS TO 31 DECEMBER 2010

 

Letting activity, developments and strong investor demand for prime assets drive income, valuation and NAV growth

 

Continued outperformance driven by good income and capital growth

·      Q3 underlying PBT2 up 10% at £64 million

·      Q3 portfolio valuation £9.3 billion: up 2.3% in the quarter: +13.1% over 12 months

·      Net Asset Value1 per share at 548 pence: up 4.4% in the quarter; +25% over 12 months

·      Continued capital outperformance versus IPD: +100 bps in Q3, +480bps over 12 months

·      Third quarter dividend maintained at 6.5 pence; takes total accounting return to shareholders to 5.6%; 31.1% over 12 months

 

Further improvement in retail rental performance

·      Retail ERV up 0.4% (IPD benchmark down 0.1%) building further on growth in Q2

·      170,000 sq ft of new lettings and lease renewals agreed at an average of 7.3% ahead of ERV

·      Over 730,000 sq ft of rent reviews capturing rental income growth of 12.8%

 

Continued growth in London office rental values: establishing higher rental levels

·      Office ERV up 1.4% (IPD benchmark up 0.4%); building further on growth in Q2 and Q1

·      Lettings agreed at 7.7% ahead of ERV continuing to establish higher rental levels

 

Increased investment activity: development programme and acquisitions totalling £1.93 billion in the year to date

·      Completion of joint venture with Oxford Properties to develop 610,000 sq ft Leadenhall Building

·      Agreed purchase and re-development of Marble Arch House

·      £330 million of acquisitions since September (£400 million YTD) including the 570,000 sq ft Drake Circus Shopping Centre

 

Good progress on largest committed central London office development programme

·      Building works underway at the Leadenhall Building, NEQ and Baker Street

·      Detailed planning application submitted for 700,000 sq ft development at 5 Broadgate

·      Detailed planning consent obtained for major refurbishment at 199 Bishopsgate

·      Marble Arch House on schedule to start on site mid-year

 

Q3 2010/11

Q3 2009/10

change

Net Asset Value1 per share

548p

438p

+25%

IFRS net assets

£4,710m

£3,645m


Underlying profit before tax2

£64m

£58m

+10%

IFRS profit before tax

£263m

£611m


Underlying diluted EPS2

7.0p

6.6p

+6%

Basic EPS

29.6p

72.4p


Dividends per share

6.5p

6.5p

-

1 EPRA (European Public Real Estate Association) basis - see Note 1 to the accounts

2 see Note 1 to the accounts

3 British Land share £1.4 billion

 

 

 

Chris Grigg, Chief Executive said: "This is a strong financial performance from British Land which reflects the good progress we have made right across the business during what has been a busy quarter. We continued to outperform the IPD benchmark and delivered good growth in income, valuation and NAV. Looking forward, while the UK recovery is likely to be muted, British Land is well placed to benefit from occupier and investor demand for high quality space in retail and central London offices coupled with an increase in acquisition opportunities at more realistic prices."

 

 

 

Investor Conference Call

 

British Land will host a conference call at 9.30am today, 15 February 2011.  The details for the conference call are as follows:

 

UK Toll Free number:                 0800 028 1243

UK number:                               +44 207 806 1950

Passcode:                                 5014997

 

A dial in replay will be available until 1 March 2011

 

Replay number:                         0800 358 7735

Passcode:                                 5014997#

 

A podcast and transcript will be available on the group's website www.britishland.com from 16 February, 2011

 

 

Investor Relations

 

Sally Jones, British Land                                    020 7467 2942

 

Media 

Pip Wood, British Land                                       020 7467 2838

Gordon Simpson, Finsbury Group/                       020 7251 3801

Guy Lamming, Finsbury Group

 

 

 

Forward-Looking Statements

 

This report contains certain "forward-looking" statements reflecting current views on our markets, activities and prospects. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of British Land speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. British Land does not undertake to update forward-looking statements to reflect any changes in British Land's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

 

 

 

 

Notes to Editors:

 

British Land is one of the UK's largest Real Estate Investment Trusts with total assets, owned or under management, valued at £14.5 billion (British Land share £9.3 billion), as at 31 December 2010.  Our property portfolio is focused on high quality retail locations and central London offices which we believe are well placed to benefit from growing customer demand.  We have among the highest occupancy rates and average lease lengths of the major UK REITs at 98.1% and 12.1 years respectively. 

 

Retail assets account for 66% of our portfolio, around 80% of which are located at prime out-of-town sites.  Our portfolio comprises over 26 million sq ft of retail space across 89 retail warehouse properties, 99 superstores, 11 shopping centres and 10 department stores.  Our portfolio benefits from flexible planning consents making the portfolio adaptable to a wide range of formats.  This allows us to actively manage our portfolio and deliver the most attractive space to both retailers and consumers.

 

Central London offices currently comprise 32% of the portfolio.  Our portfolio comprises 6 million sq ft of office space and includes a 50% share in Broadgate, the premier office campus in the City and Regent's Place, an office estate in the West End.  During 2010, we committed to a significant development programme in central London which, on the basis of current estimates of values at completion, increases the weighting of offices in the group's portfolio from 32% to nearly 40%.  These developments, which will deliver 2.2 million sq ft of high quality space in the City and West End by 2014, include: a new 700,000 sq ft building for UBS at Broadgate; the 610,000 sq ft Leadenhall Building in London's insurance district; and the 500,000 sq ft NEQ building, which will complete the Regent's Place estate in the West End. The aggregate development cost, including land and interest is expected to be £1.5 billion, of which British Land's share is £1.0 billion.

 

Further details can be found on the British Land website at www.britishland.com

 

 

CHIEF EXECUTIVE'S REVIEW

 

It was a busy quarter for British Land and we made excellent progress across all areas of our business - asset management, development and investment - in line with our objective of delivering superior total shareholder returns. Our capital returns over the last 12 months are now significantly ahead of the IPD benchmark at +13.3% compared to +8.5% for IPD. The strength of our income, valuation and NAV performance reflect:

 

·      Our sector focus - high quality retail and prime central London offices - where occupier trends have improved and investor demand remains strong. ERVs across our portfolio rose by 0.5% on the prior quarter bringing the increase for the year to date to 1.8%, ahead of the IPD benchmark at +0.1% for the quarter and -0.1% for the year to date;

·      Our income focus - best in class income profile with long leases (average 12.1 years) and high occupancy (98.1%) in locations and formats with strong occupier appeal;

·      Successful asset management - with lettings ahead of ERVs in both retail and offices;

·      Higher development valuations - the valuation of our office developments rose by 11.9% reflecting continued strong growth in central London office rents.

 

We continued to build our future income stream with an additional £330 million of capital committed to acquisitions since the beginning of the quarter, which included the purchase of Drake Circus shopping centre in Plymouth. We also concluded our agreement to develop the Leadenhall Building in a joint venture with Oxford Properties. So far in 2010/11, we have committed to £1.9 billion (BL share £1.4 billion) of development projects and acquisitions with further prospective deals under review.

 

Financial Overview

 

·      Portfolio valuation up 2.3% to £9.3 billion - continued trend of outperformance reflecting asset allocation and focus on prime properties.  The uplift in the office portfolio valuation was driven by continued investor confidence in central London with yield compression and ERV growth in standing investments and developments, notably the Leadenhall Building. The retail portfolio valuation growth reflected continued investor appetite for high quality retail with Meadowhall also benefiting from rental performance, and the Oasis food court redevelopment.

 

·      NAV per share up 4.4% with 12 month increase of 25%. Net Asset Value per share increased to 548 pence, which compares with 438 pence at 31 December 2009 and 525 pence at September 2010.

 

·      Underlying profits growth (+10%). Underlying pre-tax profits at £64 million were 10% ahead of the comparable quarter last year, benefiting from the successful letting of newly developed space over the last year. Underlying pre-tax profits for the 9 months at £191 million are now significantly ahead of prior year, excluding the 2009 provision release.

 

·      Dividend maintained at 6.5 pence for the quarter, as previously indicated, taking total accounting returns to shareholders in the form of capital growth and dividends to 5.6% for the quarter and 31.1% for the last 12 months.

 

Asset Management Highlights

 

·      Improving retail rental performance with ERVs ahead by 0.4% up from +0.1% in the second quarter. This compares with declines of 0.1% for the IPD benchmark in both quarters. We agreed a total of 170,000 sq ft of new lettings and renewals at an average of 7.3% ahead of ERV. This included 20,000 sq ft of new lettings at Meadowhall and 50,000 sq ft of space let at Rotherham to Asda Living and Currys/PC World. Occupancy across our retail portfolio was maintained at 98.8%.

 

·      Further growth in London office rental values with ERVs up 1.4%; lettings establish higher rental levels. This brings the increase for the 12 months to date to 9.6% reflecting strong occupier demand coupled with limited availability of modern prime space in central London locations. During the quarter, lettings were agreed at an average of 7.7% ahead of ERV which continued to establish higher benchmark rents. Overall occupancy in the office portfolio increased to 97.1%.

 

Investment Highlights

 

·      Significant increase in investment activity: £1.9 billion of developments and acquisitions year to date. As expected, investment activity has increased in recent months.  We are seeing a greater number of attractive opportunities coming on to the market, particularly good secondary property and assets which require combinations of development, re-financing and restructuring. Following major development commitments earlier in the year, key deals since the beginning of the quarter totalling £330 million (£400 million YTD) have included:

-      £240 million purchase of Drake Circus Shopping Centre in Plymouth, a net initial yield of 6%. It is the dominant shopping location for Devon and Cornwall with further asset management potential;

-      £59 million commitment to purchase and re-develop an 86,000 sq ft building on the site of Marble Arch House, just North of Oxford St and within the Portman Village;

-      Agreement to purchase  a 20 acre retail development site in Luton;

-      £30 million agreement (announced today) to purchase Green Lanes Shopping Centre in Barnstaple, a locally dominant retail destination, representing a net initial yield of over 8%;

-      Sale of a Sainsbury's superstore at Macclesfield for £36 million representing a net initial yield of 4.4%.

