TIDMBLND
RNS Number : 5291G
British Land Co PLC
16 November 2022
Good operational performance in a challenging macroeconomic
environment
16 November 2022
Simon Carter, CEO said: "Our good operational performance in the
half reflects the high quality of our portfolio and reinforces our
conviction in our value-add strategy which is focused on sectors
with pricing power. We delivered 5% like for like net rental growth
and leased 1.5m sq ft of space well ahead of ERV. As a result,
underlying profit increased 13% and the dividend is up by 12%.
Higher interest rates have increased property yields, but the
impact on valuations was partially cushioned by rental growth. In
Campuses, demand remains robust for best-in-class workspace. Retail
Parks continue to benefit from retailers' focus on omni-channel and
affordability, while the fundamentals in urban logistics remain
compelling given the acute lack of supply and the transport savings
operators can realise from the best London locations.
We go into the second half with a strong leasing pipeline, but
mindful of the weaker macro environment in which we are operating.
Well-timed disposals strengthened our balance sheet and combined
with the quality of our platform and our continued commitment to
capital recycling, mean we are well placed to exploit our
attractive development pipeline and the opportunities now emerging
in the market."
Performance summary
Good underlying performance and a strong balance sheet
- Underlying Profit growth of 13.3% driven by strong rental
growth and cost control; EPRA cost ratio improved 650 bps to
19.7%
- HY23 EPS of 14.5p and dividend of 11.6p per share, both up
12.4%
- Portfolio value down 3.0% with Campuses down 2.7% and Retail
& Fulfilment down 3.6%
- +17 bps yield expansion overall; +18 bps in Campuses; +17 bps
in Retail & Fulfilment
- ERV growth up 1.2%, Campuses +1.6%, Retail Parks +0.8%, Urban
Logistics +16.7%
- EPRA Net Tangible Assets (NTA) down 4.4% to 695p, with Total
Accounting Return at -2.8%
- Raised GBP765m of new finance on good terms including GBP515m
loan in Paddington Central Joint Venture
- LTV at 30.7% (32.9%: March 2022); GBP2bn of undrawn facilities
and cash
- No requirement to refinance until late 2025
- Interest costs fully hedged for the next year and 77% of
projected debt is hedged on average over the next 5 years
- Fitch affirmed our senior unsecured credit rating at "A"
Strong operational delivery: 1.5m sq ft leased, 14.7% ahead of
ERV and 1.1m sq ft under offer, 11.4% ahead of ERV
- 494,000 sq ft of Campus leasing in the period, 18.4% ahead of
ERV; further 310,000 sq ft under offer
- 1m sq ft Retail & Fulfilment leasing, 10.3% ahead of ERV;
further 772,000 sq ft under offer
- Delivering 140,000 sq ft of lab space across our Campuses,
with over 80,000 sq ft let or in negotiations
- Storey occupancy up 10ppt to 96% since March 2022
- Delivering net zero carbon initiatives; EPC A-B rated
properties increased to 52% by ERV for our Campus portfolio
GBP0.9bn of gross capital activity
- GBP694m from sale of 75% of majority of Paddington Central
completed in July 2022, crystallising 9% p.a. total property
returns
- GBP25m acquisition of Peterhouse Western Expansion, 90,000 sq
ft consented scheme in Cambridge
- GBP22m investment in an urban logistics development site on
Mandela Way in Southwark, London
Progressing attractive development pipeline
- On site with 1.7m sq ft of net zero carbon developments across
our Campuses; 92% of costs fixed for committed developments
- 10m sq ft development pipeline, targeting IRRs of 10-12%
Expect good underlying performance underpinned by rental growth,
set against upward pressure on property yields
- Upward pressure on property yields dependent on where medium
term interest rates settle
- ERV guidance, next 12 months: 2-4% growth in Campuses, 1-3%
growth in Retail Parks and 4-5% in Urban Logistics
Summary performance
HY 2022/23 HY 2021/22 Change
===================================================== ============ ========== =======
Income statement
Underlying Profit GBP136m GBP120m 13.3%
Underlying earnings per share2 14.5p 12.9p 12.4%
IFRS (loss) / profit after tax GBP(34)m GBP370m
IFRS basic earnings per share (3.7)p 39.9p
Dividend per share 11.60p 10.32p
===================================================== ============ ========== =======
Total accounting return(2) (2.8)% 6.1%
===================================================== ============ ========== =======
30 Sep 31 March
Balance sheet 2022 2022
Portfolio at valuation (proportionally consolidated) GBP9,643m GBP10,467m (3.0)%1
EPRA Net Tangible Assets per share(2) 695p 727p (4.4)%
IFRS net assets GBP6,598m GBP6,733m
Loan to value ratio (proportionally consolidated)(3) 30.7% 32.9%
Fitch senior unsecured credit rating A A
===================================================== ============ ========== =======
Operational Statistics HY 2022/2023 HY 2021/22
1.1m sq 1.3m sq
Lettings and renewals over 1 year ft ft
1.5m sq 1.8m sq
Total lettings and renewals ft ft
1.7m sq 2.0m sq
Committed and recently completed development ft ft
===================================================== ============ ========== =======
Sustainability Performance
MSCI ESG AAA rating AAA rating
GRESB (Standing Investments / Developments) 4* / 5* 5* / 5*
===================================================== ============ ========== =======
1. Valuation movement during the period (after taking account of
capex) of properties held at the balance sheet date, including
developments (classified by end use), purchases and sales.
2. See Note 2 to the condensed interim financial statements.
3. EPRA Loan to value is disclosed in Table E of the condensed
interim financial statements.
Results Presentation and Investor Conference Call
A presentation of the results will take place at 9.00am on 16
November 2022 at Peel Hunt, 100 Liverpool Street, Broadgate and
will be broadcast live via webcast (Britishland.com) and conference
call. The details for the conference call and weblink are as
follows:
UK Toll Free Number: 0800 640 6441
Access code: 544585
Click for access: Audio weblink
A dial in replay will be available later in the day for 7 days.
The details are as follows:
Replay number: 020 3936 3001
Passcode: 994348
Accompanying slides will be made available at Britishland.com
just prior to the event starting.
For Information Contact
Investors
Sandra Moura, British
Land 07989 755535
Joanna Waddingham, British
Land 07714 901166
Media
Charlotte Whitley, British
Land 07887 802535
Guy Lamming/Gordon Simpson,
Finsbury 020 7251 3801
britishland@finsbury.com
Chief Executive's review
Overview
The past six months have seen a material deterioration in the
economic environment. Against this backdrop, our business is
performing well operationally, with Underlying Profit increasing
13% reinforcing our conviction in our value-add strategy which is
to focus on supply constrained markets where we have pricing power,
leveraging our strengths in asset management and sustainable
development. We have maintained leasing momentum across our
business. We are progressing our committed developments and
managing our risks appropriately. Across the wider development
pipeline, we are progressing planning, demolition and site
mobilisation so we can move forward as and when the time is right.
We have maintained our balance sheet strength and have continued to
raise financing at attractive levels. However, valuations have been
impacted by rising interest rates, and as a result, total
accounting return was down 2.8% for the half year.
Performance
Our London Campuses include Broadgate, Regent's Place and
Paddington Central and we are creating a fourth at Canada Water.
Despite the tougher macro environment, the gravitational pull
towards modern, high quality and sustainable space is accelerating
as businesses demand the best space. Our model plays well to these
themes and as a result we leased 494,000 sq ft in the half year,
18.4% ahead of ERV. This included a significant renewal to Meta and
our second life sciences letting at Regent's Place where momentum
continues to build at this centre of innovation. Our pipeline of
deals under offer remains healthy, covering 310,000 sq ft,
including up to 126,800 sq ft to Reed Smith at our Norton Folgate
development. However, rising interest rates reduced investors'
appetite to make acquisitions over the period, impacting investment
markets and sentiment. As a result, the Campus portfolio valuation
declined 2.7% with yields increasing by 18 bps partially offset by
ERV growth of 1.6%.
Our Retail & Fulfilment portfolio is focused on high quality
retail parks, which account for 60% of the Retail & Fulfilment
portfolio and we are the largest owner and operator of this format
in the UK. Shopping Centres comprise 23% of the portfolio and we
are building a business in Urban Logistics in London. Following a
record year in FY22, leasing remained strong across the Retail
& Fulfilment portfolio covering 1m sq ft, 10.3% ahead of ERV.
In Retail Parks, lettings were just 2.9% below previous passing
rent, whilst in Shopping Centres, there are indications that ERVs
are stabilising. We have 772,000 sq ft in our leasing pipeline
18.0% ahead of ERV. This is weighted towards Retail Parks where we
expect demand to be more resilient through a downturn due to the
affordability of rents and suitability for fulfilling online
retail. Valuations were also impacted by rising rates with a yield
shift of +17 bps, partially offset by ERV growth of 0.6% reducing
the value of the Retail & Fulfilment portfolio by 3.6%.
As a result of the strong operational performance across the
portfolio, Underlying Profit increased GBP16m or 13.3% in the
period to GBP136m, with Underlying earnings per share up 12.4% to
14.5p.
Business model
We focus on value-add opportunities which exploit our deep asset
management and development capabilities. Our approach is to:
- Source value-add opportunities - targeting value accretive
acquisitions in the market and creating development opportunities
on our portfolio which play to our strengths
- Develop & actively manage - creating modern, high quality
and sustainable space which we manage ourselves to respond to
customer needs
- Recycle capital - rotating out of assets where we have
delivered our business plan and into opportunities where we can
drive stronger returns through asset management or development
Our target is to deliver total accounting returns of 8-10%
through the cycle. In the current environment, driving growth
organically becomes increasingly important to deliver returns for
our shareholders. Our progress in each area is summarised
below:
Progress in HY23
================== ===============================================================
Source value-add
opportunities * Acquisition of Peterhouse Western Expansion for
GBP25m, a fully consented development site covering
90,000 sq ft following the acquisition of Peterhouse
Technology Park last year (140,000 sq ft)
* Acquisition of Mandela Way, Southwark, development
site for a multi-storey urban logistics facility for
GBP22m
* Progressing planning on development opportunities
with 1.2m sq ft consents achieved including The
Printworks at Canada Water (based on gross area)
================== ===============================================================
Develop & actively
manage * Delivering c.140,000 sq ft of lab space across the
portfolio, of which over 80,000 sq ft is let or in
negotiations
* Progressing plans for life sciences-led redevelopment
of Euston Tower, 578,000 sq ft
* Progressing planning for an urban logistics facility
at our Paddington Campus, "The Box" (127,000 sq ft)
* Maintaining tight control of development costs, 92%
fixed; focus on tier 1 contractors
* Delivering our net zero carbon initiatives; 52% of
Campus portfolio now EPC A - B rated
* Supporting local partners through the cost of living
crisis with GBP200,000 funding
================== ===============================================================
Recycle capital
* GBP694m from the sale of 75% of majority of assets at
Paddington Central completed, establishing a new JV
* GBP47m of acquisitions in innovation and urban
logistics opportunities
* Improved balance sheet and liquidity post refinancing
including GBP515m loan for Paddington Central Joint
Venture
================== ===============================================================
Strategy
Our business segments comprise Campuses and Retail &
Fulfilment. Within this we are focusing on the following three
strategic themes, and are targeting opportunities which play best
to our skill set and where we see the most attractive opportunities
to drive future returns:
- Campuses - leveraging the Campus proposition to focus on
customers in growth and innovation sectors including science,
technology and health;
- Retail Parks - aligned to the growth of convenience and
omni-channel; and
- London Urban Logistics - where we are delivering new space in
a chronically undersupplied market via repurposing and
densification
Campuses
Our strong conviction in Campuses is reinforced by the continued
strength of demand for the best, most sustainable buildings as
occupiers focus on the right space for their business. Our Campuses
combine well-located, high quality workspace with opportunities to
shop, dine and socialise. Our Campus model provides flexibility for
occupiers to expand their footprint as they grow and our large
floor plates provide customers with a blank canvas from which they
can design collaborative space suited to their specific needs. At
the same time, we are targeting innovation businesses across the
science, technology and health sectors on our existing London
Campuses given the strong growth potential of these sectors. We
have built up a 7.3m sq ft development pipeline across our Campuses
which we expect will deliver attractive returns, benefiting from
the continued trend for best in class space. Since the half year
end we have seen this play out with rents for best in class new
space up around 5-10% based on recent transactions.
We are also taking this model outside London to markets where
supply is constrained but demand is very strong, with the clearest
opportunities being in the Golden Triangle. We are being patient in
our capital deployment, typically focussing on situations where our
development and regeneration skills give us an edge. In the half,
we signed a Memorandum of Understanding with Cambridge Biomedical
Campus Ltd to be a Partner in Masterplanning at the campus.
Retail & Fulfilment
Retail Parks: In Retail Parks, we made timely acquisitions last
year and benefitted as yields contracted and values increased.
Although we have seen some yield expansion in the period, we now
have greater conviction in the underlying fundamentals and pricing
power of retail parks. As the role of the store changes, retail
parks are increasingly the preferred format for retailers. They are
ideal for omni-channel, enabling click and collect, returns and
ship from store, and are affordable with an occupational cost ratio
of 10% on our portfolio which is increasingly important as
retailers face margin pressures from higher inflation and lower
disposable incomes. As a result, retail parks appeal to a broad
range of occupiers, including general retailers, grocers,
discounters and service offerings such as discount gyms. Occupancy
is high at 97.5% and with no new supply, we have good pricing power
and are beginning to see rental growth. If the current weakness in
capital markets spills over into the retail park investment market,
we will look to make further acquisitions of retail parks where we
can deploy our asset management capabilities to reduce vacancy and
drive rents, but we will maintain our usual discipline on
price.
We continue to actively manage our Shopping Centres by improving
occupancy and driving rents. Yields have remained relatively stable
over the period despite a more challenging macroeconomic outlook.
This is because the gap between yields and bond rates is wider than
other sectors and we expect the outlook for the best centres to
become more attractive as confidence improves.
Urban Logistics: In Urban Logistics, the chronic shortage of
space in London is the key theme underpinning our focus on this
part of the market - Savills estimate that vacancy in London is
2.2%. We have assembled a pipeline of urban logistics development
opportunities with a gross development value of GBP1.5bn which will
give us the most centrally located portfolio in London. Our
strategy is to focus on development opportunities where we deliver
solutions by repurposing or intensifying the site to drive returns.
We primarily operate in two markets: the nascent market of Zone 1
or edge of Zone 1 locations and best in class facilities in Greater
London which are over 200,000 sq ft. With demand for same day
delivery increasing, proximity to the customer is key because it
reduces transport costs for occupiers, driving profitability and
making demand for this space inelastic to price. For a typical
occupier, rents are c. 6% of the cost of delivering goods to the
consumer compared to c.60% for transport. Our urban logistics
development appraisals assume some outward yield shift and with
rental growth stronger than anticipated we still expect these
schemes to deliver attractive IRRs of 10-15%. Our appetite in this
sector is unchanged given the strong occupational fundamentals and
the potential for a softer investment market to allow us to source
opportunities at more attractive pricing.
Capital allocation and balance sheet
A key priority for our business is to actively recycle capital
by rotating out of dry, lower returning assets and redeploy into
assets where we can leverage our strengths in asset management and
development to drive returns. We expect the current environment to
generate opportunities particularly in both Retail Parks and Urban
Logistics. We have a strong balance sheet, providing the
flexibility to make timely decisions on asset sales and
purchases.
Our LTV is low at 30.7% and we have a strong liquidity position
with access to GBP2bn of available facilities and cash and no
requirement to refinance until late 2025. We maintain good
long-term relationships with debt providers across the markets and
have continued to raise funds on good terms. Financing activity
completed in the half year included a GBP515m five year secured
loan for the Paddington joint venture, provided by a club of three
banks. In October 2022, we renewed a GBP100m bilateral bank
revolving credit facility for British Land with a 5 year initial
term. In November, we signed a further new GBP150m facility, also
for 5 year initial term. Both of these RCFs are ESG linked with
targets linked to our sustainability strategy. The interest rate on
our debt is fully hedged for the next year and 77% of projected
debt is hedged on average over the next 5 years.
We are pleased to be announcing a half year dividend of 11.6p
per share, in line with our policy of setting the dividend at 80%
of Underlying EPS.
Outlook
We are now operating in a significantly different environment to
the one we reported on in May 2022. Rapid inflation has led the
Bank of England to initiate an interest rate hike cycle and 10 year
gilt rates are significantly ahead of the level six months ago,
albeit below recent highs. This has directly impacted property
yields with the effect most pronounced in lower yielding assets.
Looking forward, yields will be heavily influenced by where medium
term interest rates settle, which is difficult to forecast, but we
currently expect to see yield expansion across our business in the
second half. However, this impact will likely be cushioned by
rental growth across our key markets.
We are proactively managing our risk given the economic
uncertainty. On our committed London Campus developments, we have
fixed 92% of costs and pre-let or placed under offer 34% of the
space (40% of offices pre-let or under offer). Given a lack of new
supply, we expect to achieve higher rents on the remaining space,
increasing yield on cost. Looking forward, we have a very
attractive development pipeline across our Campuses of 7.3m sq ft,
c.80% of which is consented. The sequencing of our programme means
that we are unlikely to make major new commitments in the next 12
months. In the meantime, we are progressing demolition and basement
works at 2 Finsbury Avenue. We typically pre-let around one third
of our developments ahead of placing the main build contract. We
have maintained our forecast construction cost inflation of 8-10%
this year, moderating to 4-5% next year. There is a possibility
that inflation next year is lower than our forecast with early
signs construction capacity is increasing and tender prices for
demolition works are stabilising. Current leasing discussions
indicate that occupiers continue to prioritise having the best
space for their business over price. Vacancy across prime London
office space remains low and availability of new, best in class
space is scarce. In particular, new and newly refurbished space
accounts for just 1.5% of the market. These factors drive strong
pricing power on Campuses where we now expect ERV growth of between
2-4% over the next 12 months with rental growth at our developments
likely to exceed these levels.
In Retail Parks, the underlying fundamentals are favourable.
Supply is tight, with retail parks accounting for 10% of the total
retail market and our occupancy is 97.5%. As a result, we expect to
be able to build on the rental growth achieved in the first half to
deliver ERV growth of between 1-3%. For shopping centres ERV
declines moderated in the half and based on our most recent leasing
activity, we would expect this to continue.
In Urban Logistics, the market in London is chronically
undersupplied and demand remains strong, underpinned by the
continued growth of same day delivery. We expect strong rental
growth of 4-5 % p.a..
We go into the second half with a strong leasing pipeline
focused on markets where we have pricing power, but we are mindful
of the weaker macro environment we are operating in. The disposal
of stakes in Paddington Central and Canada Water strengthened our
balance sheet and combined with the quality of our platform and our
continued commitment to capital recycling, mean we are well placed
to exploit our attractive development pipeline and the
opportunities now emerging in the market.
Market backdrop
Macro-economic context
Macroeconomic uncertainty escalated in the period and it now
looks increasingly likely that the UK will enter a recession. GDP
fell 0.6% in September 2022 and forecasts are generally being
revised downwards while inflation has risen much faster than
expected, leading to four successive Bank of England interest rate
rises since May. Rising energy prices and mortgage rates will put
consumers under pressure over the winter and consumer confidence is
low. However, the labour market remains robust; unemployment stands
at 3.5%, the lowest since 1974 and both household savings and
corporate balance sheets are generally strong. These fundamentals
will be supportive over the coming months, but the depth and
duration of any recession is hard to predict, particularly given
geopolitical tensions including the war in Ukraine. Against this
backdrop, investors will prefer sectors with proven pricing power
and which can demonstrate resilience in a downturn.
London office market
Central London occupational markets have remained robust with
take up of 4.9m sq ft across the City and West End over the six
month period to 30 September. Banking & Finance, Professional
Services and Creative Industries were the largest sources of take
up with consolidation in some sectors (notably legal) an important
driver. Demand is clearly gravitating towards the very best, with
an emphasis on sustainability, wellness, shared and flexible space
and excellent transport connections. New and newly refurbished
space accounts for just 1.5% of the market; it leases faster,
achieves premium prices and vacancy is lower than in the wider
market which is 8.4%. In 2021 and so far in 2022, developments in
London were on average 75% pre-let two years and one year
respectively prior to completion. 34% of all development space
under construction is currently pre-let and in the context of a
more uncertain macro environment, elevated input prices mean
projects are being delayed and as a result, the supply pipeline has
tightened.
After a strong start to 2022, investment markets were more
subdued in the half with investors pausing to assess the impact of
rising interest rates and inflation. The spread between bid and ask
prices has increased and as a result, volumes were lighter than the
previous six months at c.GBP6.6bn across the City and West End.
Pricing has been impacted with prime yields moving out c.50bps in
the City and 25 bps in the West End to 4.25% and 3.50% respectively
in the six months to 30 September. However, the highest quality
buildings with best in class sustainability credentials command
tighter yields. Certain investors are actively looking to allocate
capital to physical real estate but are likely to postpone making a
decision until there is more clarity on the outlook.
Retail market
Occupational markets continued to strengthen over the period
with more retailers recovering to pre-covid trading levels and
online reverting to its trajectory, now at 24% of retail sales vs.
38% at the height of the pandemic. With many weaker brands having
already exited the market pre pandemic, today's more successful
retailers have typically established more resilient business models
which include an effective omni channel strategy. These businesses
are performing well and are selectively taking space, particularly
on retail parks. They include more general retailers such as Marks
& Spencer and Next and specialists such as Lush, Rituals and
Pandora. As consumers see their disposable incomes squeezed with
rising energy and mortgage costs, customers are turning to value
retailers such as Lidl, Aldi and B&M who are outperforming as a
result. Across the market retailers are also facing higher costs
and margin pressures. To help manage this and stimulate more
impulse purchases to increase the average basket size, more are
incentivising shoppers to complete fulfilment instore which is the
most cost effective solution. Coupled with lower occupancy costs on
retail parks, this plays well to the retail park proposition.
Investment activity remained strong for retail parks well into
the first quarter but there were signs over the summer that higher
finance costs and the reduced availability of finance had impacted
investor sentiment. Total volumes in the period were GBP2.3bn,
heavily weighted towards the first quarter. The sector has
benefitted from significant yield contraction over the past 12
months with retail parks emerging as the preferred format for
retailers. Prime yields have moved out (c. 50+ bps), potentially
providing an attractive opportunity for equity investors and
several motivated sellers have recently brought assets to market.
Shopping Centre volumes were GBP660m, slightly down on the previous
six months but ahead year on year with investors starting to see
opportunities for good returns with values declining more than 60%
since peak. However, investors will want more clarity on pricing
before activity picks up which could arise in the coming months
with several larger assets being readied for sale.
Logistics market
In London, the occupational market remained strong. Take up year
to date (calendar 2022) is already ahead of the calendar year for
2019 and 2020 at 1.6m sq ft (although below 2021, a record year
reflecting pandemic related demand) and rents continue to grow with
prime rent now GBP26.50 psf. This reflects the strength of demand
for very centrally located space driven by the growth of e-commerce
and increased expectations for same day / next day delivery,
requiring closer proximity to the customer. As a result, vacancy in
London is very low at 2.2% and there is only one available site of
over 200,000 sq ft.
However, as a very low yielding sector, sentiment across the
wider UK logistics market has been impacted by rising interest
rates. Investment activity reduced over the period with a slowdown
in stock coming to market as sellers choose to delay sales where
they have optionality. However, logistics remains the most active
sector by volume with nearly GBP5.5bn transacted in the six months.
In the South East, prime yields have drifted out 50+ bps and we see
greater prospects for opportunistic purchases.
