REG - British Land Co PLC - Final Results- Part 2 <Origin Href="QuoteRef">BLND.L</Origin> - Part 1

British LandAnnouncement

16/05/2016 07:07

RNS Number : 2775Y
British Land Co PLC
16 May 2016
consolidated income statement
for the year ended 31 march 2016



2016

20152

Note

Underlying1
m
Capital
and other
m
Total
m

Underlying1
m
Capital
and other
m
Total
m
Revenue
3

569
21
590

505
51
556
Costs
3

(128)
(11)
(139)

(115)
(45)
(160)

3

441
10
451

390
6
396
Joint ventures and funds
(see also below)
8

135
262
397

129
597
726
Administrative expenses


(93)
-
(93)

(85)
-
(85)
Valuation movement
4

-
616
616

-
884
884
Profit on disposal of investment properties and investments


-
35
35

-
20
20
Net financing costs









- financing income
5

5
65
70

7
-
7
- financing charges
5

(111)
(34)
(145) 

(112)
(47)
(159)



(106)
31
(75)

(105)
(47)
(152)
Profit on ordinary activities before taxation


377
954
1,331

329
1,460
1,789
Taxation
6


33
33


(24)
(24)
Profit for the year after taxation




1,364



1,765
Attributable to non-controlling interests


14
5
19

16
39
55
Attributable to shareholders
of the Company


363
982
1,345

313
1,397
1,710
Earnings per share:









- basic
2



131.2p



168.3p
- diluted
2



124.1p



167.3p
All results derive from continuing operations.



2016

20152

Note

Underlying1
m
Capital 
and other
m
Total
m

Underlying1
m
Capital
and other
m
Total
m
Results of joint ventures and funds accounted for using the equity method









Underlying Profit


135
-
135

129
-
129
Valuation movement
4

-
245
245

-
589
589
Profit on disposal of investment properties, trading properties and investments


-
18
18

-
6
6
Taxation


-
(1)
(1)

-
2
2

8

135
262
397

129
597
726
1 See definition in glossary.
2 The prior year comparatives have been restated. See note 1.
consolidated statement OF COMPREHENSIVE INCOME
for the year ended 31 march 2016

2016
m
2015
m
Profit for the year after taxation
1,364
1,765
Other comprehensive income:


Items that will not be reclassified subsequently to profit or loss:


Net actuarial loss on pension scheme
(1)
(5)
Valuation movements on owner-occupied property
19
10

18
5
Items that may be reclassified subsequently to profit or loss:


(Losses) gains on cash flow hedges


- Group
(24)
(71)
- Joint ventures and funds
(3)
3
- Reclassification of items from the statement of comprehensive income
-
30

(27)
(38)
Transferred to the income statement (cash flow hedges)


- Foreign currency derivatives
2
(11)
- Interest rate derivatives
10
8

12
(3)
Exchange differences on translation of foreign operations


- Hedging and translation
(3)
6
- Other
3
(6)

-
-



Deferred tax on items of other comprehensive income
(15)
10



Other comprehensive loss for the year 
(12)
(26)
Total comprehensive income for the year
1,352
1,739
Attributable to non-controlling interests
19
53
Attributable to shareholders of the Company
1,333
1,686
consolidated BALANCE SHEET
AS AT 31 march 2016

Note

2016
m
2015
m
ASSETS




Non-current assets




Investment and development properties
7

9,643
9,120
Owner-occupied property
7

95
60



9,738
9,180
Other non-current assets




Investments in joint ventures and funds
8

3,353
2,901
Other investments
9

142
379
Deferred tax assets
13

3
-
Interest rate and currency derivative assets
14

167
139



13,403
12,599
Current assets




Trading properties
7

325
274
Debtors
10

33
20
Cash and short-term deposits
14

114
108



472
402
Total assets


13,875
13,001
LIABILITIES




Current liabilities




Short-term borrowings and overdrafts
14

(74)
(102)
Creditors
11

(218)
(261)
Corporation tax


(18)
(9)



(310)
(372)
Non-current liabilities




Debentures and loans
14

(3,687)
(3,847)
Other non-current liabilities
12

(122)
(79)
Deferred tax liabilities
13

-
(12)
Interest rate and currency derivative liabilities
14

(137)
(126)



(3,946)
(4,064)
Total liabilities


(4,256)
(4,436)
Net assets


9,619
8,565
EQUITY




Share capital


260
258
Share premium


1,295
1,280
Merger reserve


213
213
Other reserves


(93)
(82)
Retained earnings


7,667
6,563
Equity attributable to shareholders of the Company


9,342
8,232
Non-controlling interests


277
333
Total equity


9,619
8,565
EPRA NAV per share*
2

919p
829p
* As defined in glossary.
consolidated statement OF CASH FLOWS
for the year ended 31 march 2016

Note

2016
m
20151
m
Rental income received from tenants


435
397
Fees and other income received


58
49
Operating expenses paid to suppliers and employees


(152)
(128)
Cash generated from operations


341
318





Interest paid


(124)
(124)
Interest received


11
18
Corporation taxation repayments received


8
-
Distributions and other receivables from joint ventures and funds
8

58
73
Net cash inflow from operating activities


294
285





Cash flows from investing activities




Development and other capital expenditure


(256)
(157)
Purchase of investment properties


(243)
(172)
Sale of investment and trading properties


564
415
Payments received in respect of future trading property sales


40
32
Purchase of investments


-
(7)
Acquisition of Speke Unit Trust


-
(90)
Tesco property swap


-
(93)
Investment in and loans to joint ventures and funds


(241)
(173)
Capital distributions and loan repayments from joint ventures and funds


366
134
Net cash inflow (outflow) from investing activities


230
(111)





Cash flows from financing activities




Issue of ordinary shares


5
12
Dividends paid
15

(235)
(228)
Dividends paid to non-controlling interests


(16)
(19)
Acquisition of units in Hercules Unit Trust


(61)
(93)
Closeout of interest rate derivatives


15
(12)
Cash collateral transactions


(24)
10
Decrease in bank and other borrowings


(919)
(581)
Drawdowns on bank and other borrowings


373
703
Issue of zero coupon 2015 convertible bond


344
-
Net cash outflow from financing activities


(518)
(208)





Net increase (decrease) in cash and cash equivalents


6
(34)
Cash and cash equivalents at 1 April


108
142
Cash and cash equivalents at 31 March


114
108





Cash and cash equivalents consists of:




Cash and short-term deposits
14

114
108
1 The prior year comparatives have been restated. See note 1.
consolidated statement OF CHANGES IN EQUITY
for the year ended 31 march 2016

Share capital
m
Share premium
m
Hedging and translation reserve1
m
Re-
valuation
reserve
m
Merger reserve
m
Retained earnings
m
Total
m
Non-controlling interests
m
Total
equity
m
Balance at 1 April 2015
258 
1,280 
(76)
(6)
213 
6,563 
8,232
333 
8,565 
Profit for the year after taxation
-
-
-
-
-
1,345
1,345
19
1,364
Losses on cash flow hedges
-
-
(24)
-
-
-
(24)
-
(24)
Revaluation of owner-occupied property
-
-
-
19
-
-
19
-
19
Exchange and hedging movements in joint ventures and funds
-
-
-
(3)
-
-
(3)
-
(3)
Reclassification of gains on cash flow hedges









- Foreign currency derivatives
-
-
2
-
-
-
2
-
2
- Interest rate derivatives
-
-
10
-
-
-
10
-
10
Exchange differences on translation
of foreign operations
-
-
(3)
3
-
-
-
-
-
Net actuarial loss on pension schemes
-
-
-
-
-
(1)
(1)
-
(1)
Deferred tax on items of
other comprehensive income
-
-
(16)
1
-
-
(15)
-
(15)
Other comprehensive (loss) income
-
-
(31)
20 
- 
(1)
(12)
- 
(12)
Total comprehensive income for the year
-
- 
(31)
20 
- 
1,344
1,333
19 
1,352
Share issues
2 
15 
- 
- 
- 
(12)
5
- 
5 
Fair value of share and share option awards
-
-
-
-
-
8
8
-
8
Purchase of units from non-controlling interests
- 
- 
- 
- 
- 
-
-
(59)
(59)
Loss on purchase of units from non-controlling interests
- 
- 
- 
- 
- 
(1)
(1)
- 
(1)
Dividends payable in year (28.0p per share)
- 
- 
- 
- 
- 
(287)
(287)
-
(287)
Dividends payable by subsidiaries
- 
- 
- 
- 
- 
- 
- 
(16)
(16)
Adjustment for scrip dividend element
- 
- 
- 
- 
- 
52
52
- 
52 
Balance at 31 March 2016
260
1,295 
(107)
14
213 
7,667 
9,342
277 
9,619 










Balance at 1 April 2014
255
1,257
(32)
(38)
213
5,091
6,746
371
7,117
Profit for the year after taxation
-
-
-
-
-
1,710
1,710
55
1,765
Losses on cash flow hedges
-
-
(69)
-
-
-
(69)
(2)
(71)
Revaluation of owner-occupied property
-
-
-
10
-
-
10
-
10
Exchange and hedging movements in joint ventures and funds
-
-
-
3
-
-
3
-
3
Reclassification of items from the statement
of comprehensive income
-
-
-
30
-
-
30
-
30
Reclassification of (losses) gains on cash flow hedges









