REG - British Land Co PLC - Half-year Report
16/11/2022 07:00
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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 £765m of new finance on good terms including £515m loan in
Paddington Central Joint Venture
- LTV at 30.7% (32.9%: March 2022); £2bn 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
£0.9bn of gross capital activity
- £694m from sale of 75% of majority of Paddington Central completed in
July 2022, crystallising 9% p.a. total property returns
- £25m acquisition of Peterhouse Western Expansion, 90,000 sq ft consented
scheme in Cambridge
- £22m 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 £136m £120m 13.3%
Underlying earnings per share2 14.5p 12.9p 12.4%
IFRS (loss) / profit after tax £(34)m £370m
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%
Balance sheet 30 Sep 2022 31 March 2022
Portfolio at valuation (proportionally consolidated) £9,643m £10,467m (3.0)%1
EPRA Net Tangible Assets per share(2) 695p 727p (4.4)%
IFRS net assets £6,598m £6,733m
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
Lettings and renewals over 1 year 1.1m sq ft 1.3m sq ft
Total lettings and renewals 1.5m sq ft 1.8m sq ft
Committed and recently completed development 1.7m sq ft 2.0m sq 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 (https://streamstudio.world-television.com/927-1254-34051/en)
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 (mailto: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 £16m or 13.3% in the period to £136m, 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 £25m, 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 £22m
- 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
£200,000 funding
Recycle capital - £694m from the sale of 75% of majority of assets at Paddington Central
completed, establishing a new JV
- £47m of acquisitions in innovation and urban logistics opportunities
- Improved balance sheet and liquidity post refinancing including £515m
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 £1.5bn
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
£2bn 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 £515m five year secured loan
for the Paddington joint venture, provided by a club of three banks. In
October 2022, we renewed a £100m bilateral bank revolving credit facility for
British Land with a 5 year initial term. In November, we signed a further new
£150m 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.£6.6bn 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 £2.3bn, 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 £660m, 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 £26.50 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 £5.5bn 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
As at 30 Sep 2022 31 Mar 2022
Portfolio valuation £9,643m £10,467m
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%
- Yield shift +17 bps (42) bps
- ERV movement 1.2% (1.2)%
- Valuation movement (3.0)% 6.8%
Six months to: 30 Sep 2022 30 Sep 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 £894m £814m
- Acquisitions £47m £501m
- Disposals £(694)m £(196)m
- Capital investment £153m £117m
Net investment/(divestment) £(494)m £422m
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
At 30 September 2022 Valuation Valuation movement ERV movement Yield shift Total property return
£m
%
%
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
From 1 April 2022 Campuses Retail & Fulfilment Total
£m
£m
£m
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 £894m.
The most significant transaction was the sale of a 75% interest in the
majority of our assets at Paddington Central to GIC for £694m. 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 £25m
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 £22m, our second
urban logistics location in Southwark, following the acquisition of Verney
Road for £31m 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. £100m
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 £8.4m 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 £2m, 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 £1bn 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 £200,000 to a dedicated
Cost of Living Fund and immediately pledged £25,000 to the Shelter Hardship
Fund (in addition to our support to the Shelter National Helpline) and
£25,000 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 2022 31 Mar 2022
Portfolio Valuation (BL share) £6,229m £6,967m
Occupancy 96.9% 96.7%
Weighted average lease length to first break 7.5 yrs 7.0 yrs
Six months to: 30 Sep 2022 30 Sep 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 £6.2bn, 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 £52m (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 £4.0bn.
It is expected to complete in 2031 and should deliver a total development
value of £6.0bn of which the commercial element accounts for £3.7bn 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 £50 psf and
a capital value psf of around £1,000 psf on the residential, which are both
attractive relative to competing schemes.