Business review
Key metrics
30 Sep 31 Mar
As at 2022 2022
============================================= ========= ==========
Portfolio valuation GBP9,643m GBP10,467m
Occupancy(1) 96.7% 96.5%
Weighted average lease length to first break 5.9 yrs 5.8 yrs
Total property return (1.0)% 11.7%
(42) bps
* Yield shift +17 bps
* ERV movement 1.2% (1.2)%
* Valuation movement (3.0)% 6.8%
30 Sep 30 Sep
Six months to: 2022 2021
Lettings/renewals (sq ft) over 1 year 1.1m 1.3m
Lettings/renewals over 1 year vs ERV +14.7% +4.3%
Gross capital activity GBP894m GBP814m
GBP47m
* Acquisitions GBP501m
GBP(694)m
* Disposals GBP(196)m
GBP153m
* Capital investment GBP117m
Net investment/(divestment) GBP(494)m GBP422m
--------------------------------------------- --------- ----------
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Where occupiers have entered CVA or administration but are
still liable for rates, these are treated as occupied. If units in
administration are treated as vacant, then the occupancy rate would
reduce from 96.7% to 96.3%.
Portfolio performance
Valuation Total property
Valuation movement ERV movement Yield shift return
At 30 September 2022 GBPm % % bps %
================================ ========= ========= ============ =========== ==============
Campuses 6,229 (2.7) 1.6 +18 (1.3)
Central London 5,666 (3.0) 1.7 +18 (1.6)
Canada Water & other Campuses 460 (1.6) 0.0 +5 (0.4)
Retail & Fulfilment 3,414 (3.6) 0.6 +17 (0.3)
Retail Parks 2,046 (3.7) 0.8 +20 (0.3)
Shopping Centres 788 (2.1) (1.0) (1) 2.1
Urban Logistics 323 (6.0) 16.7 +60 (5.0)
================================ ========= ========= ============ =========== ==============
Total 9,643 (3.0) 1.2 +17 (1.0)
================================ ========= ========= ============ =========== ==============
See supplementary tables for detailed breakdown
The value of the portfolio was down 3.0% driven by yield
expansion, notably for lower yielding assets where the impact of
rising interest rates has been most acute. This was partially
offset by positive ERV growth in Campuses, Retail Parks and Urban
Logistics.
Campus valuations were down 2.7% with our West End portfolio
down 2.5% and City portfolio down 3.6%, reflecting yield expansion
of 19 bps and 17 bps respectively. While macroeconomic uncertainty
has impacted investment markets, occupational demand has remained
robust, particularly for best in class buildings with strong
sustainability credentials. We saw ERV growth of 1.6% across
Campuses, driven by the West End where ERVs were up 2.8% reflecting
our successful leasing activity and tighter supply in the West End.
Against a backdrop of rising inflation and given broader market
uncertainty, Campus developments valuations were down 1.2% although
Aldgate Place, a residential, build to rent scheme was up 19.6% due
to the strength of that sub market and the progress made on
site.
The value of our Retail Park portfolio fell by 3.7% in the
period, driven by yield expansion of 20bps. Following rapid yield
contraction over the past 12 months, the sector has been impacted
by the recent increase in interest rates. Encouragingly it
generated positive ERV growth for the first time in four years, up
0.8%. Conversely in Shopping Centres, yields were flat but ERVs
declined 1.0%. Urban Logistics, which is low yielding, saw yield
expansion of 60bps but the combination of strong occupational
demand and chronic undersupply of the right kind of space has
driven ERV growth of 16.7%. Our urban logistics assets are
primarily valued on an investment basis, with the uplift from our
densification plans likely to be realised as we make progress on
planning.
Capital activity
Retail
Campuses & Fulfilment Total
From 1 April 2022 GBPm GBPm GBPm
======================= ======== ============= =====
Purchases 25 22 47
Sales (694) - (694)
Development Spend 113 3 116
Capital Spend 25 12 37
========================= ======== ============= =====
Net Investment (531) 37 (494)
========================= ======== ============= =====
Gross Capital Activity 857 37 894
========================= ======== ============= =====
On a proportionally consolidated basis including the Group's
share of joint ventures
The total gross value of our capital activity since 1 April 2022
was GBP894m. The most significant transaction was the sale of a 75%
interest in the majority of our assets at Paddington Central to GIC
for GBP694m. This was 1% below September 2021 book value and
represented a net initial yield of 4.5%. The transaction completed
in July 2022 establishing a new joint venture, with ownership split
75:25 for GIC and British Land respectively, with the partners
having joint control. As part of the transaction agreement, GIC
were given options over two further assets at Paddington Central,
the development site at 5 Kingdom Street and the Novotel at 3
Kingdom Street. The option at 5 Kingdom Street has now lapsed and
the option at 3 Kingdom Street, which enables GIC to acquire the
asset at prevailing market value via the first joint venture, is
available for five years. British Land will continue to act as the
development and asset manager for the campus, for which we will
earn fees.
We have continued to progress innovation opportunities including
the GBP25m purchase of a site to the west of our holding on the
Peterhouse Technology Park (Peterhouse Western Expansion), with
consent for a 90,000 sq ft office building (completed post period
end). This acquisition represents an opportunity to deliver lab
space in Cambridge, a market which is structurally undersupplied,
with no lab space currently available, and where rental growth is
expected to be c.5% to 2027.
In Urban Logistics, we acquired a site in Mandela Way for
GBP22m, our second urban logistics location in Southwark, following
the acquisition of Verney Road for GBP31m in February 2022. Mandela
Way is an excellent location for a multi-storey, urban logistics
scheme, close to the Old Kent Road, the City and London Bridge, and
in an area that is popular with a range of third party logistics
providers.
Sustainability
We have continued to demonstrate leadership in international
benchmarks and were delighted to achieve a GRESB 5 star rating for
developments, and were recognised as a Global Sector Leader. We
achieved a 4 star rating for standing investments, reflecting the
change in our portfolio mix following recent acquisitions of retail
parks and logistics facilities, as well as higher usage of our
office space post lockdown. We are now focused on initiatives which
will improve our score over the coming years. We retained our MSCI
AAA rating and improved our ranking in the FTSE4Good index by 7
percentage points to rank just outside the top decile.
Net Zero - Development
We are making good progress against our 2030 environmental
commitments. Average embodied carbon across our office development
pipeline is 632 kg CO(2) e per sqm (including completed
developments) which compares well to our 2030 target of 500 kg
CO(2) e per sqm. We are on site across 1.7m sq ft, targeting the
highest sustainability credentials including BREEAM Outstanding on
offices at 1 Broadgate and across the offices at Canada Water. Last
year we received an innovation credit from BRE, the Building
Research Establishment, for the UK's first large-scale use of a
materials passport at our 1 Broadgate development. We are taking
the same approach at 2 Finsbury Avenue where we have commenced
deconstruction and our focus is on upcycling demolition materials
to create bespoke finishes and products for the new buildings,
examples include upcycling aluminium to create wall finishes and
locker doors.
As we start to build an urban logistics business, we are
applying the processes and knowledge gained from our other sectors
to set environmental targets for our logistics developments which
meet our own and our occupiers net zero ambitions.
Net Zero - Standing portfolio and EPC performance
In offices, we are already fully compliant with 2023 MEES
(Minimum Energy Efficiency Standard) legislation which stipulates a
minimum EPC rating of E and 52% of our offices space is currently
rated A or B (by ERV). For the whole portfolio, 42% is currently A
or B rated and 75% is A to C rated, ahead of the March 2022
positions of 36% and 70% respectively, driven by the net zero
initiatives we are delivering.
Our estimate for the total retrofit cost of the portfolio
remains at c. GBP100m of which we expect c. two-thirds to be funded
through the service charge. We expect the cost to be split roughly
50/50 between offices and retail. In offices, we have spent GBP8.4m
to date, of which our contribution has been c. 15%. Over the next
few years, we expect air source heat pumps to account for c. 40% of
anticipated spend, with LED lighting a further c. 30%.
Following completion of our net zero audit programme last year,
our focus now is on implementing their recommendations. Notable
successes in the six months include Exchange House, where our
improvements delivered a B rating from an E for less than GBP2m,
equating to 0.4% of the building's value. We are also on site with
similar initiatives at 338 Euston Road, for example, where we have
recently installed air source heat pumps replacing comfort cooling
and heating, reducing emissions and gas consumption. The next step
is to continue our LED lighting programme and we are engaging
closely with occupiers to achieve this. We expect to achieve a B
rating on completion of the works from a D currently.
Looking at our 2030 targets more broadly, which are to improve
energy efficiency and reduce carbon intensity, customer engagement
will be critical because the space they control is within scope. To
progress this, we held four round table sessions on our net zero
plans attended by many of our top 20 retail and office
occupiers.
BL Connect, our smart dashboard which uses Internet of Things
sensors around the building to extract and store data, is operating
successfully at 100 Liverpool Street and has already enabled us to
reduce energy consumption on heating and cooling by 15%. We are
rolling this out to all our developments, starting with 1 Broadgate
and Canada Water and we will trial a retrofit of an existing
building later this year.
As part of our debt portfolio, we have over GBP1bn of Green
loans and ESG linked facilities.
Social Sustainability
Our strategy is to focus on three key areas where we can make a
difference: education, employment and affordable space. In
education, we have continued to support the work of the National
Literacy Trust with nearly 8,000 children participating in Young
Readers Week activities across our portfolio. Bright Lights, our
skills and employment programme has provided employment support to
over 1,000 individuals of which c. 300 went on to achieve full time
employment. We are increasingly looking to use our space to make a
positive difference and are piloting a 'Really Local' store concept
to deliver retail space at low or zero cost to small, local
businesses, charity or community groups who source or manufacture
things locally. To date we have allocated over 25,000 sq ft to
local operators at Meadowhall in Sheffield, Ealing Broadway, Fort
Kinnaird in Edinburgh and Royal Victoria Place in Tunbridge
Wells.
Recently, we have redirected some of our efforts to support
local communities through the 'cost of living crisis'. From our
learnings through Covid we are focusing our support on our partner
organisations who are facing unprecedented demands on their
services. We have committed over GBP200,000 to a dedicated Cost of
Living Fund and immediately pledged GBP25,000 to the Shelter
Hardship Fund (in addition to our support to the Shelter National
Helpline) and GBP25,000 to the Trussell Trust's emergency appeal
for foodbanks across the country. We are providing strategic
support to our core charity and community partners through the
Centre for Charity Effectiveness to help them navigate through the
crisis. We are also working closely with our teams across the UK to
identify local need and provide economic support that is targeted
and relevant including the set up of donation points and supporting
warm spaces.
At Paddington Central, we have continued to support the
Ukrainian Institute language school by providing space at Storey
Club and 2 Kingdom Street for a 12 week term, providing support to
over 250 displaced Ukrainians, and enabling 165 individuals to gain
a basic qualification in English. The students ranged between 18
and 70 years old with 87% being female. A second course is now
underway.
Campuses
Key metrics
30 Sep 31 Mar
2022 2022
============================================= ========= =========
Portfolio Valuation (BL share) GBP6,229m GBP6,967m
Occupancy 96.9% 96.7%
Weighted average lease length to first break 7.5 yrs 7.0 yrs
30 Sep 30 Sep
Six months to: 2022 2021
Total property return (1.3)% 4.5%
* Yield shift +18 bps (6) bps
* ERV growth 1.6% (0.3)%
* Valuation movement (2.7)% 3.0%
Total lettings/renewals (sq ft) 494,000 819,000
Lettings/renewals (sq ft) over 1 year 433,000 668,000
Lettings/renewals over 1 year vs ERV +18.4% +6.1%
Like-for-like income(1) +9.2% +1.4%
============================================= ========= =========
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Like-for-like excludes the impact of surrender premia, CVAs
& admins and provisions for debtors and tenant incentives.
Campus operational review
Campuses were valued at GBP6.2bn, down 2.7%, driven by 18 bps
yield expansion partly offset by ERV growth of 1.6%. Investment
lettings and renewals totalled 494,000 sq ft, with deals over one
year 18.4% ahead of ERV. Like-for-like income was up 9.2%, driven
primarily by strong leasing, particularly in Storey where we saw
114,000 sq ft of leasing activity, increasing occupancy at Storey
to 96%. We are under offer on a further 310,000 sq ft, 3.8% ahead
of ERV. In addition, we had 82,000 sq ft rent reviews agreed 8.0%
ahead of passing rent.
Across our standing portfolio, we benefit from a diverse
portfolio of high quality occupiers focused on technology,
financial, corporate, science, health and media sectors. Occupancy
is 96.9% and we have collected 99% our rent for the period. Our
recent customer satisfaction survey was strong: we scored 4.3 out
of 5 and 79% say we are "The Best" or outperformed the majority of
other providers based on a survey of 53 office facilities
managers.
Broadgate
Leasing activity at Broadgate covered 155,000 sq ft in the half
year (excluding Storey), of which all were long term deals,
completed on average 11.1% ahead of ERV. The most significant was a
regear to Credit Agricole at Broadwalk House, covering 116,550 sq
ft and extending their lease by five years to 2030. In this case,
we have worked closely with the occupier to deliver energy
efficient interventions which progress our net zero plans and
generate efficiencies for Credit Agricole, particularly in the
context of higher energy prices. These interventions include
localised cooling to more efficiently serve their space without
powering the whole building out of hours; a new air source heat
pump and LED lighting. Progressing our net zero ambition plays an
important role in our lease negotiations and we are involved in
similar conversations elsewhere at Broadgate. We are underway with
significant asset management initiatives at Exchange House, 10
Exchange Square and 155 Bishopsgate, totalling GBP52m (our share)
where we have taken the opportunity to incorporate energy efficient
interventions at little incremental cost since they are part of the
wider refurbishment.
We have made some exciting additions to our food and beverage
offer with Los Mochis, a pan-Pacific concept opening a flagship
restaurant on the rooftop of 100 Liverpool Street covering 14,000
sq ft. New additions such as this encourages footfall to our campus
which is benefitting from the opening of the Elizabeth line.
Our social sustainability initiatives continue to focus on
forging connections between our occupiers and local communities and
we were pleased that 16 volunteers from SMBC at 100 Liverpool
Street participated in New City College's Employability week
reaching over 100 students. As part of our Bright Lights
initiatives, the Broadgate Connect programme supported 27 local job
seekers with 17 placed into work and in connection with the Young
Readers Programme, 290 students participated in activities across
the Campus.
The Campus saw a valuation decline of 4.1% driven by outward
yield shift of 17bps, offsetting ERV growth of 0.6%. Values for
larger City assets which are typically more reliant upon debt
funding have been disproportionately impacted by rising rates.
Broadgate occupancy is 97.7% up from 96.7% six months ago.
Regent's Place
At Regent's Place we have completed 193,000 sq ft (excluding
Storey) of long term deals, including a significant regear to Meta
at 10 Brock Street covering 146,000 sq ft.
Regent's Place is gaining momentum as a life sciences and
innovation hub. We have already delivered lab space across one
floor at 338 Euston Road of which 5,000 sq ft is let to Relation
Therapeutics and are converting further floors at that building. We
have similar opportunities at other buildings on the campus and are
aiming to deliver c. 60,000 sq ft of lab space at Regent's Place by
September 2023. We are having positive discussions with key life
sciences and innovation organisations in the Knowledge Quarter to
partner with them on delivering our plans. This is in addition to
our current innovation occupiers such as Meta, the General Medical
Council, Babylon Health and the NHS.
We are on site with the second phase of a public realm programme
which will be delivered by the end of 2022. Our social programmes
have included partnering with the Rebel Business School, with 59
participants attending a high impact training programme on how to
start their own business and we supported 14 local residents into
employment with service partners on the Campus.
Regent's Place was down 2.4% in value, driven by outward yield
shift of 18 bps but we benefitted from ERV growth of 2.6%.
Occupancy is now 95.1%.
Paddington Central
With very high occupancy of 99.7%, leasing activity was 23,000
sq ft (excluding Storey).
Following the sale of 75% of the majority of assets at the
Campus to GIC, Paddington Central is now held in a joint venture
with GIC owning 75% and British Land owning the remaining 25% with
the partners having joint control. Working with GIC, we continue to
manage the Campus where our future plans include a comprehensive
upgrade of 3 Sheldon Square which will deliver an all electric
building; we expect to start in the new year. We are also underway
with an extensive upgrade to the public realm and have commenced
works at the amphitheatre which we expect to complete in February
2023.
We are part of the Paddington Life Science Partnerships Group
being led by Imperial NHS Trust and are delighted that they have
chosen to locate their innovation centre on the Campus at 1a
Sheldon Square. We have provided space to the Ukrainian Institute
language school to teach English benefitting over 250 Ukrainians in
the first term with a second underway. Working with the National
Literacy Trust, 270 local children visited Paddington Central as
part of their Young Readers Programme, taking part in
sustainability workshops with Square Mile Farms, an urban farming
business on the campus.
Paddington Central saw valuation decline of 2.7% driven by
significant outward yield shift of 34bps which was partially offset
by strong ERV growth of 7.2% reflecting the improving rental tone
in the wider Paddington area.
Canada Water
Following the sale of 50% of our share in the Canada Water
Masterplan in March 2022, this Campus is now held in a 50:50 joint
venture with AustralianSuper, Australia's largest superannuation
fund. This partnership will accelerate returns and the delivery of
the Masterplan, bringing new homes, workspace, retail, education,
cultural and leisure opportunities and an enhanced public realm to
the local community.
The joint venture is committed to developing Phase 1 of the
Masterplan covering 585,000 sq ft and to progressing subsequent
phases of the development, with funding split equally between
British Land and AustralianSuper. The total development cost of the
entire project is GBP4.0bn. It is expected to complete in 2031 and
should deliver a total development value of GBP6.0bn of which the
commercial element accounts for GBP3.7bn and residential the
remainder. British Land is targeting development returns of 11%
from commitment for Phase 1 and low teens for the whole
project.
We have outline planning permission for the entire scheme and
are on site with Phase 1, which comprises a mix of workspace,
retail, leisure and residential as set out below. We are targeting
rents on the workspace of over GBP50 psf and a capital value psf of
around GBP1,000 psf on the residential, which are both attractive
relative to competing schemes.
Retail No. residential
Sq ft Workspace & leisure homes Total
======================================== ========= ========== =============== =======
1-3 Deal Porters Way (A1); The Founding
(residential) 122,000 9,000 186 276,000
The Dock Shed (A2) 182,000 65,000 - 247,000
Robert's Close (K1) - - 79 62,000
======================================== ========= ========== =============== =======
Total 304,000 74,000 265 585,000
======================================== ========= ========== =============== =======
The London Borough of Southwark held an initial 20% interest in
the scheme and the ability to participate in the development up to
a maximum of 20% with returns pro-rated accordingly. They have
elected not to fully participate in Phase 1 but are pre-purchasing
the 79 affordable homes at K1 and have part funded the 55,000 sq ft
leisure centre in A2.
In July 2022, we were pleased that Southwark Council granted
detailed planning permission for the Printworks, in Zone H of the
Masterplan. Reflecting its success as a cultural destination, we
are now working with the operators to explore retaining a cultural
venue to capitalise on the popularity of the offer. In the same
month, Southwark Council also granted planning permission to
develop Zones F and L, adjacent to the Printworks. Together these
will deliver 647 homes including 147 affordable homes, as well as
workspace and retail space. We have also submitted a reserved
matters application for Zone G of the Masterplan, which includes a
replacement Tesco store, 419 homes of which 61% are affordable
housing and some smaller flexible retail space. Together, these
developments represent the next phases of the Canada Water
Masterplan.
We are encouraged by the level of interest we are seeing from
occupiers and building on the success of the TEDI modular campus we
are progressing plans for a 33,000 sq ft modular innovation campus
on the site and are in advanced discussions with a technology
business to take some of that space.
The valuation of the Canada Water Campus was broadly flat in the
half reflecting an improving residential market and progress on
Phase 1 offset by cost increases.
Storey: our flexible workspace offer
Storey is an important part of our Campus proposition and is
currently operational across 296,000 sq ft across all our Campuses,
providing occupiers with the flexibility to expand at short notice
or to benefit from ad hoc meeting or events space. The quality of
the space and access to Campus amenities means it is also highly
attractive to scale up businesses and we have seen demand
strengthen as people return to the office.
We exchanged 114,000 sq ft of leasing in the half year, with a
further 7,500 sq ft post period end. 48,000 sq ft of these deals
are renewals, and Storey has achieved 70% renewals on expiry in the
financial year so far. Levin Group have grown with Storey, adding
7,000 sq ft of space at 100 Liverpool Street to their original
space at 1 Finsbury Avenue, as well as pre-letting all 22,500 sq ft
of Storey space at 155 Bishopsgate to allow consolidation of their
offices. Activity this half year has delivered 100% occupancy on
the Storey space at the Paddington Central campus. Total occupancy
has increased significantly to 96% from 86% at March 2022, meaning
Storey is effectively fully occupied.
Rent collection was 100% reflecting the strength of Storey's
customer base, with the majority of occupiers being UK / European
headquarters for large multinationals or scale-up businesses.
Storey has now ceased operations at 3 Finsbury Avenue as we
prepare this building for development but we are looking at options
to expand Storey elsewhere on our Campuses.
Retail & Fulfilment
Key metrics
30 Sep 31 Mar
As at 2022 2022
============================================= ========= =========
Portfolio valuation (BL share) GBP3,414m GBP3,500m
GBP2,114m
* Of which Retail Parks GBP2,046m
GBP800m
* Of which Shopping Centres GBP788m
GBP319m
* Of which Urban Logistics GBP323m
Occupancy1 96.6% 96.3%
Weighted average lease length to first break 4.6 yrs 4.6 yrs
30 Sep 30 Sep
Six months to: 2022 2021
Total property return (0.3)% +6.5%
* Yield shift +17 bps (32) bps
* ERV growth 0.6% (1.9)%
* Valuation movement (3.6)% 2.7%
Total lettings/renewals (sq ft) 1,017,000 1,024,000
Lettings/renewals (sq ft) over 1 year 698,000 632,000
Lettings/renewals over 1 year vs ERV +10.3% +0.2%
Like-for-like income(2) +0.8% +1.5%
============================================= ========= =========
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Where occupiers have entered CVA or administration but are
still liable for rates, these are treated as occupied. If units in
administration are treated as vacant, then the occupancy rate for
Retail would reduce from 96.6% to 95.7%.
2. Like-for-like excludes the impact of surrender premia, CVAs
& admins and provisions for debtors and tenant incentives.
Retail & Fulfilment operational review
Operational performance
Following record leasing volumes last year, momentum has
continued into the new financial year with 1m sq ft of leasing
activity, with deals over one year 10.3% ahead of ERV and 7.8%
below previous passing rent. Occupancy is high at 96.6% and 96% of
HY23 rent collected. Like for like income was 0.8% and including
the impact of CVA and administrations, it was down 2.2%. Weighted
average lease length remained at 4.6 years. We had 171,000 sq ft of
rent reviews that were agreed 0.9% above passing rent. In total, we
have 772,000 sq ft of deals under offer, 18.0% above March ERV; c.
two-thirds of this volume is at our Retail Parks. We had an
excellent response to our recent customer satisfaction survey:
retail store managers rated British Land 4.4 out of 5 and 75% say
we are "The Best" or outperformed the majority of other providers,
amongst a sample of 725 store managers.
Retail Parks
We completed 465,000 sq ft of deals across our Retail Park
portfolio, on average just 2.9% below previous passing rent and
6.3% above ERV demonstrating that rents on Retail Parks have
effectively rebased. Retail Parks occupancy is 97.5% up 10 bps,
reflecting strong leasing activity and like for like income was up
2.2%.
Recent deals included 37,000 sq ft to Inditex (Zara) at Glasgow
Fort, doubling their footprint, and 39,000 sq ft to Poundland
across Queens Retail Park Stafford, New Mersey Speke and Crownpoint
Denton. We continue to let well to Aldi, with 19,000 sq ft let at
the Lion Retail Park in Woking, which follows 84,000 sq ft of
leases starting with Aldi last year. These significantly improved
the performance of individual parks, for example footfall rose 12%
at Denton following the opening of the new Aldi.