- Foreign currency derivatives
-
-
(11)
-
-
-
(11)
-
(11)
- Interest rate derivatives
-
-
8
-
-
-
8
-
8
Exchange differences on
translation of foreign operations
-
-
6
(6)
-
-
-
-
-
Net actuarial loss on pension schemes
-
-
-
-
-
(5)
(5)
-
(5)
Deferred tax on items of other comprehensive income
-
-
22
(5)
-
(7)
10
-
10
Other comprehensive (loss) income
-
-
(44)
32
-
(12)
(24)
(2)
(26)
Total comprehensive income for the year
-
-
(44)
32
-
1,698
1,686
53
1,739
Share issues
3
23
-
-
-
(10)
16
-
16
Non-controlling interest on acquisition of subsidiary
-
-
-
-
-
-
-
31
31
Fair value of share and share option awards
-
-
-
-
-
10
10
-
10
Purchase of units from non-controlling interests
-
-
-
-
-
2
2
(103)
(101)
Dividends payable in year (27.3p per share)
-
-
-
-
-
(277)
(277)
-
(277)
Dividends payable by subsidiaries
-
-
-
-
-
-
-
(19)
(19)
Adjustment for scrip dividend element
-
-
-
-
-
49
49
-
49
Balance at 31 March 2015
258
1,280
(76)
(6)
213
6,563
8,232
333
8,565
1 The balance at the beginning of the year includes 10m in relation to translation and (86m) in relation to hedging.
Notes to the accounts
1 Basis of preparation, significant accounting
policies and accounting judgements
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 March 2016 or 2015, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of Companies Act 2006 or equivalent preceding legislation.
The financial statements for the year ended 31 March 2016 have been prepared on a historical cost basis, except for the revaluation of properties, investments held for trading and derivatives. The financial statements have also been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation.
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in June 2016.
In the current financial year the Group has adopted Annual Improvements to IFRSs 2010-2012 cycle and 2011-2013 cycle and Defined Benefit Plans: Employee Contributions - Amendments to IAS 19.
The adoption of these standards has not had a material impact on the Group and otherwise the accounting policies used are consistent with those contained in the Group's previous Annual Report and Accounts for the year ended 31 March 2015.
A number of new standards and amendments to standards and interpretations have been issued but are not yet effective for the current accounting period. None of these are expected to have a material impact on the consolidated financial statements of the Group, except the following set out below:
IFRS 9 - Financial Instruments, will impact both the measurement and disclosures of financial instruments and is effective for the Group's year ending 31 March 2019. The Group has not yet completed its evaluation of the effect of the adoption.
IFRS 15 - Revenue from contracts with customers, does not apply
to gross rental income, but does apply to service charge income, management and performance fees and trading property disposals and is effective for the Group's year ending 31 March 2019. The Group does not expect adoption of IFRS 15 to have a material impact on the measurement of revenue recognition, but additional disclosures will be required with regards to the above sources of income.
IFRS 16 - Leases, will impact both the measurement and disclosures of the Group's head leases and is effective for the Group's year ending 31 March 2020. The Group has not yet completed its evaluation of the effect of the adoption.
Restatement
During the year, the accounting for Broadgate Estates, a wholly owned subsidiary of the Group which acts as a property manager, has been reviewed resulting in a reclassification of items presented in the Consolidated Income Statement and the Consolidated Statement
of Cash Flows.
This reclassification had no impact on either IFRS profit before tax or Underlying Profit. It resulted in a 29m increase in other fees and commissions received offset by a 26m increase in other fees and commissions expenses and a 3m increase in administrative expenses.
This reclassification had no impact on the net cash inflow from operating activities presented in the Consolidated Statement of Cash Flows. It resulted in 35m increase in fees and other income received and a 35mincrease in operating expenses paid to suppliers and employees. In addition, the format of the Consolidated Income Statement has been changed to aid the clarity and usability of the financial statements and the prior-year comparatives have been re presented to reflect this change.
Accounting judgements and estimates
In applying the Group's accounting policies, the Directors are required to make judgements and estimates that affect the financial statements.
Significant areas of estimation are:
Valuation of properties and investments held for trading: The Group uses external professional valuers to determine the relevant amounts. The primary source of evidence for property valuations should be recent, comparable market transactions on an arms-length basis. However, the valuation of the Group's property portfolio and investments held for trading are inherently subjective, as they are made on the basis of assumptions made by the valuers which may not prove to be accurate.
Other less significant areas of estimation include the valuation of fixed rate debt and interest rate derivatives, the determination of share-based payment expense, and the actuarial assumptions used in calculating the Group's retirement benefit obligations.
The key areas of accounting judgement are:
REIT status: British Land is a Real Estate Investment Trust (REIT) and does not pay tax on its property income or gains on property sales, provided that at least 90% of the Group's property income is distributed as a dividend to shareholders, which becomes taxable in their hands. In addition, the Group has to meet certain conditions such as ensuring the property rental business represents more than 75% of total profits and assets. Any potential or proposed changes to the REIT legislation are monitored and discussed with HMRC. It is Management's intention that the Group will continue as a REIT for the foreseeable future.
Accounting for joint ventures and funds: In accordance with IFRS 10 'Consolidated financial statements', IFRS 11 'Joint arrangements', and IFRS 12 'Disclosures of interests in other entities' an assessment is required to determine the degree of control or influence the Group exercises and the form of any control to ensure that the financial statement treatment is appropriate.
Interest in the Group's joint ventures is commonly driven by the terms of the partnership agreements which ensure that control is shared between the partners. These are accounted for under the equity method, whereby the consolidated balance sheet incorporates the Group's share of the net assets of its joint ventures and associates. The consolidated income statement incorporates the Group's share of joint venture and associate profits after tax.
Accounting for transactions: Property transactions are complex in nature and can be material to the financial statements. Assessment is required to determine the most appropriate accounting treatment of assets acquired and of potential contractual arrangements in the legal documents for both acquisitions and disposals. Management consider each transaction separately and, when considered appropriate, seek independent accounting advice.
2 Performance measures
Earnings per share
The Group measures financial performance with reference to underlying earnings per share, the European Public Real Estate Association (EPRA) earnings per share and IFRS earnings per share. The relevant earnings and weighted average number of shares (including dilution adjustments) for each performance measure are shown below, and a reconciliation between these is shown within the supplementary disclosures (Table B).
EPRA earnings per share is calculated using EPRA earnings, which is the IFRS profit after taxation attributable to shareholders of the Company excluding investment and development property revaluations, gains/losses on investing and trading property disposals, changes in the fair value of financial instruments and associated close-out costs and their related taxation. EPRA earnings (diluted) also takes into account dilution due to the 2012 convertible bond.
Underlying earnings per share is calculated using Underlying Profit adjusted for underlying taxation (see note 6). Underlying Profit is the pre-tax EPRA earnings measure, with additional Company adjustments. No Company adjustments were made in either the current or prior year. For the year ended 31 March 2015 the 2012 convertible bond was not dilutive for underlying earnings, as the contingent conditions associated to the bond had not been met. The convertible conditions period ended on 25 September 2015 and therefore the bond was treated as dilutive in the current year.

2016

2015
Earnings per share
Relevant
earnings
m
Relevant 
number
of shares
million
Earnings
per share
pence

Relevant
earnings
m
Relevant
number
of shares
million
Earnings
per share
pence
Underlying







Underlying basic
365
1,025
35.6

313
1,016
30.8
Underlying diluted
371
1,089
34.1

313
1,022
30.6
EPRA







EPRA basic
365
1,025
35.6

313
1,016
30.8
EPRA diluted
371
1,089
34.1

319
1,080
29.5
IFRS







Basic
1,345
1,025
131.2

1,710
1,016
168.3
Diluted
1,351
1,089
124.1

1,710
1,022
167.3
Net asset value
The Group measures financial position with reference to EPRA net asset value (NAV) per share and EPRA triple net asset value (NNNAV) per share. The net asset value and number of shares for each performance measure is shown below. A reconciliation between IFRS net assets and EPRA net assets, and the relevant number of shares for each performance measure, is shown within the supplementary disclosures (Table B). EPRA net assets is a proportionally consolidated measure that is based on IFRS net assets excluding the mark-to-market on effective cash flow hedges and related debt adjustments, the mark-to-market on the convertible bonds as well as deferred taxation on property and derivative valuations. They include the valuation surplus on trading properties and are adjusted for the dilutive impact of share options and the 400 million convertible bond maturing in 2017.

2016

2015
Net asset value per share
Relevant
net assets
m
Relevant
number
of shares
million
Net asset
value per
share
pence

Relevant
net assets
m
Relevant
number
of shares
million
Net asset
value per
share
pence
EPRA







EPRA NAV
10,074
1,096
919

9,035
1,090
829
EPRA NNNAV
9,640
1,096
880

8,359
1,090
767
IFRS







Basic
9,619
1,029
935

8,565
1,020
840
Diluted
10,019
1,096
914

8,565
1,032
830
Total accounting return
The Group also measures financial performance with reference to total accounting return. This is calculated as the increase in EPRA net asset value per share and dividend paid in the year as a percentage of the EPRA net asset value per share at the start of the year.

