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

British LandAnnouncement

16/11/2016 07:07

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London, particularly
from overseas. However, pricing levels following the referendum are yet to be
established, particularly for larger lot sizes, with only two assets over £200
million trading in the period. Pricing of these transactions and others has
informed the yield expansion on our London Office portfolio of 21 bps. 
 
In London residential, uncertainty from the UK's decision to leave the EU has
compounded existing trends in the prime market where supply has moved ahead of
demand. There has been limited evidence in the super prime market. We continue
to believe that exceptional product, such as Clarges Mayfair, will prove
attractive to those who share our view of London as an enduring global
capital, particularly where they can benefit from the weaker pound when
acquiring. The mainstream market in London, under £1,000 psf has remained
relatively robust with steady demand, evidenced by our continuing sales at
Aldgate Place. 
 
Portfolio Performance 
 
Influenced by market uncertainty following the referendum, the value of our
Offices and Residential portfolio fell -3.3% in the half to close at £6.8
billion, primarily due to 21 bps of yield expansion. This represents a capital
return for Offices 50 bps lower than the IPD benchmark for the period
reflecting greater valuation falls on assets with near term expiries. ERV
growth was up by 0.1%, including the impact of more modest refurbishment
assumptions than previously planned at certain assets including 1 Finsbury
Avenue. On a like-for-like basis with March 2016 assumptions, ERV growth is
higher at 0.5%. The yield movement was greater in the City at 27 bps, where
there is higher risk to occupational demand from Brexit-related policy shifts,
including the potential loss of passporting. The movement in the West End was
16 bps. Overall this gives a portfolio NEY of 4.6%. 
 
This headline performance masks a wide dispersion in asset level performance.
In the current uncertainty, investors are attaching a higher premium to long
term, secure income and so 5 Broadgate with its 17 year lease to UBS with
index-linked uplifts saw an increase in value, while buildings with low income
security, such as those which UBS will vacate shortly, saw double digit
valuation declines. The fact that this averages down to 3.3% across our Office
and Residential portfolio indicates the strong weighting of our portfolio
towards high quality, well-let buildings with long term, secure income. 
 
The residential portfolio, which represents 2% of our assets, has not changed
in value. This reflects a modest reduction in end values, offset by profit
releases as we progress towards practical completion at Aldgate Place and The
Hempel. 
 
Asset Management 
 
We entered this period of uncertainty 99% occupied and had less than 200,000
sq ft of space to let, including development completions in the period.
Despite the uncertainty, occupiers have continued to be attracted to our high
quality space and this has enabled us to complete 68,000 sq ft of lettings,
4.9% ahead of March ERVs, including the final floors at both The Leadenhall
Building and Marble Arch House. Recently, attention has turned to letting the
51,000 sq ft office component of our development at Clarges Mayfair which
completed in the half and was launched in September, and Yalding House,
another West End development of 29,000 sq ft, which also completed earlier
this year. We have received good interest and have 30,000 sq ft of this space
let or under offer, ahead of March ERVs. In total, we have let or put under
offer half of the available space to let. The combination of this activity and
rent reviews we completed has contributed to like-for-like rental growth of
6.7%. 
 
At Regent's Place, our focus has been on capturing reversion from the current
rent review cycle. We concluded rent reviews on 118,000 sq ft in the half,
adding £2.3 million of annualised rent, an uplift of 45% to an average new
rent of £62 psf. This brings the total rent review uplift secured across the
portfolio in the last 18 months to £6.6 million. We also continue to progress
plans for a major redevelopment of 1 Triton Square and in November submitted a
planning application for a scheme which would add a further 121,000 sq ft to
the building. Progressing that scheme would depend on securing a pre-let. We
also remain focused on enhancing links with the communities in which we
operate and at Regent's Place, we have successfully partnered with occupiers
on the Regent's Place Community Fund, announcing five local charitable
projects awarded with grants of up to £9,000 each. The fund endeavours to make
a meaningful difference to people in the local area by helping smaller
organisations. We are delighted to work with occupiers in this way. 
 