Sq ft Workspace Retail & leisure No. residential 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
As at 30 Sep 2022 31 Mar 2022
Portfolio valuation (BL share) £3,414m £3,500m
- Of which Retail Parks £2,046m £2,114m
- Of which Shopping Centres £788m £800m
- Of which Urban Logistics £323m £319m
Occupancy1 96.6% 96.3%
Weighted average lease length to first break 4.6 yrs 4.6 yrs
Six months to: 30 Sep 2022 30 Sep 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
% of 2019(1) Benchmark 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
At 30 September 2022 Sq ft Current Value Cost to complete ERV ERV
'000
£m
£m
£m
Let & under offer
£m
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 £62.3m 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
As at 30 September 2022 Sector BL Share 100% sq ft PC Calendar Year ERV Forecast IRR
%
'000
£m(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 Way, A12 Mixed Use 50 276 Q4 2024 3.6 11
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
Six months to 30 Sep 2022 30 Sep 2021
Underlying Profit1,2 £136m £120m
Underlying earning per share1,2 14.5p 12.9p
IFRS (loss)/profit after tax £(34)m £370m
Dividend per share 11.60p 10.32p
Total accounting return1 (2.8)% 6.1%
As at 30 Sep 2022 31 Mar 2022
EPRA Net Tangible Assets per share1,2 695p 727p
EPRA Net Disposal Value per share1,2 729p 702p
IFRS net assets £6,598m £6,733m
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 £136m, 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
£m
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 £1m. This reflects the difference between the £1m 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 £16m, 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 £2m in the period. This reflects a
£6m increase from the £794m of acquisitions in Retail Parks, Urban
Logistics, and innovation opportunities within Campuses over the last 18
months. Offsetting this, we disposed of £1,180m of mature assets, resulting
in a £8m 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 £62m, of which 34% is already pre-let or under offer.
IFRS loss after tax for the period was £34m, compared with a profit after tax
for the prior period of £370m. 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 £515m 5 year secured loan for the
Paddington joint venture, provided by a club of three banks. In October, for
British Land, we renewed a £100m bilateral bank revolving credit facility
(RCF) with a new 5 year initial term. In November, we signed a further new
£150m 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 £2bn 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 £29m 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.
Six months to Section 30 Sep 2022 30 Sep 2021
£m
£m
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 £1m underlying tax charge in the period.
1.2 Net rental income
£m
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 £1m. This reflects the difference between the £1m 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 £10m in the period, where the proceeds from sales are being reinvested
into value accretive acquisitions and developments. Acquisitions have
increased net rents by £9m, primarily as a result of the purchase of retail
parks in Farnborough, Thurrock and Reading Gate. Developments have increased
net rents by £10m, driven by the completion of 1 Triton Square. The committed
development pipeline is expected to deliver £62m 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 £1m
compared to the prior period, with a net £1m credit recognised in the period.
We've made good progress on prior year debtors; the £72m of tenant debtors
and accrued income as at 31 March 2022 now stands at £46m, primarily driven
by cash collection and negotiations with occupiers. As of 30 September 2022,
tenant debtors and accrued income totalled £89m of which £55m (or 62%) is
provided for.
1.3. Administrative expenses
Administrative expenses are flat period on period at £44m 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
£m
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 £3m increase in costs,
mostly offset by proceeds from sales which were used to repay revolving credit
facilities with a net cost of £1m. As we continue to progress our committed
development programme, the interest capitalised on the funds drawn has
increased period on period, resulting in a £1m 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 £34m, compared with a profit after
tax for the prior period of £370m. 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 £189m,
the capital and other income loss from joint ventures of £97m, net capital
finance income of £147m (primarily the mark-to-market movement on the
derivatives hedging the interest rate on our debt) and the Underlying Profit
of £136m. 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
As at Section 30 Sep 2022 31 Mar 2022
£m
£m
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 £6,598m, a decrease of £135m from
31 March 2022. This was primarily due to the IFRS loss after tax of £34m and
dividends paid in the period of £108m.
Cash flow, net debt and financing
6. Adjusted net debt1
£m
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 £636m whilst development
spend totalled £118m with a further £34m on capital expenditure related to
asset management on the standing portfolio. The value of committed
developments is £581m, with £569m 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 £772m.