2016

2015

Increase in NAV per share
pence
Dividend per share paid
pence
Total
accounting
return

Increase in NAV per share
pence
Dividend per
share paid
pence
Total
accounting
return
Total accounting return
90
28.02
14.2%

141
27.30
24.5%
3 Revenue and costs

2016

2015

Underlying
m
Capital
and other
m

Underlying
m
Capital
and other
m
Rent receivable
437
-

369
-
Spreading of tenant incentives and guaranteed rent increases
12
-

26
-
Surrender premia
2
-

4
-
Gross rental income
451
-

399
-
Trading property sales proceeds
-
21

-
51
Service charge income
72
-

65
-
Management and performance fees (from joint ventures and funds)
8
-

7
-
Other fees and commissions
38
-

34
-
Revenue
569
21

505
51






Trading property cost of sales
-
(11)

-
(45)
Service charge expenses
(72)
-

(65)
-
Property operating expenses
(26)
-

(24)
-
Other fees and commissions expenses
(30)
-

(26)
-
Costs
(128)
(11)

(115)
(45)

441
10

390
6
The cash element of net rental income recognised during the year ended 31 March 2016 from properties which were not subject to a security
interest was 229m (2014/15: 182m). Property operating expenses relating to investment properties that did not generate any rental income were 1m (2014/15: 2m). Contingent rents of 3m (2014/15: 3m) were recognised in the year.
4 Valuation movements on property

2016
m
2015
m
Consolidated income statement


Revaluation of properties
616
884
Revaluation of properties held by joint ventures and funds accounted for using the equity method
245
589

861
1,473
Consolidated statement of comprehensive income


Revaluation of owner-occupied properties
19
10

880
1,483
5 Net financing costs

2016
m
2015
m
Underlying





Financing charges


Bank loans, overdrafts and derivatives
(30)
(36)
Other loans
(88)
(88)
Obligations under head leases
(2)
(2)

(120)
(126)
Development interest capitalised
9
14

(111)
(112)
Financing income


Deposits, securities and liquid investments
3
2
Loans to joint ventures
2
5

5
7
Net financing charges - underlying
(106)
(105)



Capital and other





Financing charges


Valuation movements on translation of foreign currency debt
2
(11)
Hedging reserve recycling
(2)
11
Valuation movements on fair value derivatives
54
108
Valuation movements on fair value debt
(53)
(104)
Recycling of fair value movement on close-out of derivatives
(6)
(12)
Capital financing costs1
(29)
(2)
Fair value movement on convertible bonds
-
(35)
Valuation movement on translation of foreign currency net assets
-
(1)
Fair value movement on non-hedge accounted derivatives
-
(1)

(34)
(47)
Financing income


Fair value movement on convertible bonds
64
-
Fair value movement on non-hedge accounted derivatives
1
-

65
-
Net financing income (charges) - capital
31
(47)






Net financing costs


Total financing income
70
7
Total financing charges
(145)
(159)
Net financing costs
(75)
(152)
1 Primarily debenture bonds tender offer and purchase.
Interest payable on unsecured bank loans and related interest rate derivatives was 19m (2014/15: 24m). Interest on development expenditure
is capitalised at the Group's weighted average interest rate of 2.6% (2014/15: 3.3%). The weighted average interest rate on a proportionately consolidated basis at 31 March 2016 was 3.3% (2014/15: 3.8%).
6Taxation

2016
m
2015
m
Taxation income (expense) 


Current taxation:


UK corporation taxation: 20% (2014/15: 21%)
(15)
(1)
Adjustments in respect of prior years
17
-
Total current taxation income (expense)
2
(1)
Deferred taxation on revaluations and derivatives
31
(23)
Group total taxation
33
(24)
Attributable to joint ventures and funds
(1)
2
Total taxation income (expense)
32
(22)



Taxation reconciliation


Profit on ordinary activities before taxation
1,331
1,789
Less: profit attributable to joint ventures and funds1
(397)
(726)
Group profit on ordinary activities before taxation
934
1,063
Taxation on profit on ordinary activities at UK corporation taxation rate of 20% (2014/15: 21%)
(187)
(223)
Effects of:


REIT exempt income and gains
161
232
Taxation losses
11
(10)
Deferred taxation on revaluations and derivatives
31
(23)
Adjustments in respect of prior years
17
-
Group total taxation income (expense)
33
(24)
1 A current taxation expense of 1m (2014/15: 2m expense) and a deferred taxation expense of nil (2014/15: 4m credit) arose on profits attributable to joint ventures and funds.
Taxation attributable to Underlying Profit for the year ended 31 March 2016 was a credit of 2m (2014/15: nil). Corporation taxation payable at 31 March 2016 was 18m (2014/15: 9m) as shown on the balance sheet.
7 Property
Property reconciliation for the year ended 31 March 2016
Canada Water was added as a property sector in the year, reflecting the key role the campus has in the strategy of the Group.

Investment







Retail & leisure
Level 3
m
Offices & residential
Level 3
m
Canada
Water
Level 3
m
Developments
Level 3
m
Investment
and
development properties
Level 3
m
Trading properties
m
Owner-
occupied
Level 3
m
Total
m
Carrying value at 1 April 2015
5,584
2,902
249
385
9,120
274
60
9,454
Additions








- property purchases
4
234
-
-
238
-
-
238
- development expenditure
4
6
1
43
54
59
-
113
- capitalised interest and staff costs
-
-
1
3
4
5
-
9
-
capital expenditure on asset management initiatives
91
24
1
-
116
-
-
116

99
264
3
46
412
64
-
476
Depreciation
-
-
-
-
-
-
(1)
(1)
Disposals
(372)
(130)
-
(7)
(509)
(11)
-
(520)
Reclassifications
135
22
-
(172)
(15)
(2)
17
-
Revaluations included in income statement
161
369
4
82
616
-
-
616
Revaluation included in OCI
-
-
-
-
-
-
19
19
Movement in tenant incentives and contracted rent uplift balances
10
9
-
-
19
-
-
19
Carrying value at 31 March 2016
5,617
3,436
256
334
9,643
325
95
10,063
Head lease liabilities (note 12)







(37)
Valuation surplus on trading properties






85
Group property portfolio valuation
at 31 March 2016






10,111
Non-controlling interests







(324)
Group property portfolio valuation at 31 March 2016 attributable to shareholders


9,787
Property valuation
The different valuation method levels are defined below:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
These levels are specified in accordance with IFRS 13 'Fair Value Measurement'. Property valuations are inherently subjective as they are made on the basis of assumptions made by the valuer which may not prove to be accurate. For these reasons, and consistent with EPRA's guidance, we have classified the valuations of our property portfolio as Level 3 as defined by IFRS 13. The unobservable inputs to the valuations are analysed in the table on the following page.
The Group's total property portfolio was valued by independent external valuers on the basis of fair value, in accordance with the RICS Valuation - Professional Standards 2014, ninth edition, published by The Royal Institution of Chartered Surveyors.
The information provided to the valuers, and the assumptions and valuations models used by the valuers are reviewed by the property portfolio team, the Head of Offices, the Head of Retail and the Chief Financial Officer. The valuers meet with the external auditors and also present directly to the Audit Committee at the interim and year end review of results.
Investment properties, excluding properties held for development, are valued by adopting the "investment method" of valuation. This approach involves applying capitalisation yields to current and future rental streams net of income voids arising from vacancies or rent-free periods and associated running costs. These capitalisation yields and future rental values are based on comparable property and leasing transactions in the market using the valuers' professional judgement and market observation. Other factors taken into account in the valuations include the tenure of the property, tenancy details and ground and structural conditions.
In the case of ongoing developments, the approach applied is the "residual method" of valuation, which is the investment method of valuation as described above, with a deduction for all costs necessary to complete the development, including a notional finance cost, together with a further allowance for remaining risk. Properties held for development are generally valued by adopting the higher of the residual method of valuation, allowing for all associated risks, or the investment method of valuation for the existing asset.
Copies of the valuation certificates of Knight Frank LLP and CBRE can be found at www.britishland.com/reports
Within their valuation report, CBRE have highlighted that they expect considerable uncertainty to arise if there is a decision for the UK to exit the EU following the referendum on 23 June 2016 and that this has the potential to reduce investment volumes and liquidity. This is a forward looking statement which has no impact on the valuations as at 31 March 2016.
A breakdown of valuations split between the Group and its share of joint ventures and funds is shown below:

2016

2015

Group
m
Joint
ventures and funds
m
Total
m

Group
m
Joint
ventures and funds
m
Total
m
Knight Frank LLP
7,529
3,576 
11,105 

6,795
3,313
10,108
CBRE
2,582
1,361 
3,943 

2,714
1,401
4,115
Total property portfolio valuation
10,111
4,937 
15,048 

9,509
4,714
14,223
Non-controlling interests
(324)
(76)
(400)