At Paddington Central, our focus has been on delivering our vision for the
public realm. Our phase two works to bring Kingdom Street to life, with
gardens and community areas, are on track to complete in time for the launch
of our development at 4 Kingdom Street in Spring 2017. This 147,000 sq ft
office development topped out in May. We are also progressing our works to
strengthen the campus' link with the canal side, and in June, brought the
first of our barges into action as a marketing suite for the campus. As part
of our continued enlivenment of the campus, we recently launched the public
art installation "Message from an Unseen World" which celebrates the life and
work of Alan Turing, a former Paddington resident and computer science
pioneer. We are increasingly providing flexible working opportunities for
existing occupiers and smaller companies who are attracted to our campus
environments. At Paddington, which is virtually fully let, we identified a
creative solution to add this to our offer, by activating previously redundant
space within the atrium at 2 Kingdom Street to provide a flexible working
operation for Central Working which went live in June 2016 and has been very
successful. 
 
We are continuing to transform Broadgate into a world class, mixed-use
destination, building on its excellent location, catchment and connectivity.
UBS have now taken occupation of their new 710,000 sq ft office at 5 Broadgate
and so have served their break notices on 100 Liverpool Street, 1 Finsbury
Avenue and 2 Finsbury Avenue. Getting this space back provides us with the
opportunity to accelerate wider plans and we will start by committing to the
redevelopment of 100 Liverpool Street. This 520,000 sq ft mixed-use scheme is
located at the entrance to the campus and adjacent to the station for
Crossrail, which will cement Broadgate's position as one of the best connected
locations in London when it arrives in 2018. British Land's share of the
development spend is £164 million and the returns on this investment are
enhanced by the addition of 140,000 sq ft of new lettable space. 90,000 sq ft
of this will be retail and food and beverage ('F&B'), accounting for almost
25% of the rent. This new space will double the amount of rent from retail and
F&B at Broadgate, integrating with Broadgate Circle and taking advantage of
the significant footfall at Liverpool Street station. The space will be
flexible to meet a broad range of occupier requirements and we expect to
complete the building in 2019, shortly after the arrival of Crossrail. 
 
Our decision to commit to the development of 100 Liverpool Street is one
outcome from a review we have conducted since the referendum of the phasing of
all of our development opportunities and capex plans. At 1 Finsbury Avenue,
whilst still assessing our options with our partner GIC, our preferred route
is to undertake a lower cost refurbishment than previously planned to deliver
the space back to the market by late 2018. In line with our aim to broaden the
range of uses and occupiers at Broadgate, we plan for a mix of curated retail
and leisure on the lower floors and less corporate and more flexible
commercial space on the upper floors differentiating it from the remainder of
the campus and in particular, 100 Liverpool Street. 
 
We were delighted to obtain planning for a 560,000 sq ft scheme at 2-3
Finsbury Avenue in October, giving us the option to treble the size of the
building. We are not able to proceed with this development until we take 3
Finsbury Avenue back from UBS in late 2018 at the earliest. Even then, it is
likely that we will only proceed with this redevelopment with the benefit of a
significant pre-let. In the meantime, we will pursue meanwhile uses for 2-3
Finsbury Avenue. 
 
We are in discussions with a number of occupiers from a range of sectors on
potential requirements for space at these development opportunities across all
of our London campuses. In addition, we were pleased to agree terms with
Credit Agricole, one of our largest occupiers at Broadgate, to extend their
occupation at Broadwalk House until July 2025. This commitment reinforces
Broadgate's appeal and our track record of retaining occupiers at our
campuses. 
 
Investment Activity 
 
We have not made any office acquisitions or disposals since the year end. Our
investment activity is currently focused on completing our existing
developments at Clarges Mayfair, Aldgate Place, The Hempel Collection and 4
Kingdom Street, as well as progressing enabling works for 100 Liverpool
Street. 
 
We completed the 51,000 sq ft office component of our super prime mixed-use
development at Clarges Mayfair in the half. We launched this exceptional
scheme to the market in September and have already placed two floors under
offer as well as the ground floor restaurant, comprising 18,000 sq ft, at
terms ahead of our valuation assumptions, despite the uncertainty caused by
the referendum. This gives us confidence that quality buildings will continue
to prosper. 
 
We continued to make good progress at our residential schemes, Aldgate Place
and The Hempel Collection, selling £20 million of apartments. The prime
residential market continued to soften and we achieved prices on average 4%
below March values. 
 
