REG - British Land Co PLC - Final Results- Part 1 <Origin Href="QuoteRef">BLND.L</Origin> - Part 4
16/05/2016 07:05
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cyber security systems are backed up by incident management, disaster recovery and business continuity plans, all of which are
regularly reviewed to be able to respond to changes in the threat landscape and organisational requirements.· We also have
appropriate insurance in place across the portfolio.
Internal Risks
Risks and impacts How we monitor andmanage the risk Change in the period
Investment Strategy In order to meet our strategic objectives we must invest in and exit from the right properties at the right time. Significant underperformance could result from inappropriate determination and execution of our property investment strategy, including:· sector selection and weighting;· timing of investment and divestment decisions;· exposure to developments;· sector, asset, tenant, region concentration;· co-investment arrangements. Our investment strategy is determined to be consistent with our target risk appetite and is based on the evaluation of the ↔ We are focusing the business around long term trends and continue to see the benefits of the investments we made in recent years. In line with our priorities set out last year, we have focused our investment on London and the South East, and investing around transport infrastructure; we've achieved some key development milestones and are also getting closer to our customers. In Retail, we made £420 million of disposals as we increase our focus on the multi-let portfolio where we can put our placemaking skills to work to drive rental growth.
external environment.· Progress against the strategy and continuing alignment with our risk appetite is discussed at each Risk
Committee with reference to the property markets and the external economic environment.· Individual investment decisions are
subject to robust risk evaluation overseen by our Investment Committee including consideration of returns relative to risk
adjusted hurdle rates.· Review of prospective performance of individual assets and their business plans.· We foster
collaborative relationships with our co-investors and enter into ownership agreements which balance the interests of the
parties.
Development exposure Development provides an opportunity for outperformance but this brings with it elevated risk. The care with which we make our decisions around which schemes to develop when, as well as our execution of these projects, must reflect this.Development risks could adversely impact underlying income and capital performance including:· development letting exposure;· construction timing and costs;· major contractor failure;· adverse planning judgements. We maintain our levels of total and speculative development exposure as a proportion of the investment portfolio value within a ↔ Development is an important part of our business and a key driver of returns. We have assembled an attractive pipeline of development opportunities which gives us growth into the future, and where we are able to make timely decisions to reflect changes in market conditions. These include exciting opportunities across our three existing London campuses, the potential to create a new London campus at Canada Water, alongside significant investment opportunities in our existing Retail assets.
target range taking into account associated risks and the impact on key financial metrics. This is monitored quarterly by the
Risk Committee along with progress of developments against plan.· Prior to committing to a development, the Group undertakes a
detailed appraisal overseen by our Investment Committee including consideration of returns relative to risk adjusted hurdle
rates.· Pre-let targets are used to reduce development letting risk where considered appropriate.· We actively engage with the
communities in which we operate, as detailed in our Local Charter, to ensure that our development activities consider the
interests of all stakeholders.· We manage environmental and social risks across our development supply chain by engaging with
our suppliers, including through our Sustainability Brief for Developments and Health and Safety Policy.
People A number of critical business processes and decisions lie in the hands of a few people. Failure to recruit, develop and retain staff and Directors with the right skills and experiencemay result in significant underperformance or impact the effectiveness of operations and decision making, in turn impacting business performance. Our HR strategy is designed to minimise risk through:· informed and skilled recruitment processes;· talent, performance ↔ Having expert people is one of the four core focus areas of our business model. We provide a strong corporate culture committed to our people, a great working environment, competitive benefits and career development opportunities. We empower our people to make the most of their potential with us. Our high level of staff engagement was recognised by maintaining a One Star rating in the Sunday Times Best Companies to Work For survey.
management and succession planning for key roles;· highly competitive compensation and benefits;· people development and
training;The risk is measured through employee engagement surveys, employee turnover and retention metrics and regular 'people
review' activities. We monitor this through the number of unplanned executive departures in addition to conducting exit
interviews. We engage with our outsourced suppliers to make clear our requirements in managing key risks including health and
safety, fraud and bribery and other social and environmental risks, as detailed in our Supply Chain Charter.