Shopping centres
We continue to actively manage our Shopping Centres improving
occupancy and driving rents forward. We have completed 478,000 sq
ft of deals across our shopping centre portfolio, on average 13.4%
below previous passing rent but encouragingly 15.3% ahead of ERV.
Notable recent deals have included 9,300 sq ft to Watches of
Switzerland across Meadowhall and Bath and 10,000 sq ft to the Gym
Group, also at Bath. Yields have remained relatively stable over
the period despite a more challenging macroeconomic backdrop and we
expect the outlook for the best centres to become more attractive
as confidence improves.
Footfall and sales are now close to pre-pandemic levels as set
out below:
3 April 2022 - 1 October
2022
==============================
Benchmark
% of 2019(1) outperformance2
====================== ============ ================
Footfall
* Portfolio 93.0% +663bps
* Retail parks 98.0% +171bps
Sales
* Portfolio 103.6% n/a
* Retail parks 103.9% n/a
====================== ============ ================
1. Compared to the equivalent weeks in 2019
2. Footfall benchmark: Springboard
London Urban Logistics
Urban Logistics now accounts for 9.5% of Retail &
Fulfilment. Leasing activity across these assets was 33,000 sq ft,
all long term deals overall 2.3% ahead of ERV.
Developments
ERV
Current Cost to Let &
Sq ft Value complete ERV under offer
At 30 September 2022 '000 GBPm GBPm GBPm GBPm
===================== ====== ======= ========= ===== =============
Committed 1,681 581 569 62.3 21.5
Near term 1,766 223 772 62.4 -
Medium term 8,132
--------------------- ------ ------- --------- ----- -------------
Total pipeline 11,579 804 1,341 124.7 21.5
===================== ====== ======= ========= ===== =============
On a proportionally consolidated basis including the Group's
share of joint ventures (except area which is shown at 100%)
Development pipeline
Progressing value accretive developments is a key driver of
returns for British Land. Our experience has demonstrated that some
of our best performing developments, including The Leadenhall
Building and 100 Liverpool Street, are those which were progressed
during periods of uncertainty because they delivered into supply
constrained markets. We target project IRRs of 10-12%.
We are currently on site with 1.7m sq ft of best in class
workspace, which will be BREEAM Outstanding or Excellent delivering
GBP62.3m of ERV with 34% already pre-let or under offer. Excluding
build to sell residential and retail space which we will let closer
to completion, we are 40% pre-let or under offer by ERV. Total
development exposure is now 6.3% of portfolio gross asset value
with speculative exposure at 7.3% (which is based on ERV and
includes space under offer), within our internal risk parameter of
12.5%.
Supply chain issues related to the continued fallout from
Covid-19 and the ongoing war in Ukraine continue to create
uncertainty, putting upwards pressure on construction costs and
making forecasting difficult. We have maintained our inflation
forecast (based on tender price inflation) at 8-10% in 2022,
moderating to 4-5% next year. There is a possibility that inflation
next year is lower than our forecast with early signs construction
capacity is increasing as development projects are deferred or
cancelled and tender prices for demolition works are stabilising.
We regularly review inflation drivers to ensure our contingencies
and cost plans are robust to deal with the market fluctuations.
We have been able to place contracts competitively and 92% of
costs are fixed on committed developments. We have built up
excellent relationships with Tier 1 contractors and throughout our
supply chain so we are confident of placing mutually attractive
contracts for our near term developments.
Committed developments
Our committed pipeline stands at 1.7m sq ft with no new
commitments made in the half year. The Committed pipeline is
focused on our Campuses, including 1 Broadgate and Norton Folgate
in London. 1 Broadgate (544,000 sq ft) will be our most
operationally efficient building yet. It is on track to be both
BREEAM Outstanding and NABERS 5* and reflecting these strong
environmental credentials, the building is fully pre-let or under
option on all the office space to JLL and Allen & Overy. Norton
Folgate is a 335,000 sq ft scheme, comprising 302,000 sq ft of
office space, alongside retail and leisure space within a mix of
Georgian and Victorian buildings. We are under offer on one-third
of the space to Reed Smith.
At Canada Water, we are on site at the first three buildings
covering 585,000 sq ft. 1-3 Deal Porters Way, (previously A1) is a
35 storey tower, including 186 homes and 122,000 sq ft of
workspace; practical completion is targeted for Q4 2024. The Dock
Shed (A2) includes 182,000 sq ft of workspace as well as a new
leisure centre and Roberts Close (K1) comprises 79 affordable
homes. We are targeting BREEAM Outstanding on all the commercial
space, BREEAM Excellent on retail and a minimum of home Quality
Mark 3* for residential. The London Borough of Southwark are not
participating in Phase 1 but will take ownership of the affordable
housing on completion and have part-funded the leisure centre in
A2. We expect to sell the residential units in A1 closer to
practical completion.
Phase 2 at Aldgate Place is our first build to rent residential
scheme. It comprises 159 premium apartments with 19,000 sq ft of
best-in-class office space and 8,000 sq ft of retail and leisure
space. It is well located, adjacent to Aldgate East and between the
Crossrail stations at Liverpool Street and Whitechapel. Completion
is expected in Q2 2024.
Our most recent commitment, The Priestley Centre is located on
the University of Surrey Research Park, home to a number of well
established technology and engineering businesses and close to the
Royal Surrey County Hospital. We are on site with an 81,000 sq ft
office development which will be partially lab enabled.
Recently Committed Developments
100% sq Forecast
As at 30 September BL Share ft PC Calendar ERV IRR
2022 Sector % '000 Year GBPm(1) %
===================== ============ ======== ======= =========== ======== ========
Norton Folgate Office 100 335 Q4 2023 23.6 8
1 Broadgate Office 50 544 Q2 2025 20.2 11
Aldgate Place,
Phase 2 Residential 100 136 Q2 2024 6.5 10
1-3 Deal Porters 11
Way, A12 Mixed Use 50 276 Q4 2024 3.6 blended
The Dock Shed,
A22 Mixed use 50 247 Q4 2024 5.5
Robert's Close
K12 Residential 50 62 Q3 2023 -
The Priestley Centre Office 100 81 Q3 2023 2.9 22
===================== ============ ======== ======= =========== ======== ========
Total Committed 1,681 62.3
=================================== ======== ======= =========== ======== ========
1. Estimated headline rental value net of rent payable under
head leases (excluding tenant incentives).
2. The London Borough of Southwark has confirmed they will not
be investing in Phase 1, but retain the right to participate in the
development of subsequent plots up to a maximum of 20% with their
returns pro-rated accordingly.
Near Term pipeline
Our near term pipeline covers 1.8m sq ft with the latest
addition being The Peterhouse Western Expansion, adjacent to the
Peterhouse Technology Park, which was acquired post period end. The
site has consent for 90,000 sq ft of office space which we expect
to commence early next year.
The largest scheme in the near term pipeline is 2 Finsbury
Avenue, where we have planning for a 727,000 sq ft office scheme.
We have commenced deconstruction and our focus is on upcycling
demolition materials for reuse in the new building. At 5 Kingdom
Street, we intend to submit a planning application later this month
for a new 127,000 sq ft underground urban logistics hub which has a
further 211,000 sq ft of consented office space above it.
Medium Term Pipeline
The further phases at Canada Water account for 4.5m sq ft of our
8.1m sq ft medium term pipeline. At Euston Tower (578,000 sq ft) we
have an exciting opportunity to deliver a highly sustainable
redevelopment, which will include a substantial amount of lab
enabled space leveraging its location in London's Knowledge
Quarter. We expect to submit planning next year.
Urban Logistics opportunities account for 2.0m sq ft of medium
term opportunities. At Thurrock, we are submitting plans for a
637,400 sq ft two-storey logistics hub east of London by
repurposing two-thirds of the retail space and utilising the site
topography to facilitate multi-level development. Public
consultation is currently underway. We see further opportunities to
intensify existing buildings at Hannah Close in Wembley and
Heritage House in Enfield, with potential to deliver 668,000 sq ft
and 408,000 sq ft respectively of well located, urban logistics
space. Both are in North London, within the M25 and close to the
North Circular and the Enfield scheme is out for public
consultation. In addition, we have three centrally located
opportunities at Finsbury Square in the City and Verney Road and
the recently acquired Mandela Way in Southwark altogether totalling
317,000 sq ft where we are working towards planning.
Finance review
30 Sep 30 Sep
Six months to 2022 2021
====================================== ========= =========
Underlying Profit1,2 GBP136m GBP120m
Underlying earning per share1,2 14.5p 12.9p
IFRS (loss)/profit after tax GBP(34)m GBP370m
Dividend per share 11.60p 10.32p
Total accounting return1 (2.8)% 6.1%
====================================== ========= =========
30 Sep 31 Mar
As at 2022 2022
====================================== ========= =========
EPRA Net Tangible Assets per share1,2 695p 727p
EPRA Net Disposal Value per share1,2 729p 702p
IFRS net assets GBP6,598m GBP6,733m
====================================== ========= =========
LTV3,4,5 30.7% 32.9%
Weighted average interest rate 3.5% 2.9%
Fitch unsecured credit rating A A
====================================== ========= =========
1. See Note 2 within condensed interim financial statements for
definition and calculation.
2. See Table B within supplementary disclosures for
reconciliations to IFRS metrics.
3. See Note 11 within condensed interim financial statements for
definition, calculation and reconciliation to IFRS metrics.
4. On a proportionally consolidated basis including the Group's
share of joint ventures.
5. EPRA Loan to value is disclosed in Table E of the condensed
interim financial statements.
Overview
Financial performance has continued to improve driven by strong
like-for-like rental growth and our recently completed
developments. Underlying Profit is up 13.3% at GBP136m, while
underlying earnings per share (EPS) is up 12.4% at 14.5p. Based on
our policy of setting the dividend at 80% of Underlying EPS, the
Board have proposed an interim dividend of 11.60p per share, up
12.4%.
Underlying Profit
GBPm
======================================================== ====
Underlying Profit for the six months ended 30 September
2021 120
======================================================== ====
Like-for-like net rent (incl. CVA and administrations) 7
Provisions for debtors and tenant incentives(1) 1
Net capital activity (2)
Developments 11
Net finance costs & fee income (1)
Underlying Profit for the six months ended 30 September
2022 136
======================================================== ====
1. The period on period impact of provisions for debtors and
tenant incentives was GBP1m. This reflects the difference between
the GBP1m credit to the income statement in the six-month period to
30 September 2022 (as disclosed in Note 7 and 10 of condensed
interim financial statements) and the nil charge in the six-month
period to 30 September 2021.
Underlying Profit increased by GBP16m, due to strong operational
performance across our portfolio driving like-for-like net rents,
as well as the impact of recently completed development, primarily
relating to 1 Triton Square. This was partially offset by an
increase in finance costs as a result of rising market rates.
Net capital activity decreased earnings by GBP2m in the period.
This reflects a GBP6m increase from the GBP794m of acquisitions in
Retail Parks, Urban Logistics, and innovation opportunities within
Campuses over the last 18 months. Offsetting this, we disposed of
GBP1,180m of mature assets, resulting in a GBP8m decrease to
earnings.
Alongside our value accretive acquisitions, proceeds from sales
have been deployed into our development pipeline. Our committed
schemes are expected to generate an ERV of GBP62m, of which 34% is
already pre-let or under offer.
IFRS loss after tax for the period was GBP34m, compared with a
profit after tax for the prior period of GBP370m. The movement
period-on-period primarily reflects the downward valuation movement
on the Group's properties and those of its joint ventures, offset
by the mark-to-market movement on the derivatives hedging the
interest rate on our debt.
Overall valuations have decreased by 3.0% on a proportionally
consolidated basis, resulting in an overall EPRA NTA per share
decrease of 4.4%. Including dividends of 11.60p per share paid
during the period, total accounting return is -2.8%.
At 30 September 2022, LTV decreased by 220bps from 31 March 2022
to 30.7%. This reflects the sale of a 75% interest in the majority
of our assets in Paddington Central, which completed in July, and
the valuation decline as noted above.
We maintain good long-term relationships with debt providers
across the markets and have continued to raise funds on good terms.
Financing activity completed in the half year included a GBP515m 5
year secured loan for the Paddington joint venture, provided by a
club of three banks. In October, for British Land, we renewed a
GBP100m bilateral bank revolving credit facility (RCF) with a new 5
year initial term. In November, we signed a further new GBP150m
bilateral RCF, also for a 5 year initial term.
Our weighted average interest rate is 3.5%, a 60bps increase
from 31 March 2022. This increase was primarily due to the
repayment of our lower cost bank RCFs from the proceeds of the
Paddington transactions, as well as the impact of rising market
rates. The impact on our interest costs is limited by our hedging
which includes swaps to fixed rate and caps where the strike rates
are now below SONIA. The interest rate on all of our debt is fully
hedged for the next year and 77% of our projected debt is hedged on
average over the next 5 years.
Our financial position remains strong with GBP2bn of undrawn
facilities and cash as at 30 September 2022 and based on our
current commitments and facilities, we have no requirement to
refinance until late 2025.
We retain significant headroom to our debt covenants, meaning
the Group could withstand a fall in asset values across the
portfolio of 48% prior to taking any mitigating actions.
Fitch Ratings, as part of their annual review in August 2022,
affirmed all our credit ratings with a Stable Outlook, including
the senior unsecured rating at 'A'.
Presentation of financial information and alternative
performance measures
The Group financial statements are prepared under IFRS where the
Group's interests in joint ventures are shown as a single line item
on the income statement and balance sheet and all subsidiaries are
consolidated at 100%.
Management considers the business principally on a
proportionally consolidated basis when setting the strategy,
determining annual priorities, making investment and financing
decisions and reviewing performance. This includes the Group's
share of joint ventures on a line-by-line basis and excludes
non-controlling interests in the Group's subsidiaries. The
financial key performance indicators are also presented on this
basis.
A summary income statement and summary balance sheet which
reconcile the Group income statement and balance sheet to British
Land's interests on a proportionally consolidated basis are
included in Table A within the supplementary disclosures.
Management use a number of performance metrics in order to
assess the performance of the Group and allow for greater
comparability between periods, however, do not consider these
performance measures to be a substitute for, IFRS measures.
Management monitors Underlying Profit as it is an additional
informative measure of the underlying recurring performance of our
core property rental activity and excludes the non-cash valuation
movement on the property portfolio when compared to IFRS metrics.
It is based on the Best Practices Recommendations of the European
Public Real Estate Association (EPRA) which are widely used
alternate metrics to their IFRS equivalents, with additional
Company adjustments when relevant (see Note 2 in the condensed
interim financial statements for further detail).
Management monitors EPRA NTA as this provides a transparent and
consistent basis to enable comparison between European property
companies. Linked to this, the use of Total Accounting Return
allows management to monitor return to shareholders based on
movements in a consistently applied metric, being EPRA NTA, and
dividends paid.
Loan to value (proportionally consolidated) is also monitored by
management as a key measure of the level of debt employed by the
Group to meet its strategic objectives, along with a measurement of
risk. It also allows comparison to other property companies who
similarly monitor and report this measure. The definition of Loan
to value is shown in Note 11 of the condensed interim financial
statements.
Income statement
1. Underlying Profit
Underlying Profit is the measure that we use to assess income
performance. This is presented below on a proportionally
consolidated basis. No company adjustments were made in the current
period. In the period to 30 September 2021, a GBP29m surrender
premium payment was excluded from the calculation of Underlying
Profit (see Note 2 of the condensed interim financial statements).
There was no tax effect of this Company adjusted item.
30 Sep 30 Sep
2022 2021
Six months to Section GBPm GBPm
======================================== ======= ====== =======
Gross rental income 251 241
Property operating expenses (24) (31)
======================================== ======= ====== =======
Net rental income 1.2 227 210
Net fees and other income 9 5
Administrative expenses 1.3 (44) (44)
Net financing costs 1.4 (56) (51)
======================================== ======= ====== =======
Underlying Profit 136 120
======================================== ======= ====== =======
Underlying tax charge (1) -
Non-controlling interests in Underlying
Profit 1 1
EPRA and Company adjustments(1) (170) 249
======================================== ======= ====== =======
IFRS (loss)/profit after tax 2 (34) 370
======================================== ======= ====== =======
Underlying EPS 1.1 14.5p 12.9p
IFRS basic EPS 2 (3.7)p 39.9p
Dividend per share 3 11.60p 10.32p
======================================== ======= ====== =======
1. EPRA adjustments consist of investment and development
property revaluations, gains/losses on investment and trading
property disposals, changes in the fair value of financial
instruments, associated close out costs and related deferred tax.
Company adjustments consist of items which are considered to be
unusual and/or significant by virtue to their size or nature. These
items are presented in the 'capital and other' column of the
consolidated income statement.
1.1 Underlying EPS
Underlying EPS is 14.5p, up 12.4%. This reflects the Underlying
Profit increase of 13.3% and the GBP1m underlying tax charge in the
period.
1.2 Net rental income
GBPm
======================================================== ====
Net rental income for the six months ended 30 September
2021 210
Disposals (10)
Acquisitions 9
Developments 10
Like-for-like net rent (incl. CVAs and administrations) 7
Provisions for debtors and tenant incentives(1) 1
Net rental income for the six months ended 30 September
2022 227
======================================================== ====
1. The period on period impact of provisions for debtors and
tenant incentives was GBP1m. This reflects the difference between
the GBP1m credit to the income statement in the six-month period to
30 September 2022 (as disclosed in Note 7 and 10 of condensed
interim financial statements) and the nil charge in the six-month
period to 30 September 2021.
Disposals of income producing assets over the last 18 months
reduced net rents by GBP10m in the period, where the proceeds from
sales are being reinvested into value accretive acquisitions and
developments. Acquisitions have increased net rents by GBP9m,
primarily as a result of the purchase of retail parks in
Farnborough, Thurrock and Reading Gate. Developments have increased
net rents by GBP10m, driven by the completion of 1 Triton Square.
The committed development pipeline is expected to deliver GBP62m of
rent in future years.
Campus like-for-like net rental growth was 9% in the period.
This was driven by strong letting activity across our Storey
spaces, with 100 Liverpool Street and Orsman Road now fully let, as
well as the impact of rent reviews with dentsu at 10 Triton and
Meta at 10 Brock Street. Excluding the impact of CVAs and
administrations, like-for-like net rental growth for Retail Parks
was 2% and declined 4% for Shopping Centres. This reflects improved
occupancy on our Retail Parks, deals on our Shopping Centres
transacting at lower passing rents and normalised car park and
turnover income following the lifting of Covid-19 related
restrictions. When including the impact of CVAs and
administrations, like-for-like net rents for Retail &
Fulfilment decreased 2%.
Provisions made against debtors and tenant incentives decreased
by GBP1m compared to the prior period, with a net GBP1m credit
recognised in the period. We've made good progress on prior year
debtors; the GBP72m of tenant debtors and accrued income as at 31
March 2022 now stands at GBP46m, primarily driven by cash
collection and negotiations with occupiers. As of 30 September
2022, tenant debtors and accrued income totalled GBP89m of which
GBP55m (or 62%) is provided for.
1.3. Administrative expenses
Administrative expenses are flat period on period at GBP44m as a
result of our focus on cost control. The Group's EPRA operating
cost ratio decreased to 19.7% (September 2021: 26.2%) driven by
like-for-like rental growth, increased occupancy reducing void
costs and an higher fee income from the new Canada Water and
Paddington joint ventures. In the second half of the year, our
operating cost ratio will be slightly higher than the 19.7%
reported in the current six month period, due to reduction in
rental income in the second half as a result of the 75% disposal of
Paddington Central. However, for the full year to 31 March 2023 we
expect that our operating cost ratio will be lower than the 24.2%
reported for the year to 31 March 2022.
1.4 Net financing costs
GBPm
========================================================== ====
Net financing costs for the six months ended 30 September
2021 (51)
Market rates (5)
Net investment (1)
Developments 1
Net financing costs for the six months ended 30 September
2022 (56)
========================================================== ====
There was a net nil impact from investment and development
activity. Acquisitions over the last 18 months resulted in GBP3m
increase in costs, mostly offset by proceeds from sales which were
used to repay revolving credit facilities with a net cost of GBP1m.
As we continue to progress our committed development programme, the
interest capitalised on the funds drawn has increased period on
period, resulting in a GBP1m reduction in financing costs.
We have a balanced approach to interest rate risk management. At
30 September 2022, the interest rate on our debt was fully hedged
on a spot basis and we continue to be fully hedged over the next
year. On average over the next five years and with a gradually
declining profile, we have interest rate hedging on 77% of our
projected debt, with 63% fixed (including by swaps) and the balance
capped. The strike rates on our caps are now below current
rates/SONIA, thereby limiting the impact of rising rates on our
finance costs. The use of interest rate caps as part of our hedging
also means we do not incur mark to market costs on any repayment of
debt which is capped.
At 30 September 2022 our weighted average interest rate is 3.5%
(March 2022: 2.9%). The increase is primarily due to the repayment
of our lower cost bank revolving credit facilities from the
proceeds of the Paddington transactions, as well as rising market
rates.
2. IFRS loss after tax
The main differences between IFRS loss after tax and Underlying
Profit are that IFRS includes the valuation movements on investment
and trading properties, fair value movements on financial
instruments and associated deferred tax, capital financing costs
and any Company adjustments. In addition, the Group's investments
in joint ventures are equity accounted in the IFRS income statement
but are included on a proportionally consolidated basis within
Underlying Profit.
The IFRS loss after tax for the period was GBP34m, compared with
a profit after tax for the prior period of GBP370m. IFRS basic EPS
was (3.7)p, compared to 39.9p in the prior period. The IFRS loss
after tax for the period primarily reflects the downward valuation
movement on the Group's properties of GBP189m, the capital and
other income loss from joint ventures of GBP97m, net capital
finance income of GBP147m (primarily the mark-to-market movement on
the derivatives hedging the interest rate on our debt) and the
Underlying Profit of GBP136m. The Group valuation movement and
capital and other income profit from joint ventures was driven
principally by outward yield shift of 17bps offset by ERV growth of
1.2% in the portfolio resulting in a valuation loss of 3.0%.
The basic weighted average number of shares in issue during the
year was 927m (2021/22: 927m).
3. Dividends
Our dividend is semi-annual and calculated at 80% of Underlying
EPS based on the most recently completed six-month period. Applying
this policy, the Board are proposing an interim dividend for the
six months ended 30 September 2022 of 11.60p per share. Payment
will be made on Friday 6 January 2023 to shareholders on the
register at close of business on Friday 25 November 2022. The
dividend will be a Property Income Distribution and no SCRIP
alternative will be offered.
Balance sheet
30 Sep 31 Mar
2022 2022
As at Section GBPm GBPm
============================== ======= ======= =======
Property assets 9,652 10,476
Other non-current assets 85 69
============================== ======= ======= =======
9,737 10,545
Other net current liabilities (279) (316)
Adjusted net debt 6 (2,977) (3,458)
Other non-current liabilities - -
============================== ======= ======= =======
EPRA Net Tangible Assets 6,481 6,771
============================== ======= ======= =======
EPRA NTA per share 4 695p 727p
============================== ======= ======= =======
Non-controlling interests 14 15
Other EPRA adjustments1 103 (53)
============================== ======= ======= =======
IFRS net assets 5 6,598 6,733
============================== ======= ======= =======
Proportionally consolidated basis
1. EPRA Net Tangible Assets NTA is a proportionally consolidated
measure that is based on IFRS net assets excluding the
mark-to-market on derivatives and related debt adjustments, the
carrying value of intangibles, the mark-to-market on the
convertible bonds, as well as deferred taxation on property and
derivative valuations. The metric includes the valuation surplus on
trading properties and is adjusted for the dilutive impact of share
options. Details of the EPRA adjustments are included in Table B
within the supplementary disclosures.