At Clarges Mayfair, we have already pre-sold over 50% of the residential units
by value and will market the remaining 12 units, predominantly on the upper
floors, on completion in late 2017. We continue to be confident that these
final units will sell well. 
 
This leaves total residential exposure, excluding pre-sold units, of £230
million, of which three quarters is at Clarges. Across our recently completed
and under construction residential developments, anticipated profits remain
significantly ahead of our investment case. 
 
Including our commitment to 100 Liverpool Street, and excluding pre-sold
residential, the speculative development commitment is 5% of our portfolio. 
 
Apart from 1 Finsbury Avenue which is in our near term pipeline, our remaining
Office and Residential development opportunities are included within our
medium term pipeline. This includes 2-3 Finsbury Avenue at Broadgate, 1 Triton
Square at Regent's Place, 5 Kingdom Street at Paddington Central and Blossom
Street in Shoreditch. We will take steps to progress plans on these projects
to put ourselves in the best position to act when demand justifies it. 
 
At Blossom Street, the Court of Appeal ruled in November that the planning
permission for our proposed development could not be legally challenged,
bringing the planning process to a successful conclusion. We will continue
discussions with potential occupiers to secure a sufficient level of pre-lets
before committing to the scheme. 
 
FINANCE REVIEW 
 
 6 months to                           30 September 2015  30 September 2016  
 Underlying profit1,2                  £171m              £199m              
 Underlying earnings per share1        16.0p              19.3p              
 IFRS profit/(loss) before tax         £823m              £(205)m            
 Dividend per share                    14.18p             14.60p             
 Total accounting return1,3            +9.1%              -1.5%              
 As at                                 31 March 2016      30 September 2016  
 EPRA net asset value per share1,2     919p               891p               
 IFRS net assets                       £9,619m            £9,181m            
 LTV (proportionally consolidated)1,4  32.1%              31.6%              
 Weighted average interest rate        3.3%               3.2%               
 
 
1 See Glossary for definitions 
 
2 See Table B within supplementary disclosure for reconciliations to IFRS
metrics 
 
3 See Note 2 within financial statements for calculation 
 
4 See Note 10 within financial statements for calculation and reconciliation
to IFRS metrics 
 
Overview 
 
We delivered a good set of results, with underlying profit growth of 16.4% and
underlying earnings per share (EPS) growth of 20.6%. 
 
Portfolio valuations decreased by 2.8% on a proportionally consolidated basis
and EPRA net asset value (NAV) decreased by 3.0%. This includes the impact of
no longer treating the 1.5% 2012 convertible bond as dilutive as the share
price was below the exchange price of 693 pence at the period end, NAV
decreased by 4.1% on a like-for-like basis. 
 
We undertook £1.0 billion of gross capital activity; proceeds from £0.5
billion of mature and non-core asset completed sales have partly been
reinvested in our current committed development programme, portfolio capex and
in selected acquisitions adjacent to existing assets. 
 
Our balance sheet metrics remain strong. The proportionately consolidated loan
to value ratio has decreased by 50 bps to 31.6% from 32.1% at March 2016 with
the impact of fall in values more than offset by sales. Our proportionally
consolidated weighted average interest rate has decreased by 10 bps to 3.2%
from 3.3% at March 2016. 
 
Underlying profit increased by 16.4% to £199 million; the impact of sales has
been more than offset by like-for-like rental growth, leasing of developments,
financing activity and a reduction in administrative expenses. 
 
The increase in underlying EPS of 20.6% is more than the increase in
underlying profit of 16.4% due to the 2012 convertible bond no longer being
dilutive. 
 
IFRS loss before tax for the half year of £205 million is lower than the prior
period profit of £823 million, primarily due to a negative property valuation
movement, resulting from outward yield shift offset in part by ERV growth. 
 
As announced in the 2015/16 full year results, we are increasing the dividend
by 3% for the year to March 2017 which gives a full year dividend of 29.20p.
In line with that, the second quarter dividend at 7.30p brings the total for
the half year to 14.60p. 
 
Presentation of financial information 
 
The Group financial statements are prepared under IFRS where the Group's
interests in joint ventures and funds 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 and funds 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 statements to British Land's interests on a proportionally consolidated
basis are included in Table A within the supplementary disclosures. 
 