7. Financing
Group Proportionally consolidated
30 Sep 2022 31 Mar 2022 30 Sep 2022 31 Mar 2022
Net debt / adjusted net debt1 £1,800m £2,541m £2,977m £3,458m
Principal amount of gross debt £2,012m £2,562m £3,217m £3,648m
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 debt 6.0 years 6.6 years 6.3 years 6.9 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 £515m 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 £2bn 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 £100m bilateral bank RCF with a new 5 year initial
term. In November, we signed a further £150m 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
£420m 'Green loan' completed in 2021 secured by 100 Liverpool Street, we have
raised over £1bn 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 £14.1bn (British Land share: £9.6bn) 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 (http://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 Risk Status at year end Change since year end Commentary
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, Legal and Regulatory Medium to High Increasing The global geopolitical environment remains uncertain, heightened by the
recent war 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 to High No change The market outlook for retail continues 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 Logistics Low No change Occupational fundamentals remain favourable 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/ Business Disruption Medium to High No change Whilst Covid-19 disruption has eased, the heightened global and political
uncertainty, 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 Risk Status at year end Change since year end Commentary
Internal
Portfolio Strategy Medium No change External impacts discussed in the macroeconomic 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 Medium No change Market interest rates have risen sharply 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 £2bn
of undrawn facilities and cash.
Environmental Sustainability Medium No change We are making good progress against our 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 Culture Medium to High No change Like many companies, we are experiencing 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 to High Increasing We are mindful that higher input prices 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 and Compliance Medium No change Key risks include: Information Systems & 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 30 September 2022 Six months ended 30 September 2021
Unaudited
Unaudited
Note Underlying1 Capital Total Underlying1 Capital Total
£m
and other
£m
£m
and other
£m
£m
£m
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 - (20) (20) - 3 3
investments
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 30 September 2022 Six months ended 30 September 2021
Unaudited
Unaudited
Note Underlying1 Capital Total Underlying1 Capital Total
£m
and other
£m
£m
and other
£m
£m
£m
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 £2m (six months ended 30 September 2021: charge of £2m).
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 ended Six months ended
30 September
30 September
2022
2021
Unaudited
Unaudited
£m
£m
(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
Note 30 September 2022 31 March
Unaudited
2022
£m
Audited
£m
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
Note Six months ended Six months ended
30 September 2022
30 September 2021
Unaudited
Unaudited
£m Restated(1)
£m
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)
Share capital Share premium £m Hedging Re- valuation reserve Merger reserve Retained earnings Total Non-controlling interests Total
£m
and translation reserve
£m
£m
£m
£m
£m
equity
£m
£m
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)
Share capital Share premium £m Hedging Re- valuation reserve Merger reserve Retained earnings Total Non-controlling interests Total
£m
and translation reserve
£m
£m
£m
£m
£m
equity
£m
£m
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 £38m. 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 £40m and consequently £40m 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 £38m 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 £187m to £149m and the net cash outflow from financing
activities increases from £2m to £40m 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
£234m, predominantly due to short term borrowings and overdrafts of £316m
and deferred income of £58m (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 £2.0bn 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 £29m 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 30 September 2022 Six months ended 30 September 2021
Relevant earnings Relevant Earnings Relevant Relevant Earnings
£m
number
per share
earnings
number
per share
of shares
pence
£m
of shares
pence
million
million
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
Relevant Relevant Net asset Relevant Relevant Net asset
net assets
number
value per
net assets
number
value per
£m
of shares
share
£m
of shares
share
million
pence
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 30 September 2022 Six months ended 30 September 2021
Movement in Dividend per share paid Total Movement in NTA per share Dividend per share paid Total
NTA per share
pence
accounting return
pence
pence
accounting
pence
return
Total accounting return (32) 11.60 (2.8%) 33 6.64 6.1%
3 Revenue and costs
Six months ended 30 September 2022 Six months ended 30 September 2021
Underlying Capital Total Underlying Capital Total
£m
and other
£m
£m
and other
£m
£m
£m
Rent receivable 160 - 160 158 - 158
Spreading of tenant incentives and contracted 7 - 7 6 - 6
rent increases
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 £29m payment
to one party for the surrender of an agreement for lease, with a subsequent
premium of £29m 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 £29m 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 £27m (30 September 2021: £29m).
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 ended Six months ended
30 September
30 September
2022
2021
£m
£m
Revaluation of properties (189) 220
Revaluation of owner-occupied property - (1)
Revaluation of properties held by joint ventures accounted for using the (126) 60
equity method
(315) 279
5 Net financing
Six months ended Six months ended
30 September
30 September 2021
2022
£m
£m
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 ended Six months ended
30 September
30 September 2021
2022
£m
£m
Taxation expense
Current taxation
Underlying Profit
Current period UK corporation taxation (30 September 2022: 19%; 30 September (1) (1)
2021: 19%)
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 £1m (six months ended 30 September 2021: £nil).