(441)
(105)
(546)
Total property portfolio valuation
attributable to shareholders
9,787
4,861
14,648

9,068
4,609
13,677
Information about fair value measurements using unobservable inputs (Level 3)

Investment


ERV per sq ft

Equivalent Yield

Costs to complete per sq ft
Fair value at
31 March 2016
m
Valuation
technique
Min
Max

Average

Min
%
Max
%

Average
%

Min
Max

Average
Retail & leisure
5,608
Investment methodology
2
75
22

3
11
5

-
45
8
Offices & residential1,2
3,492
Investment methodology
4
136
53

1
8
4

-
150
15
Canada Water
250
Investment methodology
15
25
22

1
5
3

-
5
4
Developments2
343
Residual methodology
65
107
73

4
5
4

-
664
447
Total
9,693












Trading properties
at fair value
418












Group property portfolio valuation
10,111












1 Includes owner-occupied.
2 Includes Residential with an average capital value per sq ft of 1,028 including developments at end value and mixed use.
All other factors being equal:
 a higher equivalent yield or discount rate would lead to a decrease in the valuation of an asset;
 an increase in the current or estimated future rental stream would have the effect of increasing the capital value; and
 an increase in the costs to complete would lead to a decrease in the valuation of an asset.
However, there are interrelationships between the unobservable inputs which are partially determined by market conditions, which would impact
on these changes. There were no transfers between valuation levels in the period.
8 Joint ventures and funds
Summary movement for the year of the investments in joint ventures and funds

Joint ventures
m
Funds
m
Total
m

Equity
m
Loans
m
Total
m
At 1 April 2015
2,586
315
2,901

2,598
303
2,901
Additions
246
-
246

14
232
246
Disposals
(2)
(13)
(15)

-
(15)
(15)
Share of profit on ordinary activities after taxation
365
32
397

397
-
397
Distributions and dividends:







- Capital
-
(76)
(76)

(76)
-
(76)
- Revenue
(90)
(13)
(103)

(103)
-
(103)
Hedging and exchange movements
4
(1)
3

3
-
3
At 31 March 2016
3,109
244
3,353

2,833
520
3,353
Additional investments in joint ventures and funds covenant information
At 31 March 2016 the investments in joint ventures included within the total investments in joint ventures and funds was 3,348m (2014/15: 2,869m), being the 3,353m total investment shown above, less the net investment of 5m (2014/15: 32m) in PREF, a property fund in Continental Europe.
The summarised income statements and balance sheets below show 100% of the results, assets and liabilities of joint ventures and funds. Where necessary these have been restated to the Group's accounting policies.
Joint ventures' and funds' summary financial statements for the year ended 31 March 2016

Broadgate
REIT
Ltd
MSC Property
Intermediate
Holdings Ltd
BL Sainsbury
Superstores
Ltd
Tesco Joint
Ventures1
Partners
Euro Bluebell LLP
(GIC)
Norges Bank Investment
Management
J Sainsbury plc
Tesco PLC
Property sector
City Offices
Broadgate
Shopping Centres
Meadowhall
Superstores
Superstores
Group share
50%
50%
50%
50%





Summarised income statements
m
m
m
m
Revenue5
244
102
56
19
Costs
(48)
(23)
(1)
-

196
79
55
19
Administrative expenses
-
-
-
-
Net interest payable
(86)
(36)
(24)
(9)
Underlying Profit
110
43
31
10
Net valuation movement
334
50
(36)
(9)
Profit on disposal of investment properties and investments
-
-
2
-
Profit on ordinary activities before taxation
444
93
(3)
1
Taxation
-
-
-
1
Profit on ordinary activities after taxation
444
93
(3)
2
Other comprehensive income (expenditure)
5
-
-
3
Total comprehensive income
449
93
(3)
5
British Land share of total comprehensive income
225
46
(2)
3
British Land share of distributions payable
44
17
11
4





Summarised balance sheets
m
m
m
m
Investment and trading properties
4,622
1,786
946
354
Current assets
4
5
2
-
Cash and deposits
293
32
80
6
Gross assets
4,919
1,823
1,028
360
Current liabilities
(77)
(31)
(30)
(3)
Bank and securitised debt
(1,842)
(694)
(462)
(184)
Other non-current liabilities
(65)
(24)
-
(15)
Gross liabilities
(1,984)
(749)
(492)
(202)
Net external assets
2,935
1,074
536
158
British Land share of net assets
1,467
537
269
79
The SouthGate Limited Partnership
USS
Joint
Ventures2
Leadenhall
Holding Co
(Jersey) Ltd
Hercules Unit Trust
joint ventures
and sub-funds3
Other
joint ventures
and funds4
TOTAL
2016
TOTAL
Group share
2016
Aviva
Investors
Universities Superannuation Scheme Group
PLC
Oxford
Properties




Shopping
Centres
Shopping
Centres
City Offices
Leadenhall
Retail
Parks



50%
50%
50%
Various










m
m
m
m
m
m
m
19
12
35
38
6
531
266
(6)
(3)
(10)
(7)
(1)
(99)
(44)
13
9
25
31
5
432
222
(1)
-
(1)
(6)
(2)
(10)
(5)
(1)
-
-
(8)
-
(164)
(82)
11
9
24
17
3
258
135
4
12
124
4
7
490
245
-
-
-
-
30
32
18
15
21
148
21
40
780
398
-
-
-
-
(3)
(2)
(1)
15
21
148
21
37
778
397
-
-
-
(2)
-
6
3
15
21
148
19
37
784
400
8
11
74
10
25
400

4
6
3
59
31
179








m
m
m
m
m
m
m
267
252
942
612
108
9,889
4,944
2
1
-
4
14
32
18
5
7
5
9
33
470
239
274
260
947
625
155
10,391
5,201
(4)
(6)
(6)
(7)
(51)
(215)
(111)
-
-
-
(139)
-
(3,321)
(1,660)
(28)
-
-
(4)
(18)
(154)
(77)
(32)
(6)
(6)
(150)
(69)
(3,690)
(1,848)
242
254
941
475
86
6,701
3,353
121
128
471
237
44
3,353

1 Tesco joint ventures include BLT Holdings (2010) Limited as at 31 March 2016.
2 USS joint ventures include the Eden Walk Shopping Centre Unit Trust and the Fareham Property Partnership.
3 Hercules Unit Trust joint ventures and sub-funds includes 50% of the results of Deepdale Co-Ownership Trust, Gibraltar Limited Partnership and Valentine Co-Ownership Trust and 41.25% of Birstall Co-Ownership Trust. The balance sheet shows 50% of the assets of these joint ventures and sub-funds.
4Included in the column headed 'Other joint ventures and funds' are contributions from the following: BL Goodman Limited Partnership, The Aldgate Place Limited Partnership, Bluebutton Property
Management UK Limited, City of London Office Unit Trust and Pillar Retail Europark Fund (PREF). The Group's ownership share of PREF is 65%, however as the group is not able to exercise control over significant decisions of the fund, the Group equity accounts for its interest in PREF.
5 Revenue includes gross rental income at 100% share of 495m (2014/15: 451m).
The borrowings of joint ventures and funds and their subsidiaries are non-recourse to the Group. All joint ventures are incorporated in the United Kingdom, with
the exception of Broadgate REIT Limited, the Eden Walk Shopping Centre Unit Trust and Leadenhall Holding Co (Jersey) Limited which are incorporated in Jersey.
Of the funds, the Hercules Unit Trust (HUT) joint ventures and sub-funds are incorporated in Jersey and PREF in Luxembourg.

These financial statements include the results and financial position of the Group's interest in the Fareham Property Partnership, the Aldgate Place Limited Partnership, the BL Goodman Limited Partnership, the Auchinlea Partnership and the Gibraltar Limited Partnership. Accordingly, advantage has been taken of the exemptions provided by Regulation 7 of the Partnership (Accounts) Regulations 2008, not to attach the partnership accounts to these financial statements.
Operating cash flows of joint ventures and funds (Group share)

2016
m
2015
m
Rental income received from tenants
208
234
Fees and other income received
1
1
Operating expenses paid to suppliers and employees
(18)
(26)
Cash generated from operations
191
209
Interest paid
(86)
(114)
Interest received
1
2
UK corporation tax paid
(3)
(7)
Foreign tax paid
(1)
(2)
Cash inflow from operating activities
102
88
Cash inflow from operating activities deployed as:


Surplus cash retained within joint ventures and funds
44
15
Revenue distributions per consolidated statement of cash flows
58
73
Revenue distributions split between controlling and non-controlling interests


Attributable to non-controlling interests
4
7
Attributable to shareholders of the Company
54
66
9 Other investments

2016

2015

Investment
held for
trading
m
Loans, receivables
and other
m
Total
m

Investment
held for
trading
m
Loans,
receivables
and other
m
Total
m
At 1 April
99
280
379

92
170
262
Additions
-
35
35

-
113
113
Disposals
-
(272)
(272)

-
(2)
(2)
Revaluation
2
-
2

7
-
7
Depreciation
-
(2)
(2)