Capital Structure - leverage We maintain a capital structure which recognises the balance between performance, risk and flexibility.· Leverage magnifies returns, both positive and negative.· An increase in leverage increases the risk of a breach of covenants on borrowing facilities and may increase finance costs. · We manage our mix of equity and debt financing to achieve the right balance between enhancing returns for shareholders and ↔ Balance sheet metrics in the year remained strong. We have maintained our capital discipline with investment and development being broadly balanced by asset disposals, and reduced our proportionally consolidated LTV to 32% in line with our strategy to not increase leverage solely on the basis of an improvement in market yields.
the risk of higher leverage.· We monitor our LTV to manage leverage levels over the property cycle and seek to ensure that LTV
should not exceed a maximum threshold if market yields were to rise to previous peak levels. This means we will not increase our
LTV if asset values increase only as a result of market yield improvement.· We manage our investment activity, the size and
timing of which can be uneven, as well as our development commitments to ensure that our LTV level remains appropriate.· We
leverage our equity and achieve benefits of scale while spreading risk through joint ventures and funds which are typically
partly financed with debt without recourse to British Land.
Finance strategy execution Our strategy addresses risks both to continuing solvency and the stability of our profits. Failure to manage the refinancing requirement may result in a shortage of funds to sustain the operations of the business or repay facilities as they fall due. This and a breach of financial covenant limits are considered to be significant risks to the continuing operation of British Land as a going concern. We have five key principles guiding our financing which together are employed to manage the risks in this area: diversify our ↔ We continue to achieve attractive financings which improve earnings and liquidity. We have completed over £1 billion of financing activity during the year, including a zero coupon £350 million senior unsecured convertible bond due 2020 which provides further diversification of our sources of finance, and includes flexible settlement options. Based on current commitments and our current available facilities, the Group has no requirement to refinance for at least four years.
sources of finance, phase maturity of debt portfolio, maintain liquidity, maintain flexibility, and maintain strong balance
sheet metrics.· We monitor the period until refinancing is required, which is a key determinant of financing activity, and
regularly evaluate the likelihood of covenant breach.· We are committed to maintaining and enhancing relationships with our key
financing partners.· We are mindful of relevant emerging regulation which has the potential to impact the way that we finance
the Group.
Income sustainability We must be mindful of maintaining sustainable income streams in order to continue to generate returns for our shareholders and provide the platform from which to grow the business through development andcapital appreciation. We consider sustainability of our income streams in:· execution of investment strategy and capital recycling, notably timing of reinvestment of sale proceeds;· nature and structure of leasing activity;· nature and timing of asset management and development activity. · We undertake comprehensive profit and cash flow forecasting incorporating scenario analysis to model the impact of proposed ↔ The quality of our portfolio and environments enables us to attract some of the strongest occupiers to our properties; this, together with our high occupancy levels and long lease lengths, provides security of income. We are increasing the diversity of our occupier mix and no single occupier accounts for more than 5.7% of revenues. In delivering our investment strategy we are mindful of the impact on our income security.
transactions.· Pro-active asset management approach to maintain strong occupier line-up. We monitor our market letting exposure
including vacancies, upcoming expiries and breaks and tenants in administration as well as our weighted average lease length.·
We have a diversified occupier base and monitor concentration of exposure to individual occupiers or sectors.· We are proactive
in addressing key lease breaks and expiries to minimise periods of vacancy.· We actively engage with the communities in which
we operate, as detailed in our Local Charter, to ensure we provide buildings that meet the needs of all relevant stakeholders.
Key
Change from last year:
↑ Risk exposure has increased
↔ No significant change in risk exposure
↓ Risk exposure has reduced
Directors' responsibility statement
The Directors are responsible for preparing the Annual Report, the Directors'
Remuneration Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group financial
statements in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union, and the parent Company financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law).
Under Company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and the Company and of the profit or loss of the Group
for that period. In preparing these financial statements, the Directors are
required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and
prudent;
· state whether IFRSs as adopted by the European Union and applicable UK
Accounting Standards have been followed, subject to any material departures
disclosed and explained in the Group and parent Company financial statements
respectively; and
· prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and the
Group and enable them to ensure that the financial statements and the
Directors' Remuneration Report comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS Regulation. They
are also responsible for safeguarding the assets of the Company and the Group
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
The Directors consider that the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Company's position and performance, business
model and strategy.
Each of the Directors confirm that to the best of their knowledge:
· the Group financial statements, which have been prepared in accordance
with IFRSs as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit of the Group; and
· the Strategic Report and the Directors' Report include a fair review of
the development and performance of the business and the position of the Group,
together with a description of the principal risks and uncertainties that it
faces.
By order of the Board.
Lucinda Bell
Chief Financial Officer
16 May 2016
This information is provided by RNS
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