Management monitors underlying profit as this more accurately reflects the
Group's financial performance and the underlying recurring performance of our
core property rental activity, as opposed 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. 
 
Management also monitors EPRA NAV 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 consistent applied
metric, being EPRA NAV, and dividends paid. 
 
Loan to value (proportionately 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. 
 
Income statement 
 
1.     Underlying profit 
 
Underlying profit is the measure that is used internally to assess income
performance. No company adjustments have been made in the current or prior
year and therefore this is the same as the pre-tax EPRA earnings measure which
includes a number of adjustments to the IFRS reported profit before tax. This
is presented below on a proportionally consolidated basis: 
 
 6 months to                                     Section  30 September 20151  30 September 2016  
                                                          £m                  £m                 
 Gross rental income                                      326                 327                
 Property operating expenses                              (17)                (15)               
 Net rental income                               1.1      309                 312                
 Net fees and other income                                7                   8                  
 Administrative expenses                         1.3      (49)                (43)               
 Net financing costs                             1.2      (96)                (78)               
 Underlying profit                                        171                 199                
 Non-controlling interests in underlying profit           8                   7                  
 EPRA adjustments2                                        644                 (411)              
 IFRS profit/(loss) before tax                   2        823                 (205)              
 Underlying EPS                                  1.4      16.0p               19.3p              
 IFRS basic EPS                                  2        79.8p               (19.0)p            
 Dividend per share                              3        14.18p              14.60p             
 
 
1 Fees and other income and administrative expenses have been restated to
reflect the change in presentation of the results of Broadgate Estates, a
wholly owned subsidiary of the Group at 31 March 2016. This restatement has
had no impact on underlying profit. Refer to note 1 of the financial
statements for further details. 
 
2 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 and associated close out
costs.  These items are presented in the capital and other column of the
consolidated income statement. 
 
1.1   Net rental income 
 
                                                                   £m    
 Net rental income for the six months ended 30 September 2015      309   
 Capital activity                                                  (11)  
 Like-for-like rental income growth                                8     
 Leasing of developments                                           6     
 Net rental income for the six months ended 30 September 2016      312   
 
 
The £3 million increase in net rental income during the year was the result of
like-for-like growth and leasing of developments more than offsetting the
impact of net sales. Net sales over the last 18 months have reduced rents by
£11 million in the period. 
 
Retail and Leisure growth was 1.7% (1.1% including the impact of surrender
premia). This was driven by strong leasing activity, asset management
activities, such as splitting units, and additional turnover income. It also
includes a 40 bps drag as a result of the BHS administration, however 80% of
this space is now let or under offer. 
 
Like-for-like rental income growth was 3.4% excluding the impact of surrender
premia. Office and Residential growth was 6.7%; just over half of this was due
to the letting up of completed developments that are now in the like-for-like
portfolio, predominantly The Leadenhall Building and Marble Arch House which
are both now full, with the remainder being attributable to strong rent review
activity, particularly at Regent's Place. 
 
The successful letting of our recently completed development programme
provided £6 million of additional rent this half year, benefitting from UBS'
index-linked lease at 5 Broadgate. 
 
1.2   Net financing costs 
 
                                                                     £m    
 Net financing costs for the six months ended 30 September 2015      (96)  
 Financing activity - debt transactions                              12    
 Financing activity - lower rates                                    5     
 Acquisitions                                                        (1)   
 Disposals                                                           3     
 Completion of developments                                          (1)   
 Net financing costs for the six months ended 30 September 2016      (78)  
 
 
Financing costs were £18 million lower this half year. 
 
Debt transactions over the last 18 months, including the £350 million zero
coupon convertible bond, reduced costs by £12 million this half year. In the
current period, we used sales proceeds to repay revolving credit facilities
and we completed the repayment of the £295 million TBL Properties Limited
secured debt facility. Our liability management, which is NPV positive, has
reduced NAV by 2p. We have also agreed one year extensions to a portion of our
unsecured facilities, in total £885 million. 
 
Our approach to interest rate management remains an important factor in
reducing interest costs. The decision to keep a portion of our debt at
floating rates has seen us benefit from a saving of £5 million resulting from
lower market rates. At the period end the proportion of our debt held at fixed
rates was 52% on average over the next 5 years. 
 