-
(1)
(1)
At 31 March
101
41
142

99
280
379
The investment held for trading comprises interests as a trust beneficiary. The trust's assets comprise freehold reversions in a pool of commercial properties, comprising Sainsbury's superstores. The interest was categorised as Level 3 in the fair value hierarchy, is subject to the same inputs as those disclosed in note 7, and its fair value was determined by independent external valuers.
Included within the loans, receivables and other balance is nil (2014/2015: 243m) in relation to a loan to the Broadgate joint venture, which is carried at amortised cost, and was fully repaid in the year.
10 Debtors

2016
m
2015
m
Trade and other debtors
24
16
Prepayments and accrued income
9
4

33
20
Trade and other debtors are shown after deducting a provision for bad and doubtful debts of 16m (2014/15: 16m). The charge to the income statement in relation to bad and doubtful debts was 1m (2014/15: 1m).
The Directors consider that the carrying amount of trade and other debtors is approximate to their fair value. There is no concentration of credit risk with respect to trade debtors as the Group has a large number of customers who are paying their rent in advance.
As at 31 March, trade and other debtors outside their payment terms yet not provided for are as follows:


Outside credit terms but not impaired

Total
m
Within credit terms
m
0-1 month
m
1-2 months
m
More than
2 months
m
2016
24
12
11
1
-
2015
16
9
7
-
-
11 Creditors

2016
m
2015
m
Trade creditors
39
61
Other taxation and social security
34
31
Accruals
72
98
Deferred income
73
71

218
261
Trade creditors are interest-free and have settlement dates within one year. The Directors consider that the carrying amount of trade and other creditors is approximate to their fair value.
12 Other non-current liabilities

2016
m
2015
m
Other creditors
70
32
Head leases1
46
41
Net pension liabilities
6
6

122
79
1 Includes 9m in relation to head lease liabilities on trading properties held at cost.
13 Deferred tax
The movement on deferred tax is as shown below:
Deferred tax assets year ended 31 March 2016

1 April
2015
m
Credited to income 
m
Credited (debited) to equity 
m 
Transferred to joint ventures 
m 
31 March
2016 
m 
Interest rate and currency derivative revaluations
-
-
5
-
5
Other timing differences
-
6
-
-
6

-
6
5
-
11
Deferred tax liabilities year ended 31 March 2016

m
m
m
m
m
Property and investment revaluations
(5)
-
(2)
-
(7)
Interest rate and currency derivative revaluations
(4)
25
(21)
-
-
Other timing differences
(3)
-
-
2
(1)

(12)
25
(23)
2
(8)






Net deferred tax (liability) asset
(12)
31
(18)
2
3
Deferred tax assets year ended 31 March 2015

1 April
2014
m
Expensed
to income
m
Credited to
equity
m
Transferred to joint ventures
m
31 March
2015
m

-
-
-
-
-
Deferred tax liabilities year ended 31 March 2015

m
m
m
m
m
Property and investment revaluations
-
(5)
-
-
(5)
Interest rate and currency derivative revaluations
-
(19)
15
-
(4)
Other timing differences
(4)
1
-
-
(3)

(4)
(23)
15
-
(12)






Net deferred tax (liability) asset
(4)
(23)
15
-
(12)
The following corporation tax rates have been substantively enacted; 20% effective from 1 April 2015 reducing to 19% effective from 1 April 2017
and 18% effective from 1 April 2020. The deferred tax assets and liabilities have been calculated at the tax rate effective in the period that the tax is expected to crystallise.
The Group has recognised a deferred tax asset calculated at 18% (2014/2015: 20%) of 6m (2014/2015: nil) in respect of capital losses from previous years available for offset against future capital profit. Further unrecognised deferred tax assets in respect of capital losses of 60m (2014/2015: 87m) exist at 31 March 2016.
The Group has recognised deferred tax assets on derivative revaluations to the extent that future matching taxable profits are expected to arise.
At 31 March 2016 the Group had an unrecognised deferred tax asset calculated at 18% (2014/2015: 20%) of 51m (2014/2015: 38m) in respect of UK revenue tax losses from previous years.
Under the REIT regime, development properties which are sold within three years of completion do not benefit from tax exemption. At 31 March 2016 the value of such properties is 967m (2014/2015: 1,008m) and if these properties were to be sold and no tax exemption was available, the tax arising would be 56m (2014/15: 66m).
14 Net debt

Footnote
2016
m
2015
m
Secured on the assets of the Group



9.125% First Mortgage Debenture Stock 2020
1.1
34
35
5.264% First Mortgage Debenture Bonds 2035

371
355
5.0055% First Mortgage Amortising Debentures 2035

100
99
5.357% First Mortgage Debenture Bonds 2028

349
344
6.75% First Mortgage Debenture Stock 2020

62
176
Bank loans
1.2, 1.3
733
963
Loan notes

2
2


1,651
1,974
Unsecured



5.50% Senior Notes 2027

101
98
6.30% Senior US Dollar Notes 2015

-
104
3.895% Senior US Dollar Notes 2018
2
28
28
4.635% Senior US Dollar Notes 2021
2
165
158
4.766% Senior US Dollar Notes 2023
2
105
99
5.003% Senior US Dollar Notes 2026
2
69
64
3.81% Senior Notes 2026

113
111
3.97% Senior Notes 2026

116
114
1.5% Convertible Bond 2017

445
493
0% Convertible Bond 2020

334
-
Bank loans and overdrafts

634
706


2,110
1,975
Gross debt
3
3,761
3,949
Interest rate and currency derivative liabilities

137
126
Interest rate and currency derivative assets

(167)
(139)
Cash and short-term deposits
4,5
(114)
(108)
Total net debt

3,617
3,828
Net debt attributable to non-controlling interests

(104)
(190)
Net debt attributable to shareholders of the Company

3,513
3,638
1 These are non-recourse borrowings with no recourse for repayment to other companies or assets in the Group:

2016
m
2015
m
1.1 BLD Property Holdings Ltd
34
35
1.2 Hercules Unit Trust
443
645
1.3 TBL Properties Limited and subsidiaries
290
318

767
998
2 Principal and interest on this borrowing was fully hedged into Sterling at a floating rate at the time of issue.
3 The principal amount of gross debt at 31 March 2016 was 3,552m (2014/15: 3,717m). Included in this is the principal amount of secured borrowings and other borrowings of non-recourse companies of 1,563m of which the borrowings of the partly-owned subsidiary, Hercules Unit Trust, not beneficially owned by the Group
is 109m.
4 Included within cash and short-term deposits is the cash and short-term deposits of Hercules Unit Trust, of which 8m is the proportion not beneficially owned
by the Group.
5 Cash and deposits not subject to a security interest amount to 93m (2014/15: 84m).
Maturity analysis of net debt

2016
m
2015
m
Repayable: within one year and on demand
74
102
Between: one and two years
504
71
 two and five years
1,491
1,707
 five and ten years
807
943
 ten and fifteen years
500
747
 fifteen and twenty years
385
6
 twenty and twenty five years
-
373

3,687
3,847
Gross debt
3,761
3,949
Interest rate and currency derivatives
(30)
(13)
Cash and short-term deposits
(114)
(108)
Net debt
3,617
3,828
1.5% Convertible bond 2012 (maturity 2017)
On 10 September 2012 British Land (Jersey) Limited (the 2012 Issuer), a wholly-owned subsidiary of the Group, issued 400 million 1.5% guaranteed convertible bonds due 2017 (the 2012 bonds) at par. The 2012 Issuer is fully guaranteed by the Company in respect of the 2012 bonds.
Subject to their terms, the 2012 bonds are convertible into preference shares of the 2012 Issuer which are automatically transferred to the Company in exchange for ordinary shares in the Company or, at the Company's election, any combination of ordinary shares and cash. Bondholders may exercise their conversion right at any time up to (but excluding) the 20th dealing day before 10 September 2017 (the maturity date).
The initial exchange price was 693.07 pence per ordinary share. The exchange price is adjusted based on certain events.
From 25 September 2015, the Company has the option to redeem the 2012 bonds at par if the Company's share price has traded above 130% of the exchange price for a specified period, or at any time once 85% by nominal value of the 2012 bonds have been converted, redeemed, or purchased and cancelled. The 2012 bonds will be redeemed at par on 10 September 2017 (the maturity date) if they have not already been converted, redeemed or purchased and cancelled. No redemption of the bonds occurred in the year.
0% Convertible bond 2015 (maturity 2020)
On 9 June 2015 British Land (White) 2015 Limited (the 2015 Issuer), a wholly owned subsidiary of the Group, issued 350 million zero coupon guaranteed convertible bonds due 2020 (the 2015 bonds) at par. The 2015 Issuer is fully guaranteed by the Company in respect of the 2015 bonds.
Subject to their terms, the 2015 bonds are convertible into preference shares of the Issuer which are automatically transferred to the Company in exchange for ordinary shares in the Company or, at the Company's election, any combination of ordinary shares and cash. From 20 July 2015 up to and including 29 June 2018, a bondholder may exercise its conversion right if the share price has traded at a level exceeding 130% of the exchange price for a specified period. Thereafter, and up to but excluding the 7th dealing day before 9 June 2020 (the maturity date), a bondholder may convert at any time.
The initial exchange price was 1103.32 pence per ordinary share. The exchange price is adjusted based on certain events (such as the Company paying dividends in any year above 14.18 pence per ordinary share).
From 30 June 2018, the Company has the option to redeem the 2015 bonds at par if the Company's share price has traded above 130% of the exchange price for a specified period, or at any time once 85% by nominal value of the 2015 bonds have been converted, redeemed, or purchased and cancelled. The 2015 bonds will be redeemed at par on 9 June 2020 (the maturity date) if they have not already been converted, redeemed or purchased and cancelled.
Fair value and book value of net debt