 

·      Development programme on schedule with construction underway at three of our six major sites.  Our developments at Leadenhall Street and Regent's Place are already generating strong interest from a broad range of occupiers from across the insurance, financial, professional and corporate business sectors. Key milestones since the beginning of the quarter included:

-      Completion of our joint venture agreement with Oxford Properties to develop the 610,000 sq ft Leadenhall Building. Piling and basement works started in early January and we are on schedule to start construction mid-year;

-      Completion of demolition works at NEQ, Regent's Place, with piling and basement works commenced on site and completion on track for Q2 2013;

-      Securing vacant possession, placing the building contract and starting on site at our 158,000 sq ft office-led development on Baker Street;

-      Submitting the planning application for the 700,000 sq ft building for UBS at Broadgate. The planning process is well advanced and we expect to start on site later this year;

-      Receipt of detailed planning consent for the major refurbishment of 199 Bishopsgate.

 

Financing

 

·      Balance sheet strength to fund significant investment programme. We remain in a strong position to take advantage of the increase in investment opportunities while at the same time pursuing our development programme.  Our loan to value ratio remains comfortable at 23% on a group basis and 45% including our share of debt in joint ventures and funds.  The strength and quality of our properties and their rental income continue to underpin our ability to finance our expansion on competitive terms. In the quarter, we refinanced a maturing £185 million debt facility for a joint venture with Tesco on a seven year term at a finance rate lower than the maturing facility.

 

Outlook

 

Looking forward, the pace of the recovery in the UK economy seems likely to be muted with uncertainty around the near-term impact of the government's austerity programme and continued pressure on the consumer. However, we have focused our business on those sectors of the property market where we believe the underlying demand dynamics - high quality retail and central London offices - are expected to remain positive.

 

As anticipated, we are starting to see property coming to market at more realistic prices than was the case for most of calendar year 2010.  We have made a number of attractive investments in the quarter with further deals under review and we remain confident that British Land is well placed to take advantage of these opportunities. 

 

 

Chris Grigg

Chief Executive

 

 

 

BUSINESS REVIEW

 

 

PORTFOLIO OVERVIEW

 

The quality of the Group's income stream continues to be underpinned by high occupancy rates, long leases and low levels of contracted rent subject to expiry over the short to medium term. The occupancy rate for the total portfolio at 31 December 2010 remained high at 98.1%, with the average lease length to first break at 12.1 years and only 7.7% of contracted rent subject to break and expiry over the next 3 years.

 

High occupancy & long leases

At 31 Dec 2010

Retail

Offices

Total

Occupancy rate (%)1

98.8

97.1

98.1

Average lease length (years to first break)

13.1

9.4

12.1

% of contracted rent subject to lease break or expiry over the next 3 years

7.0

9.1

7.7

Data includes Group's share of properties in Funds & Joint Ventures

1underlying occupancy including accommodation under offer or subject to asset management

 

 

PORTFOLIO VALUATION

 

The value of the portfolio increased by 2.3% to £9.3 billion in the three months ended 31 December 2010, bringing the increase for the 9 months of the year to date to 5.1%.

 

Valuation by sector

Group

Funds & JVs1

Total

Portfolio

Change2

At 31 Dec 2010

£m

£m

£m

%

9 mths %

3 mths %

Retail:







Retail warehouses

1,725

1,057

2,782

30.0

2.4

1.2

Superstores

136

1,187

1,323

14.3

5.0

1.5

Shopping centres

449

1,080

1,529

16.5

6.5

4.1

Department stores3

445

-

445

4.8

1.8

2.2

All retail

2,755

3,324

6,079

65.6

3.9

2.1

Offices4:







City

450

1,371

1,821

19.6

6.6

2.8

West End

1,115

-

1,115

12.0

9.4

3.2

Provincial

35

8

43

0.5

25.1

4.7

All Offices

1,600

1,379

2,979

32.1

7.8

3.0

Other

204

12

216

2.3

1.6

0.9

Total

4,559

4,715

9,274

100.0

5.1

2.3

1 Group's share of properties in Funds & Joint Ventures

2 valuation movement during the period (after taking account of capital expenditure) of properties held at the balance

  sheet date, including developments (classified by end use), purchases and sales

3 includes High Street: total value £20 million (0.2% of portfolio), 2.4% increase for the 3 months (9 months:+0.9%)

4 includes committed and prospective developments: total value £272 million (2.9% of portfolio), 11.9% increase for the

  3 months (9 months: +15.5%)

 

The main contributors to the valuation increase were:

·      Letting activity in both retail and offices;

·      A 11.9% uplift in development property valuations driven by the growth in ERVs in the committed development pipeline and our joint venture agreement with Oxford Properties to develop the Leadenhall Building;

·      Yield compression in shopping centres, notably Meadowhall, reflecting both recent market investment activity and on-going asset management initiatives.

 

The portfolio capital return (as measured by IPD) for the third quarter was 2.4%, contributing to a capital return of 5.1% for the 9 months to 31 December 2010.  This compared to the IPD Benchmark capital return of 1.4% and 4.0% for the same periods.

 

ERV growth for the total portfolio was up 0.5% in the third quarter, ahead of the IPD Benchmark which was up 0.1%.  As a result, rental values across the portfolio have risen 1.8% since 31 March 2010, compared with the IPD Benchmark of -0.1% over the same period.  In retail, there was further evidence of improving trends in rental values across our prime portfolio with ERV growth of 0.4% in the quarter.  ERV growth in offices up 1.4% continued to outperform driven by recent lettings which have benefited from the cyclical recovery in central London now well underway. 

 

Portfolio yields &

ERV Growth

(excluding developments)

Gross top-up

initial yield %1

Net

equivalent

yield %2,3

Net equivalent yield compression bps2,3

ERV

Growth %3,4

9 mths

3 mths

9 mths

3 mths

Retail:







Retail warehouses

6.2

5.9

(12)

(7)

0.4

0.3

Superstores

5.3

5.1

(18)

(7)

0.3

0.2

Shopping centres

6.4

5.9

(45)

(26)

0.2

0.9

Department store5

6.8

6.7

(46)

(12)

-

-

All retail

6.1

5.8

(20)

(12)

0.3

0.4

Offices:







City

6.9

5.9

(16)

(5)

5.9

1.9

West End

6.3

5.6

(15)

(8)

5.3

0.6

Offices

6.7

5.8

(16)

(6)

5.7

1.4

Other

9.5

9.3

(12)

(17)

(7.9)

(7.9)

Total

6.4

5.8

(21)

(10)

1.8

0.5

Data includes Group's share of properties in Funds & Joint Ventures

1yield to British Land (without notional purchaser's costs), adding back rent frees and contracted rental uplifts

2 after notional purchaser's costs

3 excludes Europe

4 like for like (as calculated by IPD)

5 includes High Street

 

The EPRA net initial yield for the portfolio at 31 December 2010 was 5.2% and the EPRA topped up net initial yield was 5.9%.  Further information is provided in the supplementary information.

 

 

RETAIL

 

Asset Management

Within the existing portfolio, we agreed new lettings and lease renewals covering nearly 170,000 sq ft with an average lease length of 9 years to first break at an average of 7.3% ahead of ERV. Of these, 70% were long-term deals.  Across the retail portfolio, letting activity included:

 

·       Meadowhall, where we agreed 15 long-term lettings including Sugacane, Fashion Rocks, Hugh Rice, Café Rouge, and Thomas Sabo.  Occupier demand for the proposed refurbishment of the Oasis Food Court has been strong;

 

·       Parkgate Rotherham, new leases were signed for a 30,000 sq ft Currys/PC World store and a 20,000 sq ft Asda Living store;

 

·       Bon Accord in Aberdeen, lettings included: the Disney Store, Modelzone, and Bravissimo.

 

Rent reviews totalling 734,000 sq ft were settled in the quarter capturing an increase in rental income of 12.8%.  The superstore portfolio accounted for more than 70% of the uplift with rent reviews settled at 13.5% above the previous passing rent. 

 

Investment Activity

Investment activity has increased since the beginning of the quarter with key deals including:

 

·      The acquisition of Drake Circus Shopping Centre in Plymouth, for £240 million reflecting a net initial yield of 6.0% with significant potential for income growth through asset management initiatives.  The 570,000 sq ft centre, which was opened in 2006, comprises 70 units in modern retail formats and is anchored by Primark, Marks & Spencer and Next with other key occupiers including established retailers such as Top Shop, New Look, Boots and H&M as well as newer fast growing retail brands such as Cult/Superdry and Republic.  Located in the middle of Plymouth, it is the West Country's most popular shopping destination with an extensive catchment covering both Devon and Cornwall, and an annual footfall of nearly 19 million people;

 

·      Agreement to purchase a majority share in Power Court, a 20 acre development site close to Luton town centre;

 

·      Agreement to acquire Green Lanes Shopping Centre in Barnstaple, north Devon, (announced today) for £30 million, representing a net initial yield of over 8%. Green Lanes is one of north Devon's principal shopping locations, providing 131,000 sq ft of retail space and attracting nearly 5.5 million visitors to the scheme each year. It is virtually fully let (99% occupancy) and has 42 retail units. The centre is anchored by Bhs and Wilkinson with other key tenants including Top Shop/Top Man, Peacocks, New Look, Mothercare, Monsoon, M&Co and La Senza. Zone A rents range from £50 to £80 per square foot;

 

·      The sale of a Sainsbury's superstore in Macclesfield for £36 million, representing a net initial yield of 4.4%.  The store, which was acquired by British Land in January last year for £32 million, is leased to Sainsbury's for 28.5 years with annual RPI linked increases (subject to a range of 2-4% per annum).

 

 

Development

During the quarter, we continued to progress a number of retail development plans.