4. EPRA Net Tangible Assets per share
pence
======================================== =====
EPRA NTA per share at 31 March 2022 727
Valuation performance (35)
Underlying Profit 15
Dividend (12)
EPRA NTA per share at 30 September 2022 695
======================================== =====
The 4.4% decrease in EPRA NTA per share reflects a valuation
decrease of 3.0% compounded by the Group's gearing. The decrease in
valuations was driven by yield expansion, notably in low yielding
sectors where the impact of rising interest rates has been most
acute.
Campus valuations were down 2.7%, driven by yields moving out
18ps, but offset by ERV growth of 1.6% reflecting our successful
leasing activity and tighter supply in the West End.
Valuations in Retail & Fulfilment were down 3.6% overall,
with outward yield shift of 17bps and ERVs up 0.6%. Retail Parks
fell by 3.7% in the period, driven by yield expansion of 20bps,
although offset by positive ERV growth, up 0.8%. Conversely in
Shopping Centres, yields were flat but ERVs declined 1.0%. Urban
Logistics saw yield expansion of 60bps but the combination of
strong occupational demand and chronic undersupply of space has
driven ERV growth of 16.7%.
5. IFRS net assets
IFRS net assets at 30 September 2022 were GBP6,598m, a decrease
of GBP135m from 31 March 2022. This was primarily due to the IFRS
loss after tax of GBP34m and dividends paid in the period of
GBP108m.
Cash flow, net debt and financing
6. Adjusted net debt1
GBPm
======================================= =======
Adjusted net debt at 31 March 2022 (3,458)
Disposals 674
Acquisitions (38)
Development and capex (152)
Net cash from operations 112
Dividend (106)
Other (9)
======================================= =======
Adjusted net debt at 30 September 2022 (2,977)
======================================= =======
1. Adjusted net debt is a proportionally consolidated measure.
It represents the Group net debt as disclosed in Note 11 to the
condensed interim financial statements and the Group's share of
joint ventures' net debt excluding the mark-to-market on
derivatives, related debt adjustments and non-controlling
interests. A reconciliation between the Group net debt and adjusted
net debt is included in Table A within the supplementary
disclosures.
Disposals net of acquisitions decreased debt by GBP636m whilst
development spend totalled GBP118m with a further GBP34m on capital
expenditure related to asset management on the standing portfolio.
The value of committed developments is GBP581m, with GBP569m costs
to come. Speculative development exposure is 7.3% of ERV (includes
space under offer). There are 1.8m sq ft of developments in our
near term pipeline with anticipated cost of GBP772m.
7. Financing
Proportionally
Group consolidated
==================== ====================
30 Sep 31 Mar 30 Sep 31 Mar
2022 2022 2022 2022
=================================== ========= ========= ========= =========
Net debt / adjusted net debt1 GBP1,800m GBP2,541m GBP2,977m GBP3,458m
Principal amount of gross debt GBP2,012m GBP2,562m GBP3,217m GBP3,648m
Loan to value 22.0% 26.2% 30.7% 32.9%
Weighted average interest rate 3.0% 2.4% 3.5% 2.9%
Interest cover 5.4 5.6 3.4 3.5
Weighted average maturity of drawn 6.6 years 6.9 years
debt 6.0 years 6.3 years
=================================== ========= ========= ========= =========
1. Group data as presented in Note 11 of the condensed interim
financial statements. The proportionally consolidated figures
include the Group's share of joint ventures' net debt and exclude
the mark-to-market on derivatives and related debt adjustments and
non-controlling interests.
At 30 September 2022, our proportionally consolidated LTV was
30.7%, down from 32.9% at 31 March 2022. Disposals in the period,
primarily the sale of a 75% interest in the majority of our assets
in Paddington Central, decreased LTV by 440 bps. This was offset by
the impact of valuation movements which added 100 bps, as well as
development spend which added 90 bps. Note 11 of the condensed
interim financial statements sets out the calculation of the Group
and proportionally consolidated LTV.
We maintain good long term relationships with debt providers
across the markets and continue to raise funds on good terms.
Financing activity completed in the half year included a GBP515m 5
year loan for the Paddington joint venture, secured on its assets.
A club of three banks, DBS Bank Ltd., London Branch,
Oversea-Chinese Banking Corporation Limited, and SMBC Bank
International PLC and affiliates provided the loan and the related
interest rate hedging which completed in July. The proceeds of the
Paddington transaction and our share of this loan were used to
repay our bank revolving credit facilities (RCF).
At 30 September 2022, we had GBP2bn of undrawn facilities and
cash. Based on our current commitments and available facilities,
the Group has no requirement to refinance until late 2025.
In October we renewed a GBP100m bilateral bank RCF with a new 5
year initial term. In November, we signed a further GBP150m
bilateral RCF for an initial 5 year term, with a bank which is new
to our unsecured relationships. Both RCFs have provisions for
extensions of up to a further two years. ESG targets apply to these
facilities which are in line with our other RCFs; these targets are
linked to our sustainability strategy. Together with the other RCFs
and the GBP420m 'Green loan' completed in 2021 secured by 100
Liverpool Street, we have raised over GBP1bn of 'Green' and ESG
linked finance.
Our debt and interest rate management approach (outlined in
section 1.4 above) has enabled us to maintain a low weighted
average interest rate of 3.5% at September.
Fitch Ratings, as part of their annual review in August 2022
affirmed all our credit ratings, with a stable outlook; senior
unsecured credit rating 'A', long term IDR 'A-' and short term IDR
'F1'.
Our strong balance sheet and flexible liquidity enables us to
deliver on our strategy.
Bhavesh Mistry
Chief Financial Officer
About British Land
Our portfolio of high quality UK commercial property is focused
on London Campuses and Retail & Fulfilment assets throughout
the UK. We own or manage a portfolio valued at GBP14.1bn (British
Land share: GBP9.6bn) as at 30 September 2022 making us one of
Europe's largest listed real estate investment companies.
We create Places People Prefer, delivering the best, most
sustainable places for our customers and communities. Our strategy
is to leverage our best in class platform and proven expertise in
development, repositioning and active management, investing behind
two key themes: Campuses and Retail & Fulfilment.
Our three Campuses at Broadgate, Paddington Central and Regent's
Place are dynamic neighbourhoods, attracting growth customers and
sectors, and offering some of the best connected, highest quality
and most sustainable space in London. We are delivering our fourth
Campus at Canada Water, where we have planning consent to deliver
5m sq ft of residential, commercial, retail and community space
over 53 acres. Our Campuses account for 65% of our portfolio.
Retail & Fulfilment accounts for 35% of the portfolio and is
focused on retail parks which are aligned to the growth of
convenience, online and last mile fulfilment. We are complementing
this with urban logistics primarily in London, focused on
development-led opportunities.
Sustainability is embedded throughout our business. In 2020, we
set out our sustainability strategy which focuses on two
time-critical areas where British Land can create the most benefit:
making our whole portfolio net zero carbon by 2030, and partnering
to grow social value and wellbeing in the communities where we
operate.
Further details can be found on the British Land website at
www.britishland.com
Risk management and principal risks
At British Land, effective risk management is fundamental to how
we do business. It directly informs our strategy and how we
position the business to create value whilst delivering positive
outcomes for all our stakeholders on a long-term, sustainable
basis. Ultimate responsibility for risk rests with the Board, but
the effective day to day management of risk is integral to the way
the Group conducts business. In summary, our approach to risk
management is centred on being risk-aware, clearly defining our
risk appetite, responding quickly to changes in our risk profile
and having a strong risk management culture amongst all employees
with clearly defined roles and accountability. The Group's risk
appetite, our integrated approach to managing risk, and our
governance framework are unchanged from that set out in the
Managing Risk section of the 2022 Annual Report on pages on pages
84 - 96.
Since the release of our 2022 full year results, there is
greater global economic uncertainty. Within the UK, the main
challenges facing the economy are rising interest rates, heightened
inflation, compounded by the impact of the on-going war in the
Ukraine and the increasing risk of recession. The potential adverse
impact of these factors on our business includes operational and
financial challenges for our occupiers, reduced demand for our
assets in the investment market, the ability for us to continue to
execute our portfolio and development strategy at pace, and
increased financing costs, which could impact property values and
our rental income. The Board and key committees have overseen the
Group's response to the impact of these challenges on our business
and their wider economic influences throughout the period. The
manner in which we have addressed the challenges of the last two
years have demonstrated the resilience of our business model, and
our robust risk management approach, to protect our business
through this period of uncertainty and adapt to a rapidly changing
environment.
The Board have considered the principal risks and uncertainties
as set out in the Annual Report and Accounts published in May 2022,
in light of the challenging macroeconomic environment, and do not
consider that the fundamental principal risks and uncertainties
facing the Group have changed for the remaining six months of the
financial year. However, our current assessment is the
Macroeconomic, Political, Legal and Regulatory and Campus Property
Market external principal risks have increased, as well as our
Development and Customer risks. Whilst there is still much
uncertainty around the future trajectory of the economy over the
remainder of the financial year, we have set out in our principal
risk table below, an update on the changes to our principal risks
and expected impacts on our business of the macroeconomic
uncertainty, and the mitigating actions and controls we have in
place. Our comprehensive risk management process, and the Group's
continued ability to be flexible to adjust and respond to these
external risks as they evolve, will be fundamental to the future
performance of our business.
External Principal Risks
Principal Status Change since Commentary
Risk at year year end
end
============= ======== ============ ==================================================
External
============= ======== ============ ==================================================
Macroeconomic High Increasing Macroeconomic uncertainty escalated in
the period reflecting rapid inflation
and the increased prospect of a recession
in the UK, with subsequent impacts on
interest rates, rental income, construction
costs and property valuations. We are
proactively managing our business for
this environment by taking a risk-managed
approach in moderating our activity, and
we will deploy capital patiently. In particular,
we are managing our development risk by
fixing costs and creating options to progress
our pipeline as and when the time is right.
Also, we are actively managing our financing
risk with access to a diverse range of
sources of finance with a spread of repayment
dates, along with the use of hedging to
mitigate against rising interest rates.
The strength of our balance sheet, the
quality of our assets and experienced
Board and management team put us in a
strong position to help us to navigate
through these near-term challenges and
take advantage of potential market opportunities.
============= ======== ============ ==================================================
Political, Medium Increasing The global geopolitical environment remains
Legal and to High uncertain, heightened by the recent war
Regulatory in Ukraine, with potential impacts on
security, cyber risks, sanctions compliance,
supply chains and reputational risks.
At the same time, increased political
volatility in the UK brings uncertainty
in terms of both future policy and economic
growth. We continue to closely monitor
the changes in political outlook and any
potential changes in regulations to ensure
changes which may impact the Group, or
our customers, are identified and addressed
appropriately.
============= ======== ============ ==================================================
Property
Markets
(a) Campuses Medium Increasing The prime London office market continues
to demonstrate better occupational fundamentals
due to low vacancy, reduced development
pipeline and the continued flight to quality.
However, structural headwinds remain from
an increased trend in working from home,
accelerated by the impact of Covid-19,
as well as from rising bond yields impacting
investor sentiment. Our Campus model is
centred on providing well connected, high
quality and sustainable buildings with
a wide range of amenities and an engaging
public realm, supporting the resilience
of our offer as occupiers focus on the
best space for their business. This is
reflected in our leasing performance across
our Campuses in the period.
(b) Retail Medium No change The market outlook for retail continues
to High to be challenging reflecting the structural
shift to online, which accelerated through
Covid-19, albeit there are signs that
online growth is slowing and returning
to pre-pandemic levels. Retailers' profitability
is being put under pressure due to increased
costs, such as rising input and energy
costs, wages, business rates and the erosion
of margins from online competition. Our
Retail portfolio focuses on retail parks
where we expect demand to be more resilient
through any downturn, reflecting their
relative affordability to retailers and
compatibility with an omnichannel retail
strategy. Leasing at these assets has
remained strong in the first half of the
year. We are focused on providing the
best quality space across the UK, maintaining
high occupancy to drive sustainable rents.
(c) Urban Low No change Occupational fundamentals remain favourable
Logistics underpinned by structural changes in e-commerce.
In London, supply of the right kind of
space remains highly constrained and demand
is strong, driving rental growth. As a
low yielding sector, the investment market
has been heavily impacted by rising interest
rates and pricing has softened over the
last six months, potentially creating
the environment for opportunistic purchases.
We are building an Urban Logistics business
focused on a development-led pipeline
through the intensification and repurposing
of existing buildings in London where
our development expertise is a competitive
advantage.
============= ======== ============ ==================================================
Major Events/ Medium No change Whilst Covid-19 disruption has eased,
Business to High the heightened global and political uncertainty,
Disruption exacerbated by war in Ukraine, continues
to potentially have an impact on the Group's
operations and stakeholders. The challenges
of the last two years have demonstrated
the resilience of our business model and
our robust crisis management and business
continuity plans. We remain vigilant to
the continued risk from the pandemic and
other external threats.
============= ======== ============ ==================================================
Internal Principal Risks
Principal Status Change since Commentary
Risk at year year end
end
=============== ======== ============ ==================================================
Internal
=============== ======== ============ ==================================================
Portfolio Medium No change External impacts discussed in the macroeconomic
Strategy and property markets risks may influence
our ability to execute our portfolio and
development strategy, and the rising interest
rate environment has inevitably impacted
valuations. Despite this tougher macro
environment, our operational performance
has been strong, and reinforces our conviction
in our key markets of Campuses, Retail
Parks and Urban Logistics. Our approach
to portfolio management and capital allocation
in the current environment is to deploy
capital patiently, sell into pockets of
demand and be responsive to opportunities
that arise, particularly in Retail Parks
and Urban Logistics. Our portfolio has
been positioned to be resilient through
the cycle and our investment criteria
have been reassessed to reflect the impacts
of the current macroeconomic uncertainty.
=============== ======== ============ ==================================================
Development Medium Increasing During the period, inflationary pressures
in the construction supply chain for certain
materials and labour are continuing. These
have been further compounded by the war
in Ukraine, impacting both development
returns and the timing of our future pipeline.
We are progressing our committed development
pipeline, whilst managing the risks appropriately
through a combination of timing, pre-lets,
fixing costs and use of joint ventures.
Our development exposure remains well
within our internal risk parameters of
12.5% at 6.3% of portfolio gross asset
value. We have secured fixed price contracts
on 92% of the costs of our committed developments
and will continue to proactively work
alongside our contractors to mitigate
any risks of delays or cost increases.
Looking forward, we are continuing to
progress our near term pipeline and are
likely to seek partial pre-lets ahead
of placing main build contracts.
=============== ======== ============ ==================================================
Financing Low to No change Market interest rates have risen sharply
Medium from very low levels and further rises
are anticipated. Fixed rate debt and derivatives
(swaps and caps) are used to mitigate
against the risk of rising interest rates
both now and going forward, with 77% of
projected debt hedged on average over
the next 5 years. The current uncertain
environment reinforces the importance
of a strong balance sheet. We have continued
to monitor our LTV which is currently
30.7%. We have significant headroom to
our Group covenants. We maintain good
long term relationship with debt providers
across the markets, providing us continued
access to debt financing despite the current
uncertainty, with GBP2bn of undrawn facilities
and cash.
=============== ======== ============ ==================================================
Environmental Medium No change We are making good progress against our
Sustainability 2030 environmental commitments which include
ambitious targets to be net zero carbon
by 2030 and a focus on environmental leadership.
We are continuing to improve the energy
efficiency of our standing portfolio and
have improved EPC ratings as a result
of our net zero initiatives with 42% of
the portfolio currently A or B rated (March
2022: 36%) and in offices we are already
fully compliant with 2023 MEES legislation
which stipulates a minimum EPC rating
of E.
=============== ======== ============ ==================================================
People and Medium No change Like many companies, we are experiencing
Culture to High rising wage expectations and an increase
in employee mobility. However, our staff
turnover remains relatively low and we
are continuing to focus on staff wellbeing
and actively respond to feedback from
employee surveys continuing on the themes
outlined in our 2022 Annual Report.
=============== ======== ============ ==================================================
Customer Medium Increasing We are mindful that higher input prices
to High may impact the profitability of our customers,
particularly on the retail side which
may increase the risk of future administrations
or CVAs. We have continued to work closely
with our customers to ensure we provide
them with high quality space at a sustainable
total occupancy cost, allowing us to maximise
occupancy and rent collection, whilst
monitoring their covenant strength and
taking actions appropriately to mitigate
our customer risk. This is reflected in
our rent collection which is 98% for the
first half of the year.
=============== ======== ============ ==================================================
Operational Medium No change Key risks include: Information Systems
and Compliance & Cyber Security, Health & Safety, Third
Party Relationships and Financial Crime
Compliance. We remain vigilant to these
key operational risks for our business
with no significant issues to note over
the first half of the year. We are continuing
to monitor and are executing our plans
to strengthen our cyber security and IT
infrastructure and associated key controls
as well as our wider internal controls
environment.
=============== ======== ============ ==================================================
Directors' Responsibilities Statement
The directors confirm that these condensed interim financial
statements have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the United Kingdom and that the interim management report
includes a fair review of the information required by DTR 4.2.7R
and DTR 4.2.8R, namely:
- An indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
- Material related party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
The directors of British Land plc are listed on the company
website www.britishland.com
By order of the Board.
Bhavesh Mistry
Chief Financial Officer
15 November 2022
Independent review report to The British Land Company PLC
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed The British Land Company PLC's condensed
consolidated interim financial statements (the "interim financial
statements") in the Half Year Results of The British Land Company
PLC for the 6 month period ended 30 September 2022 (the
"period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
- the Consolidated Balance Sheet as at 30 September 2022;
- the Consolidated Income Statement and the Consolidated
Statement of Comprehensive Income for the period then ended;
- the Consolidated Statement of Cash Flows for the period then
ended;
- the Consolidated Statement of Changes in Equity for the period
then ended; and
- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year
Results of The British Land Company PLC have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, 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,
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.
We have read the other information contained in the Half Year
Results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with this ISRE.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half Year Results, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the Half
Year Results in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the Half Year Results, including
the interim financial statements, the directors are responsible for
assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or to cease operations, or
have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Year Results based on our review.
Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
15 November 2022
Consolidated Income Statement
For the six months ended 30 September 2022
Six months ended Six months ended
30 September 2022 30 September 2021
Unaudited Unaudited
============================ ===========================
Capital Capital
and and
Underlying1 other Total Underlying1 other Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
================================ ==== =========== ======= ====== =========== ======= =====
Revenue 3 215 - 215 211 (20) 191
Costs2 3 (51) - (51) (64) (9) (73)
================================ ==== =========== ======= ====== =========== ======= =====
3 164 - 164 147 (29) 118
Joint ventures (see also
below) 8 47 (97) (50) 45 47 92
Administrative expenses (43) - (43) (43) - (43)
Valuation movement 4 - (189) (189) - 219 219
(Loss) profit on disposal
of investment properties
and revaluation of investments - (20) (20) - 3 3
Net financing income (charges)
financing income 5 4 147 151 - 17 17
financing charges 5 (35) - (35) (28) (5) (33)
----------- ------- ------ ----------- ------- -----
(31) 147 116 (28) 12 (16)
-------------------------------- ---- ----------- ------- ------ ----------- ------- -----
(Loss) profit on ordinary
activities before taxation 137 (159) (22) 121 252 373
Taxation 6 (1) (11) (12) - (2) (2)
================================ ==== =========== ======= ====== =========== ======= =====
(Loss) profit for the period
after taxation 136 (170) (34) 121 250 371
-------------------------------- ---- ----------- ------- ------ ----------- ------- -----
Attributable to non-controlling
interests 1 (1) - 1 - 1
Attributable to shareholders
of the Company 135 (169) (34) 120 250 370
================================ ==== =========== ======= ====== =========== ======= =====
Earnings per share:
basic 2 (3.7)p 39.9p
------ -----
diluted 2 (3.7)p 39.8p
====== =====
All results derive from continuing operations.
Six months ended Six months ended
30 September 2022 30 September 2021
Unaudited Unaudited
=========================== ===========================
Capital Capital
and and
Underlying1 other Total Underlying1 other Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
========================== ==== =========== ======= ===== =========== ======= =====
Results of joint ventures
accounted for using the
equity method
Underlying Profit 47 - 47 45 - 45
Valuation movement 4 - (126) (126) - 60 60
Capital financing income
(charges) - 30 30 - (13) (13)
Taxation - (1) (1) - - -
8 47 (97) (50) 45 47 92
-------------------------- ---- ----------- ------- ----- ----------- ------- -----
1. See definition in Note 2 and a reconciliation between
Underlying Profit and IFRS profit in Note 13.
2. Included within 'Costs' is a credit relating to the
provisions for impairment of tenant debtors, accrued income, tenant
incentives and contracted rent increases of GBP2m (six months ended
30 September 2021: charge of GBP2m). This is disclosed in further
detail in Note 3, Note 7 and Note 10.
Consolidated Statement of Comprehensive Income
For the six months ended 30 September 2022
Six months Six months
ended ended
30 September 30 September
2022 2021
Unaudited Unaudited
GBPm GBPm
====================================================== ============= =============
(Loss) profit for the period after taxation (34) 371
Other comprehensive income:
Items that may be reclassified subsequently to profit
or loss:
Gains on cash flow hedges
* Joint ventures 4 1
------------- -------------
4 1
Other comprehensive income for the period 4 1
====================================================== ============= =============
Total comprehensive (loss) income for the period (30) 372
====================================================== ============= =============
Attributable to non-controlling interests - 1
Attributable to shareholders of the Company (30) 371
====================================================== ============= =============
Consolidated Balance Sheet
As at 30 September 2022
30 September 31 March
2022 2022
Unaudited Audited
Note GBPm GBPm
=================================================== ==== ============ ========
ASSETS
Non-current assets
Investment and development properties 7 5,919 7,032
5,919 7,032
============ ========
Other non-current assets
Investments in joint ventures 8 2,591 2,511
Other investments 9 61 41
Property, plant and equipment 24 27
Interest rate and currency derivative assets 11 231 97
8,826 9,708
------------ --------
Current assets
Investment property held-for-sale 7 122 -
Trading properties 7 18 18
Debtors 10 30 39
Corporation tax 2 3
Cash and short term deposits 11 118 74
============ ========
290 134
=================================================== ==== ============ ========
Total assets 9,116 9,842
=================================================== ==== ============ ========
LIABILITIES
Current liabilities
Short term borrowings and overdrafts 11 (316) (189)
Creditors (208) (245)
(524) (434)
------------ --------
Non-current liabilities
Debentures and loans 11 (1,722) (2,427)
Other non-current liabilities(1) (150) (152)
Deferred tax liabilities (11) -
Interest rate and currency derivative liabilities 11 (111) (96)
============ ========
(1,994) (2,675)
=================================================== ==== ============ ========
Total liabilities (2,518) (3,109)
=================================================== ==== ============ ========
Net assets 6,598 6,733
=================================================== ==== ============ ========
EQUITY
Share capital 234 234
Share premium 1,308 1,307
Merger reserve 213 213
Other reserves 9 5
Retained earnings 4,820 4,959
--------------------------------------------------- ---- ------------ --------
Equity attributable to shareholders of the Company 6,584 6,718
=================================================== ==== ============ ========
Non-controlling interests 14 15
=================================================== ==== ============ ========
Total equity 6,598 6,733
--------------------------------------------------- ---- ------------ --------
EPRA Net Tangible Assets per share2 2 695p 727p
=================================================== ==== ============ ========
1. See footnote 1 in Note 3.
2. See definition in Note 2.
Consolidated Statement of Cash Flows
For the six months ended 30 September 2022
Six months Six months
ended ended
30 September 30 September
2022 2021
Unaudited Unaudited
Restated(1)
Note GBPm GBPm
================================================= ==== ============= =============
Income received from tenants 163 175
Fees and other income received 26 13
Operating expenses paid to suppliers and
employees (74) (81)
Sale of trading properties - 9
============= =============
Cash generated from operations 115 116
============= =============
Interest paid (37) (31)
Corporation tax payments - (2)
Distributions and other receivables from
joint ventures 8 34 24
============= =============
Net cash inflow from operating activities 112 107
============= =============
Cash flows from investing activities
Development and other capital expenditure (128) (120)
Sale of investment properties 4 169
Purchase of investment properties (24) (293)
Sale of investment properties to Paddington
Central Joint Venture 685 -
Purchase of investments (14) (4)
Investment in and loans to joint ventures (59) (29)
Loan repayments from joint ventures 125 133
Indirect taxes received (paid) in respect
of investing activities 3 (5)
------------- -------------
Net cash inflow (outflow) from investing
activities 592 (149)
------------- -------------
Cash flows from financing activities
Dividends paid (106) (64)
Dividends paid to non-controlling interests (1) (5)
Decrease in lease liabilities (3) (3)
Purchase of non-controlling interest in Hercules
Unit Trust(1) - (38)
Decrease in bank and other borrowings (584) (182)
Drawdown on bank and other borrowings 34 252
------------- -------------
Net cash outflow from financing activities (660) (40)
------------- -------------
Net increase (decrease) in cash and cash
equivalents 44 (82)
Cash and cash equivalents at 1 April 74 154
------------------------------------------------- ---- ------------- -------------
Cash and cash equivalents at 30 September 118 72
================================================= ==== ============= =============
Cash and cash equivalents consists of:
Cash and short-term deposits 118 72
================================================= ==== ============= =============
1. See Note 1 for details of the restatement of the purchase of
non-controlling interest in Hercules Unit Trust.