The impact of capital activity and developments on net financing costs was
broadly balanced. 
 
1.3   Administrative expenses 
 
Overall, administrative expenses decreased by £6 million this half year. This
is due to actions that we have taken to manage costs and reflects lower
accruals on management incentives. The Group's operating cost ratio has
reduced by 280 bps to 15.0% (H1 2015/16: 17.8%). 
 
Last year, we brought the property management of our Retail assets in-house to
Broadgate Estates, a wholly owned subsidiary, in line with our strategic focus
on customer orientation and placemaking. In recognition of the core role
Broadgate Estates now plays in how we run the business, we changed the way its
results were presented in the Group income statement at 31 March 2016. For the
period to 30 September 2016, this has resulted in a £2 million increase in
administrative expenses and an equal and offsetting increase in net fees and
other income; importantly this change has no impact on underlying profit. The
prior period comparatives for administrative expenses and net fees and other
income have also been restated to reflect this change in presentation. 
 
1.4   Underlying EPS 
 
Underlying EPS was 19.3 pence (H1 2015/16: 16.0 pence) based on underlying
profit after tax of £199 million (H1 2015/16: £171 million). The increase in
underlying EPS of 20.6% is more than the increase in underlying profit of
16.4% as the 2012 1.5% convertible bond is no longer dilutive. As the share
price fell below the 693 pence exchange price at period end, no dilution
adjustment was made (H1 2015/16: £6 million interest added back and shares
increased by 57.8 million), in line with EPRA guidance. 
 
2.     IFRS profit/(loss) before tax 
 
The main difference between IFRS profit/(loss) before tax and underlying
profit is that it includes the valuation movement on investment and
development properties and the fair value movements of financial instruments.
In addition, the Group's investments in joint ventures and funds are equity
accounted in the IFRS income statement but are included on a proportionately
consolidated basis within underlying profit. 
 
The IFRS loss before tax for the period was £205 million, compared to a profit
before tax for the prior period of £823 million, resulting from outward yield
shift and a slowdown in ERV growth, particularly following the UK's decision
to leave the EU in June. This impacts IFRS profit/(loss) before tax through
the valuation movement on the Group's properties which was £654 million less
than the prior period and the valuation movement on the properties held in
joint ventures and funds which was £422 million less than the prior period. 
 
The £39 million decrease in IFRS net financing costs to £26 million was
principally due to revaluation gains recorded in respect of the Group's
convertible bonds. 
 
IFRS basic EPS was a negative 19.0 pence per share, compared to a positive
79.8 pence per share in the prior period. The basic weighted average number of
shares in issue during the period was 1,029 million (H1 2015/16: 1,022
million). 
 
3.     Dividends 
 
As previously announced in May 2016, we proposed an increase in the dividend
by 3% for the year to March 2017 which gives a full year dividend of 29.20p.
In line with this, the second quarter dividend at 7.30p brings the total for
the half year to 14.60p. The increase in EPS of 20.6% resulted in a reduction
in the dividend pay-out ratio to 76% (H1 2015/16: 88%). 
 
Balance sheet 
 
                                      Section  FY 2015/16  H1 2016/17  
                                               £m          £m          
 Properties at valuation                       14,648      13,919      
 Other non-current assets                      138         146         
                                               14,786      14,065      
 Other net current liabilities                 (257)       (247)       
 Adjusted net debt                    6        (4,765)     (4,463)     
 Other non-current liabilities                 (90)        (101)       
 EPRA net assets (undiluted)                   9,674       9,254       
 Dilution impact of convertible bond           400         -           
 EPRA net assets (diluted)                     10,074      9,254       
 EPRA NAV per share                   4        919p        891p        
 Non-controlling interest                      277         249         
 EPRA adjustments1                             (732)       (322)       
 IFRS net assets                      5        9,619       9,181       
 
 
1 EPRA net assets exclude the mark-to-market on effective cash flow hedges and
related debt adjustments, the mark-to-market on the convertible bonds as well
as deferred taxation on property and derivative revaluations. They include the
valuation surplus on trading properties and are adjusted for the dilutive
impact of share options. H1 2015/16 also includes an adjustment for the
dilutive impact of the 1.5% convertible bond maturing in 2017. No dilution
adjustment is made for the £350 million zero coupon convertible bond maturing
in 2020. Details of the EPRA adjustments are included in Table B within the
supplementary disclosures. 
 