2016

2015

Fair value
m
Book value
m
Difference
m

Fair value
m
Book value
m
Difference
m
Debentures and unsecured bonds
1,637
1,613
24

1,925
1,785
140
Convertible bonds
779
779
-

493
493
-
Bank debt and other floating rate debt
1,384
1,369
15

1,691
1,671
20
Gross debt
3,800
3,761
39

4,109
3,949
160
Interest rate and currency derivative liabilities
137
137
-

126
126
-
Interest rate and currency derivative assets
(167)
(167)
-

(139)
(139)
-
Cash and short-term deposits
(114)
(114)
-

(108)
(108)
-
Net debt
3,656
3,617
39

3,988
3,828
160
Net debt attributable to non-controlling interests
(106)
(104)
(2)

(192)
(190)
(2)
Net debt attributable to shareholders of the Company
3,550
3,513
37

3,796
3,638
158
The fair values of debt, debentures and the convertible bonds have been established by obtaining quoted market prices from brokers. The bank debt and loan notes have been valued assuming they could be renegotiated at contracted margins. The derivatives have been valued by calculating the present value of expected future cash flows, using appropriate market discount rates, by an independent treasury advisor.
Short-term debtors and creditors and other investments have been excluded from the disclosures on the basis that the fair value is equivalent
to the book value.
Group loan to value (LTV)

2016
m
2015
m
Group loan to value (LTV)
25%
28%



Principal amount of gross debt
3,552
3,717
Less debt attributable to non-controlling interests
(109)
(200)
Less cash and short-term deposits (balance sheet)
(114)
(108)
Plus cash attributable to non-controlling interests
8
10
Total net debt for LTV calculation
3,337
3,419
Group property portfolio valuation (note 7)
10,111 
9,509
Investments in joint ventures and funds (note 8)
3,353 
2,901
Other investments (note 9)
142 
379
Less property and investments attributable to non-controlling interests
(384)
(528)
Total assets for LTV calculation
13,222
12,261
Proportionally consolidated loan to value (LTV)

2016
m
2015
m
Proportionally consolidated loan to value (LTV)
32%
35%



Principal amount of gross debt
5,217
5,404
Less debt attributable to non-controlling interests
(128)
(200)
Less cash and short-term deposits
(353)
(300)
Plus cash attributable to non-controlling interests
9
10
Total net debt for proportional LTV calculation
4,745
4,914
Group property portfolio valuation (note 7)
10,111
9,509
Share of property of joint ventures and funds (note 7)
4,937
4,714
Other investments (note 9)
142
379
Less other investments attributable to joint ventures and funds
(4)
(123)
Less property attributable to non-controlling interests
(400)
(546)
Total assets for proportional LTV calculation
14,786
13,933
British Land Unsecured Financial Covenants
The two financial covenants applicable to the Group unsecured debt including convertible bonds are shown below:

2016
m
2015
m
Net Borrowings not to exceed 175% of Adjusted Capital and Reserves
34%
38%



Principal amount of gross debt
3,552 
3,717
Less the relevant proportion of borrowings of the partly-owned subsidiary / non-controlling interests
(109)
(200)
Less cash and deposits (balance sheet)
(114)
(108)
Plus the relevant proportion of cash and deposits of the partly-owned subsidiary / non-controlling interests
8 
10
Net Borrowings
3,337 
3,419
Share capital and reserves (balance sheet)
9,619 
8,565
EPRA deferred tax adjustment (EPRA Table A)
5
13
Trading property surpluses (EPRA Table A)
93 
96
Exceptional refinancing charges (see below)
287 
300
Fair value adjustments of financial instruments (EPRA Table A)
198 
257
Less reserves attributable to non-controlling interests (balance sheet)
(277)
(333)
Adjusted Capital and Reserves
9,925 
8,898
In calculating Adjusted Capital and Reserves for the purpose of the unsecured debt financial covenants, there is an adjustment of 287m (2014/15: 300m) to reflect the cumulative net amortised exceptional items relating to the refinancings in the years ended 31 March 2005, 2006 and 2007.

2016
m
2015
m
Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets
29%
28%



Principal amount of gross debt
3,552 
3,717
Less cash and deposits not subject to a security interest (being 93m less the relevant proportion of cash and deposits of the partly owned subsidiary / non-controlling interests of 5m)
(88)
(77)
Less principal amount of secured and non-recourse borrowings
(1,563)
(1,906)
Net Unsecured Borrowings
1,901 
1,734
Group property portfolio valuation (note 7)
10,111
9,509
Investments in joint ventures and funds (note 8)
3,353
2,901
Other investments (note 9)
142
379
Less investments in joint ventures (note 8)
(3,348)
(2,869)
Less encumbered assets (note 7)
(3,803)
(3,844)
Unencumbered Assets
6,455
6,076
Reconciliation of movement in Group net debt for the year ended 31 March 2016

2015
Cash flows
Business combinations
Transfers3
Foreign exchange
Fair value
Arrangement
costs
amortisation
2016
Short term borrowings
102
(104)
-
74
2
-
-
74
Long term borrowings
3,847
(98)
-
(74)
14
(9)
7
3,687
Derivatives1
(13)
22
-
-
(13)
(26)
-
(30)
Total liabilities from financing activities
3,936
(180)
-
-
3
(35)
7
3,731









Cash and cash equivalents
(108)
(6)
-
-
-
-
-
(114)
Net debt
3,828
(186)
-
-
3
(35)
7
3,617
Reconciliation of movement in Group net debt for the year ended 31 March 2015

2014
Cash flows
Business combinations
Transfers3
Foreign
exchange
Fair value
Arrangement
costs
amortisation
2015
Short term borrowings
495
(495)
-
102
-
-
-
102
Long term borrowings
2,803
616
379
(102)
40
104
7
3,847
Derivatives2
25
(4)
-
-
(47)
13
-
(13)
Total liabilities from financing activities
3,323
117
379
-
(7)
117
7
3,936









Cash and cash equivalents
(142)
34
-
-
-
-
-
(108)
Net debt
3,181
151
379
-
(7)
117
7
3,828
1 Cash flows on derivatives include 7m of net receipts on derivative interest.
2 Cash flows on derivatives include 8m of net receipts on derivative interest.
3 Transfers comprises debt maturing from long term to short term borrowings.
Fair value hierarchy
The table below provides an analysis of financial instruments carried at fair value, by the valuation method. The fair value hierarchy levels are defined in note 7.

2016

2015

Level 1
m
Level 2
m
Level 3
m
Total
m

Level 1
m
Level 2
m
Level 3
m
Total
m
Interest rate and currency derivative assets
-
(167)
-
(167)

-
(139)
-
(139)
Other investments - held for trading
-
-
(101)
(101)

-
-
(99)
(99)
Assets
-
(167)
(101)
(268)

-
(139)
(99)
(238)
Interest rate and currency derivative liabilities
-
137
-
137

-
126
-
126
Convertible bonds
779
-
-
779

493
-
-
493
Liabilities
779
137
-
916

493
126
-
619
Total
779
(30)
(101)
648

493
(13)
(99)
381
Categories of financial instruments

2016
m
2015
m
Financial assets


Fair value through income statement


Other investments - held for trading
101
99



Derivatives in designated hedge accounting relationships
164
139
Derivatives not in designated hedge accounting relationships
3
-



Amortised cost


Trade and other debtors
24
16
Cash and short term deposits
114
108
Other investments - loans and receivables
41
280

447
642
Financial liabilities


Fair value through income statement


Convertible bonds
(779)
(493)



Derivatives in designated hedge accounting relationships
(137)
(126)



Amortised cost


Gross debt
(2,982)
(3,456)
Head leases payable
(46)
(41)



Creditors
(133)
(178)

(4,077)
(4,294)
Total
(3,630)
(3,652)
Gains and losses on financial instruments, as classed above, are disclosed in note 5 (net financing costs), note 10 (debtors), note 4 (valuation movements on property), the consolidated income statement and the consolidated statement of comprehensive income. The Directors consider that the carrying amounts of other investments and head leases payable are approximate to their fair value, and that the carrying amounts are recoverable.
Maturity of committed undrawn borrowing facilities

2016
m
2015
m
Maturity date: over five years
-
-
  between four and five years
1,113
930
  between three and four years
95
-
Total facilities available for more than three years
1,208
930