Current taxation expense attributable to Capital and other profit was £nil
(six months ended 30 September 2021: £2m). Deferred taxation on revaluation
of derivatives attributable to Capital and other profit was £11m (six months
ended 30 September 2021: £nil).
7 Property
Property reconciliation
Six months ended 30 September 2022 Year ended 31 March 2022
Investment and development properties Level 3 Trading and held-for-sale properties Owner-occupied Level 3 Total Investment and development properties Level 3 Trading Owner-occupied Total
£m
£m
£m
£m
£m
Level 3
£m
and held-
£m
for-sale properties
£m
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 24 - - 24 18 - - 18
management initiatives
- 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 5,942 6,929
to shareholders
1. Development expenditure includes government grants received for the
development of affordable and social housing of £nil (31 March 2022: £4m).
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 £5,956m 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 £934m of investment and development properties and £2m of
property, plant and equipment with a resulting loss in the Capital and other
column of the Consolidated income statement of £19m 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 £122m, 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
Fair value at Impact on valuations Impact on valuations Impact on valuations
30 September 2022
£m
+5% ERV -5% ERV -25bps NEY +25bps NEY -5% costs +5% costs
£m
£m
£m
£m
£m
£m
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
Investment Fair value at Valuation ERV per sq ft Equivalent yield Costs to complete per sq ft
30 September 2022
technique
£m
Min Max Average Min Max Average Min Max Average
£
£
£
%
%
%
£
£
£
Campuses 2,429 Investment methodology 9 157 57 4 7 5 - 132 30
Retail & Fulfilment 2,698 Investment methodology 2 30 17 3 19 6 - 40 6
Developments 803 Residual methodology 30 95 86 4 6 4 156 1,345 780
Total 5,930
Trading properties 26
at fair value
Group property 5,956
portfolio valuation
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 £23m (31 March 2022: £23m) 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 £1m (six months ended 30 September 2021:
£2m) (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 £2m increase/decrease to provisions for impairment of
tenant incentives (31 March 2022: £2m). 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 £3m
increase/decrease in provisions for impairment of tenant incentives (31 March
2022: £2m). 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.
Movement in provisions for impairment of tenant incentives Group Proportionally consolidated
£m
£m
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 £1,221m (31 March 2022: £1,266m) were subject to a
security interest and other properties of non-recourse companies amounted to
£655m (31 March 2022: £649m), totalling £1,876m (31 March 2022: £1,915m).
8 Joint ventures
Summary movement for the period of the investments in joint ventures
Equity Loans Total
£m
£m
£m
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 £934m of investment and development properties and £2m
of property, plant and equipment with a resulting loss in the Capital and
other column of the Consolidated income statement of £19m 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 £2m
and share of net assets less shareholders loans of £107m 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 £685m
of cash consideration in relation to the sale of the investment and
development properties to the joint venture (net of transaction costs of
£9m), and subsequently a further £125m 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 ended Six months ended
30 September 2022
30 September 2021
£m £m £m £m
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 ended Six months ended
30 September 2022
30 September 2021
£m
£m
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
£m
£m
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 £41m
(31 March 2022: £28m) 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
£m
£m
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 £43m (31 March 2022: £47m). 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 £3m (six months ended 30 September 2021: £nil), as disclosed in Note 3.
10 Debtors continued
The decrease in provisions for impairment of tenant debtors and accrued income
of £4m (six months ended 30 September 2021: £4m) is equal to the release to
the income statement of £3m (six months ended 30 September 2021: £nil), plus
write-offs of tenant debtors and accrued income of £1m (six months ended 30
September 2021: £4m).
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 £1m increase (31 March 2022: £1m increase) and a £1m
decrease (31 March 2022: £1m 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 £5m increase (31 March 2022: £2m increase) and
a £5m decrease (31 March 2022: £2m 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.