 

Plans are well under way to create a new 45,000 sq ft leisure destination at the Glasgow Fort Shopping Park and we are now close to concluding negotiations with a major cinema operator.  In addition, discussions are at an advanced stage with a number of leading restaurant brands.

 

In spring 2011, we expect to accelerate development at Puerto Venecia, Zaragoza, alongside our connected retail park. 

 

Retail developments

 

 

Sq ft

 

'000

PC

Current

Value

£m

Cost to complete £m

Notional interest1

£m

ERV2

 

£m

Pre-let

 

£m

Committed:








Puerto Venecia, Zaragoza3

1,360

2012

32

74

10

8

3

Four superstore extensions4

61

2010/12

-

9

-

1

1

Total committed

1,421


32

83

10

9

4

 

Prospective:








Whiteley Village, Fareham5

278

Detailed planning consent

Glasgow Fort Shopping Park6

175

Detailed planning consent

Glasgow Fort Shopping Park (leisure)6

45

Detailed planning consent

Fort Kinnaird, Edinburgh7

110

Detailed planning consent

Surrey Quays Shopping Centre9

101

Planning pending

Broughton Park, Chester6

58

Planning pending

Deepdale Shopping Park, Preston8

45

Planning pending

Tesco superstore extension9

22

Planning pending

Kingston Centre, Milton Keynes9

21

Detailed planning consent

Total prospective

855


Total committed/prospective

2,276


Data includes Group's share of properties in Funds & Joint Ventures (except area which is shown at 100%)

1 from 1 January 2011 to Practical Completion based on a notional cost of finance of 6%

2 estimated headline rental value (excluding tenant incentives)

3 joint venture with Eurofund Investments Zaragoza (BL Share 50%)

4 Banbury, Cardiff, Preston and Rugby - joint venture with Sainsbury's (BL Share 50%)

5 joint venture with Universities Superannuation Scheme (BL Share 50%)

6 Hercules Unit Trust (BL Share 39%)

7 joint venture between Hercules Unit Trust and The Crown Estate (BL Share 19%)

8 joint venture between Hercules Unit Trust and LaSalle Investment Management (BL Share 19%)

9 joint venture with Tesco (BL Share 50%)

 

 

OFFICES

 

Asset Management

With the portfolio now over 97% let, the focus during the quarter was on setting benchmark rents in our remaining space with lettings during the quarter agreed at an average of 7.7% ahead of ERV. At The Broadgate Tower, the Brazilian bank, Banco Itau, took 12,300 sq ft for a term of 10.5 years at a headline rent of £52.50 psf, 11.1% ahead of ERV, contributing to a 4.7% increase in ERV for the whole Tower in Q3.

 

At 39 Victoria Street, we accepted a surrender of the Bank of America lease in return for a premium payment. We are working up our extension and refurbishment options in anticipation of obtaining vacant possession in mid-2012. We also extended our lease with the Royal Bank of Scotland at 199 Bishopsgate and will secure vacant possession in March 2011 ready for a comprehensive refurbishment.  Planning consent has now been received.

 

Development

We continued to make progress on the £1.5 billion central London office development programme (British Land's share £1.0 billion), and further added to this pipeline with the agreement to purchase and re-develop Marble Arch House in the West End.  The programme now comprises 2.2 million sq ft of prime City and West End accommodation to be delivered between 2012 and 2014, and continues to represent the largest commitment to office development in central London at a time when demand/supply imbalances are expected to generate strong growth in rental values.    

 

Office developments

 

 

Sq ft

 

'000

PC

Current

Value

£m

Cost to complete £m

Notional interest1 £m

ERV2

 

£m

Pre-let

£m

Sales3

 

£m

Committed:









5 Broadgate, EC24

700

Q3 2014

62

167

31

19.1

19.1

-

The Leadenhall Building, EC35

610

Q3 2014

48

165

28

18.4

-

-

NEQ, Regent's Place, NW16

500

 Q2 2013

52

220

22

18.4

-

87

199 Bishopsgate, EC24

142

Q4 2012

21

17

4

3.5

-

-

Baker Street, W17

158

Q1 2013

47

64

9

7.7

-

17

Marble Arch House, W18

86

Q2 2013

-

55

4

3.6

-

13

Total committed

2,196


230

688

98

70.7

19.1

117










Prospective:









6-9 Eldon Street, EC2

33


Pre submission

Colmore Row, Birmingham

280


Detailed planning consent

Meadowhall Metropolitan

2,200


Outline planning consent

New Century Park9

1,000


Outline planning consent

Data includes Group's share of properties in Funds & Joint Ventures (except area which is shown at 100%)

1 from 1 January 2011 to Practical Completion based on a notional cost of finance of 6%

2 estimated headline rental value net of rent payable under head leases (excluding tenant incentives)

3 parts of development expected to be sold, no rent allocated

4 joint venture with Blackstone Group (BL Share 50%) - 5 Broadgate subject to planning

5 joint venture with Oxford Properties (BL Share 50%)

6 includes 120,000 sq ft of residential

7 includes 25,000 sq ft of residential and retail at 95-99 Baker Street (pre-sold)

8 agreement to purchase and re-develop site for £18m (included within the total cost to complete of £59 million) on receipt of vacant possession - includes 10,000 sq ft of residential

9 joint venture with Goodman Real Estate (UK) Ltd (BL share: 50%)

 

 

Major development activities included:

 

·      Completion of our joint venture with Oxford Properties to develop the 610,000 sq ft Leadenhall Building at 122 Leadenhall Street.  We contributed the site at an effective land value of £90 million.  Detailed planning consent is in place and piling and basement works are already underway, with practical completion scheduled for mid 2014;

 

·      Submission of detailed planning application for the development of 5 Broadgate, a new 700,000 sq ft building providing world class office space for UBS. UBS will occupy the entire building on an average lease of 18.2 years to first break at an initial rent of £54.50 per sq ft with annual increases in line with RPI (subject to a range of 0-4% per annum); 

 

·      Commitment to a major refurbishment of 199 Bishopsgate, a 142,000 sq ft building opposite the recently completed 201 Bishopsgate and The Broadgate Tower. Detailed planning consent was received in February 2011, with the refurbishment scheduled for completion towards the end of 2012;

 

·      £59 million commitment to purchase and re-develop Marble Arch House, W1.  On receipt of vacant possession, we will pay £18 million for the development site which is located on the corner of Seymour Street and Edgware Road, situated within Portman Village and just a short walk from Oxford Street and Hyde Park.  On completion, the new building will comprise 60,000 sq ft of Grade A offices together with 26,000 sq ft of retail and private residential accommodation.  Demolition and ground works are expected to start later this year, to allow for delivery of the building in mid-2013;  

 

·      Work is now well underway on the 500,000 sq ft mixed use development at NEQ, Regent's Place, NW1, which will complete the last phase of our office estate near Regent's Park in the West End;

 

·      On Baker St, we secured vacant possession, successfully re-geared the head lease with the Portman Estate, placed the building contract and started on site at the 158,000 sq ft office-led development.

 

 

FINANCIAL REVIEW

 

 

Income Statement (data presented on a proportionally consolidated basis - Table A)

 

Underlying profit before tax for the three months ended 31 December 2010 was £64 million, representing an increase of 10.3% compared to the prior year period.   

 

 

3 months to 31 Dec

2010

2009


Group

Funds

& JVs

Prop Consol

Group

Funds

& JVs

Prop Consol


£m

£m

£m

£m

£m

£m

Gross rental income

66

70

136

74

60

134

Property outgoings

(1)

(3)

(4)

(3)

(3)

(6)

Net rental income

65

67

132

71

57

128

Other income

3


3

1


1

Funds & JVs underlying profit

30



20



Administrative expenses

(15)

(1)

(16)

(12)

(5)

(17)

Profit before interest and tax



119



112

Net financing costs

(19)

(36)

(55)

(22)

(32)

(54)

Funds & JVs underlying profit


30



20


Group underlying profit

64


64

58


58

 

Gross rental income increased 1.5% to £136 million as income from lettings, rent reviews, and acquisitions throughout the last 12 months offset the effect of disposals made during 2009.  Property outgoings decreased by £2 million as a consequence of the increase in the portfolio's occupancy rate.  As a result, net rental income increased by £4 million (or 3.1%) to £132 million for the third quarter of 2010. 

 

On a like-for-like basis, annualised gross rental income at 31 December 2010 was 1.4% higher than as at 31 March 2010.  Retail increased by 1.5% while offices grew by 0.9% on a like-for-like basis.

 

Net financing costs in the quarter included interest capitalised on developments of £1 million (9 months to 31 December 2010: £3 million).  For the full year ended 31 March 2011 interest capitalised on developments is expected to be around £4 million.

 

Underlying profit before tax for the 9 months ended 31 December 2010 was £191 million compared with £187 million for the previous year which included the release of £16 million of credit risk provisions. Excluding this item, underlying profit increased by 11.7%. 

 

Underlying earnings per share for the third quarter were 7.0 pence (third quarter 2009: 6.6 pence), giving 21.2 pence for the 9 months to 31 December 2010 (9 months ended 31 December 2009: 21.3 pence). 

 

Balance Sheet

 

EPRA net asset value per share at 31 December 2010 was 548 pence representing an increase of 8.7% since 31 March 2010 and 4.4% since 30 September 2010.  This contributed to a total return of 12.6% for the 9 months ended 31 December 2010.