Consolidated Statement of Changes in Equity
For the six months ended 30 September 2022
Six month movements in equity (unaudited)
Hedging
and Re-
Share Share translation valuation Merger Retained Non-controlling Total
capital premium reserve reserve reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=================== ======== ======== =========== ========== ======== ========= ===== =============== =======
Balance at 1 April
2022 234 1,307 2 3 213 4,959 6,718 15 6,733
------------------- -------- -------- ----------- ---------- -------- --------- ----- --------------- -------
Total comprehensive
(loss)
income for the
period - - - 4 - (34) (30) - (30)
-------- -------- ----------- ---------- -------- --------- ----- --------------- -------
Share issues - 1 - - - - 1 - 1
Fair value of share
and
share option
awards - - - - - 3 3 - 3
Dividends paid in
period
(11.60p per share) - - - - - (108) (108) - (108)
Dividends paid to
non-controlling
interests - - - - - - - (1) (1)
------------------- -------- -------- ----------- ---------- -------- --------- ----- --------------- -------
Balance at 30
September
2022 234 1,308 2 7 213 4,820 6,584 14 6,598
------------------- -------- -------- ----------- ---------- -------- --------- ----- --------------- -------
Balance at 1 April
2021 234 1,307 14 2 213 4,154 5,924 59 5,983
------------------- -------- -------- ----------- ---------- -------- --------- ----- --------------- -------
Total comprehensive
income
for the period - - - 1 - 370 371 1 372
-------- -------- ----------- ---------- -------- --------- ----- --------------- -------
Fair value of share
and
share option
awards - - - - - (1) (1) - (1)
Purchase of units
from
non-controlling
interests1 - - - - - 2 2 (40) (38)
Dividends paid in
period
(6.64p per share) - - - - - (62) (62) - (62)
Dividends paid to
non-controlling
interests - - - - - - - (5) (5)
------------------- -------- -------- ----------- ---------- -------- --------- ----- --------------- -------
Balance at 30
September
2021 234 1,307 14 3 213 4,463 6,234 15 6,249
=================== ======== ======== =========== ========== ======== ========= ===== =============== =======
Prior year movements in equity (audited)
Hedging
and Re-
Share Share translation valuation Merger Retained Non-controlling Total
capital premium reserve reserve reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=================== ======== ======== =========== ========== ======== ========= ===== =============== =======
Balance at 1 April
2021 234 1,307 14 2 213 4,154 5,924 59 5,983
------------------- -------- -------- ----------- ---------- -------- --------- ----- --------------- -------
Total comprehensive
income
(loss) for the
year - - (12) 1 - 958 947 2 949
======== ======== =========== ========== ======== ========= ===== =============== =======
Fair value of share
and
share option
awards - - - - - 2 2 - 2
Purchase of the
units
from
non-controlling
interests(1) - - - - - 2 2 (40) (38)
Dividends paid in
the
year (16.96p per
share) - - - - - (157) (157) - (157)
Dividends payable
by subsidiaries - - - - - - - (6) (6)
------------------- -------- -------- ----------- ---------- -------- --------- ----- --------------- -------
Balance at 31 March
2022 234 1,307 2 3 213 4,959 6,718 15 6,733
=================== ======== ======== =========== ========== ======== ========= ===== =============== =======
1. On 5 July 2021, the Group completed the acquisition of the
remaining 21.9% units of Hercules Unit Trust that the Group did not
already own for a consideration of GBP38m. Whilst the transaction
was completed on 5 July 2021, the Group obtained the risks and
rewards of ownership of the 21.9% of Hercules Unit Trust on 1 April
2021 and therefore the change in ownership percentage and resulting
non-controlling interests were reflected at this date in the
interim financial statements. The book value of the net assets
purchased at 1 April 2021 were GBP40m and consequently GBP40m has
been transferred from non-controlling interests to shareholders
equity.
Notes to the Accounts
For the six months ended 30 September 2022
1 Basis of preparation
The financial information for the period ended 30 September 2022
does not constitute statutory accounts as defined in section 434 of
the Companies Act 2006. A copy of the statutory accounts for the
year ended 31 March 2022 has been delivered to the Registrar of
Companies. The auditors' report on those accounts was not
qualified, did not include a reference to matters to which the
auditor 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 condensed consolidated interim financial statements for the
half-year reporting period ended 30 September 2022 included in this
announcement has been prepared on a going concern basis using
accounting policies consistent with UK-adopted international
accounting standards, in accordance with UK-adopted IAS 34 'Interim
Financial Reporting', and in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. On 31 December 2020 EU-adopted IFRS
was brought into UK law and became UK-adopted international
accounting standards, with future changes to IFRS being subject to
endorsement by the UK Endorsement Board. The Group transitioned to
UK-adopted International Accounting Standards in its consolidated
financial statements for the year ended 31 March 2022. This change
constituted a change in accounting framework. However, there was no
impact on recognition, measurement or disclosure as a result of the
change in framework. The current period financial information
presented in this document has been reviewed, not audited.
The condensed consolidated interim financial statements do not
include all the notes of the type normally included in the annual
report and accounts. Accordingly, this report is to be read in
conjunction with the annual report and accounts for the year ended
31 March 2022, which has been prepared in accordance with both
UK-adopted International Accounting Standards in conformity with
the requirements of the Companies Act 2006, and any public
announcements made by the Group during the interim reporting
period. The same accounting policies are followed in the condensed
consolidated interim financial statements as applied in the Group's
latest annual audited financial statements.
A number of new standards and amendments to standards and
interpretations have been issued for the current accounting period.
Those that are effective include narrow-scope amendments to IFRS 3,
IAS 16 and IAS 37 and annual improvements on IFRS 1, IFRS 9 and IAS
41. Those not yet effective include amendments to IAS 1
'Presentation of Financial Statements' on classification of
liabilities, a number of narrow-scope amendments to IFRS 17, IAS 1,
IAS 8, IAS 12 and some annual improvements on IFRS 16. The above
effective amendments have not had a significant impact on the
Group's results, and those not yet effective are not expected to
have a significant impact on the Group's results. The Group is
currently assessing the impact of the IFRS Interpretation
Committee's recent Agenda Decisions in respect of both Lessor
Forgiveness of Lease payments (IFRS 9 and IFRS 16) and Demand
Deposits with Restrictions on Use arising from a Contract with a
Third Party (IAS 7).
The general risk environment in which the Group operates has
remained heightened during the period. Whilst the UK economy
strengthened in comparison to the prior year period, which was
impacted by the ongoing Covid-19 pandemic, increasing geopolitical
and macroeconomic uncertainty has continued to present a
challenging environment for the sectors in which we operate. At our
Campuses, whilst the trend for increased workforce flexibility
(including working from home) remains, businesses continue to
recognise the value of prime, sustainable places and occupier
demand for this very best space has remained robust. Within Retail
& Fulfilment, our tenants have benefitted from the reopening of
the economy, with sales returning to near pre-pandemic levels,
however in recent months they have become more acutely concerned
about the impact of significantly rising inflation on their
businesses. The conflict in Ukraine, as well as UK and wider
geopolitical uncertainties, has contributed to significant
inflation over the period, including energy prices, which has the
potential to materially impact the economic viability of some
retailers. In response to inflation, rising interest rates will
also have the impact of dampening investor demand for real estate,
with the resulting impact on valuations. The Directors remain
vigilant to these risks, as well as any potential resulting
opportunities that may arise, as further disclosed within the risk
management and principal risks section of this interim report.
Restatement of Consolidated Statement of Cash Flows
The Statement of Cash Flows for the six month period to 30
September 2021 has been restated to classify the purchase of
non-controlling interest in Hercules Unit Trust of GBP38m from cash
flows from investing activities to cash flows from financing
activities. The restatement correctly classifies the
non-controlling interest purchase as a financing activity in
accordance with IAS 7 'Statement of Cash Flows' following an error
in presentation in the 30 September 2021 condensed consolidated
interim financial statements. As a result of this restatement, the
net cash outflow from investing activities decreases from GBP187m
to GBP149m and the net cash outflow from financing activities
increases from GBP2m to GBP40m for the six month period to 30
September 2021.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of these interim financial statements requires
management to make critical accounting judgements and assess key
sources of estimation uncertainty, that affect the application of
accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results might differ from
these estimates.
1 Basis of preparation continued
In preparing these interim financial statements, the critical
accounting judgements in applying the Group's accounting policies
and the key sources of estimation uncertainty are the same as those
applied to the Group's consolidated financial statements for the
year ended 31 March 2022, with the exception of a new critical
accounting judgement exercised in respect of the joint control
assessment of the Paddington Central Joint Venture.
Critical accounting judgements
The Directors have exercised critical judgement in respect of
the joint control assessment of the Paddington Central Joint
Venture which was entered into in the period. As part of the
assessment, the Directors considered the Group's control over the
Paddington Property Limited Partnership in respect of its 25%
ownership. The Directors assessed the Group's power to direct the
relevant activities of the Partnership through the partnership
agreements, including reserved matters which require the unanimous
consent of the Partners, and the Group's subsequent exposure to
variable returns. Through this analysis, the Directors have been
able to satisfactorily conclude that the Group has joint control
over the Partnership and therefore has accounted for the
Partnership as a joint venture using the equity method, in-line
with the Group's accounting policies.
In July 2022 the Group granted an unconditional option to GIC to
acquire the 5 Kingdom Street investment and development property
through a new 50:50 joint venture with the Group. The option
subsequently lapsed, extinguishing on 7 November 2022, subsequent
to the 30 September 2022 reporting date, as per Note 17. As at the
reporting date, the property had met the held-for-sale criteria
under IFRS 5 and in-line with the Group's accounting policies. As
such, the property has been reclassified as a held-for-sale
investment property within current assets on the Group balance
sheet, and the carrying amount is disclosed separately from the
investment and development properties within Note 7.
The held-for sale criteria were supported by the fact that the
terms of the transaction had been agreed between the relevant
parties and the sale deemed highly probable. The held-for-sale
criteria were satisfied on the date at which the unconditional
option was granted, prior to this the held-for-sale criteria had
not been met. At this point, upon the reclassification of the
property as held-for-sale, management expected the carrying amount
of the Group's investment in the property to be recovered
principally through a sale transaction rather than continuing
operations and was committed to the transaction.
Management have exercised a degree of accounting judgement in
respect of the held-for-sale classification, however that judgement
has not been considered as an area of critical accounting
judgement.
The Directors do not consider there to be any additional
critical accounting judgements exercised in the preparation of the
Group's interim financial statements. The areas of ongoing
accounting judgement that are not considered to be critical
judgements are consistent with those disclosed in the Group's
latest audited financial statements.
Key sources of estimation uncertainty
The Group's key sources of estimation uncertainty are consistent
with those disclosed in the Group's latest audited financial
statements.
Going concern
The interim financial statements are prepared on a Going Concern
basis. The balance sheet shows the Group is in a net current
liability position of GBP234m, predominantly due to short term
borrowings and overdrafts of GBP316m and deferred income of GBP58m
(related to quarterly rents paid in advance which will not result
in cash outflows) and other current creditors which will result in
cash outflows over the next 12 months in the ordinary course of
business. Set against this, the Group has access to GBP2.0bn
undrawn facilities and cash, which provides the Directors with a
reasonable expectation that the Group will be able to meet these
current liabilities as they fall due. In making this assessment the
Directors also took into account the headroom on Group debt
covenants, equivalent to a 48% fall in property values, and the
absence of interest cover covenants on the unsecured facilities.
Before factoring in any income receivable, the facilities and cash
would be sufficient to cover forecast capital expenditure, property
operating costs, administrative expenses, maturing debt and
interest over the next 12 months from the approval date of the
interim financial statements at 30 September 2022.
Having assessed the Principal Risks, the Directors believe that
the Group is well placed to manage its financing and other business
risks satisfactorily despite the current economic climate, and have
a reasonable expectation that the Company and the Group have
adequate resources to continue in operation for at least 12 months
from the signing date of these interim financial statements. They
therefore consider it appropriate to adopt the Going Concern basis
of accounting in preparing the interim financial statements. The
interim financial statements were approved by the Board on 15
November 2022.
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.
Underlying earnings per share is calculated using Underlying
Profit adjusted for Underlying taxation (see Note 6), with the
dilutive measure being the primary disclosure measure used.
Underlying Profit is the pre-tax EPRA earnings measure, with
additional Company adjustments for items which are considered to be
unusual and/or significant by virtue of their size and nature. No
Company adjustments were made in the current period to 30 September
2022. In the prior period comparative to 30 September 2021, a
GBP29m surrender premium payment was excluded from the calculation
of Underlying Profit (see Note 3 for further details). There was no
tax effect of this Company adjusted item.
Six months ended Six months ended
30 September 2022 30 September 2021
=============================== ===============================
Relevant Earnings Relevant Earnings
Relevant number per Relevant number per
earnings of shares share earnings of shares share
GBPm million pence GBPm million pence
=================== ========= ========== ======== ========= ========== ========
Underlying
Underlying basic 135 927 14.6 120 927 12.9
Underlying diluted 135 930 14.5 120 930 12.9
=================== ========= ========== ======== ========= ========== ========
EPRA
EPRA basic 135 927 14.6 91 927 9.8
EPRA diluted 135 930 14.5 91 930 9.8
=================== ========= ========== ======== ========= ========== ========
IFRS
Basic (34) 927 (3.7) 370 927 39.9
Diluted (34) 927 (3.7) 370 930 39.8
=================== ========= ========== ======== ========= ========== ========
Net asset value
The Group measures financial position with reference to EPRA Net
Tangible Assets ('NTA'), Net Reinvestment Value ('NRV') and Net
Disposal Value ('NDV'). The net assets and number of shares for
each performance measure is shown below. A reconciliation between
IFRS net assets and the three EPRA net asset valuation metrics, and
the relevant number of shares for each performance measure, is
shown within the supplementary disclosures (Table B). EPRA NTA is a
measure that is based on IFRS net assets excluding the
mark-to-market on derivatives and related debt adjustments, the
carrying value of intangibles, as well as deferred taxation on
property and derivative valuations. The metric includes the
valuation surplus on trading properties and is adjusted for the
dilutive impact of share options.
30 September 2022 31 March 2022
=============================== ===============================
Net asset Net asset
Relevant Relevant value Relevant Relevant value
net number per net number per
assets of shares share assets of shares share
GBPm million pence GBPm million pence
========= ======== ========== ========= ======== ========== =========
EPRA
EPRA NTA 6,481 933 695 6,771 932 727
EPRA NRV 7,065 933 757 7,403 932 794
EPRA NDV 6,801 933 729 6,542 932 702
========= ======== ========== ========= ======== ========== =========
IFRS
Basic 6,598 927 712 6,733 927 726
Diluted 6,598 933 707 6,733 932 722
========= ======== ========== ========= ======== ========== =========
Total accounting return
The Group also measures financial performance with reference to
total accounting return. This is calculated as the movement in EPRA
NTA per share and dividend paid in the period as a percentage of
the EPRA NTA per share at the start of the period.
Six months ended Six months ended
30 September 2022 30 September 2021
================================= ===================================
Movement
in Dividend Movement Dividend
NTA per per share Total in NTA per share Total
share paid accounting per share paid accounting
pence pence return pence pence return
======================== ======== ========== =========== ========== ========== ===========
Total accounting return (32) 11.60 (2.8%) 33 6.64 6.1%
======================== ======== ========== =========== ========== ========== ===========
3 Revenue and costs
Six months ended Six months ended
30 September 2022 30 September 2021
========================== ==========================
Capital Capital
and and
Underlying other Total Underlying other Total
GBPm GBPm GBPm GBPm GBPm GBPm
==================================== ========== ======= ===== ========== ======= =====
Rent receivable 160 - 160 158 - 158
Spreading of tenant incentives
and contracted
rent increases 7 - 7 6 - 6
Surrender premia(1) - - - 1 (29) (28)
==================================== ========== ======= ===== ========== ======= =====
Gross rental income 167 - 167 165 (29) 136
==================================== ========== ======= ===== ========== ======= =====
Trading property sales proceeds - - - - 9 9
Service charge income 30 - 30 32 - 32
Management and performance fees
(from joint ventures) 6 - 6 3 - 3
Other fees and commissions 12 - 12 11 - 11
==================================== ========== ======= ===== ========== ======= =====
Revenue 215 - 215 211 (20) 191
==================================== ========== ======= ===== ========== ======= =====
Trading property cost of sales - - - - (9) (9)
Service charge expenses (26) - (26) (30) - (30)
Property operating expenses (18) - (18) (23) - (23)
Release of impairment of trade
debtors and accrued income 3 - 3 - - -
Provisions for impairment of tenant
incentives and contracted rent
increases (1) - (1) (2) - (2)
Other fees and commissions expenses (9) - (9) (9) - (9)
==================================== ========== ======= ===== ========== ======= =====
Costs (51) - (51) (64) (9) (73)
==================================== ========== ======= ===== ========== ======= =====
164 - 164 147 (29) 118
==================================== ========== ======= ===== ========== ======= =====
1. In the prior period, on 31 August 2021, the Group undertook a
leasing transaction with two unrelated parties in relation to one
of its investment properties. The transaction was commercially
beneficial and resulted in an overall increase in the net assets of
the Group. It involved a GBP29m payment to one party for the
surrender of an agreement for lease, with a subsequent premium of
GBP29m received for the grant of a new agreement for lease for the
same property with another party meaning the transaction was cash
neutral. In-line with the requirements of IFRS 16, and due to the
two unrelated parties in the transaction, the Group is required to
account for the elements of the transaction separately, and as such
an associated GBP29m surrender premium payment was recognised in
full through the income statement in the period. Owing to the
unusual and significant size and nature of the payment and in-line
with the Group's accounting policies the payment has been included
within the Capital and other column of the income statement. The
premium recognised as deferred income on the balance sheet as at 30
September 2022 within other non-current liabilities was GBP27m (30
September 2021: GBP29m).
Further detail on the provisions for impairment of trade
debtors, accrued income, tenant incentives and contracted rent
increases is disclosed in Note 7 and Note 10.
4 Valuation movements on property
Six months Six months
ended ended
30 September 30 September
2022 2021
GBPm GBPm
=========================================================== ============= =============
Revaluation of properties (189) 220
Revaluation of owner-occupied property - (1)
Revaluation of properties held by joint ventures accounted
for using the equity method (126) 60
----------------------------------------------------------- ------------- -------------
(315) 279
=========================================================== ============= =============
5 Net financing
Six months Six months
ended ended
30 September 30 September
2022 2021
GBPm GBPm
============================================================= ============= =============
Underlying
Financing charges
Facilities and overdrafts (12) (9)
Derivatives 11 15
Other loans (38) (36)
Obligations under head leases (2) (1)
============= =============
(41) (31)
Development interest capitalised 6 3
============= =============
(35) (28)
Financing income
Deposits, securities and liquid investments 4 -
------------------------------------------------------------- ------------- -------------
Net financing charges - Underlying (31) (28)
============================================================= ============= =============
Capital and other
Financing charges
Valuation movement on fair value hedge accounted debt - 25
Valuation movement on fair value hedge accounted derivatives - (30)
- (5)
------------- -------------
Financing income
Valuation movements on translation of foreign currency
debt and investments 3 -
Valuation movement on fair value hedge accounted debt 26 -
Valuation movement on fair value hedge accounted derivatives (22) -
Valuation movement on non-hedge accounted derivatives 140 17
147 17
------------------------------------------------------------- ------------- -------------
Net financing income - Capital and other 147 12
============================================================= ============= =============
Total financing income 151 17
Total financing charges (35) (33)
------------------------------------------------------------- ------------- -------------
Net financing income (charges) 116 (16)
============================================================= ============= =============
Interest on development expenditure is capitalised at the
Group's weighted average interest rate at 30 September 2022 of 3.0%
(30 September 2021: 2.1%). The weighted average interest rate on a
proportionately consolidated basis at 30 September 2022 was 3.5%
(30 September 2021: 2.7%).
6 Taxation
Six months Six months
ended ended
30 September 30 September
2022 2021
GBPm GBPm
========================================================== ============= =============
Taxation expense
Current taxation
Underlying Profit
Current period UK corporation taxation (30 September
2022: 19%; 30 September 2021: 19%) (1) (1)
Underlying Profit adjustments in respect of prior periods - 1
============= =============
Total current Underlying Profit taxation expense (1) -
============= =============
Capital and other profit:
Current period UK corporation taxation (30 September - -
2022: 19%; 30 September 2021: 19%)
Capital and other profit adjustments in respect of
prior periods - (2)
Total current Capital and other profit taxation expense - (2)
Total current taxation expense (1) (2)
Deferred taxation on revaluation of derivatives (11) -
---------------------------------------------------------- ------------- -------------
Group total taxation (12) (2)
Attributable to joint ventures (1) -
---------------------------------------------------------- ------------- -------------
Total taxation expense (13) (2)
========================================================== ============= =============
Current taxation expense attributable to Underlying Profit for
the six months ended 30 September 2022 was GBP1m (six months ended
30 September 2021: GBPnil). Current taxation expense attributable
to Capital and other profit was GBPnil (six months ended 30
September 2021: GBP2m). Deferred taxation on revaluation of
derivatives attributable to Capital and other profit was GBP11m
(six months ended 30 September 2021: GBPnil).