4.     EPRA net asset value per share 
 
                                                 pence  
 EPRA NAV per share at 31 March 2016             919    
 Offices and Residential valuation movement      (22)   
 Retail and Leisure valuation movement           (17)   
 Underlying profit                               18     
 Dividends                                       (13)   
 Finance transaction costs                       (2)    
 Defined benefit pension movement                (2)    
 1.5% convertible bond dilution reversal         10     
 EPRA NAV per share at 30 September 2016         891    
 
 
The 3.0% decrease in EPRA NAV per share reflects a valuation decline of 2.8%.
This is primarily due to outward yield movement of 19 bps, offset by ERV
growth of 0.5% and the benefit of completing sales ahead of March 2016
valuations. 
 
Retail and Leisure valuations were down 2.4% with outward yield movement of 18
bps offset by ERV growth of 0.9%; the multi-let portfolio saw stronger ERV
growth of 1.3%. Investment evidence since the referendum has been focused on
smaller retail centres. This is reflected in the relative yield movements
between the regional and local assets; yield movements in Regional have been
in the range 7 bps to 41 bps and for Local, the range is 12 bps to 84 bps. 
 
Office and Residential valuations were down 3.3% with outward yield movement
of 21 bps offset by modest ERV growth of 0.1%; the West End performed slightly
better than the City, partly due to the reversion captured through rent
reviews at Regent's Place. City valuations were down 4.9%; this includes the
Broadgate campus which was down 5.5% reflecting a range of results; properties
with lease expiries in the next 18 months were down 15% on average;
conversely, UBS' new headquarters at 5 Broadgate was up 3.6% reflecting the 17
year  unexpired lease term and RPI linked increases. 
 
The 2p impact of finance transaction costs primarily relates to early
repayment of term debt facilities and associated swaps. Movements in
liabilities of the Group's defined benefit scheme, which is closed to new
members, contributed a 2p reduction in EPRA NAV as a result of falling
corporate bond rates. 
 
There is a 10p benefit to EPRA NAV due to the reversal of the 2012 convertible
bond dilution included in FY2015/16 results. As the share price fell below the
693p exchange price at period end, no dilution adjustment was made (FY2015/16:
£400 million debt deducted from net asset value and diluted number of shares
increased by 57.8 million). Excluding this adjustment, NAV decreases by 4.1%
on a like-for-like basis. 
 
5.     IFRS net assets 
 
IFRS net assets at 30 September 2016 were £9,181 million, a decrease of £438
million from 31 March 2016. This was primarily due to property revaluation
losses in the current year, which were £257 million for the Group and £205
million for the Group's share of joint ventures and funds. 
 
The short-term borrowings of £416 million represent the 1.5% £400 million
convertible bond, which matures on 10 September 2017. 
 
Cash flow, net debt and financing 
 
6.     Adjusted net debt1 
 
                                             £m       
 Adjusted net debt at 31 March 2016          (4,765)  
 Disposals                                   536      
 Acquisitions                                (88)     
 Development and capex                       (138)    
 Net cash from operations                    173      
 Dividends                                   (150)    
 Other                                       (31)     
 Adjusted net debt at 30 September 2016      (4,463)  
 
 
1 Adjusted net debt is a proportionally consolidated measure. It represents
the Group net debt as disclosed in Note 10 and the Group's share of joint
venture and funds' net debt excluding the mark-to-market on effective cash
flow hedges and 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. 
 
The impact of our investment activity in the half year was a net decrease in
debt of £310 million. Completed disposals included the sale of Debenhams,
Oxford Street for £400 million and BL's interest in three superstores
totalling £79 million (BL share). Contracts were exchanged on the sale of a
portfolio of non-core Retail assets for £191 million with completion scheduled
for January 2017. 
 
Acquisitions completed in the year included the New George Street Estate in
Plymouth for £64 million which will now be managed as an integrated part of
Drake Circus which it is adjacent to, and the purchase of an additional 1.2%
of the units in Hercules Unit Trust bringing the Group's ownership to 76.5% at
the period end. 
 