 

As at 31 December 2010

As at 31 March 2010


Group

Funds & JVs

Prop Consol

Group

Funds & JVs

Prop Consol


£m

£m

£m

£m

£m

£m

Properties at valuation

4,559

4,715

9,274

4,152

4,387

8,539

Investment in Funds & JVs

1,934



1,594



Other non-current assets

51


51

271

(105)

166


6,544

4,715

9,325

6,017

4,282

8,705

Other net current liabilities

(205)

8

(197)

(189)

(24)

(213)

Net debt

(1,577)

(2,773)

(4,350)

(1,550)

(2,660)

(4,210)

Other non-current liabilities

(52)

(16)

(68)

(70)

(4)

(74)

Funds & JVs net assets


1,934



1,594


IFRS net assets

4,710


4,710

4,208


4,208

EPRA adjustments1

202


202

199


199

EPRA net assets1

4,912


4,912

4,407


4,407

EPRA NAV per share

548p


548p

504p


504p

1 EPRA net assets (which exclude the mark to market on effective cash flow hedges and related debt adjustments, as well as

  deferred taxation on revaluations) at 31 December 2010 was £4.9 billion, compared with £4.4 billion at 31 March 2010

 

Property and other investments at the end of the third quarter were £9.3 billion, up from £8.7 billion in March largely due to a net valuation movement (including profits and losses on disposals) of £418 million recognised in the 9 months ended 31 December 2010 and purchases, principally Drake Circus. Net debt at 31 December 2010 was £4.4 billion (31 March 2010: £4.2 billion).  During the quarter, net debt increased by £181 million.

 

Financing statistics

Group

Group and share of

Funds & Joint Ventures

Net debt

£1,577m

£4,350m3

Weighted average debt maturity

11.5 years

10.6 years

Weighted average interest rate

5.1%

5.1%

Interest cover1

2.9x

2.2x

Loan to value2

23%

45%

1 Underlying profit before interest and tax / net interest

2 debt to property and investments

3 net debt (EPRA basis) £4,223 million. Net debt (EPRA basis) differs from IFRS net debt by excluding the mark to market on

  effective cash flow hedges and related debt instruments

 

During the quarter, BLT Properties Limited, a joint venture between British Land and Tesco, completed the refinancing of its portfolio of 8 superstores and one retail park and agreed to extend the joint venture for a further 10 years.  The new £185 million 7 year loan facility provided by BayernLB, London branch, was used to repay BLT's existing bank loan. 

 

The loan to value (LTV) ratio was unchanged at 45% (including the Group's share of funds and joint ventures) compared with the previous quarter but down from 47% at 31 March 2010.  Interest cover for the 9 months to 31 December 2010 has increased from 2.0 times to 2.2 times, compared with the prior year period due to the formation of the Broadgate Joint Venture in 2009.

 

The Group LTV ratio was 23% (31 March 2010: 25%) and interest cover for the 9 months to 31 December 2010 was 2.9 times (9 months to 31 December 2009: 2.2 times).  The Group average debt maturity was 11.5 years.  The Group also retains £2.6 billion of committed undrawn facilities, of which £0.9 billion have a maturity of more than 3 years, and £255 million of cash, short-term deposits and liquid investments. 

 

 

Cash Flow

 

Net cash inflow from operating activities for the quarter was £69 million including receipts from funds and joint ventures of £23 million.

 

Investing activity absorbed a net £247 million, of which £262 million was spent on income earning investments and £17 million on development expenditure partially offset by disposals.  Acquisitions included the purchase of Drake Circus for £240 million. Development expenditure has reduced compared to the equivalent period in the prior year due to the completion of 10 and 20 Triton Square and Ropemaker in 2009.

 

As at 31 December 2010, the portfolio benefited from an annual £62 million of contracted growth to come in cash rents from the expiry of rent free periods and from guaranteed fixed and minimum rental uplifts over the next five years.

 

Dividends

 

The 2011 second quarter dividend of 6.5 pence per share, totalling £58 million, is payable on 18 February 2011.

 

The third quarter dividend of 6.5 pence per share, totalling £58 million, is payable on 13 May 2011 to shareholders on the register at close of business on 1 April 2011.

 

Having regard to share price volatility the Board will announce the availability of the Scrip Alternative via the Regulatory News Service and on the group's website (www.britishland.com), no later than 48 hours before the ex-dividend date of 30 March 2011. The Board expects to announce the split between PID and non-PID income at that time. The Scrip Alternative will not be enhanced.

 

 

SUPPLEMENTARY INFORMATION

Data includes Group's share of properties in Funds & Joint Ventures

 

 

Portfolio Yield Profile

 

Excluding developments

EPRA net

initial

yield %1,2

Gross

initial

yield %3

Gross top-up

initial

yield %3,4

Gross

reversionary yield %3

Net

equivalent

yield %1

Retail:






Retail warehouses

5.6

6.1

6.2

6.6

5.9

Superstores

5.0

5.3

5.3

5.4

5.1

Shopping centres

5.5

6.1

6.4

6.9

5.9

Department stores5

5.6

6.0

6.8

6.9

6.7

All retail

5.5

5.9

6.1

6.4

5.8

Offices:






City

4.9

5.2

6.9

5.9

5.9

West End

4.1

4.3

6.3

6.3

5.6

Offices

4.6

4.8

6.7

6.0

5.8

Other

8.2

8.7

9.5

10.1

9.3

Total

5.2

5.7

6.4

6.4

5.8

1 after notional purchaser's costs - excludes Europe

2 EPRA topped up net initial yield is 5.9%

3 excluding notional purchaser's costs (i.e. yield to British Land)

4 adding back rent frees and contracted rental uplifts

5 includes High Street

 

 

Annualised Gross Rental Income and Annualised Rent

 

Excluding developments

Annualised gross rental income (accounting basis)1

Annualised rent

(cash flow basis)2

Group

£m

Funds

& JVs £m

Total

£m

Group

£m

Funds

& JVs £m

Total

£m

Retail:







Retail warehouses

103

63

166

105

60

165

Superstores

8

63

71

8

63

71

Shopping centres

31

60

91

31

62

93

Department stores3

33

-

33

27

-

27

All retail

175

186

361

171

185

356

Offices:







City

23

81

104

5

82

87

West End

56

-

56

44

-

44

Offices

79

81

160

49

82

131

Other

19

-

19

16

1

17

Total

273

267

540

236

268

504

1 gross rental income will differ from annualised rents due to accounting adjustments for fixed & minimum contracted rental uplifts and lease incentives

2 gross rents plus, where rent reviews are outstanding, any increases to ERV (as determined by the Group's external valuers), less any grounds rents payable under head leases

3 includes High Street

 

Future Income Profile

 

Retail

Offices

Other

Total


£m

£m

£m

£m

Annualised rents (cash flow basis)

356

131

17

504

Contracted from fixed uplifts and

expiry of rent free periods1

12

49

1

62

Rent reviews & lease renewals1,2

12

(23)

-

(11)

Letting of current vacant space

6

6

1

13

Reversionary income

386

163

19

568






Committed developments at ERV3

9

71

-

80

1 within 5 years

2 includes future portfolio voids on lease break or expiry (as determined by the Group's external valuers)

3 of which £23 million pre-let

 

 

Average Rent, Lease Lengths and Occupancy Rate

 

Excluding developments & Europe

Average rent

Average lease length

Occupancy rate

Contracted £psf

ERV

£psf

To expiry

yrs

To first break, yrs

Underlying    

%1

Basic

%

Retail:







Retail warehouses

23

24

11.7

10.7

99.0

98.8

Superstores

21

21

17.1

17.1

100.0

100.0

Shopping centres

28

30

10.9

10.2

97.6

96.2

Department stores2

11

13

29.2

26.0

99.1

99.1

All retail

22

23

14.0

13.1

98.8

98.3

Offices:







City

46

42

12.0

10.0

96.2

96.2

West End

42

42

11.4

8.4

98.5

97.6

Offices

45

42

11.9

9.4

97.1

96.7

Other

17

20

20.4

20.1

92.8

92.8

Total

30

30

13.5

12.1

98.1

97.7

1 including accommodation under offer or subject to asset management

2 includes High Street

 

Rent Subject to Lease Break or Expiry

 

12 months to 31 Dec

2011

2012

2013

2014

2015

2011-13

2011-15

Excluding developments & Europe

£m

£m

£m

£m

£m

£m

£m

Retail:








Retail warehouses

3

3

4

6

6

10

22

Superstores

-

-

-

-

-

-

-

Shopping centres

4

3

6

3

4

13

20

Department stores1

-

1

-

-

-

1

1

All retail

7

7

10

9

10

24

43

Offices:








City

1

-

3

9

11

4

24

West End

1

9

2

2

3

12

17

Offices

2

9

5

11

14

16

41

Other

1

-

1

-

-

2

2

Total

10

16

16

20

24

42

86

% of contracted rent

1.8

2.9

3.0

3.6

4.4

7.7

15.7

1 includes High Street

 

 

Top 10 Properties by British Land Share of value

 

Excluding developments

Sq ft

BL Share

Rent

Occupancy

Lease length


'000

%

£m pa1

rate %2

yrs

Broadgate

3,866

50

172

96.4

8.4

Meadowhall Shopping Centre

1,387

50

78

98.4

10.8

Regent's Place

1,210

100

49

98.2

9.1

Ropemaker Place

594

100

26

95.0

16.7

Drake Circus Shopping Centre

570

100

15

99.7

8.4

Teesside Shopping Park

458

100

14

100.0

10.0

Debenhams, Oxford Street

367

100

10

100.0

28.2

York House, Seymour Street

101

100

5

100.0

6.8

Glasgow Fort Shopping Park

393

39

16

98.9

7.9

St Stephen's Shopping Centre

410

100

8

98.9

9.9

1 annualised contracted rent including 100% of Funds & Joint Ventures

2 includes accommodation under offer or subject to asset management

 

 

 

Top Retail and Office Occupiers

 

Retail

% of total rent


Office

% of total rent






Tesco

7


UBS

4

Sainsbury's

6


HM Government

2

Debenhams

4


Bank of Tokyo-Mitsubishi

2

B&Q

2


Macquarie Group

2

Homebase

2


Herbert Smith

2

Next

2


RBS

1

Boots

1


JP Morgan

1

Asda

1


Aegis Group

1

Marks & Spencer

1


Reed Smith

1

Currys

1


Gazprom

1

 