7 Property
Property reconciliation
Six months ended 30 Year ended 31 March
September 2022 2022
================================================= ==============================================
Investment Investment
and and Trading
development Trading development and
properties and Owner-occupied properties held- Owner-occupied
Level held-for-sale Level Level for-sale Level
3 properties 3 Total 3 properties 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================================================= =========== ============= ============== ===== =========== ========== ============== =====
Carrying value at the
start of the period/year 7,032 18 - 7,050 6,326 26 2 6,354
Additions
* property purchases 24 - - 24 596 - - 596
* development expenditure(1) 77 - - 77 191 - - 191
* capitalised interest and staff costs 6 - - 6 8 - - 8
* capital expenditure on asset management initiatives 24 - - 24 18 - - 18
* right-of-use assets - - - - 4 - - 4
=========== ============= ============== ===== =========== ========== ============== =====
131 - - 131 817 - - 817
=========== ============= ============== ===== =========== ========== ============== =====
Disposals (940) - - (940) (605) (8) (2) (615)
Reclassifications for
held-for-sale properties (122) 122 - - - - - -
Revaluations included
in income statement (189) - - (189) 471 - - 471
Movement in tenant incentives
and contracted rent uplift
balances 7 - - 7 23 - - 23
=========== ============= ============== ===== =========== ========== ============== =====
Carrying value at the
end of the period/year 5,919 140 - 6,059 7,032 18 - 7,050
=========== ============= ============== ===== =========== ========== ============== =====
Lease liabilities (102) (105)
Less surplus on right-of-use
assets(2) (9) (9)
Valuation surplus on trading
properties 8 8
============================================================= =========== ============= ============== ===== =========== ========== ============== =====
Group property portfolio
valuation at the end of
the period/year 5,956 6,944
Non-controlling interests (14) (15)
============================================================= =========== ============= ============== ===== =========== ========== ============== =====
Group property portfolio
valuation at the end of
the period/year attributable
to shareholders 5,942 6,929
============================================================= =========== ============= ============== ===== =========== ========== ============== =====
1. Development expenditure includes government grants received
for the development of affordable and social housing of GBPnil (31
March 2022: GBP4m).
2. Relates to the fair value of right-of-use assets in excess of
their associated lease liabilities. The fair value of right-of-use
assets is determined by calculating the present value of net rental
cashflows over the term of the lease agreements. IFRS 16
right-of-use assets are not externally valued, their fair value is
determined by management, and are therefore not included in the
Group property portfolio valuation of GBP5,956m above.
The Group's total property portfolio was valued by external
valuers on the basis of fair value, in accordance with the RICS
Valuation - Global Standards 2022, published by The Royal Institute
of Chartered Surveyors. The information provided to the valuers,
and the assumptions and valuation models used by the valuers are
reviewed by the property portfolio team, the Head of Real Estate
and the Chief Financial Officer. The valuers meet with the external
auditors and also present directly to the Audit Committee on a half
yearly basis.
On 19 July 2022, the Group entered into a Joint Venture
Agreement with GIC in relation to the majority of the Paddington
Central Campus, resulting in the disposal of GBP934m of investment
and development properties and GBP2m of property, plant and
equipment with a resulting loss in the Capital and other column of
the Consolidated income statement of GBP19m in the period.
Also in July 2022, the Group granted an unconditional option to
GIC to acquire the 5 Kingdom Street investment and development
property through a new 50:50 joint venture with the Group. In-line
with the Group's accounting policies, the property was reclassified
as a held-for-sale property upon granting of the option and is
presented as such as at 30 September 2022 for GBP122m, at which
time the option had not been exercised. See Note 1 and Note 17 for
further details of the option and events subsequent to the 30
September 2022 reporting date respectively.
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 inputs to the
valuations are defined as 'unobservable' by IFRS 13. These key
unobservable inputs are net equivalent yield and estimated rental
values for investment properties, and costs to complete for
development properties. Further analysis and sensitivity
disclosures of these key unobservable inputs have been included on
the page to follow. There were no transfers between levels in the
current period nor in the prior year comparative.
There has been no change in the valuation methodology used for
investment property.
7 Property continued
Information about the impact of changes in unobservable inputs
(Level 3) on the fair value of the Group's property portfolio
valuation for the six months ended 30 September 2022
Impact on valuations Impact on valuations Impact on valuations
========================= ============= ====================== ====================== ======================
Fair
value
at
30 September -25bps +25bps
2022 +5% ERV -5% ERV NEY NEY -5% costs +5% costs
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================= ============= ========== ========== ========== ========== ========== ==========
Campuses1 2,455 91 (91) 155 (138) - -
Retail & Fulfilment 2,698 112 (109) 129 (115) 2 (2)
Developments 803 81 (80) 112 (99) 36 (35)
========================= ============= ========== ========== ========== ========== ========== ==========
Group property portfolio
valuation 5,956 284 (280) 396 (352) 38 (37)
========================= ============= ========== ========== ========== ========== ========== ==========
1. Includes trading properties at fair value.
Information about fair value measurements using unobservable
inputs (Level 3) for the six months ended
30 September 2022
Costs to complete
ERV per sq ft Equivalent yield per sq ft
=================== ============= ============ =================== ==================== =====================
Fair value
at
30 September
2022 Valuation Min Max Average Min Max Average Min Max Average
Investment GBPm technique GBP GBP GBP % % % GBP GBP GBP
=================== ============= ============ ==== ==== ======= ==== ==== ======== ===== ===== =======
Investment
Campuses 2,429 methodology 9 157 57 4 7 5 - 132 30
Investment
Retail & Fulfilment 2,698 methodology 2 30 17 3 19 6 - 40 6
Residual
Developments 803 methodology 30 95 86 4 6 4 156 1,345 780
=================== ============= ============ ==== ==== ======= ==== ==== ======== ===== ===== =======
Total 5,930
Trading properties
at fair value 26
=================== ============= ============ ==== ==== ======= ==== ==== ======== ===== ===== =======
Group property
portfolio
valuation 5,956
=================== ============= ============ ==== ==== ======= ==== ==== ======== ===== ===== =======
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.
Provisions for impairment of tenant incentives and contracted
rent increases
A provision of GBP23m (31 March 2022: GBP23m) has been made for
impairment of tenant incentives and contracted rent uplift
balances. The charge to the income statement in relation to
provisions for impairment for tenant incentives and contracted
rents was GBP1m (six months ended 30 September 2021: GBP2m) (see
Note 3). The Directors consider that the carrying amount of tenant
incentives is approximate to their fair value.
7 Property continued
A 10% increase/decrease in the loss rates assumed for each
credit risk rating would result in a GBP2m increase/decrease to
provisions for impairment of tenant incentives (31 March 2022:
GBP2m). This sensitivity analysis has been performed on medium and
high risk tenants and tenants in CVA or Administration only, as the
significant estimation uncertainty is wholly related to tenants
with these risk ratings.
A 10% increase/decrease in the percentage share of high and low
risk Retail & Fulfilment tenant incentives only, i.e. assuming
10% of tenant incentives move from medium to high risk and 10% of
tenant incentives move from low to medium risk and vice versa,
would result in a GBP3m increase/decrease in provisions for
impairment of tenant incentives (31 March 2022: GBP2m). A movement
in the share of Campuses tenant incentives within each credit risk
rating has not been considered as management believes there is less
uncertainty associated to the assumption on Campuses tenants'
credit risk ratings. A 10% increase or decrease represents
management's assessment of the reasonable possible change in loss
rates and movement in the percentage share of tenant incentives
within each credit risk rating.
The table below shows the movement in provisions for impairment
of tenant incentives for the six months ended
30 September 2022 on a Group and proportionally consolidated
basis.
Proportionally
Group consolidated
Movement in provisions for impairment of tenant incentives GBPm GBPm
=========================================================== ===== ==============
Provisions for impairment of tenant incentives as
at 1 April 2022 23 32
Write-offs of tenant incentives (1) (2)
Movements in provisions for impairment of tenant
incentives 1 2
===== ==============
Total provision movement recognised in income statement 1 2
===== ==============
Provisions for impairment of tenant incentives as
at 30 September 2022 23 32
=========================================================== ===== ==============
Additional property covenant information
Properties valued at GBP1,221m (31 March 2022: GBP1,266m) were
subject to a security interest and other properties of non-recourse
companies amounted to GBP655m (31 March 2022: GBP649m), totalling
GBP1,876m (31 March 2022: GBP1,915m).
8 Joint ventures
Summary movement for the period of the investments in joint
ventures
Equity Loans Total
GBPm GBPm GBPm
=============================== ====== ===== =====
At 1 April 2022 1,883 628 2,511
Additions 32 273 305
Disposals (17) (125) (142)
Share of loss after taxation (50) - (50)
Distributions and dividends:
- Revenue (37) - (37)
Hedging and exchange movements 4 - 4
----------------------------------- ------ ----- -----
At 30 September 2022 1,815 776 2,591
=================================== ====== ===== =====
On 19 July 2022, the Group entered into a new Joint Venture
Agreement with GIC in relation to the majority of the Paddington
Central Campus. The transaction value of the assets transferred by
the Group on the formation of the joint venture at 100% was GBP934m
of investment and development properties and GBP2m of property,
plant and equipment with a resulting loss in the Capital and other
column of the Consolidated income statement of GBP19m in the
period. The Group owns 25% of this new joint venture while GIC owns
the remaining 75% stake. The Group has recognised a share of the
joint venture's loss of GBP2m and share of net assets less
shareholders loans of GBP107m in relation to this new joint venture
in the period. A critical accounting judgement has been exercised
in relation to the joint control assessment of the Paddington
Central Joint Venture as further outlined in Note 1. The Group
received GBP685m of cash consideration in relation to the sale of
the investment and development properties to the joint venture (net
of transaction costs of GBP9m), and subsequently a further GBP125m
through a loan repayment from the newly formed joint venture, as a
result of the joint venture obtaining external debt financing. The
Group's investment into the Paddington Central Joint Venture is
principally through a shareholder loan from the Group to the new
joint venture.
Summary income statement for the period of the investments in
joint ventures
Six months Six months
ended ended
30 September 30 September
2022 2021
================ ================
GBPm GBPm GBPm GBPm
100% BL Share 100% BL Share
============================================ ===== ========= ===== =========
Revenue 215 103 193 93
Costs (63) (30) (52) (24)
-------------------------------------------- ----- --------- ----- ---------
152 73 141 69
Administrative expenses (3) (1) (2) (1)
Net financing charges (53) (25) (46) (23)
----- --------- ----- ---------
Underlying Profit 96 47 93 45
Net valuation movement (285) (126) 117 60
Capital financing income (charges) 89 30 (26) (13)
(Loss) profit on ordinary activities before
taxation (100) (49) 184 92
----- --------- ----- ---------
Taxation (4) (1) - -
-------------------------------------------- ----- --------- ----- ---------
(Loss) profit on ordinary activities after
taxation (104) (50) 184 92
-------------------------------------------- ----- --------- ----- ---------
(Loss) profit split between controlling
and non-controlling interests
Attributable to non-controlling interests - - - -
Attributable to shareholders of the Company (104) (50) 184 92
============================================ ===== ========= ===== =========
8 Joint ventures continued
Operating cash flows of joint ventures (Group share)
Six months Six months
ended ended
30 September 30 September
2022 2021
GBPm GBPm
==================================================== ============= =============
Income received from tenants 77 73
Operating expenses paid to suppliers and employees (15) (11)
------------- -------------
Cash generated from operations 62 62
------------- -------------
Interest paid (22) (23)
UK corporation tax (paid) received (1) 1
==================================================== ============= =============
Cash inflow from operating activities 39 40
---------------------------------------------------- ------------- -------------
Cash inflow from operating activities deployed as:
Cash surplus following revenue distributions 5 16
Revenue distributions per consolidated statement of
cash flows 34 24
Revenue distributions split between controlling and
non-controlling interests
---------------------------------------------------- ------------- -------------
Attributable to non-controlling interests - 5
Attributable to shareholders of the Company 34 19
==================================================== ============= =============
9 Other investments
30 September 31 March
2022 2022
GBPm GBPm
================================== ============ ========
Fair value through profit or loss 51 28
Amortised cost 2 4
Intangible assets 8 9
---------------------------------- ------------ --------
61 41
================================== ============ ========
The amount included in the fair value through profit or loss
includes private equity/venture capital investments of GBP41m
(31 March 2022: GBP28m) which are categorised as Level 3 in the
fair value hierarchy. The fair values of private equity/venture
capital investments are determined by the Directors.
10 Debtors
30 September 31 March
2022 2022
GBPm GBPm
=============================== ============ ========
Trade and other debtors 13 24
Prepayments and accrued income 12 11
Rental deposits 5 4
------------------------------- ------------ --------
30 39
=============================== ============ ========
Trade and other debtors are shown after deducting a provision
for impairment against tenant debtors of GBP43m (31 March 2022:
GBP47m). The provisions for impairment is calculated as an expected
credit loss on trade and other debtors in accordance with IFRS 9,
with the same key assumptions as disclosed in the Group's latest
audited financial statements, updated for market conditions and
future expectations as at 30 September 2022.
The credit to the income statement in relation to provisions for
impairment of tenant debtors and accrued income for the six months
ended 30 September 2022 was GBP3m (six months ended 30 September
2021: GBPnil), as disclosed in Note 3.
10 Debtors continued
The decrease in provisions for impairment of tenant debtors and
accrued income of GBP4m (six months ended 30 September 2021: GBP4m)
is equal to the release to the income statement of GBP3m (six
months ended 30 September 2021: GBPnil), plus write-offs of tenant
debtors and accrued income of GBP1m (six months ended 30 September
2021: GBP4m).
The Directors consider that the carrying amount of trade and
other debtors is approximate to their fair value.
A 10% increase/decrease in the loss rates assumed for each
credit risk rating would result in a GBP1m increase (31 March 2022:
GBP1m increase) and a GBP1m decrease (31 March 2022: GBP1m
decrease) to provisions for impairment of tenant debtors and
accrued income. This sensitivity analysis has been performed on
medium and high risk tenants and tenants in CVA or Administration
only, as the significant estimation uncertainty is wholly related
to tenants with these risk ratings. A 10% increase/decrease in the
percentage share of high and low risk Retail & Fulfilment
tenant debtors, i.e. assuming 10% of debtors move from medium to
high risk and 10% of debtors move from low to medium risk and vice
versa, would result in a GBP5m increase (31 March 2022: GBP2m
increase) and a GBP5m decrease (31 March 2022: GBP2m decrease) in
provisions for impairment of tenant debtors and accrued income. A
movement in the share of Campuses debtors and accrued income within
each credit risk rating has not been considered as management
believes there is less uncertainty associated to the assumption on
Campuses tenants' credit risk ratings. A 10% increase or decrease
represents management's assessment of the reasonable possible
change in loss rates and movement in the percentage share of tenant
incentives within each credit risk rating.
The table below summarises the movement in provisions for
impairment of tenant debtors and accrued income during the six
months ended 30 September 2022.
Proportionally
Movement in provisions for impairment of tenant debtors Group consolidated
and accrued income GBPm GBPm
======================================================== ===== ==============
Provisions for impairment of tenant debtors and accrued
income as at 1 April 2022 47 61
Write-offs of tenant debtors and accrued income (1) (3)
Movement in provisions for impairment of tenant debtors
and accrued income (3) (3)
Total provision movement recognised in income statement (3) (3)
===== ==============
Provisions for impairment of tenant debtors and accrued
income as at 30 September 2022 43 55
======================================================== ===== ==============
30 September 2022
========================================================================================
Proportionally
Group consolidated
========================================= =================
< 90 90 - > 365
days 190 days 190 - days
past past 365 days past
due due past due due Total Total Percentage
GBPm GBPm GBPm GBPm GBPm GBPm provided
========================== ===== ========= ========= ===== ===== ===== ==========
Tenant debtors 25 3 8 27 63 86
Provisions for impairment
against tenant debtors (4) (3) (8) (27) (42) (54)
========================== ===== ========= ========= ===== ===== ===== ==========
Net tenant debtors 21 - - - 21 32 63%
========================== ===== ========= ========= ===== ===== ===== ==========
31 March 2022
========================================================================================
Proportionally
Group consolidated
========================================= =================
< 90 90 - > 365
days 190 days 190 - days
past past 365 days past
due due past due due Total Total Percentage
GBPm GBPm GBPm GBPm GBPm GBPm provided
========================== ===== ========= ========= ===== ===== ===== ==========
Tenant debtors 11 5 10 27 53 70
Provisions for impairment
against tenant debtors (6) (4) (10) (27) (47) (60)
========================== ===== ========= ========= ===== ===== ===== ==========
Net tenant debtors 5 1 - - 6 10 86%
========================== ===== ========= ========= ===== ===== ===== ==========
11 Net debt
11.1 Fair value and book value of net debt
30 September 2022 31 March 2022
========================== ==========================
Fair Book Fair Book
value value Difference value value Difference
GBPm GBPm GBPm GBPm GBPm GBPm
========================================= ====== ====== ========== ====== ====== ==========
Debentures and unsecured bonds 1,507 1,636 (129) 1,745 1,665 80
Bank debt and other floating
rate debt 407 402 5 955 951 4
========================================= ====== ====== ========== ====== ====== ==========
Gross debt 1,914 2,038 (124) 2,700 2,616 84
========================================= ====== ====== ========== ====== ====== ==========
Interest rate and currency derivative
liabilities 111 111 - 96 96 -
Interest rate and currency derivative
assets (231) (231) - (97) (97) -
Cash and short term deposits (118) (118) - (74) (74) -
----------------------------------------- ------ ------ ---------- ------ ------ ----------
Total net debt 1,676 1,800 (124) 2,625 2,531 84
========================================= ====== ====== ========== ====== ====== ==========
Net debt attributable to non-controlling
interests 1 1 - 1 1 -
========================================= ====== ====== ========== ====== ====== ==========
Net debt attributable to shareholders
of the Company 1,677 1,801 (124) 2,626 2,542 84
========================================= ====== ====== ========== ====== ====== ==========
Total net debt 1,676 1,800 (124) 2,625 2,541 84
========================================= ====== ====== ========== ====== ====== ==========
Amounts payable under leases 129 129 - 133 144 -
========================================= ====== ====== ========== ====== ====== ==========
Net debt (including lease liabilities) 1,805 1,929 (124) 2,758 2,674 84
========================================= ====== ====== ========== ====== ====== ==========
Net debt attributable to non-controlling
interests (including lease liabilities) 1 1 - 1 1 -
========================================= ====== ====== ========== ====== ====== ==========
139
Net debt attributable to shareholders
of the Company (including lease
liabilities) 1,806 1,930 (124) 2,759 2,675 84
========================================= ====== ====== ========== ====== ====== ==========
The fair values of debentures and unsecured bonds have been
established by obtaining quoted market prices from brokers. The
bank debt and other floating rate debt has been valued assuming it
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 (see Note 9) have been excluded from the
disclosures on the basis that the fair value is equivalent to the
book value.
11.2 Loan to value ('LTV')
LTV is the ratio of principal value of gross debt less cash,
short term deposits and liquid investments to the aggregate value
of properties and investments, excluding non-controlling
interests.
EPRA LTV has been disclosed in Table E.
Group LTV
30 September 31 March
2022 2022
GBPm GBPm
============================================================== ============ ========
Group LTV 22.0% 26.2%
============================================================== ============ ========
Principal value of gross debt 2,012 2,562
Less debt attributable to non-controlling interests - -
Less cash and short term deposits (balance sheet) (118) (74)
Plus cash attributable to non-controlling interests 1 1
-------------------------------------------------------------- ------------ --------
Total net debt for LTV calculation 1,895 2,489
============================================================== ============ ========
Group property portfolio valuation (Note 7) 5,956 6,944
Investments in joint ventures (Note 8) 2,591 2,511
Other investments and property, plant and equipment
(balance sheet)1 64 46
Less property and investments attributable to non-controlling
interests (14) (15)
-------------------------------------------------------------- ------------ --------
Total assets for LTV calculation 8,597 9,486
============================================================== ============ ========
1. The GBP21m difference between other investments and plant,
property and equipment per the balance sheet totalling GBP85m,
relates to a right-of-use asset recognised under a lease which is
classified as property, plant and equipment which is not included
within Total assets for the purposes of the LTV calculation.
11 Net debt continued
Proportionally consolidated LTV
30 September 31 March
2022 2022
GBPm GBPm
======================================================== ============ ========
Proportionally consolidated LTV 30.7% 32.9%
======================================================== ============ ========
Principal value of gross debt 3,217 3,648
Less attributable to non-controlling interests - -
Less cash and short term deposits (241) (191)
Plus cash attributable to non-controlling interests 1 1
-------------------------------------------------------- ------------ --------
Total net debt for proportional LTV calculation 2,977 3,458
======================================================== ============ ========
Group property portfolio valuation (Note 7) 5,956 6,944
Share of property of joint ventures 3,701 3,538
Other investments and property, plant and equipment
(balance sheet)1 64 46
Less property attributable to non-controlling interests (14) (15)
-------------------------------------------------------- ------------ --------
Total assets for proportional LTV calculation 9,707 10,513
======================================================== ============ ========
1. The GBP21m difference between other investments and plant,
property and equipment per the balance sheet totalling GBP85m,
relates to a right-of-use asset recognised under a lease which
is classified as property, plant and equipment which is not included
within Total assets for the purposes of the LTV calculation.
11.3 British Land Unsecured Financial Covenants
The two financial covenants applicable to the Group unsecured
debt are shown below:
30 September 31 March
2022 2022
GBPm GBPm
=============================================================== ============ ========
Net Borrowings not to exceed 175% of Adjusted Capital
and Reserves 29% 36%
=============================================================== ============ ========
Principal amount of gross debt 2,012 2,562
Less the relevant proportion of borrowings of the partly-owned -
subsidiary/non-controlling interests -
Less cash and deposits (balance sheet) (118) (74)
Plus the relevant proportion of cash and deposits of
the partly-owned subsidiary/non-controlling interests 1 1
--------------------------------------------------------------- ------------ --------
Net Borrowings 1,895 2,489
=============================================================== ============ ========
Share capital and reserves (balance sheet) 6,598 6,733
Deferred tax liabilities (EPRA Table A) 12 -
Trading property surpluses (EPRA Table A) 8 8
Exceptional refinancing charges (see below) 167 174
Fair value adjustments of financial instruments (EPRA
Table A) (134) 46
Less reserves attributable to non-controlling interests
(balance sheet) (14) (15)
--------------------------------------------------------------- ------------ --------
Adjusted Capital and Reserves 6,637 6,946
=============================================================== ============ ========
In calculating Adjusted Capital and Reserves for the purpose of
the unsecured debt financial covenants, there is an adjustment of
GBP167m (31 March 2022: GBP174m) to reflect the cumulative net
amortised exceptional items relating to the refinancings in the
years ended 31 March 2005, 2006 and 2007.
30 September 31 March
2022 2022
GBPm GBPm
============================================================= ============ ========
Net Unsecured Borrowings not to exceed 70% of Unencumbered
Assets 22% 30%
============================================================= ============ ========
Principal amount of gross debt 2,012 2,562
Less cash and deposits not subject to a security interest
(being GBP118m less cash subject to a security interest
of GBP6m) (112) (64)
Less principal amount of secured and non-recourse borrowings (984) (985)
------------------------------------------------------------- ------------ --------
Net Unsecured Borrowings 916 1,513
============================================================= ============ ========
Group property portfolio valuation (Note 7) 5,956 6,944
Investments in joint ventures (Note 8) 2,591 2,511
Other investments and property, plant and equipment
(balance sheet)1 64 46
Less investments in joint ventures (Note 8) (2,591) (2,511)
Less encumbered assets (Note 7) (1,876) (1,915)
------------------------------------------------------------- ------------ --------
Unencumbered Assets 4,144 5,075
============================================================= ============ ========
1. The GBP21m difference between other investments and plant,
property and equipment per the balance sheet totalling GBP85m,
relates to a right-of-use asset recognised under a lease which is
classified as property, plant and equipment which is not included
within Unencumbered Assets for the purposes of the covenant
calculation.
11 Net debt continued
11.4 Fair value hierarchy
The table below analyses financial instruments carried at fair
value, by the valuation method. The different levels are defined as
follows:
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).
The fair value of interest rate and currency derivatives are
determined using the present value of estimated future cash flows
and discounted based on the applicable yield curves derived from
quoted interest rates and the appropriate exchange rate at the
balance sheet date.