Other investment included development expenditure of £94 million and capital
expenditure of £44 million related to asset management on the standing
portfolio. The value of developments under construction or committed is £619
million with costs to come of £277 million. Speculative development exposure
is 5% of the portfolio after taking into account residential pre-sales. There
is 449,000 sq ft of developments in our near term pipeline with anticipated
cost of £155 million. 
 
7.     Financing 
 
                                 Group          Proportionally consolidated  
                                 31 March 2016  30 September 2016            31 March 2016  30 September 2016  
 Net debt / adjusted net debt 1  £3,617m        £3,372m                      £4,765m        £4,463m            
 Principal amount of gross debt  £3,552m        £3,297m                      £5,089m        £4,804m            
 Loan to value                   25.2%          24.6%                        32.1%          31.6%              
 Weighted average interest rate  2.6%           2.5%                         3.3%           3.2%               
 Interest cover                  3.3            4.4                          3.0            3.5                
 Weighted average debt maturity  7.2 years      7.2 years                    8.1 years      8.0 years          
 
 
1 The Group figures represent net debt as presented in note 10 of the interim
financial statements. The proportionally consolidated figures include the
Group's share of joint venture and funds' net debt and exclude the
mark-to-market on effective cash flow hedges and related debt adjustments and
non-controlling interests.   
 
Balance sheet metrics remain strong. LTV and weighted average interest rate on
drawn debt were reduced and interest cover improved. Our proportionally
consolidated LTV was 31.6% at September 2016, down 50 bps from 32.1% at March
2016 reflecting the impact of the sales and fall in property values. The group
LTV reduced for similar reasons from 25.2% to 24.6%. Note 10 of the interim
financial statements sets out the calculation of the Group and proportionally
consolidated LTV. 
 
The strength of the Group's balance sheet is reflected in British Land's
senior unsecured credit rating which continues to be rated by Fitch at A-. 
 
Our proportionally consolidated weighted average interest rate reduced to 3.2%
at 30 September 2016 from 3.3% at 31 March 2016. This reflects a rise of 20
bps due to repayment of cheaper facilities with sales proceeds received,
including from the sale of Debenhams, Oxford Street, offset by a 30 bps
reduction principally as a result of our financing activity. 
 
Our weighted average debt maturity has stayed stable at 8 years. 
 
British Land has £1.7 billion of committed unsecured revolving banking
facilities. Of these facilities, £1.6 billion have maturities of more than two
years and £1.0 billion was undrawn at 30 September 2016. Based on our current
commitments and these facilities, the Group has no requirement to refinance
until 2020, even if the 1.5% convertible does not convert. 
 
Further information on our approach to financing is provided in the financial
policies and principles section of the audited annual report for the year
ended 31 March 2016. 
 
Lucinda Bell 
 
Chief Financial Officer 
 
RISK MANAGEMENT AND PRINCIPAL RISKS 
 
For British Land, effective risk management is a cornerstone of our strategy
and fundamental to the achievement of our strategic objectives in delivery of
long term sustainable returns. The Group's risk appetite and its integrated
approach to managing risk remains as set out on pages 57-58 of the Annual
Report and Accounts published in May 2016. 
 
The Directors have considered the principal risks and uncertainties that the
company is exposed to, and which may impact performance for the remaining six
months of the year, in light of the outcome of the UK's referendum on
continued membership of the EU.  Whilst, we consider the principal risks are
unchanged from those set out on pages 60-63 of the Annual Report and Accounts
published in May 2016, several risks are elevated as a result of the increased
political and economic uncertainty. 
 
As a result of the increased economic and political risk, other principal
risks that are considered to be impacted while the terms and timing of exit
are negotiated, and potentially beyond, are; investor and occupier demand,
availability of finance, execution of investment strategy and income
sustainability. 
 
We have continued to see good activity and interest in our portfolio since the
referendum, but are mindful of the increased uncertainty and have optionality
in respect of our major development decisions to respond to the changing
environment. We have a high quality portfolio with secure income and robust
finances. 
 
Our principal risks and uncertainties are summarised below. 
 