 

Consolidated Income Statement for the nine month period ended 31 December 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended
31 March 2010

 

 

Nine months ended
31 December 2010

Nine months ended
31 December 2009

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

394

 

394

Gross rental and related income

2

221

 

221

327

 

327

 

 

 

 

 

 

 

 

 

 

 

337

 

337

Net rental and related income

2

187

 

187

279

 

279

 

 

 

 

 

 

 

 

 

 

 

13

 

13

Fees and other income

2

10

 

10

7

 

7

 

 

 

 

 

 

 

 

 

 

 

 

(15)

(15)

Amortisation of intangible assets

 

 

(10)

(10)

 

(11)

(11)

 

 

 

 

 

 

 

 

 

 

 

81

398

479

Funds and joint ventures (see also below)

 

90

220

310

52

189

241

 

 

 

 

 

 

 

 

 

 

 

(55)

 

(55)

Administrative expenses

(43)

 

(43)

(41)

 

(41)

 

 

 

 

 

 

 

 

 

 

 

 

496

496

Net valuation movement (includes profits & losses on disposals)

2

 

194

194

 

133

133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net financing costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30

 

30

- financing income

 

20

 

20

20

 

20

(157)

 

(157)

- financing charges

 

(73)

(4)

(77)

(130)

 

(130)

 

 

 

 

 

 

 

 

 

 

 

(127)

 

(127)

 

 

(53)

(4)

(57)

(110)

 

(110)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

249

879

1,128

Profit on ordinary activities before taxation

 

191

400

591

187

311

498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

24

- current tax (expense) income

2

 

(2)

(2)

 

22

22

 

(12)

(12)

- deferred tax income (expense)

2

 

11

11

 

(9)

(9)

 

 

 

 

 

 

 

 

 

 

 

 

12

12

 

2

 

9

9

 

13

13

 

 

 

 

 

 

 

 

 

 

 

 

 

1,140

Profit for the period after taxation attributable to shareholders of the Company

 

 

 

600

 

 

511

 

 

 

 

 

 

 

 

 

 

 

 

 

133.0p

Earnings per share: basic

1

 

 

68.6p

 

 

59.8p

 

 

132.6p

diluted

1

 

 

68.3p

 

 

59.6p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share of results of funds and joint ventures

 

 

 

 

 

 

 

81

 

81

Underlying profit before taxation

 

90

 

90

52

 

52

 

412

412

Net valuation movement (includes profits & losses on disposals)

 

 

224

224

 

202

202

 

(9)

(9)

Non-recurring items

 

 

 

 

 

(9)

(9)

 

(5)

(5)

Current tax expense

 

 

(3)

(3)

 

(4)

(4)

 

 

 

Deferred tax expense

 

 

(1)

(1)

 

 

 

81

398

479

 

4

90

220

310

52

189

241

 

 

 

 

 

 

 

 

 

 

 

*As defined in note 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Income Statement for the three month period ended 31 December 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended
31 March 2010

 

 

Three months ended
31 December 2010

Three months ended
31 December 2009

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

394

 

394

Gross rental and related income

2

79

 

79

87

 

87

 

 

 

 

 

 

 

 

 

 

 

 

 

337

 

337

Net rental and related income

2

65

 

65

71

 

71

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

13

Fees and other income

2

3

 

3

1

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15)

(15)

Amortisation of intangible assets

 

 

(2)

(2)

 

(4)

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

81

398

479

Funds and joint ventures (see also below)

 

30

110

140

20

236

256

 

 

 

 

 

 

 

 

 

 

 

 

 

(55)

 

(55)

Administrative expenses

 

(15)

 

(15)

(12)

 

(12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

496

496

Net valuation movement (includes profits & losses on disposals)

2

 

92

92

 

321

321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net financing costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30

 

30

- financing income

 

11

 

11

2

 

2

 

(157)

 

(157)

- financing charges

 

(30)

(1)

(31)

(24)

 

(24)

 

 

 

 

 

 

 

 

 

 

 

 

 

(127)

 

(127)

 

 

(19)

(1)

(20)

(22)

 

(22)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

249

879

1,128

Profit on ordinary activities before taxation

 

64

199

263

58

553

611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

24

- current tax (expense) income

2

 

(1)

(1)

 

19

19

 

 

(12)

(12)

- deferred tax expense

2

 

(1)

(1)

 

(7)

(7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

12

 

2

 

(2)

(2)

 

12

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,140

Profit for the period after taxation attributable to shareholders of the Company

 

 

 

261

 

 

623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

133.0p

Earnings per share: basic

1

 

 

29.6p

 

 

72.4p

 

 

 

132.6p

diluted

1

 

 

29.5p

 

 

72.2p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share of results of funds and joint ventures

 

 

 

 

 

 

 

 

81

 

81

Underlying profit before taxation

 

30

 

30

20

 

20

 

 

412

412

Net valuation movement (includes profits & losses on disposals)

 

 

110

110

 

246

246

 

 

(9)

(9)

Non-recurring items

 

 

1

1

 

(9)

(9)

 

 

(5)

(5)

Current tax expense

 

 

(1)

(1)

 

 

 

 

 

 

 

Deferred tax expense

 

 

 

 

 

(1)

(1)

 

81

398

479

 

4

30

110

140

20

236

256

 

 

 

 

 

 

 

 

 

 

 

 

 

*As defined in note 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheet as at 31 December 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31 March

 

 

31

December

31 December

30

September

 

2010

 

 

2010

2009

2010

 

Audited

 

 

Unaudited

Unaudited

Unaudited

 

£m

 

Note

£m

£m

£m

 

 

Assets

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

4,126

Investment and development properties

3

4,529

3,703

4,297

 

33

Owner-occupied property

3

37

30

36

 

4,159

 

 

4,566

3,733

4,333

 

 

 

 

 

 

 

 

 

Other non-current assets

 

 

 

 

 

1,594

Investments in funds and joint ventures

4

1,934

1,391

1,693

 

261

Other investments

5

51

302

51

 

10

Intangible assets

 

 

13

2

 

6,024

 

 

6,551

5,439

6,079

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

105

Debtors

 

92

103

84

 

195

Liquid investments

6

201

 

206

 

74

Cash and short-term deposits

6

54

342

223

 

374

 

 

347

445

513

 

 

 

 

 

 

 

 

6,398

Total assets

 

6,898

5,884

6,592

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

(139)

Short-term borrowings and overdrafts

6

(381)

(38)

(364)

 

(332)

Creditors

 

(345)

(357)

(352)

 

(471)

 

 

(726)

(395)

(716)

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

(1,642)

Debentures and loans

6

(1,403)

(1,769)

(1,382)

 

(30)

Other non-current liabilities

 

(23)

(31)

(25)

 

(47)

Deferred tax liabilities

 

(36)

(44)

(36)

 

(1,719)

 

 

(1,462)

(1,844)

(1,443)

 

 

 

 

 

 

 

 

(2,190)

Total liabilities

 

(2,188)

(2,239)

(2,159)

 

 

 

 

 

 

 

 

4,208

Net assets

 

4,710

3,645

4,433

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

220

Share capital

 

224

219

223

 

1,241

Share premium

 

1,237

1,242

1,238

 

(90)

Other reserves

 

(98)

(64)

(143)

 

2,837

Retained earnings

 

3,347

2,248

3,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,208

Total equity attributable to shareholders of the Company

 

4,710

3,645

4,433

 

 

 

 

 

 

 

 

504p

EPRA NAV per share*

1

548p

438p

525p

 

 

 

 

 

 

 

 

* As defined in note 1

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Comprehensive Income

 

 

 

 

for the period ended 31 December 2010

 

 

 

 

 

 

 

 

 

 

 

 

Year ended

 

 

Three months ended

Nine months ended

 

31 March

 

 

31 December

31 December

 

2010

 

 

2010

2009

2010

2009

 

Audited

 

 

Unaudited

Unaudited

Unaudited

Unaudited

 

£m

 

Note

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,140

Profit for the period after taxation

 

261

623

600

511

 

 

 

 

 

 

 

 

 

 

Gains (losses) on cash flow hedges

 

 

 

 

 

 

(6)

- Group

 

16

2

(17)

(3)

 

(10)

- Funds and joint ventures

 

28

7

(2)

10

 

 

 

 

 

 

 

 

 

 

Transferred (from) to the income statement

 

 

 

 

 

 

 

 (cash flow hedges)

 

 

 

 

 

 

6

- foreign currency derivatives

 

(2)

 

2

12

 

23

- interest rate derivatives

 

3

7

9

21

 

 

 

 

 

 

 

 

 

29

 

 

1

7

11

33

 

 

 

 

 

 

 

 

 

(1)

Exchange differences on translation of foreign operations

 

 

1

1

 

 

(2)

Actuarial loss on pension scheme

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

Other comprehensive income (loss) for the period

 

45

17

(7)

40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,150

Total comprehensive income for the period

 

306

640

593

551

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Cash Flows

 

 

 

 

for the period ended 31 December 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

      Three months

        Nine months

ended

 

 

        ended

        ended

31 March

 

 

        31 December

        31 December

2010

 

 

2010

2009

2010

2009

Audited

 

 

        Unaudited

        Unaudited

£m

 

Note

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

317

Rental income received from tenants

 

62

48

172

248

15

Fees and other income received

 

8

2

15

13

(84)

Operating expenses paid to suppliers and employees

 

(15)

(18)

(51)

(66)

248

Cash generated from operations

 

55

32

136

195

 

 

 

 

 

 

 

(179)

Interest paid

 

(10)

(36)

(60)

(138)

9

Interest received

 

1

2

13

7

(3)

UK corporation tax received (paid)

 

 

1

 

(1)

61

Distributions received from funds and joint ventures

4

23

18

76

34

136

Net cash inflow from operating activities

 

69

17

165

97

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

(75)

Purchase of investment properties

 

(262)

(42)

(291)