30 September 2022 31 March 2022
========================== ==========================
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
====================== ===== ===== ===== ===== ===== ===== ===== =====
Interest rate and
currency derivative
assets - (231) - (231) - (97) - (97)
Other investments
- fair value through
profit and loss - - (51) (51) - - (28) (28)
====================== ===== ===== ===== ===== ===== ===== ===== =====
Assets - (231) (51) (282) - (97) (28) (125)
====================== ===== ===== ===== ===== ===== ===== ===== =====
Interest rate and
currency derivative
liabilities - 111 - 111 - 96 - 96
Liabilities - 111 - 111 - 96 - 96
---------------------- ----- ----- ----- ----- ----- ----- ----- -----
Total - (120) (51) (171) - (1) (28) (29)
====================== ===== ===== ===== ===== ===== ===== ===== =====
There have been no transfers between levels in the period.
12 Dividend
The Interim dividend payment for the six months ended 30
September 2022 will be 11.60p. Payment will be made on 6 January
2023 to shareholders on the register at close of business on 25
November 2022. The Interim dividend will be a Property Income
Distribution and no SCRIP alternative will be offered.
The 2022 Final dividend of 11.60p pence per share, totalling
GBP108m was paid on 29 July 2022. The whole of the 2022 Final
dividend was a PID and no scrip alternative was offered. GBP92m was
paid to shareholders, and GBP16m of withholding tax was
retained.
13 Segment information
Operating segments
The Group allocates resources to investment and asset management
according to the sectors it expects to perform over the medium
term.
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 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 period.
Segment result
Six months ended 30 September
================================================================
Campuses Retail & Fulfilment Unallocated Total
============ ===================== ============= ============
2022 2021 2022 2021 2022 2021 2022 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================== ===== ===== ========== ========= ====== ===== ===== =====
Gross rental income
British Land Group 65 66 100 97 - - 165 163
Share of joint ventures 54 46 28 28 - - 82 74
------------------------ ----- ----- ---------- --------- ------ ----- ----- -----
Total 119 112 128 125 - - 247 237
======================== ===== ===== ========== ========= ====== ===== ===== =====
Net rental income
British Land Group 63 56 87 81 - - 150 137
Share of joint ventures 49 37 24 32 - - 73 69
======================== ===== ===== ========== ========= ====== ===== ===== =====
Total 112 93 111 113 - - 223 206
======================== ===== ===== ========== ========= ====== ===== ===== =====
Operating result
British Land Group 58 54 90 77 (28) (28) 120 103
Share of joint ventures 54 37 19 31 (1) - 72 68
======================== ===== ===== ========== ========= ====== ===== ===== =====
Total 112 91 109 108 (29) (28) 192 171
======================== ===== ===== ========== ========= ====== ===== ===== =====
Six months Six months
ended ended
30 September 30 September
2022 2021
Reconciliation to Underlying Profit before taxation GBPm GBPm
============================================================ ============= =============
Operating result - proportionately consolidated (Table
A) 192 171
Net financing charges - proportionately consolidated
(Table A) (56) (51)
------------------------------------------------------------ ------------- -------------
Underlying Profit 136 120
------------------------------------------------------------ ------------- -------------
Reconciliation to (loss) profit on ordinary activities
before taxation
============================================================ ============= =============
Underlying Profit 136 120
Capital and other (159) 252
Underlying Profit attributable to non-controlling interests 1 1
------------------------------------------------------------ ------------- -------------
Total (loss) profit on ordinary activities before taxation (22) 373
============================================================ ============= =============
Of the operating result above, GBP192m (six months ended 30
September 2021: GBP171m) was derived from within the UK.
13 Segment information continued
Segment assets
Campuses Retail & Fulfilment Total
====================== ====================== ======================
30 September 31 March 30 September 31 March 30 September 31 March
2022 2022 2022 2022 2022 2022
GBPm GBPm GBPm GBPm GBPm GBPm
======================== ============ ======== ============ ======== ============ ========
Property assets
British Land Group(1) 3,237 4,150 2,714 2,788 5,951 6,938
Share of joint ventures 3,001 2,826 700 712 3,701 3,538
------------------------ ------------ -------- ------------ -------- ------------ --------
Total 6,238 6,976 3,414 3,500 9,652 10,476
======================== ============ ======== ============ ======== ============ ========
1. The property assets for the British Land Group of GBP5,951m
(31 March 2022: GBP6,938m) reconciles to the Group property
portfolio valuation within Note 7 of GBP5,942m (31 March 2022:
GBP6,929m) due to the right-of-use assets net of lease liabilities
of GBP9m (31 March 2022: GBP9m), which in substance, relates to
properties held under leasing agreements. The fair value of the
right-of-use asset is determined by calculating the present value
of net rental cashflows over the term of the lease agreements.
Reconciliation to net assets
30 September 31 March
2022 2022
British Land Group GBPm GBPm
================================================================ ============ ========
Property assets 9,652 10,476
Other non-current assets - proportionately consolidated(1) 85 69
---------------------------------------------------------------- ------------ --------
Non-current assets 9,737 10,545
================================================================ ============ ========
Other net current liabilities - proportionately consolidated(1) (279) (316)
Adjusted net debt (Table A) (2,977) (3,458)
---------------------------------------------------------------- ------------ --------
EPRA NTA 6,481 6,771
================================================================ ============ ========
Non-controlling interests 14 15
EPRA adjustments (Table A) 103 (53)
---------------------------------------------------------------- ------------ --------
Net assets 6,598 6,733
================================================================ ============ ========
1. The GBP27m difference between the other non-current assets of
GBP85m and the other investments of GBP58m in Table A and the other
net current liabilities of GBP279m and other net (liabilities)
assets in Table A of GBP252m is GBP24m of property, plant and
equipment attributable to the Group and GBP3m of other investments
attributable to the Group's share of joint ventures.
14 Related party transactions
There have been no material changes in the related party
transactions described in the last annual report.
15 Contingent liabilities
The Group and joint ventures have contingent liabilities in
respect of legal claims, guarantees and warranties arising in the
ordinary course of business. It is not anticipated that any
material liabilities will arise from contingent liabilities.
16 Share capital and reserves
Ordinary
shares
of 25p
GBPm each
============================== ==== ===========
Issued, called and fully paid
At 1 April 2022 234 938,109,433
Share issues - 161,229
------------------------------ ---- -----------
At 30 September 2022 234 938,270,662
============================== ==== ===========
At 30 September 2022, of the issued 25p ordinary shares, 7,376
shares were held in the ESOP trust (31 March 2022: 7,376),
11,266,245 shares were held as treasury shares (31 March 2022:
11,266,245) and 926,997,041 shares were in free issue (31 March
2022: 926,835,812). No treasury shares were acquired by the ESOP
trust during the period. All issued shares are fully paid.
17 Subsequent events
Post the balance sheet date, GIC's unconditional option to
acquire the 5 Kingdom Street investment and development property
through a new 50:50 Joint venture with the Group lapsed and
therefore the option extinguished on 7 November 2022. As at the
reporting date, the property had met the held-for-sale criteria
under IFRS 5 and in-line with the Group's accounting policies. See
Note 1 for further details on this accounting judgement. However,
subsequent to the reporting date, following the extinguishment of
the option with GIC, it is no longer highly probable that a sale
would complete within the next 12 months and 5 Kingdom Street no
longer meets the held-for-sale criteria under IFRS 5. Therefore, 5
Kingdom Street will subsequently be reclassified as an investment
and development property.
There have been no other significant subsequent events post the
balance sheet date.
Supplementary Disclosures
Table A: Summary income statement and balance sheet
Summary income statement based on proportional consolidation for
the six months ended 30 September 2022
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 included on a line by line basis and
excluding non-controlling interests.
Six months ended 30 September Six months ended 30 September
2022 2021
================================================ =================================================
Less Less
Joint non-controlling Proportionally Joint non-controlling Proportionally
Group ventures interests consolidated Group ventures interests consolidated
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============== ===== ======== =============== ============== ===== ========= =============== ==============
Gross rental
income1 171 82 (2) 251 169 74 (2) 241
Property
operating
expenses (16) (9) 1 (24) (27) (5) 1 (31)
===== ======== =============== ============== ===== ========= =============== ==============
Net rental
income 155 73 (1) 227 142 69 (1) 210
Administrative
expenses (43) (1) - (44) (43) (1) - (44)
Net fees and
other
income 9 - - 9 5 - - 5
===== ======== =============== ============== ===== ========= =============== ==============
Ungeared Income
Return 121 72 (1) 192 104 68 (1) 171
Net financing
charges (31) (25) - (56) (28) (23) - (51)
--------------- ----- -------- --------------- -------------- ----- --------- --------------- --------------
Underlying
Profit 90 47 (1) 136 76 45 (1) 120
--------------- ----- -------- --------------- -------------- ----- --------- --------------- --------------
Underlying
taxation (1) - - (1) - - - -
--------------- ----- -------- --------------- -------------- ----- --------- --------------- --------------
Underlying
Profit
after taxation 89 47 (1) 135 76 45 (1) 120
=============== ===== ======== =============== ============== ===== ========= =============== ==============
Valuation
movement (315) 279
Other capital
and
taxation
(net)2 150 (29)
=============== ===== ======== =============== ============== ===== ========= =============== ==============
Result
attributable
to
shareholders
of the Company (30) 370
=============== ===== ======== =============== ============== ===== ========= =============== ==============
1. Group gross rental income includes GBP4m of all inclusive
rents relating to service charge income. For the six months ended
30 September 2021, it also excludes the GBP29m surrender premium
payable within the Capital and other column of the income
statement.
2. Includes other comprehensive income, movement in dilution of
share options and the movement in items excluded for EPRA NTA.
Summary balance sheet based on proportional consolidation as at
30 September 2022
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 included on a line-by-line basis and
excluding non-controlling interests.
Mark-to-market EPRA EPRA
Share on derivatives Valuation Intangibles NTA NTA
of Less and related surplus and 30 31
joint non-controlling Share debt Head on trading Deferred September March
Group ventures interests options adjustments leases properties tax 2022 2022
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============== ======= ======== =============== ======= ============== ====== ========== =========== ========= =======
Campuses
properties 3,275 3,005 - - - (50) 8 - 6,238 6,976
Retail &
Fulfilment
properties 2,784 716 (14) - - (72) - - 3,414 3,500
Total
properties1 6,059 3,721 (14) - - (122) 8 - 9,652 10,476
Investments in
joint
ventures 2,591 (2,591) - - - - - - - -
Other
investments 61 5 - - - - - (8) 58 48
Other net
(liabilities)
assets (302) (92) 1 19 - 122 - - (252) (295)
Deferred tax
liability (11) (1) - - - - - 12 - -
Net debt (1,800) (1,042) (1) - (134) - - - (2,977) (3,458)
-------------- ------- -------- --------------- ------- -------------- ------ ---------- ----------- --------- -------
Net assets 6,598 - (14) 19 (134) - 8 4 6,481 6,771
-------------- ------- -------- --------------- ------- -------------- ------ ---------- ----------- --------- -------
EPRA NTA per
share
(Note 2) 695p 727p
============== ======= ======== =============== ======= ============== ====== ========== =========== ========= =======
1. Included within the total property value of GBP9,652m (31
March 2022: GBP10,476m) are right-of-use assets net of lease
liabilities of GBP9m (31 March 2022: GBP9m), which in substance,
relates to properties held under leasing agreements. The fair value
of the right-of-use asset is determined by calculating the present
value of net rental cashflows over the term of the lease
agreements.
Table A continued
30 September
2022 31 March 2022
================= =================
Pence Pence
GBPm per share GBPm per share
================= ===== ========== ===== ==========
Opening EPRA NTA 6,771 727 6,050 648
Income return 135 15 255 27
Capital return (317) (35) 623 69
Dividend paid (108) (12) (157) (17)
----------------- ----- ---------- ----- ----------
Closing EPRA NTA 6,481 695 6,771 727
================= ===== ========== ===== ==========
Table B: EPRA Performance measures
EPRA Performance measures summary table
Six months Six months
ended ended
30 September 30 September
2022 2021
================ ================
Pence Pence
GBPm per share GBPm per share
============================================= ==== ========== ==== ==========
EPRA Earnings - basic 135 14.6 91 9.8
- diluted 135 14.5 91 9.8
-------------------------------------------- ---- ---------- ---- ----------
Percentage Percentage
-------------------------- ----------------- ---- ---------- ---- ----------
EPRA Net Initial Yield 4.5% 4.4%
EPRA 'topped-up' Net Initial Yield 5.2% 5.0%
EPRA Vacancy Rate 6.1% 7.9%
============================================= ==== ========== ==== ==========
EPRA Cost Ratio (including direct vacancy
costs) 19.7% 26.2%
EPRA Cost Ratio (excluding direct vacancy
costs) 13.8% 18.3%
============================================= ==== ========== ==== ==========
30 September
2022 31 March 2022
================== =================
Pence Pence
GBPm per share GBPm per share
========= ===== =========== ===== ==========
EPRA NTA 6,481 695 6,771 727
EPRA NRV 7,065 757 7,403 794
EPRA NDV 6,801 729 6,542 702
========= ===== =========== ===== ==========
Percentage Percentage
========= ===== =========== ===== ==========
EPRA LTV 33.5% 35.7%
========= ===== =========== ===== ==========
Calculation and reconciliation of Underlying/EPRA/IFRS Earnings
and Underlying/EPRA/IFRS Earnings per share
Six months Six months
ended ended
30 September 30 September
2022 2021
GBPm GBPm
=========================================================== ============= =============
(Loss) profit attributable to the shareholders of the
Company (34) 370
Exclude:
Group - non-underlying taxation - 2
Group - deferred tax 11 -
Group - valuation movement 189 (219)
Group - loss (profit) on disposal of investment properties
and revaluation of investments 20 (3)
Group - Capital and other surrender premia payable
(see Note 3) - 29
Joint ventures - valuation movement (including result
on disposals) 126 (60)
Joint ventures - capital financing (income) charges (30) 13
Joint ventures - deferred tax 1 -
Changes in fair value of financial instruments and
associated close-out costs (147) (12)
Non-controlling interests in respect of the above (1) -
----------------------------------------------------------- ------------- -------------
Underlying Earnings - basic and diluted 135 120
=========================================================== ============= =============
Group - Capital and other surrender premia payable
(see Note 3) - (29)
=========================================================== ============= =============
EPRA Earnings - basic and diluted 135 91
=========================================================== ============= =============
(Loss) profit attributable to the shareholders of the
Company (34) 370
----------------------------------------------------------- ------------- -------------
IFRS Earnings - basic and diluted (34) 370
=========================================================== ============= =============
Table B continued
Six months Six months
ended ended
30 September 30 September
2022 2021
Number Number
million million
============================================================ ============= =============
Weighted average number of shares 938 938
Adjustment for Treasury shares (11) (11)
============================================================ ============= =============
IFRS/EPRA/Underlying weighted average number of shares
(basic) 927 927
============================================================ ============= =============
Dilutive effect of share options - -
Dilutive effect of ESOP shares 3 3
============================================================ ============= =============
EPRA/Underlying weighted average number of shares (diluted) 930 930
============================================================ ============= =============
Remove anti-dilutive effect (3) -
------------------------------------------------------------ ------------- -------------
IFRS weighted average number of shares (diluted) 927 930
============================================================ ============= =============
Net assets per share
30 September
2022 31 March 2022
============== ===============
Pence Pence
per per
GBPm share GBPm share
============================================== ====== ====== ====== =======
Balance sheet net assets 6,598 6,733
---------------------------------------------- ------ ------ ------ -------
Deferred tax arising on revaluation of
derivatives 12 -
Mark-to-market on derivatives and related
debt adjustments (134) 46
Dilution effect of share options 19 8
Surplus on trading properties 8 8
Intangible assets (8) (9)
Less non-controlling interests (14) (15)
---------------------------------------------- ------ ------ ------ -------
EPRA NTA 6,481 695 6,771 727
============================================== ====== ====== ====== =======
Intangible assets 8 9
Purchasers' costs 576 623
============================================== ====== ====== ====== =======
EPRA NRV 7,065 757 7,403 794
============================================== ====== ====== ====== =======
Deferred tax arising on revaluation movements (14) (2)
Purchasers' costs (576) (623)
Mark-to-market on derivatives and related
debt adjustments 134 (46)
Mark-to-market on debt 192 (190)
============================================== ====== ====== ====== =======
EPRA NDV 6,801 729 6,542 702
============================================== ====== ====== ====== =======
EPRA NTA is the Group's primary measure of net assets and
assumes that entities buy and sell assets, thereby crystallising
certain levels of unavoidable deferred tax. Due to the Group's REIT
status, deferred tax is only provided at each balance sheet date on
properties outside the REIT regime. As a result deferred taxes are
excluded from EPRA NTA for properties within the REIT regime. For
properties outside of the REIT regime, deferred tax is included to
the extent that it is expected to crystallise, based on the Group's
track record and tax structuring. EPRA NRV reflects what would be
needed to recreate the Group through the investment markets based
on its current capital and financing structure. EPRA NDV reflects
shareholders' value which would be recoverable under a disposal
scenario, with deferred tax and financial instruments recognised at
the full extent of their liability.
30 September 31 March
2022 2022
Number Number
million million
===================================== ============ ========
Number of shares at period/year end 938 938
Adjustment for treasury shares (11) (11)
------------------------------------- ------------ --------
IFRS/EPRA number of shares (basic) 927 927
===================================== ============ ========
Dilutive effect of share options 3 3
Dilutive effect of ESOP shares 3 2
------------------------------------- ------------ --------
IFRS/EPRA number of shares (diluted) 933 932
===================================== ============ ========
Table B continued
EPRA Net Initial Yield and 'topped-up' Net Initial Yield
30 September 30 September
2022 2021
GBPm GBPm
======================================================== ============ ============
Investment property - wholly-owned 5,942 6,719
Investment property - share of joint ventures 3,701 3,131
Less developments, residential and land (1,358) (1,181)
============ ============
Completed property portfolio 8,285 8,669
Allowance for estimated purchasers' costs 589 649
======================================================== ============ ============
Gross up completed property portfolio valuation (A) 8,874 9,318
======================================================== ============ ============
Annualised cash passing rental income 435 448
Property outgoings (33) (39)
======================================================== ============ ============
Annualised net rents (B) 402 409
======================================================== ============ ============
Rent expiration of rent-free periods and fixed uplifts1 59 58
======================================================== ============ ============
'Topped-up' net annualised rent (C) 461 467
EPRA Net Initial Yield (B/A) 4.5% 4.4%
EPRA 'topped-up' Net Initial Yield (C/A) 5.2% 5.0%
======================================================== ============ ============
Including fixed/minimum uplifts received in lieu of
rental growth 4 6
======================================================== ============ ============
Total 'topped-up' net rents (D) 465 473
Overall 'topped-up' Net Initial Yield (D/A) 5.2% 5.1%
======================================================== ============ ============
'Topped-up' net annualised rent 461 467
ERV vacant space 30 41
Reversions (4) 7
======================================================== ============ ============
Total Estimated Rental Value (E) 487 515
Net Reversionary Yield (E/A) 5.5% 5.5%
======================================================== ============ ============
1. The weighted average period over which rent-free periods
expire is 1 year (30 September 2021: 1 year).
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 30 September 2022, 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 un-rented,
lettable space as a proportion of the total rental value of the
completed property portfolio.
EPRA Vacancy Rate
30 September 30 September
2022 2021
GBPm GBPm
===================================================== ============ ============
Annualised potential rental value of vacant premises 30 41
Annualised potential rental value for the completed
property portfolio 489 519
EPRA Vacancy Rate 6.1% 7.9%
===================================================== ============ ============
Table B continued
EPRA Cost Ratios
Six months Six months
ended ended
30 September 30 September
2022 2021
GBPm GBPm
============================================================= ============= =============
Property operating expenses 15 26
Administrative expenses 43 44
Share of joint ventures expenses 10 5
Less: Performance & management fees (from joint ventures) (6) (3)
Net other fees and commissions (3) (2)
Ground rent costs and operating expenses de facto included
in rents (12) (10)
============================================================= ============= =============
EPRA Costs (including direct vacancy costs) (A) 47 60
Direct vacancy costs (14) (18)
============================================================= ============= =============
EPRA Costs (excluding direct vacancy costs) (B) 33 42
Gross rental income less ground rent costs and operating
expenses de facto included in rents 157 155
Share of joint ventures (Gross Rental Income less ground
rent costs) 82 74
============================================================= ============= =============
Total Gross rental income (C) 239 229
EPRA Cost Ratio (including direct vacancy costs) (A/C) 19.7% 26.2%
EPRA Cost Ratio (excluding direct vacancy costs) (B/C) 13.8% 18.3%
============================================================= ============= =============
Reversal of impairment of tenant debtors, tenant incentives
and accrued income (D) (1) -
Adjusted Cost Ratio (including direct vacancy costs
and excluding impairment of tenant debtors, tenant
incentives and accrued income) (A-D)/C 20.1% 26.2%
Adjusted Cost Ratio (excluding direct vacancy costs
and excluding impairment of tenant debtors, tenant
incentives and accrued income) (B-D)/C 14.2% 18.3%
============================================================= ============= =============
Overhead and operating expenses capitalised (including
share of joint ventures) 3 3
============================================================= ============= =============
In the current and prior periods employee costs in relation to
staff time on development projects are capitalised into the base
cost of relevant development assets. In addition to the standard
EPRA Cost Ratios (both including and excluding direct vacancy
costs), adjusted versions of these ratios have also been presented
which remove the impact of the reversal of impairment of tenant
debtors, tenant incentives and accrued income which are exceptional
items in the current period, to show the impact of these items on
the ratios.
Table C: Gross rental income
Six months Six months
ended ended
30 September 30 September
2022 2021
GBPm GBPm
=================================================== ============= =============
Rent receivable 232 230
Spreading of tenant incentives and contracted rent
increases 17 10
Surrender premia 2 1
--------------------------------------------------- ------------- -------------
Gross rental income(1) 251 241
=================================================== ============= =============
1. For the six months ended 30 September 2021 Gross rental
income excludes the GBP29m surrender premium payable that has been
included within the Capital and other column of the income
statement.
The current and prior period information is presented on a
proportionally consolidated basis, excluding non-controlling
interests.
Table D: Property related capital expenditure
Six months ended 30 Year ended 31 March
September 2022 2022
======================================== =======================
Joint Joint
Group ventures Total Group ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
================================ ====================== ========= ===== ===== ========= =====
Acquisitions 24 - 24 596 34 630
Development 77 39 116 175 33 208
Investment properties
Incremental lettable space - - - 1 - 1
No incremental lettable space 24 13 37 12 25 37
Tenant incentives - 1 1 21 3 24
Other material non-allocated
types of expenditure 1 1 2 2 3 5
Capitalised interest 5 1 6 6 1 7
================================ ====================== ========= ===== ===== ========= =====
Total property related capex 131 55 186 813 99 912
================================ ====================== ========= ===== ===== ========= =====
Conversion from accrual to
cash basis 21 1 22 42 (7) 35
================================ ====================== ========= ===== ===== ========= =====
Total property related capex
on cash basis 152 56 208 855 92 947
================================ ====================== ========= ===== ===== ========= =====
The above is presented on a proportionally consolidated basis,
excluding non-controlling interests and business combinations. The
'Other material non-allocated types of expenditure' category
contains capitalised staff costs of GBP2m (31 March 2022:
GBP5m).