Principal External Risks 
 
Economic outlook - The economic climate and projections for interest rates
present risks and opportunities in property and financing markets and the
businesses of our occupiers. 
 
Political outlook- Significant political events and policies, including the
UK's decision to leave the EU, bring risks both in terms of uncertainty until
the terms of the exit are known and the impact of policies introduced. This
will impact the businesses of our occupiers and the wider investment case for
the UK. 
 
Commercial property investor demand  - Reduction in investor demand for UK
real estate may result in falls in asset valuations and could arise from
variations in the health of the UK economy, the attractiveness of investment
in the UK, availability of finance and the relative attractiveness of other
asset classes. 
 
Development cost inflation - Cost inflation presents a risk to the
profitability of our development projects and has the potential to adversely
affect our overall return on investment. 
 
Occupier demand and tenant default- Underlying income, rental growth and
capital performance could be adversely affected by weakening occupier demand
and occupier failures resulting from variations in the health of the UK
economy and corresponding weakening of consumer confidence, business activity
and investment. Changing consumer and business practices (including the growth
of internet retailing, flexible working practices and demand for energy
efficient buildings), new technologies, new legislation and alternative
locations may result in earlier than anticipated obsolescence of our buildings
if evolving occupier and regulatory requirements are not met. 
 
Availability and cost of finance- Reduced availability of property finance may
adversely impact British Land's ability to refinance debt and drive up cost.
This may also result in weaker investor demand for real estate. Increasing
finance costs would reduce British Land's underlying profits. 
 
Catastrophic business event- An external event such as a civil emergency,
including a large-scale terrorist attack, cybercrime, extreme weather
occurrence or environmental disaster could severely disrupt global markets
(including property and finance) and cause significant damage and disruption
to British Land's portfolio and operations. 
 
Principal Internal Risks 
 
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; and co-investment
arrangements. 
 
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; and adverse
planning judgements. 
 
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 experience may result in significant
underperformance or impact the effectiveness of operations and decision
making, in turn impacting business performance. 
 
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. 
 
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 financing
covenant limits are considered to be the most significant risks to the
continuing operation of British Land as a going concern. 
 
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 and
capital 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; and
nature and timing of asset management and development activity. 
 
Statement of directors' responsibilities 
 
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 European Union and that the
interim management report includes a fair review of the information required
by DTR 4.2.7 and DTR 4.2.8, 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 in the Annual Report and Accounts
for the year ended 31 March 2016, which is available on the company website
www.britishland.com.

By order of the Board 
 
Lucinda Bell 
 
Chief Financial Officer 
 
15 November 2016 
 
Independent review report to The British Land Company PLC 
 
Report on the condensed set of financial statements 
 
Our conclusion 
 
We have reviewed The British Land Company PLC's condensed set of 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 2016.
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 International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and the
Disclosure Rules and Transparency Rules of the United Kingdom's Financial
Conduct Authority. 
 
What we have reviewed 
 
The interim financial statements comprise: 
 
·      the consolidated balance sheet as at 30 September 2016; 
 
·      the consolidated income statement and 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 have been
prepared in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the Disclosure
Rules and Transparency Rules of the United Kingdom's Financial Conduct
Authority. 
 
As disclosed in note 1 to the interim financial statements, the financial
reporting framework that has been applied in the preparation of the full
annual financial statements of the Group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union. 
 
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, are the
responsibility of, and have been approved by, the directors. The directors are
responsible for preparing the half year results in accordance with the
Disclosure Rules and Transparency Rules of the United Kingdom's Financial
Conduct Authority. 
 
Our responsibility is to express a conclusion on the interim financial
statements in the half year results based on our review. This report,
including the conclusion, has been prepared for and only for the company for
the purpose of complying with the Disclosure Rules and Transparency Rules 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. 
 
What a review of interim financial statements involves 
 
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of 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 Ireland) and, consequently,
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion. 
 
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. 
 
PricewaterhouseCoopers LLP 
 
Chartered Accountants 
 
London 
 
15 November 2016 
 
a)   The maintenance and integrity of the The British Land Company PLC website
is the responsibility of the directors; the work carried out by the auditors
does not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the interim
financial statements since they were initially presented on the website. 
 
b)   Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions. 
 
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