Between two and three years
85
61
Between one and two years
-
235
Within one year
60
10
Total
1,353
1,236
The above facilities are comprised of British Land undrawn facilities of 1,150m, plus undrawn facilities of Hercules Unit Trust totalling 203m.
15 Dividend
The fourth quarter interim dividend of 7.09 pence per share, totalling 73m (2014/15: 6.92 pence per share, totalling 71m) was approved by the Board
on 16 May 2016 and is payable on 5 August 2016 to shareholders on the register at the close of business on 1 July 2016.
The Board will announce the availability of the Scrip Dividend Alternative, if available, via the Regulatory News Service and on its website (www.britishland.com/dividends), no later than four business days before the ex-dividend date of 30 June 2016. The Board expects to announce the split between Property Income Distributions (PID) and non-PID income at that time. Any Scrip Dividend Alternative will not be enhanced. PID dividends are paid, as required by REIT legislation, after deduction of withholding tax at the basic rate (currently 20%), where appropriate. Certain classes of shareholders may be able to elect to receive dividends gross. Please refer to our website www.britishland.com/dividends for details.
Payment date
Dividend
Pence per share
2016
m
2015
m
Current year dividends



05.08.2016
2016 4th interim
7.09


06.05.2016
2016 3rd interim
7.09


12.02.2016
2016 2nd interim
7.09
73

06.11.2015
2016 1st interim
7.09
72



28.36


Prior year dividends




07.08.2015
2015 4th interim
6.921
71

06.05.2015
2015 3rd interim
6.92
71

13.02.2015
2015 2nd interim
6.92

71
07.11.2014
2015 1st interim
6.92

70


27.68







08.08.2014
2014 4th interim
6.751

68




Dividends in consolidated statement
of changes in equity

287
277
Dividends settled in shares

(52)
(49)
Dividends settled in cash

235
228
Timing difference relating to payment
of withholding tax

-
-
Dividends in cash flow statement

235
228
1 Scrip alternative treated as non-PID for this dividend.
16 Share capital and reserves

2016
2015
Number of ordinary shares in issue at 1 April
1,031,788,286
1,019,766,481
Share issues
8,774,037
12,021,805
At 31 March
1,040,562,323
1,031,788,286
Of the issued 25p ordinary shares, 627 shares were held in the ESOP trust (2014/15: 98,453), 11,266,245 shares were held as treasury shares (2014/15: 11,266,245) and 1,029,295,451 shares were in free issue (2014/15: 1,020,423,588). No treasury shares were acquired by the ESOP trust during the year. All issued shares are fully paid.
Hedging and translation reserve
The hedging and translation reserve comprises the effective portion of the cumulative net change in the fair value of cash flow and foreign currency hedging instruments, as well as all foreign exchange differences arising from the translation of the financial statements of foreign operations.
The foreign exchange differences also include the translation of the liabilities that hedge the Company's net investment in a foreign subsidiary.
Revaluation reserve
The revaluation reserve relates to owner-occupied properties and investments in joint ventures and funds.
Merger reserve
This comprises the premium on the share placing in March 2013. No share premium is recorded in the Company's financial statements, through
the operation of the merger relief provisions of the Companies Act 2006.
17 Segment information
The Group allocates resources to investment and asset management according to the sectors it expects to perform over the medium term. Its three principal sectors are Offices, Retail and Canada Water. The Office sector includes residential, as this is often incorporated into Office schemes, and Retail includes leisure, for a similar rationale. Canada Water was added as a principal sector in the year, reflecting the key role the campus has in the strategy of the Group. Consequently the prior year comparatives in this note have been restated to reflect this additional principal sector.
The relevant gross rental income, net rental income, operating result and property assets, being the measures of segment revenue, segment result and segment assets used by the management of the business, are set out below. Management reviews the performance of the business principally on a proportionally consolidated basis, which includes the Group's share of joint ventures and funds on a line-by-line basis and excludes non-controlling interests in the Group's subsidiaries. The chief operating decision maker for the purpose of segment information is the Executive Committee.
Gross rental income is derived from the rental of buildings. Operating result is the net of net rental income, fee income and administrative expenses. No customer exceeded 10% of the Group's revenues in either year.
Segment result

Offices and residential

Retail and leisure

Canada Water

Other/unallocated

Total

2016
m
2015
m

2016
m
2015
m

2016
m
2015
m

2016
m
2015
m

2016
m
2015
m
Gross rental income














British Land Group
133
121

291
248

8
6

-
-

432
375
Share of joint ventures and funds
114
89

104
146

-
-

4
8

222
243
Total
247
210

395
394

8
6

4
8

654
618















Net rental income














British Land Group
124
112

277
233

7
6

-
-

408
351
Share of joint ventures and funds
110
85

99
141

-
-

3
8

212
234
Total
234
197

376
374

7
6

3
8

620
585















Operating result














British Land Group
112
101

260
218

7
6

(46)
(41)

333
284
Share of joint ventures and funds
109
82

102
138

-
-

(1)
10

210
230
Total
221
183

362
356

7
6

(47)
(31)

543
514












Reconciliation to Underlying Profit










2016
m
2015
m
Operating result












543
514
Net financing costs












(180)
(201)
Underlying Profit












363
313
Reconciliation to profit on ordinary activities before taxation














Underlying Profit












363
313
Capital and other












954
1,460
Underlying Profit attributable
to non-controlling interests












14
16
Total profit on ordinary activities before taxation











1,331
1,789
Of the total revenues above, 4m (2014/15: 8m) was derived from outside the UK.
Segment assets

Offices and residential

Retail and leisure

Canada Water

Other/unallocated

Total

2016
m
2015
m

2016
m
2015
m

2016
m
2015
m

2016
m
2015
m

2016
m
2015
m
Property assets














British Land Group
4,181
3,520

5,323
5,275

283
273

-
-

9,787 
9,068
Share of joint ventures and funds
2,843
2,530

2,018
2,039

-
-

-
40

4,861 
4,609
Total
7,024
6,050

7,341
7,314

283
273

-
40

14,648 
13,677
Reconciliation to net assets












British Land Group












2016
m
2015
m
Property assets












14,648
13,677
Other non-current assets












138
256
Non-current assets












14,786
13,933















Other net current liabilities












(257)
(307)
Adjusted net debt












(4,765)
(4,918)
Other non-current liabilities












(90)
(73)
EPRA net assets (undiluted)











9,674
8,635
Convertible dilution











400
400
EPRA net assets (diluted)











10,074
9,035 
Non-controlling interests











277
333 
EPRA adjustments











(732)
(803)
Net assets











9,619
8,565 
SUPPLEMENTARY DISCLOSURES
Table A: Summary income statement and balance sheet
Summary income statement based on proportional consolidation for the year ended 31 March 2016
The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. It presents the results of the Group, with its share of the results of joint ventures and funds included on a line-by-line basis and excluding non-controlling interests.

Year ended 31 March 2016

Year ended 31 March 2015

Group
m
Joint ventures and funds
m
Less non-controlling interests
m
Proportionally consolidated
m

Group
m
Joint ventures and funds
m
Less non-controlling interests
m
Proportionally consolidated
m
Gross rental income
451
231
(28)
654

399
250
(31)
618
Property operating expenses
(26)
(9)
1
(34)

(24)
(10)
1
(33)
Net rental income
425
222
(27)
620

375
240
(30)
585










Administrative expenses
(93)
(5)
4
(94)

(85)
(4)
1
(88)
Net fees and other income
16
-
1
17

15
-
2
17
Ungeared Income Return
348
217
(22)
543

305
236
(27)
514










Net financing costs
(106)
(82)
8
(180)

(105)
(107)
11
(201)
Underlying Profit
242
135
(14)
363

200
129
(16)
313
Underlying taxation
2
-
-
2

-
-
-
-
Underlying Profit after taxation
244
135
(14)
365

200
129
(16)
313
Valuation movement



861




1,473
Other capital and taxation (net)1



48




50
Capital and other



909




1,523
Total return



1,274




1,836
1 Includes other comprehensive income, movement in dilution of share options and the movement in items excluded for EPRA NAV.
Table A (continued)
Summary balance sheet based on proportional consolidation as at 31 March 2016
The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. It presents
the composition of the EPRA net assets of the Group, with its share of the net assets of the joint venture and fund assets and liabilities included
on a line-by-line basis, and excluding non-controlling interests, and assuming full dilution.