Table E: EPRA LTV
Six months ended 30 September
2022 Year ended 31 March 2022
======================================== =========================================
Proportionately Proportionately
consolidated consolidated
========================== ==========================
Share Share
of Joint Non-controlling of Joint Non-controlling
Group Ventures interests Total Group Ventures interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================== ===== ========= =============== ===== ===== ========= =============== ======
Include:
Gross debt 2,012 1,205 - 3,217 2,562 1,086 - 3,648
Net payables 196 75 - 271 224 74 - 298
Exclude:
Cash and cash equivalents (118) (123) 1 (240) (74) (117) 1 (190)
EPRA Net Debt (a) 2,090 1,157 1 3,248 2,712 1,043 1 3,756
========================== ===== ========= =============== ===== ===== ========= =============== ======
Include:
Property portfolio
valuation 5,956 3,701 (14) 9,643 6,944 3,538 (15) 10,467
Other financial assets 53 - - 53 32 - - 32
Intangibles 8 - - 8 9 - - 9
EPRA Total Property
Value (b) 6,017 3,701 (14) 9,704 6,985 3,538 (15) 10,508
========================== ===== ========= =============== ===== ===== ========= =============== ======
EPRA LTV (a/b) 34.7% 33.5% 38.8% 35.7%
========================== ===== ========= =============== ===== ===== ========= =============== ======
Supplementary Tables
Data includes Group's share of Joint Ventures
HY23 rent collection1
Rent due between 25 March 2022 and 28 September
2022 Offices Retail Total
================================================ ======= ======= =======
Received 99% 96% 98%
Outstanding 1% 4% 2%
================================================ ======= ======= =======
Total 100% 100% 100%
GBP95m GBP131m GBP226m
================================================ ======= ======= =======
1. As at 9(th) November 2022
September quarter 2022 rent collection
Rent due between 29 September 2022 and 9
November 2022 Offices Retail Total
========================================= ======= ====== ======
Received 98% 94% 96%
Outstanding 2% 6% 4%
========================================= ======= ====== ======
Total 100% 100% 100%
GBP43m GBP51m GBP94m
========================================= ======= ====== ======
Purchases
Price Price Annualised
(100%) (BL Share) Net Rents
Since 1 April 2022 Sector GBPm GBPm GBPm1
======================== ========== ======= =========== ==========
Completed
Mandela Way Logistics 22 22 -
Peterhouse Extension(2) Office 25 25 -
Total 47 47 -
==================================== ======= =========== ==========
1. BL share of annualised rent topped up for rent frees
2. Completed post period end
Sales
Price Price Annualised
(100%) (BL Share) Net Rents
Since 1 April 2022 Sector GBPm GBPm GBPm1
============================== ========= ======= =========== ==========
Completed
Paddington Central (75% sale) Campuses 934 694 27
Total 934 694 27
========================================= ======= =========== ==========
1. BL share of annualised rent topped up for rent frees
Portfolio Valuation by Sector
Change1
Group Joint ventures Total
At 30 September 2022 GBPm GBPm GBPm % GBPm
===================== ===== ============== ===== ===== =====
West End 2,495 348 2,843 (2.5) (92)
City 482 2,341 2,823 (3.6) (104)
Canada Water & other
Campuses 148 312 460 (1.6) (7)
Residential(2) 103 - 103 13.2 12
Campuses 3,228 3,001 6,229 (2.7) (191)
===================== ===== ============== ===== ===== =====
Retail Parks 1,827 219 2,046 (3.7) (78)
Shopping Centre 323 465 788 (2.1) (17)
Urban Logistics 318 5 323 (6.0) (21)
Other Retail 246 11 257 (4.2) (11)
Retail & Fulfilment 2,714 700 3,414 (3.6) (127)
===================== ===== ============== ===== ===== =====
Total 5,942 3,701 9,643 (3.0) (318)
===================== ===== ============== ===== ===== =====
Standing Investments 5,139 3,152 8,291 (3.2) (297)
Developments 803 549 1,352 (1.5) (21)
===================== ===== ============== ===== ===== =====
On a proportionally consolidated basis including the Group's
share of joint ventures
1. 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
2. Standalone residential
Gross Rental Income1
6 months to 30 September Annualised as at 30 September
2022 2022
============================ =================================
Accounting Basis
GBPm Group Joint ventures Total Group Joint ventures Total
==================== ===== ============== ===== ======= ================ ======
West End 56 6 62 81 15 96
City 7 46 53 8 81 89
Other Campuses 6 2 8 6 - 6
Residential(2) - - - 1 - 1
Campuses 69 54 123 96 96 192
==================== ===== ============== ===== ======= ================ ======
Retail Parks 67 9 76 130 16 146
Shopping Centre 20 19 39 37 40 77
Urban Logistics 4 - 4 8 - 8
Other Retail 9 - 9 18 1 19
Retail & Fulfilment 100 28 128 193 57 250
==================== ===== ============== ===== ======= ================ ======
Total 169 82 251 289 153 442
==================== ===== ============== ===== ======= ================ ======
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Gross rental income will differ from annualised valuation
rents due to accounting adjustments for fixed & minimum
contracted rental uplifts and lease incentives
2. Standalone residential
Portfolio Net Yields1,2
Overall Net equivalent ERV Growth
EPRA topped topped yield %5
EPRA net up net up net %
As at 30 initial initial initial Net equivalent Net reversionary
September yield yield yield yield movement yield
2022 % %3 %4 bps %
================ ======== =========== ======== ============== =============== ================ ==========
West End 3.1 4.1 4.1 4.4 19 4.8 2.8
City 3.4 4.2 4.2 4.4 17 4.9 0.5
Other Campuses 5.0 5.0 5.0 5.2 5 5.8 0.0
Residential(6) 3.8 3.8 3.8 4.0 - 3.1 0.0
Campuses 3.3 4.1 4.2 4.5 18 4.9 1.6
================ ======== =========== ======== ============== =============== ================ ==========
Retail Parks 6.6 6.9 7.0 6.1 20 6.1 0.8
Shopping
Centre 7.4 7.9 8.0 7.5 (1) 8.1 (1.0)
Urban Logistics 2.3 2.3 2.3 3.1 60 3.2 16.7
Other Retail 5.6 6.2 6.3 6.6 5 6.4 (1.4)
Retail &
Fulfilment 6.3 6.7 6.8 6.2 17 6.4 0.6
================ ======== =========== ======== ============== =============== ================ ==========
Total 4.5 5.2 5.2 5.2 17 5.5 1.2
================ ======== =========== ======== ============== =============== ================ ==========
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Including notional purchaser's costs
2. Excluding committed developments, assets held for development
and residential assets
3. Including rent contracted from expiry of rent-free periods
and fixed uplifts not in lieu of rental growth
4. Including fixed/minimum uplifts (excluded from EPRA
definition)
5. As calculated by MSCI
6. Standalone residential
Total Property Return (as calculated by MSCI)
6 months to 30 September
2022 Offices Retail Total
================ =============== ===============
British British British
% Land(2) MSCI Land(2) MSCI Land MSCI
========================== ======== ====== ======== ===== ======= ======
Capital Return (2.6) (3.0) (3.5) (2.1) (2.9) (3.1)
* ERV Growth 1.6 0.8 0.6 0.1 1.2 1.8
* Yield Movement1 18 bps 26 bps 17 bps 4 bps 17 bps 23 bps
Income Return 1.3 1.7 3.3 2.6 2.0 1.9
========================== ======== ====== ======== ===== ======= ======
Total Property Return (1.3) (1.3) (0.3) 0.4 (1.0) (1.3)
========================== ======== ====== ======== ===== ======= ======
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Net equivalent yield movement
2. British Land Offices reflects Campuses; British Land Retail
reflects Retail & Fulfilment
Top 20 Occupiers by Sector
% of
Retail & % of
As at 30 September Fulfilment Campuses
2022 rent As at 30 September 2022 rent
==================== =========== ========================= =========
Retail & Fulfilment Campuses
==================== =========== ========================= =========
Next 5.2 Meta (Facebook) 19.9
Walgreens (Boots) 4.6 Dentsu International 5.4
M&S 4.0 Herbert Smith Freehills 3.3
Pentland Group 3.2 SEFE Energy 3.0
Currys Plc 3.0 Vodafone 2.7
TJX (TK Maxx) 2.7 Sumitomo Mitsui 2.6
Sainsbury 2.7 Deutsche Bank 2.2
Frasers Group 2.5 Janus Henderson 2.0
Asda Group 2.1 Reed Smith 1.9
Tesco Plc 2.0 TP ICAP Plc 1.8
Kingfisher 2.0 The Interpublic Group 1.8
TGI Friday's 1.8 Softbank Group 1.7
DFS Furniture 1.8 Mayer Brown 1.7
Hutchison Whampoa 1.8 Mimecast Plc 1.4
Homebase 1.5 Credit Agricole 1.4
River Island 1.5 Accor 1.3
Primark 1.4 Milbank LLP 1.3
H&M 1.3 Monzo Bank 1.3
Wilkinson 1.3 Visa International 1.1
Pets at Home 1.1 Dimensional Fund Advisors 1.0
=========================
Total top 20 47.5 Total top 20 58.8
==================== =========== ========================= =========
Major Holdings
Lease
BL Share Sq ft Rent (100%) Occupancy length
As at 30 September 2022 % '000 GBPm pa1,4 rate %2,4 yrs3,4
========================= ======== ===== =========== ========== =======
Broadgate 50 4,468 190 97.7 6.4
Regent's Place 100 1,740 86 95.1 9.1
Paddington Central 25 958 13 99.7 8.4
Meadowhall, Sheffield 50 1,500 71 95.0 4.1
Glasgow Fort, Glasgow 100 510 17 97.8 5.2
Teesside, Stockton 100 569 15 91.4 2.3
Hannah Close, Wembley 100 246 4 100.0 3.9
Ealing Broadway, London 100 540 11 96.5 4.1
Drake's Circus, Plymouth 100 1,190 16 95.7 5.2
Giltbrook, Nottingham 100 198 7 99.7 4.2
------------------------- -------- ----- ----------- ---------- -------
1. Annualised EPRA contracted rent including 100% of joint
ventures
2. Includes accommodation under offer or subject to asset
management
3. Weighted average to first break
4. Excludes committed and near term developments
Lease Length & Occupancy
Average lease length Occupancy rate
yrs %
====================== ==============================
As at 30 September 2022 To expiry To break EPRA Occupancy Occupancy1,2,3
======================== =========== ========= ============== ==============
West End 9.0 8.5 94.4 95.9
City 7.5 6.5 91.8 97.7
Other Campuses 7.2 6.3 100.0 100.0
Residential(4) 16.0 15.8 100.0 100.0
Campuses 8.3 7.5 93.4 96.9
======================== =========== ========= ============== ==============
Retail Parks 5.9 4.3 95.5 97.5
Shopping Centre 5.6 4.4 92.8 94.4
Urban Logistics 5.8 4.7 100.0 100.0
Other Retail 7.9 7.4 95.7 96.6
Retail & Fulfilment 5.9 4.6 94.9 96.6
======================== =========== ========= ============== ==============
Total 7.0 5.9 94.1 96.7
======================== =========== ========= ============== ==============
1. Space allocated to Storey is shown as occupied where there is
a Storey tenant in place otherwise it is shown as vacant. Total
occupancy for Campuses would rise from 96.9% to 97.1% if Storey
space were assumed to be fully let
2. Includes accommodation under offer or subject to asset
management
3. Where occupiers have entered administration or CVA but are
still liable for rates, these are treated as occupied. If units in
administration are treated as vacant, then the occupancy rate for
Retail & Fulfilment would reduce from 96.6% to 95.7%, and total
occupancy would reduce from 96.7% to 96.3%
4. Standalone residential
Portfolio Weighting
2021 2022 2022
As at 30 September % % GBPm
============================== ==== ==== ======
West End 35.9 29.4 2,843
City 27.5 29.3 2,823
Canada Water & other Campuses 6.1 4.8 460
Residential(1) 0.6 1.1 103
Campuses 70.1 64.6 6,229
============================== ==== ==== ======
Retail Parks 17.6 21.2 2,046
Shopping Centre 8.3 8.2 788
Urban Logistics 1.2 3.3 323
Other Retail 2.8 2.7 257
Retail & Fulfilment 29.9 35.4 3,414
============================== ==== ==== ======
Total 100 100 9,643
============================== ==== ==== ======
London Weighting 74% 71% 6,849
============================== ==== ==== ======
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Standalone residential
Annualised Rent & Estimated Rental Value (ERV)
Annualised rent (valuation ERV
basis) GBPm Average rent
GBPm1 GBPpsf
============================== ===== =================
As at 30 September
2022 Group Joint ventures Total Total Contracted2 ERV
==================== ====== =============== ===== ===== =========== ====
West End(3) 70 14 84 128 66.2 73.5
City(3) 8 77 85 119 56.4 60.6
Other Campuses 6 - 6 7 27.2 34.5
Residential(4) 1 - 1 1 41.7 30.9
Campuses 85 91 176 255 54.3 59.4
==================== ====== =============== ===== ===== =========== ====
Retail Parks 136 17 153 138 23.4 20.0
Shopping Centre 39 41 80 75 24.8 22.2
Urban Logistics 7 - 7 10 12.9 18.2
Other Retail 17 1 18 18 11.3 10.8
Retail & Fulfilment 199 59 258 241 21.7 19.3
==================== ====== =============== ===== ===== =========== ====
Total 284 150 434 496 29.6 29.4
==================== ====== =============== ===== ===== =========== ====
On a proportionally consolidated basis including the group's
share of joint ventures and funds, excluding committed, near term
and assets held for development
1. Gross rents plus, where rent reviews are outstanding, any
increases to ERV (as determined by the Group's external valuers),
less any ground rents payable under head leases, excludes
contracted rent subject to rent free and future uplift
2. Annualised rent, plus rent subject to rent free
3. GBPpsf metrics shown for office space only
4. Standalone residential
Rent Subject to Open Market Rent Review
For year
to 31 March
As at 30
September 2023 2024 2025 2026 2027 2023-25 2023-27
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================ ===== ===== ===== ===== ===== ======= =======
West End 3 5 14 9 23 22 54
City - 16 8 27 4 24 55
Other Campuses - - 1 - - 1 1
Residential(1) - - - - 1 - 1
Campuses 3 21 23 36 28 47 111
================ ===== ===== ===== ===== ===== ======= =======
Retail Parks 5 8 9 8 7 22 37
Shopping
Centre 5 3 3 2 3 11 16
Urban Logistics - - 1 - - 1 1
Other Retail - 2 1 - 1 3 4
Retail &
Fulfilment 10 13 14 10 11 37 58
================ ===== ===== ===== ===== ===== ======= =======
Total 13 34 37 46 39 84 169
================ ===== ===== ===== ===== ===== ======= =======
On a proportionally consolidated basis including the Group's
share of joint ventures excluding committed, near term and assets
held for development
1. Standalone residential
Rent Subject to Lease Break or Expiry
For year
to 31 March
As at 30
September 2023 2024 2025 2026 2027 2023-25 2023-27
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================ ===== ===== ===== ===== ===== ======= =======
West End 7 3 7 14 4 17 35
City 3 16 5 15 2 24 41
Other Campuses 1 2 - - 1 3 4
Residential(1) - - - - - - -
Campuses 11 21 12 29 7 44 80
================ ===== ===== ===== ===== ===== ======= =======
Retail Parks 15 28 21 23 19 64 106
Shopping
Centre 7 13 9 14 8 29 51
Urban Logistics - - 2 2 - 2 4
Other Retail 3 2 1 1 1 6 8
Retail &
Fulfilment 25 43 33 40 28 101 169
================ ===== ===== ===== ===== ===== ======= =======
Total 36 64 45 69 35 145 249
================ ===== ===== ===== ===== ===== ======= =======
% of contracted
rent 7.2 12.9 9.3 13.8 7.2 29.4 50.4
================ ===== ===== ===== ===== ===== ======= =======
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Standalone residential
Committed Developments
As at 30 Sector BL Share 100% sq PC Calendar Current Cost to ERV Pre-let Forecast
September % ft Year Value come GBPm2 & under IRR %
2022 '000 GBPm GBPm1 offer
GBPm(5)
---------------- ------------ -------- ------- ----------- ------- ------- ------ -------- --------
Norton Folgate Office 100 335 Q4 2023 284 118 23.6 7.8 8
1 Broadgate(5) Office 50 544 Q2 2025 156 198 20.2 13.7 11
Aldgate
Place, Phase
2 Residential 100 136 Q2 2024 74 74 6.5 - 10
1-3 Deal
Porters Mixed 11
Way, A13 Use 50 276 Q4 2024 26 100 3.6 - blended
The Dock Mixed
Shed, A23 use 50 247 Q4 2024 22 58 5.5 -
Robert's
Close, K13 Residential 50 62 Q3 2023 - 8 - -
The Priestley
Centre Office 100 81 Q3 2023 19 13 2.9 - 22
---------------- ------------ -------- ------- ----------- ------- ------- ------ -------- --------
Total Committed 1,681 581 569 62.3 21.5
============================== ======== ======= =========== ======= ======= ====== ======== ========
Other Capital
Expenditure4 44
============================== ======== ======= =========== ======= ======= ====== ======== ========
On a proportionally consolidated basis including the group's
share of joint ventures and funds (except area which is shown at
100%)
1. From 30 September 2022. Cost to come excludes notional
interest as interest is capitalised individually on each
development at our capitalisation rate
2. Estimated headline rental value net of rent payable under
head leases (excluding tenant incentives)
3. The London Borough of Southwark has confirmed they will not
be investing in Phase 1, but retain the right to participate in the
development of subsequent plots up to a maximum of 20% with their
returns pro-rated accordingly
4. Capex committed and underway within our investment portfolio
relating to leasing, infrastructure and asset management
5. Pre-let & under offer excludes 114,000 sq ft of office
space under option
Near Term Development Pipeline
As at 30 Sector BL Share 100% sq Earliest Current Cost to ERV Planning
September % ft Start Value come GBPm2 Status
2022 '000 on Site GBPm GBPm1
============== ================ ======== ======= ======== ======= ======= ====== ==============
2 Finsbury
Avenue Office 50 727 Q3 2023 75 409 32.0 Consented
5 Kingdom
Street Office 100 338 Q3 2023 121 275 23.9 Pre-submission
Peterhouse Office 100 90 Q2 2023 25 43 4.0 Consented
Meadowhall,
Logistics Urban Logistics 50 611 Q1 2023 2 45 2.5 Consented
Total Near
Term 1,766 223 772 62.4
================================ ======== ======= ======== ======= ======= ====== ==============
Other Capital
Expenditure3 135
================================ ======== ======= ======== ======= ======= ====== ==============
On a proportionally consolidated basis including the group's
share of joint ventures and funds (except area which is shown at
100%)
1. From 30 September 2022. Cost to come excludes notional
interest as interest is capitalised individually on each
development at our capitalisation rate
2. Estimated headline rental value net of rent payable under
head leases (excluding tenant incentives)
3. Forecast capital commitments within our investment portfolio
over the next 12 months relating to leasing and asset
enhancement
Medium Term Development Pipeline
As at 30 September 2022 Sector 100% Sq Planning Status
BL Share ft
% '000
================================ ================ ========= ======== ===============
Thurrock Urban Logistics 100 637 Pre-submission
Enfield, Heritage House Urban Logistics 100 408 Pre-submission
Hannah Close, Wembley Urban Logistics 100 668 Pre-submission
Verney Road Urban Logistics 100 166 Pre-submission
Mandela Way Urban Logistics 100 104 Pre-submission
International House, Ealing Office 100 165 Consented
Euston Tower Office 100 578 Pre-submission
West One Development Mixed Use 25 73 Granted
Finsbury Square Urban Logistics 100 47 Pre-submission
1 Appold Street Office 50 363 Pre-submission
Ealing - 10-40, The Broadway Mixed Use 100 325 Submitted
Gateway Building Hotel 25 105 Consented
Canada Water - Future phases(1) Mixed Use 50 4,493 Consented
Total Medium Term 8,132
================================================== ========= ======== ===============
On a proportionally consolidated basis including the group's
share of joint ventures and funds (except area which is shown at
100%)
1. The London Borough of Southwark has the right to invest in up
to 20% of the completed development. The ownership share of the
joint venture between British Land and AustralianSuper will change
over time depending on the level of contributions made, but will be
no less than 80%
Forward-looking statements
This Press Release contains certain (and we may make other
verbal or written) 'forward-looking' statements. These
forward-looking statements include all matters that are not
historical fact. Such statements reflect current views, intentions,
expectations, forecasts and beliefs of British Land concerning,
among other things, our markets, activities, projections, strategy,
plans, initiatives, objectives, performance, financial condition,
liquidity, growth and prospects, as well as assumptions about
future events and developments. Such 'forward-looking' statements
can sometimes, but not always, be identified by their reference to
a date or point in the future, the future tense, or the use of
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other variations or comparable terminology. By their nature,
forward-looking statements involve inherent known and unknown
risks, assumptions and uncertainties because they relate to future
events and circumstances and depend on circumstances which may or
may not occur and may be beyond our ability to control, predict or
estimate. Forward-looking statements should be regarded with
caution as actual outcomes or results, may differ materially from
those expressed in or implied by such statements. Recipients should
not place reliance on, and are cautioned about relying on, any
forward-looking statements.
Important factors that could cause actual results (including the
payment of dividends), performance or achievements of British Land
to differ materially from any outcomes or results expressed or
implied by such forward-looking statements include, among other
things, changes and/or developments as regards: (a) general
business and political, social and economic conditions globally,
(b) the United Kingdom's withdrawal from, and evolving relationship
with the European Union, (c) industry and market trends (including
demand in the property investment market and property price
volatility), (d) competition, (e) the behaviour of other market
participants, (f) government, law or regulation including in
relation to the environment, landlord and tenant law, health and
safety and taxation (in particular, in respect of British Land's
status as a Real Estate Investment Trust), (g) inflation and
consumer confidence, (h) labour relations, work stoppages and
increased costs for, or shortages of, talent, (i) climate change,
natural disasters and adverse weather conditions, (j) terrorism,
conflicts or acts of war, (k) British Land's overall business
strategy, risk appetite and investment choices in its portfolio
management, (l) legal or other proceedings against or affecting
British Land, (m) cyber-attacks and other disruptions and
reliability and security of IT infrastructure, (n) occupier demand
and tenant default, (o) financial and equity markets including
interest and exchange rate fluctuations, (p) accounting practices
and the interpretation of accounting standards (q) the availability
and cost of finances, (r) public health crises (including but not
limited to the covid-19 pandemic), (s) changes in construction
supplies and labour availability or cost inflation and (t) the
Ukraine conflict and its impact on supply chains and the
macroeconomic outlook. The Company's principal risks are described
in greater detail in the section of this Press Release headed "Risk
Management and Principal Risks" and in the Company's latest annual
report and accounts (which can be found at www.britishland.com).
Forward-looking statements in this Press Release, or the British
Land website or made subsequently, which are attributable to
British Land or persons acting on its behalf, should therefore be
construed in light of all such factors.
Information contained in this Press Release relating to British
Land or its share price or the yield on its shares are not
guarantees of, and should not be relied upon as an indicator of,
future performance, and nothing in this Press Release should be
construed as a profit forecast or profit estimate, or be taken as
implying that the earnings of British Land for the current year or
future years will necessarily match or exceed the historical or
published earnings of British Land. Any forward-looking statements
made by or on behalf of British Land speak only as of the date they
are made. Such forward-looking statements are expressly qualified
in their entirety by the factors referred to above and no
representation, assurance, guarantee or warranty is given in
relation to them (whether by British Land or any of its associates,
Directors, officers, employees or advisers), including as to their
completeness, accuracy, fairness, reliability, the basis on which
they were prepared, or their achievement or reasonableness.
Other than in accordance with our legal and regulatory
obligations (including under the UK Financial Conduct Authority's
Listing Rules, Disclosure Guidance and Transparency Rules, the UK
Market Abuse Regulation, and the requirements of the Financial
Conduct Authority and the London Stock Exchange), British Land does
not intend or undertake any obligation to update or revise publicly
forward-looking statements to reflect any changes in British Land's
expectations with regard thereto or any changes in information,
events, conditions or circumstances on which any such statement is
based. This document shall not, under any circumstances, create any
implication that there has been no change in the business or
affairs of British Land since the date of this document or that the
information contained herein is correct as at any time subsequent
to this date.
Nothing in this document shall constitute, in any jurisdiction,
an offer or solicitation to sell or purchase any securities or
other financial instruments, nor shall it constitute a
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END
IR FELLFLFLZFBK
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