British Land Co Plc – Final Results

Chris Grigg, Chief Executive said: “This has been another year of good strategic and operational progress in an uneven market, as retail remained challenging but the London office market continued to be healthy. We delivered further on our strategy to build an increasingly mixed-use business by investing in our campuses, progressing developments and reshaping our retail portfolio. We sold £1.5bn of assets and leased more space than in any of the last five years, securing future income and de-risking our developments, which are now 76% pre-let. This broad-ranging operational outperformance is the result of our focus on delivering the highest quality places with the right mix of uses which reflect the changing way people and businesses are using real estate.

“Looking ahead, retail is likely to remain challenging as structural change continues but there are early signs on parts of our portfolio, that some of the short-term operational headwinds impacting retailers are easing. We expect the London market to remain active, as occupier demand for the highest quality space continues to be firm and supply is relatively constrained. We are mindful of the ongoing Brexit uncertainty, but our business is well positioned and financially strong. We remain focused on delivering operationally and being thoughtful and commercial in what we do every day while at the same time progressing our long term strategic goals.“

Financial highlights

·       Robust financial performance

·       Underlying EPS down 6.7% to 34.9p due primarily to one off surrender premia received last year and impact of asset sales; buybacks contributing 1.2p

·        LFL rental growth of £15m; more than offsetting the £14m impact of Retail CVAs 

·        Portfolio value down 4.8%; Retail down 11.1%, Offices up 1.1% and developments up 10.8%

·        EPRA NAV down 6.4% at 905p, with buybacks contributing 10p

·        Full year dividend up 3.0% at 31p; total accounting return -3.3%

·        Proposed FY20 dividend increase of 3%

·       Strong and flexible balance sheet

·        £1.5bn of asset sales, including £193.5m superstore portfolio announced post year end

·        £200m buyback completed, bringing cumulative buyback to £500m over the last two years  

·        Announcing extension to share buyback programme of up to £125m

·        Maintained low LTV at 28.1% (March 2018: 28.4%)

·        £1.4bn of new financing arranged; weighted average interest rate of 2.9%

Progress on strategy: Becoming the specialist in mixed use

·       Campus-focused London Offices: Unique mixed-use offer is delivering  

·        1.1m sq ft of leasing activity generating £21m of future headline rents; 97.7% occupancy

·        Attracting occupiers across a range of sectors including McCann, Peel Hunt, Milbank, Facebook

·        Lettings and renewals on the investment portfolio overall 1.2% ahead of ERV

·        Completed/committed developments generating £63m of future rent, 76% pre-let/under offer

·        Significant future optionality with a 5.2m sq ft near and medium-term development pipeline

·        Speculative development exposure low at 2.3% of portfolio value

·        Storey operational across 141,000 sq ft; 90% let or under offer; further 161,000 sq ft identified

·       Smaller, more focused Retail: Operational outperformance in a challenging market  

·        1.6m sq ft of leasing activity; marginally ahead of ERV; 96.7% occupancy  

·        Continuing to outperform benchmarks: total sales 160 bps ahead; footfall 230 bps ahead

·        £646m off-strategy assets sold since April 2018, 2% ahead of book value

·        £16.9m annualised rent impact of CVAs & Admins over the last two years

·        61 units subject to closure, of which 42 re-let or in negotiation  

·       Planning application for Canada Water Masterplan submitted

·        53 acre mixed use regeneration scheme including plans for 3,000 homes

·        Further opportunities to progress residential schemes across our portfolio

Summary