Group
m
Share of joint ventures
& funds
m
Less non-controlling interests
m
Share
options
m
Deferred
tax
m
Mark-to-market on effective cash flow hedges and related debt adjustments
m
Head
leases
m
Convertible bond adjustment
m
Valuation surplus on trading properties
m
EPRA Net assets 
31 March 2016
m
EPRA Net assets
31 March 2015
m
Retail properties
5,662
2,109
(400)
-
-
-
(30)
-
-
7,341
7,314
Office properties
4,118
2,835
-
-
-
-
(16)
-
87
7,024
6,050
Canada Water properties
283
-
-
-
-
-
(6)
-
6
283
273
Other properties
-
-
-
-
-
-
-
-
-
-
40
Total properties
10,063
4,944
(400)
-
-
-
(52)
-
93
14,648
13,677
Investments in joint ventures and funds
3,353
(3,353)
-
-
-
-
-
-
-
-
-
Other investments
142
(4)
-
-
-
-
-
-
-
138
256
Other net (liabilities) assets
(322)
(121)
3
36
5
-
52
-
-
(347)
(380)
Net debt
(3.617)
(1,466)
120
-
-
198
-
-
-
(4,765)
(4,918)
Dilution due to convertible bond
-
-
-
-
-
-
-
400
-
400
400
Net assets
9,619
-
(277)
36
5
198
-
400
93
10,074
9,035
EPRA NAV per share (note 2)









919p
829p
EPRA Net Assets Movement

Year ended
31 March 2016

Year ended
31 March 2015

m
Pence per share

m
Pence per share
Opening EPRA NAV
9,035
829

7,027
688
Income return
365
34

313
31
Capital return
909
77

1,523
145
Dividend paid
(235)
(21)

(228)
(27)
Dilution due to 2012 convertible bond
-
-

400
(8)
Closing EPRA NAV
10,074
919

9,035
829
Table B: EPRA Performance measures
EPRA Performance measures summary table

2016

2015

m
Pence per share

m
Pence per share
EPRA Earnings
- basic
365
35.6

313
30.8

- diluted
371
34.1

319
29.5
EPRA Net Initial Yield

4.1%


4.3%
EPRA 'topped-up' Net Initial Yield

4.5%


4.8%
EPRA Vacancy Rate

2.0%


2.9%

2016

2015

Net assets
Net asset
value per share pence

Net assets
Net asset
value per share pence
EPRA NAV

10,074
919

9,035
829
EPRA NNNAV

9,640
880

8,359
767
Calculation and reconciliation of EPRA/IFRS earnings and EPRA/IFRS earnings per share

2016
m
2015
m
Profit attributable to the shareholders of the Company
1,345
1,710
Exclude:


Group - current taxation
(2)
1
Group - deferred taxation
(31)
23
Joint ventures and funds - current taxation
1 
2
Joint ventures and funds - deferred taxation
- 
(4)
Group - valuation movement
(616)
(884)
Group - profit on disposal of investment properties and investments
(35)
(20)
Group - profit on disposal of trading properties
(10)
(6)
Joint ventures and funds - net valuation movement (including result on disposals)
(263)
(595)
Changes in fair value of financial instruments and associated close-out costs
(31)
47
Non-controlling interests in respect of the above
5 
39
Underlying Profit
363
313
Group - underlying current taxation
2
-
EPRA earnings - basic
365
313
Dilutive effect of 2012 convertible bond
6
6
EPRA earnings - diluted
371
319



Profit attributable to the shareholders of the Company
1,345
1,710
Dilutive effect of 2012 convertible bond
6
-
IFRS earnings - diluted
1,351
1,710

2016
Number
million
2015
Number
million
Weighted average number of shares
1,036
1,027
Adjustment for Treasury shares
(11)
(11)
IFRS/EPRA Weighted average number of shares (basic)
1,025
1,016
Dilutive effect of share options
2
2
Dilutive effect of ESOP shares
4
4
Dilutive effect of 2012 convertible bond
58
-
IFRS Weighted average number of shares (diluted)
1,089
1,022
Dilutive effect of 2012 convertible bond
-
58
EPRA Weighted average number of shares (diluted)
1,089
1,080
Net assets per share

2016

2015

m
Pence
per share

m
Pence
per share
Balance sheet net assets
9,619


8,565

Deferred tax arising on revaluation movements
5


13

Mark-to-market on effective cash flow hedges and related debt adjustments
198


257

Dilution effect of share options
36


37

Surplus on trading properties
93


96

Convertible bond adjustment
400


400

Less non-controlling interests
(277)


(333)

EPRA NAV
10,074
919 

9,035
829
Deferred tax arising on revaluation movements
(24)


(13)

Mark-to-market on effective cash flow hedges and related debt adjustments
(153)


(257)

Mark-to-market on debt
(257)


(406)

EPRA NNNAV
9,640
880

8,359
767
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 and derivatives.

2016
Number
million
2015
Number
million
Number of shares at year end
1,040
1,031
Adjustment for treasury shares
(11)
(11)
IFRS / EPRA number of shares (basic)
1,029
1,020
Dilutive effect of share options
2
4
Dilutive effect of ESOP shares
7
8
Dilutive effect of 2012 convertible bond
58
-
IFRS number of shares (diluted)
1,096
1,032
Dilutive effect of 2012 convertible bond
-
58
EPRA number of shares (diluted)
1,096
1,090
EPRA Net Initial Yield and 'topped-up' Net Initial Yield

2016
m
2015
m
Investment property - wholly-owned
9,787 
9,068
Investment property - share of joint ventures and funds
4,861 
4,569
Less developments, residential and land
(894)
(1,148)
Completed property portfolio
13,754 
12,489
Allowance for estimated purchasers' costs
985 
784
Gross up completed property portfolio valuation
14,739
13,273
Annualised cash passing rental income
607 
575
Property outgoings
(8)
(8)
Annualised net rents
599
567
Rent expiration of rent-free periods and fixed uplifts1
63
64
'Topped-up' net annualised rent
662
631
EPRA Net Initial Yield
4.1%
4.3%
EPRA 'topped-up' Net Initial Yield
4.5%
4.8%
Including fixed/minimum uplifts received in lieu of rental growth
24
26
Total 'topped-up' net rents
686
657
Overall 'topped-up' Net Initial Yield
4.7%
4.9%
'Topped-up' net annualised rent
662
631
ERV vacant space
14 
20
Reversions
42
18
Total ERV
718 
669
Net Reversionary Yield
4.9%
5.0%
1 The weighted average period over which rent-free periods expire is 1 year (2014/15: 1 year).
The above is stated for the UK portfolio only.
EPRA Net Initial Yield (NIY) basis of calculation
EPRA NIY is calculated as the annualised net rent (on a cash flow basis), divided by the gross value of the completed property portfolio. The valuation of our completed property portfolio is determined by our external valuers as at 31 March 2016, plus an allowance for estimated purchaser's costs. Estimated purchaser's costs are determined by the relevant stamp duty liability, plus an estimate by our valuers of agent and legal fees on notional acquisition. The net rent deduction allowed for property outgoings is based on our valuers' assumptions on future recurring non-recoverable revenue expenditure.
In calculating the EPRA 'topped-up' NIY, the annualised net rent is increased by the total contracted rent from expiry of rent-free periods and future contracted rental uplifts where defined as not in lieu of growth. Overall 'topped-up' NIY is calculated by adding any other contracted future uplift to the 'topped-up' net annualised rent.
The net reversionary yield is calculated by dividing the total estimated rental value (ERV) for the completed property portfolio, as determined by our external valuers, by the gross completed property portfolio valuation.
The EPRA vacancy rate is calculated as the ERV of the unrented, lettable space as a proportion of the total rental value of the completed property portfolio.
EPRA Vacancy Rate

2016
m
2015
m
Annualised potential rental value of vacant premises
14 
20
Annualised potential rental value for the completed property portfolio
728
692
EPRA Vacancy Rate
2.0%
2.9%
The above is stated for the UK portfolio only.


EPRA Cost Ratios

2016
m
2015
m
Property operating expenses
25
23
Administrative expenses
90
84
Share of joint ventures and funds expenses
13
14
Less:
Performance & management fees (from joint ventures & funds)
(9)
(9)

Net other fees and commissions
(8)
(8)

Ground rent costs
(3)
(3)
EPRA Costs (including direct vacancy costs) (A)
108
101
Direct vacancy costs
(11)
(11)
EPRA Costs (excluding direct vacancy costs) (B)
97
90
Gross Rental Income less ground rent costs
429
374
Share of joint ventures and funds (GRI less ground rent costs)
222
241
Total Gross Rental Income less ground rent costs (C)
651
615



EPRA Cost Ratio (including direct vacancy costs) (A/C)
16.6%
16.4%
EPRA Cost Ratio (excluding direct vacancy costs) (B/C)
14.9%
14.6%



Overhead and operating expenses capitalised (including share of joint ventures and funds)
4
-
In the current year, employee costs in relation to staff time on development projects have been capitalised into the base cost of relevant development assets.
Table C: Gross rental income

2016
m
2015
m
Rent receivable
615
581
Spreading of tenant incentives and guaranteed rent increases
36
33
Surrender premia
3
4
Gross rental income
654
618
The current and prior period information is presented on a proportionally consolidated basis, excluding non-controlling interests.
Table D: Property related capital expenditure

2016

2015

Group
Joint
ventures
and funds
Total

Group
Joint
ventures
and funds
Total
Acquisitions
238
-
238

147
-
147
Development
104
58
162

64
83
147
Like-for-like portfolio
99
6
105

67
23
90
Other
25
15
40

25
8
33
Total property related capex
466
79
545

303
114
417
The above is presented on a proportionally consolidated basis, excluding non-controlling interests and business combinations. The 'Other' category contains amounts owing to tenant incentives of 27m (2014/15: 18m), capitalised staff costs of 4m (2014/15: nil) and capitalised interest of 9m (2014/15: 15m).

This information is provided by RNS
The company news service from the London Stock Exchange
  END
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