(42)

(173)

Development and other capital expenditure

 

(17)

(39)

(49)

(128)

279

Sale of investment properties

 

37

43

39

241

6

REIT conversion charge paid

 

 

 

 

 

(43)

Purchase of investments

 

 

(43)

 

(43)

13

Sale of investments

 

 

13

 

13

(4)

Indirect taxes in respect of investing activities

 

 

1

2

(4)

 

Deferred consideration received

 

 

 

22

 

 

Loans repaid by Broadgate Joint Venture

 

 

 

220

 

31

Establishment of Broadgate Joint Venture

 

 

31

 

31

(26)

Investment in Shopping Centres Joint Venture with Tesco

 

 

(26)

 

(26)

(56)

Investment in and loans to funds and joint ventures

 

(17)

(3)

(47)

(55)

7

Capital distributions received from funds and joint ventures

 

12

7

12

7

(41)

Net cash outflow from investing activities

 

(247)

(58)

(92)

(6)

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

(154)

Dividends paid

 

(31)

(39)

(95)

(116)

(20)

Movement in other financial liabilities

 

(2)

(6)

(13)

(16)

(266)

Establishment of Broadgate Joint Venture - cash collateral

 

 

(266)

 

(266)

(200)

Increase in liquid investments

 

 

 

 

 

1

Increase in bank and other borrowings

 

44

56

14

33

(639)

Net cash inflow (outflow) from financing activities

 

11

(255)

(94)

(365)

 

 

 

 

 

 

 

(544)

Net decrease in cash and cash equivalents

 

(167)

(296)

(21)

(274)

616

Opening cash and cash equivalents

 

218

638

72

616

72

Closing cash and cash equivalents

 

51

342

51

342

 

 

 

 

 

 

 

 

Cash and cash equivalents consists of:

 

 

 

 

 

74

Cash and short-term deposits

 

54

342

54

342

(2)

Overdrafts

 

(3)

 

(3)

 

72

 

 

51

342

51

342

 

 

Consolidated Statement of Changes in Equity

 

 

 

for the period ended 31 December 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hedging &

 

 

 

 

Share

 

Share

translation

Revaluation

Retained

 

 

capital

*

premium

reserve

reserve

earnings

Total

 

£m

 

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

Nine month movements in Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 April 2010

220

 

1,241

(38)

(52)

2,837

4,208

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

(6)

(1)

600

593

Adjustment for share and share option awards

 

 

 

 

 

4

4

De-designation of cash flow hedges

 

 

 

(1)

 

1

 

Dividends payable in the nine month period

 

 

 

 

 

(170)

(170)

Adjustment for scrip dividend element

4

 

(4)

 

 

75

75

Balance at 31 December 2010

224

 

1,237

(45)

(53)

3,347

4,710

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 April 2009

217

 

1,244

(98)

(41)

1,887

3,209

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

65

10

476

551

Dividends payable in the nine month period

 

 

 

 

 

(159)

(159)

Adjustment for scrip dividend element

2

 

(2)

 

 

44

44

Balance at 31 December 2009

219

 

1,242

(33)

(31)

2,248

3,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three month movements in Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 October 2010

223

 

1,238

(62)

(81)

3,115

4,433

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

17

28

261

306

Adjustment for share and share option awards

 

 

 

 

 

2

2

Dividends payable in the three month period

 

 

 

 

 

(57)

(57)

Adjustment for scrip dividend element

1

 

(1)

 

 

26

26

Balance at 31 December 2010

224

 

1,237

(45)

(53)

3,347

4,710

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 October 2009

218

 

1,243

(77)

(39)

1,696

3,041

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

44

8

588

640

Adjustment for share and share option awards

 

 

 

 

 

(1)

(1)

Dividends payable in the three month period

1

 

(1)

 

 

(56)

(56)

Adjustment for scrip dividend element

 

 

 

 

 

21

21

Balance at 31 December 2009

219

 

1,242

(33)

(31)

2,248

3,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior year movements in Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 April 2009

217

 

1,244

(98)

(41)

1,887

3,209

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

60

(11)

1,101

1,150

Share issues

3

 

(3)

 

 

 

 

Adjustment for share and share option awards

 

 

 

 

 

1

1

Dividends payable in the year

 

 

 

 

 

(215)

(215)

Adjustment for scrip dividend element

 

 

 

 

 

63

63

Balance at 31 March 2010

220

 

1,241

(38)

(52)

2,837

4,208

 

 

 

 

 

 

 

 

* See note 11 for a summary of the number of shares in issue

 

 

Notes to the accounts (unaudited)

 

 

 

 

 

 

 

 

 

 

 

1.     Performance measures

 

 

 

 

 

 

 

 

 

 

 

Year ended

 

Nine months ended

Nine months ended

31 March 2010

 

31 December 2010

31 December 2009

Earnings

Pence
per share

Earnings per share (diluted)

Earnings

Pence
per share

Earnings

Pence
per share

£m

 

£m

£m

 

 

 

 

 

 

 

249

 

Underlying pre tax profit - income statement

191

 

187

 

(5)

 

Tax charge relating to underlying profit

(5)

 

(4)

 

 

 

 

 

 

 

 

244

28.4p

Underlying earnings per share

186

21.2p

183

21.3p

 

 

 

 

 

 

 

(5)

 

Mark to market on held for trading assets

6

 

 

 

(9)

 

Non-recurring items (table A)

(4)

 

(9)

 

 

 

 

 

 

 

 

230

26.7p

EPRA earnings per share

188

21.4p

174

20.3p

 

 

 

 

 

 

 

1,140

132.6p

Profit for the period after taxation

600

68.3p

511

59.6p

 

 

 

 

 

 

 

Year ended

 

Three months ended

Three months ended

31 March 2010

 

31 December 2010

31 December 2009

Earnings

Pence
per share

Earnings per share (diluted)

Earnings

Pence
per share

Earnings

Pence
per share

£m

 

£m

£m

 

 

 

 

 

 

 

249

 

Underlying pre tax profit - income statement

64

 

58

 

(5)

 

Tax charge relating to underlying profit

(2)

 

(1)

 

 

 

 

 

 

 

 

244

28.4p

Underlying earnings per share

62

7.0p

57

6.6p

 

 

 

 

 

 

 

(5)

 

Mark to market on held for trading assets

(5)

 

 

 

(9)

 

Non-recurring items (table A)

 

 

(9)

 

 

 

 

 

 

 

 

230

26.7p

EPRA earnings per share

57

6.4p

48

5.6p

 

 

 

 

 

 

 

1,140

132.6p

Profit for the period after taxation

261

623

72.2p

 

 

 

 

 

 

 

The European Public Real Estate Association (EPRA) issued Best Practices Recommendations in October 2010, which gives guidelines for performance measures, the 31 March 2010 comparatives have been presented to be in line with these.  The EPRA earnings measure excludes investment property revaluations and gains or losses on disposals, intangible asset movements and their related taxation.

 

 

 

 

 

 

 

Underlying earnings consists of the EPRA earnings measure, with additional company adjustments.  Adjustments include realisation of cash flow hedges, mark to market on held for trading assets and non-recurring items.

 

 

 

 

 

 

 

The weighted average number of shares in issue for the three month period was: basic: 881m (nine months ended 31 December 2010: 875m; year ended 31 March 2010: 857m; three months ended 31 December 2009: 860m; nine months ended 31 December 2009: 855m); diluted for the effect of share options: 886m (nine months ended 31 December 2010: 879m; year ended 31 March 2010: 860m; three months ended 31 December 2009: 863m; nine months ended 31 December 2009: 858m).  Basic undiluted earnings per share for the three month period was 29.6p (nine months ended 31 December 2010: 68.6p; year ended 31 March 2010: 133.0p; three months ended 31 December 2009: 72.4p; nine months ended 31 December 2009: 59.8p). Earnings per share shown in the table above are diluted.

 

 

 

 

 

 

 

31 March

 

 

 

31 December

31 December

30 September

2010

 

Net asset value (NAV)

 

2010

2009

2010

£m

 

 

 

£m

£m

£m

 

 

 

 

 

 

 

4,208

 

Balance sheet net assets

 

4,710

3,645

4,433

 

 

 

 

 

 

 

43

 

Deferred tax arising on revaluation movements

 

36

39

33

126

 

Mark to market on effective cash flow hedges and related debt adjustments

122

100

173

30

 

Dilution effect of share options

 

44

29

44

 

 

 

 

 

 

 

4,407

 

EPRA NAV

 

4,912

3,813

4,683

 

 

 

 

 

 

 

504p

 

EPRA NAV per share

 

548p

438p

525p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The EPRA NAV per share excludes the mark to market on effective cash flow hedges and related debt adjustments, deferred taxation on revaluations and is calculated on a fully diluted basis.

 

 

 

 

 

 

 

At 31 December 2010, the number of shares in issue was: basic: 884m (31 March 2010: 866m; 30 September 2010: 878m; 31 December 2009: 862m); diluted for the effect of share options: 897m (31 March 2010: 875m; 30 September 2010: 892m; 31 December 2009: 871m).

 

 

 

 

 

 

 

Total return per share for the three months to 31 December 2010 of 5.6% includes dividends paid of 6.5p (see note 7) in addition to the increase in EPRA NAV per share of 23p. Total return per share for the nine months to 31 December 2010 of 12.6% includes dividends paid of 19.5p (see note 7) in addition to the increase in EPRA NAV per share of 44p. Total return per share for the year ended 31 March 2010 was 33.5%.

 

2.     Income statement notes

 

 

 

 

 

 

 

 

 

 

Year ended

 

Three months ended

Nine months ended

31 March

 

31 December

31 December

2010

 

2010

2009

2010

2009

£m

 

£m

£m

£m

£m

 

Gross and net rental income

 

 

 

 

 

 

 

 

 

 

319

Rent receivable

56

69

169

262

23

Spreading of tenant incentives and guaranteed rent increases

8

5

22

19

 

Surrender premiums

2

 

2

 

 

 

 

 

 

 

342

Gross rental income

66

74

193

281

 

 

 

 

 

 

52

Service charge income

13

13

28

46

 

 

 

 

 

 

394

Gross rental and related income

79

87

221

327

 

 

 

 

 

 

(52)

Service charge expenses

(13)

(13)

(28)

(46)

(5)

Property operating expenses

(1)

(3)

(6)

(2)

 

 

 

 

 

 

337

Net rental and related income

65

71

187

279

 

 

 

 

 

 

 

Fees and other income

 

 

 

 

 

 

 

 

 

 

7

Performance & management fees (from funds & joint ventures)

3

1

8

5

6

Other fees and commission

 

 

2

2

 

 

 

 

 

 

13

 

3

1

10

7

 

 

 

 

 

 

 

Net revaluation movements on property and investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

530

Revaluation of properties

82

333

172

159

(18)

Result on property disposals

13

(12)

19

(14)

(12)

Revaluation of investments

(3)

 

3

(12)

(4)

Other revaluation movements

 

 

 

 

 

 

 

 

 

 

496

 

92

321

194

133

412

Share of profits of funds and joint ventures (note 4)

110

246

224

202

 

 

 

 

 

 

908

 

202

567

418

335

 

 

 

 

 

 

 

Tax (expense) income

 

 

 

 

 

 

 

 

 

 

(2)

Current tax: UK corporation tax (28%)

(1)

(1)

(2)

(2)

26

Adjustments in respect of prior periods

 

20

 

24

24

Total current tax (expense) income

(1)

19

(2)

22

(12)

Deferred tax on revaluations

(1)

(7)

11

(9)

 

 

 

 

 

 

12

Group total taxation (net)

(2)

12

9

13

 

 

 

 

 

 

(5)

Attributable to funds and joint ventures

(1)

(1)

(4)

(4)

 

 

 

 

 

 

7

Total taxation

(3)

11

5

9

 

 

 

 

 

 

Tax expense attributable to underlying profits for the three months ended 31 December 2010 was £2m (nine months ended 31 December 2010: £5m; year ended 31 March 2010: £5m; three months ended 31 December 2009: £1m; nine months ended 31 December 2009: £4m).

 

 

 

 

 

 

The deferred tax charge for the three months ended 31 December 2010 includes a credit of £1m to reflect reduced deferred tax liabilities arising from the forthcoming reduction in the UK corporation tax rate to 27% (effective from 1 April 2011).

 

 

3.     Property

 

 

 

 

 

 

 

 

 

 

 

 

 

Total property interests are £9,274m at 31 December 2010 comprising properties held by the Group of £4,559m, share of properties held by funds of £904m and share of properties held by joint ventures of £3,811m. 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

 

 

 

 

31 December

31 December

30 September

2010

 

 

 

 

2010

2009

2010

 

 

 

 

 

 

 

 

£m

 

 

 

 

£m

£m

£m

 

 

 

 

 

 

 

 

4,126

Investment properties

 

4,529

3,703

4,297

33

Owner-occupied property

 

37

30

36

4,159

Carrying value of properties on balance sheet

4,566

3,733

4,333

 

 

 

 

 

 

 

 

(7)

Head lease liabilities

 

(7)

(7)

(7)

 

 

 

 

 

 

 

 

4,152

Total British Land Group property portfolio valuation

4,559

3,726

4,326

 

 

 

 

 

 

 

 

At 31 December 2010 Group properties valued at £2,757m were subject to a security interest (31 March 2010: £2,659m; 30 September 2010: £2,708m; 31 December 2009: £2,128m).

 

 

 

 

 

 

 

 

Interest capitalised on development expenditure for the three months ended 31 December 2010 was £1m (nine months ended 31 December 2010: £3m; year ended 31 March 2010: £13m; three months ended 31 December 2009: £4m; nine months ended 31 December 2009: £13m).

 

 

 

 

 

 

 

 

4.     Funds and joint ventures

 

 

 

 

 

 

 

 

 

 

 

 

Summary of British Land's share of investments in funds and joint ventures at 31 December 2010

 

 

 

 

 

 

 

 

 

 

Underlying

Underlying

 

 

 

 

 

 

profit

profit

 

 

 

 

 

 

(nine

(three

Net

Property

Other

Gross

 

 

months)

months)

Investment

assets

assets

liabilities

 

 

£m

£m

£m

£m

£m

£m

Share of funds

18

6

487

904

125

(542)

Share of joint ventures

72

24

1,447

3,811

208

(2,572)

Total

90

30

1,934

4,715

333

(3,114)

 

 

 

 

 

 

 

 

At 31 December 2010 the investment in Joint Ventures included within the total net investment in Funds and Joint Ventures was £1,449m (31 March 2010: £1,149m; 30 September 2010: £1,221m; 31 December 2009: £988m).

 

 

 

 

 

 

 

 

Amounts owed to joint ventures at 31 December 2010 were £52m (31 March 2010: £40m; 30 September 2010: £50m; 31 December 2009: £39m).

British Land's share of the results of funds and joint ventures

 

 

 

 

 

 

 

 

 

Year

 

 

 

        Three months

        Three months

        Nine months

        Nine months

ended

 

 

 

        ended

       ended

      ended

       ended

31 March

 

 

 

31 December

31 December

31 December

31 December

2010

 

 

 

2010

2009

2010

2009

£m

 

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

219

Gross rental income

70

60

210

148

 

 

 

 

 

 

 

 

208

Net rental and related income

67

57

200

140

(8)

Other income and expenditure

(1)

(5)

(3)

(8)

(119)

Net financing costs

 

(36)

(32)

(107)

(80)

 

 

 

 

 

 

 

 

81

Underlying profit before taxation

30

20

90

52

 

 

 

 

 

 

 

 

412

Net valuation and disposal movements

110

246

224

202

(9)

Non-recurring items

 

1

(9)

 

(9)

 

 

 

 

 

 

 

 

484

Profit on ordinary activities before taxation

141

257

314

245

 

 

 

 

 

 

 

 

(5)

Current tax expense

 

(1)

 

(3)

(4)

 

Deferred tax expense

 

(1)

(1)

 

 

 

 

 

 

 

 

 

479

Profit on ordinary activities after taxation

140

256

310

241

 

 

 

 

 

 

 

 

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.     Funds and joint ventures (continued)

 

 

 

 

 

 

 

 

 

Operating cash flows of funds and joint ventures

 

 

 

 

 

 

 

 

 

Year

 

        Three months

        Three months

        Nine months

        Nine months

ended

 

        ended

        ended

        ended

        ended

31 March

 

31 December

31 December

31 December

31 December

2010

 

2010

2009

2010

2009

£m

 

£m

£m

£m

£m

 

 

 

 

 

 

215

Rental income received from tenants

70

59

206

147

 

Fees and other income received

1

 

2

 

(22)

Operating expenses paid to suppliers and employees

(7)

(8)

(21)

(21)

 

 

 

 

 

 

193

Cash generated from operations

64

51

187

126

 

 

 

 

 

 

(111)

Interest paid

(38)

(25)

(110)

(72)

(4)

UK corporation tax paid

(2)

(1)

(4)

(2)

 

 

 

 

 

 

78

Cash inflow from operating activities

24

25

73

52

 

 

 

 

 

 

 

Cash inflow from operating activities deployed as:

 

 

 

 

17

Surplus cash (distributed by) retained

1

7

(3)

18

 

within funds and joint ventures

 

 

 

 

61

Total distributed to British Land

23

18

76

34

 

 

 

 

 

 

78

 

24

25

73

52

 

 

 

 

 

 

5.     Other investments

 

 

 

 

 

 

 

 

 

 

Other investments include the investment in the HUT convertible bond of £43m (31 March 2010: £43m;  30 September 2010: £43m; 31 December 2009: £nil).  At 31 March 2010 and 31 December 2009 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

 

31 December

31

 December

30

September

 

2010

 

2010

2009

2010

 

£m

 

£m

£m

£m

 

 

 

 

 

 

 

1,165

Debentures

1,102

1,166

1,109

 

156

Bank loans and overdrafts

224

188

181

 

460

Other bonds and loan notes

458

453

456

 

 

 

 

 

 

 

1,781

Gross debt

1,784

1,807

1,746

 

 

 

 

 

 

 

49

Interest rate and currency derivative liabilities

60

36

78

 

(11)

Interest rate and currency derivative assets

(12)

(1)

(17)

 

1,819

 

1,832

1,842

1,807

 

(195)

Liquid investments

(201)

 

(206)

 

(74)

Cash and short-term deposits

(54)

(342)

(223)

 

 

 

 

 

 

 

1,550

Net debt

1,577

1,500

1,378

 

 

 

 

 

 

 

Gross debt includes £381m due within one year at 31 December 2010 (31 March 2010: £139m; 30 September 2010: £364m; 31 December 2009: £38m).

 

 

 

 

 

 

 

 

Undrawn committed bank facilities at 31 December 2010 amounted to £2,599m.

 

 

 

 

 

 

 

The two financial covenants applicable to the Group unsecured debt are:

 

Net Borrowings not to exceed 175% of Adjusted Capital and Reserves.

 

At 31 December 2010 the ratio is 34%:

 

i. Net Borrowings are £1,797m, being the principal amount of gross debt of £1,776m plus amounts owed to joint ventures of £52m (see note 4) plus TPP Investments Ltd of £23m (see note 9), less the cash and short-term deposits of £54m; and

 

 

ii. Adjusted Capital and Reserves are £5,222m, being share capital and reserves of £4,710m (see Consolidated Statement of Changes in Equity), adjusted for £36m of deferred tax (see note 1), £354m exceptional refinancing charges (see below) and £122m mark to market on interest rate swaps (see note 1); and

 

 

 

 

 

 

 

 

 

Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets.

 

At 31 December 2010 the ratio is 17%:

 

i. Net Unsecured Borrowings are £423m, being the principal amount of gross debt of £1,776m plus amounts owed to joint ventures of £52m (see note 4) less cash and deposits not subject to a security interest of £48m less the principal amount of secured and non-recourse borrowings of £1,357m; and

 

 

 

ii. Unencumbered Assets are £2,539m being properties of £4,559m (see note 3) plus investments in funds and joint ventures of £1,934m (balance sheet) and other investments of £252m (see balance sheet: liquid investments of £201m and other investments of £51m) less investments in joint ventures of £1,449m (see note 4) and encumbered assets of £2,757m (see note 3).

 

 

 

 

 

 

 

 

 

 

 

In calculating Adjusted Capital and Reserves for the purpose of the unsecured debt financial covenants, there is an adjustment of £354m 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 ratio at 31 December 2010 is 23%, being gross debt of £1,784m less cash, short-term deposits and liquid investments of £255m, divided by total Group property of £4,559m (see note 3) plus investments in Funds and Joint Ventures of £1,934m (balance sheet) and other investments of £51m (balance sheet).

 

 

 

 

 

 

 

7.     Dividends

 

 

 

 

The third quarter dividend of 6.5 pence per share, totalling £58 million, is payable on 13 May 2011 to shareholders on the register at close of business on 1 April 2011.

 

 

 

 

 

 

 

 

Having regard to share price volatility 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 30 March 2011.  The Board expects to announce the split between PID and non-PID income at that time. A Scrip Dividend Alternative will not be enhanced.

 

 

 

 

 

 

 

 

 

In respect of the 2011 second quarter PID dividend of 6.5 pence per share, totalling £58m payable on 18 February 2011, 11% of shareholders opted for the Scrip Dividend Alternative.  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 claim to receive dividends gross.  Please refer to our website (www.britishland.com) for details.  The total cash paid by the Group will be £53m, being £44m paid to shareholders and £9m of witholding tax.  A cash saving of £5m results from settling the balance by issuing of shares.

 

 

 

 

 

 

 

 

 

 

 

The Consolidated Statement of Changes in Equity shows total dividends in the nine months to 31 December 2010 of £170m, £56m being the third quarter 2010 dividend of 6.5 pence per share paid on 14 May 2010, £57m being the fourth quarter 2010 dividend of 6.5 pence per share paid on 13 August 2010 and £57m being the first quarter 2011 dividend of 6.5 pence per share paid on 12 November 2010.  Shareholders opted to receive 16m of shares in lieu of £75m in cash dividends.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

2010

2009

2010

2009

2010

2009

2010

2009

 

£m

£m

£m

£m

£m

£m

£m

£m

Nine months ended 31 December

 

 

 

 

 

 

Revenue

72

177

142

140

17

17

231

334

Net rental income

58

134

117

135

12

10

187

279

Segment assets

2,072

1,520

4,192

3,415

634

949

6,898

5,884

Capital expenditure

55

197

250

24

12

12

317

233

Three months ended 31 December

 

 

 

 

 

 

Revenue

24

40

51

43

7

5

82

88

Net rental income

21

27

39

41

5

3

65

71

Capital expenditure

4

109

244

14

11

10

259

133

 

 

 

 

 

 

 

 

 

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 funds and joint ventures. No customer exceeds 10% of the Group's revenues.

 

 

 

 

 

 

 

 

 

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 £23m (31 March 2010: £23m, 30 September 2010: £23m,  31 December 2009: £23m) and recourse is only to the partnership assets.

 

 

 

 

 

 

 

 

 

10.     Related party transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Details of transactions with funds and joint ventures 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 31 December 2010, of the issued 25p ordinary shares, 1m were held in the ESOP Trust (31 March 2010: 2m; 30 September 2010: 1m; 31 December 2009: 2m), 11m were held as Treasury shares (31 March 2010: 11m; 30 September 2010: 11m; 31 December 2009: 11m) and 884m shares were in free issue (31 March 2010: 866m; 30 September 2010: 878m; 31 December 2009: 862m). All shares are fully paid.

 

 

 

 

 

 

 

 

 

12.     Basis of preparation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The financial information for the year ended 31 March 2010 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' 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 4 to 15. 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 15 February 2011.

 

 

 

 

 

 

 

 

 

 

 

Table A

 

 

 

 

 

 

 

 

 

 

 

Summary income statement based on proportional consolidation

 

 

for the period ended 31 December 2010

 

 

 

 

 

 

 

 

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 funds and joint ventures 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

 

Three months ended

Nine months ended

31 March

 

31 December

31 December

31 December

31 December

2010

 

2010

2009

2010

2009

£m

 

£m

£m

£m

£m

 

 

 

 

 

 

538

Rent receivable

127

128

373

409

 

 

 

 

 

 

 

Spreading of tenant incentives and guaranteed

 

 

 

 

23

rent increases

6

6

27

20

 

 

 

 

 

 

 -

Surrender premiums

3

 -

3

 -

 

 

 

 

 

 

561

Gross rental income

136

134

403

429

 

 

 

 

 

 

(16)

Property operating expenses

(4)

(6)

(16)

(10)

 

 

 

 

 

 

545

Net rental income

132

128

387

419

 

 

 

 

 

 

15

Fees and other income

3

1

12

7

 

 

 

 

 

 

(65)

Administrative expenses

(16)

(17)

(48)

(49)

 

 

 

 

 

 

(246)

Net interest costs

(55)

(54)

(160)

(190)

 

 

 

 

 

 

249

Underlying profit before taxation

64

58

191

187

 

 

 

 

 

 

908

Net valuation movement (includes profits and

202

567

418

335

 

losses on disposal)

 

 

 

 

 

 

 

 

 

 

(9)

Non-recurring items *

 

(9)

(4)

(9)

 

 

 

 

 

 

(15)

Amortisation of intangible assets

(2)

(4)

(10)

(11)

 

 

 

 

 

 

 

Profit on ordinary activities

 

 

 

 

1,133

before taxation

264

612

595

502

 

 

 

 

 

 

(5)

Tax charge relating to underlying profit

(2)

(1)

(5)

(4)

 

 

 

 

 

 

(12)

Deferred tax

(1)

(8)

10

(9)

 

 

 

 

 

 

24

Other taxation

 

20

 

22

 

 

 

 

 

 

1,140

Profit for the period after taxation

261

623

600

511

 

 

 

 

 

 

28.4p

Underlying earnings per share - diluted basis

7.0p

6.6p

21.2p

21.3p

 

 

 

 

 

 

* Non-recurring items in the nine months ended 31 December 2010 amount to £4m, being the fair value adjustment on the buy back of Group debentures.  In the year ended 31 March 2010, non-recurring debt break costs of £9m were incurred in HUT.

 

 

 

 

 

 

The underlying earnings per share is calculated on underlying profit before taxation of £191m, tax attributable to underlying profits of £5m and 879m shares on a diluted basis, for the nine months ended 31 December 2010 and underlying profit before taxation of £64m, tax attributable to underlying profits of £2m and 886m shares on a diluted basis, for the three months ended 31 December 2010.

 

 

 

 

Table A (continued)

 

 

 

 

 

 

 

 

 

 

Summary balance sheet based on proportional consolidation

 

 

as at 31 December 2010

 

 

 

 

 

 

 

 

 

 

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 funds and joint ventures included on a line by line, i.e. proportional basis and assuming full dilution.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31 March

 

31 December

31 December

30 September

 

2010

 

2010

2009

2010

 

£m

 

£m

£m

£m

 

 

 

 

 

 

 

5,602

Retail properties

6,079

5,254

5,726

 

2,736

Office properties

2,979

2,458

2,928

 

201

Other properties

216

187

203

 

8,539

Total properties

9,274

7,899

8,857

 

 

 

 

 

 

 

156

Other investments

51

197

51

 

10

Intangible assets

 

13

2

 

(217)

Other net liabilities

(190)

(239)

(237)

 

(4,081)

Net debt

(4,223)

(4,057)

(3,990)

 

 

 

 

 

 

 

4,407

EPRA NAV (note 1)

4,912

3,813

4,683

 

 

 

 

 

 

 

504p

EPRA NAV per share (note 1)

548p

438p

525p

 

 

 

 

 

 

 

 

Total property valuations including share of funds and joint ventures

 

 

 

 

 

 

 

4,152

British Land Group

4,559

3,726

4,326

 

 

 

 

 

 

 

 

Share of funds and joint ventures

 

 

 

4,395

Investment properties

4,723

4,181

4,539

 

(8)

Head lease liabilities

(8)

(8)

(8)

 

 

 

 

 

 

 

4,387

 

4,715

4,173

4,531

 

 

 

 

 

 

 

8,539

Total property portfolio valuation

9,274

7,899

8,857

 

 

 

 

 

 

 

 

 

 

Calculation of EPRA NNNAV per share

 

 

 

 

 

 

 

 

 

4,407

EPRA NAV

4,912

3,813

4,683

 

 

 

 

 

 

 

(43)

Deferred tax arising on revaluation movements

(36)

(39)

(33)

 

 

 

 

 

 

 

(129)

Mark to market on effective cash flow hedges and related debt adjustments

(122)

(100)

(179)

 

 

 

 

 

 

 

285

Mark to market on debt

128

387

52

 

 

 

 

 

 

 

4,520

EPRA NNNAV

4,882

4,061

4,523

 

 

 

 

 

 

 

517p

EPRA NNNAV per share

544p

466p

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.

 

 

 

 

 

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 financial report for the nine months ended 31 December 2010 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash flows and the related notes 1 to 12. We have read the other information contained in the financial report for the nine month period 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 them 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 financial report for the nine month period is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the financial report for the nine month period  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 financial report for the nine month period 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 financial report for the nine month period 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 financial information for the nine month period 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 financial report for the nine months ended 31 December 2010 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 Auditors

London, United Kingdom

15 February 2011

 

 


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