Movement in provisions for impairment of tenant debtors and accrued income Group Proportionally consolidated
£m
£m
Provisions for impairment of tenant debtors and accrued income as at 1 April 47 61
2022
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 43 55
September 2022
30 September 2022
Group Proportionally consolidated
< 90 days 90 - 190 days 190 - 365 days past due > 365 days Total Total Percentage provided
past due
past due
£m
past due
£m
£m
£m
£m
£m
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
Group Proportionally consolidated
< 90 days 90 - 190 days 190 - 365 days past due > 365 days Total Total Percentage provided
past due
past due
£m
past due
£m
£m
£m
£m
£m
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 value Book value Difference Fair value Book value Difference
£m
£m
£m
£m
£m
£m
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 1 1 - 1 1 -
liabilities)
Net debt attributable to shareholders of the Company (including lease 1,806 1,930 (124) 2,759 2,675 139
liabilities)
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
£m
£m
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 £21m difference between other investments and plant, property and
equipment per the balance sheet totalling £85m, 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
£m
£m
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 £21m difference between other investments and plant, property and
equipment per the balance sheet totalling £85m, 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 2022 31 March
£m
2022
£m
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 1 1
subsidiary/non-controlling interests
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 £167m (31 March 2022:
£174m) to reflect the cumulative net amortised exceptional items relating to
the refinancings in the years ended 31 March 2005, 2006 and 2007.
30 September 2022 31 March
£m
2022
£m
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 £118m less (112) (64)
cash subject to a security interest of £6m)
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 £21m difference between other investments and plant, property and
equipment per the balance sheet totalling £85m, 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 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£m
£m
£m
£m
£m
£m
£m
£m
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 £108m was paid
on 29 July 2022. The whole of the 2022 Final dividend was a PID and no scrip
alternative was offered. £92m was paid to shareholders, and £16m 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
£m
£m
£m
£m
£m
£m
£m
£m
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
Reconciliation to Underlying Profit before taxation Six months ended Six months ended
30 September
30 September
2022
2021
£m
£m
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, £192m (six months ended 30 September 2021:
£171m) 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
£m
£m
£m
£m
£m
£m
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 £5,951m (31 March
2022: £6,938m) reconciles to the Group property portfolio valuation within
Note 7 of £5,942m (31 March 2022: £6,929m) due to the right-of-use assets
net of lease liabilities of £9m (31 March 2022: £9m), 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
British Land Group 30 September 31 March
2022
2022
£m
£m
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 £27m difference between the other non-current assets of £85m and
the other investments of £58m in Table A and the other net current
liabilities of £279m and other net (liabilities) assets in Table A of £252m
is £24m of property, plant and equipment attributable to the Group and £3m
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
£m Ordinary shares
of 25p 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 2022 Six months ended 30 September 2021
Group Joint ventures Less non-controlling interests Proportionally consolidated £m Group Joint ventures Less non-controlling interests Proportionally consolidated
£m
£m
£m
£m
£m
£m
£m
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 £4m of all inclusive rents relating
to service charge income. For the six months ended 30 September 2021, it also
excludes the £29m 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.
Group Share of Less non-controlling interests Share Mark-to-market on derivatives and related debt adjustments £m Head Valuation surplus on trading properties Intangibles and Deferred tax EPRA EPRA
£m
joint
£m
options
leases
£m
£m
NTA
NTA
ventures
£m
£m
30 September
31 March
£m
2022
2022
£m
£m
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 695p 727p
(Note 2)
1. Included within the total property value of £9,652m (31 March 2022:
£10,476m) are right-of-use assets net of lease liabilities of £9m (31 March
2022: £9m), 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
£m Pence per share £m Pence 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 ended Six months ended
30 September 2022
30 September 2021
£m Pence per share £m Pence 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
£m Pence £m Pence
per share 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 ended Six months ended
30 September 2022
30 September 2021
£m
£m
(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 20 (3)
investments
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 ended Six months ended
30 September
30 September 2021
2022
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
£m Pence £m Pence
per share
per 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
£m
£m
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
£m
£m
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 ended Six months ended
30 September
30 September 2021
2022
£m
£m
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 157 155
included in rents
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 (1) -
(D)
Adjusted Cost Ratio (including direct vacancy costs and excluding impairment 20.1% 26.2%
of tenant debtors, tenant incentives and accrued income) (A-D)/C
Adjusted Cost Ratio (excluding direct vacancy costs and excluding impairment 14.2% 18.3%
of tenant debtors, tenant incentives and accrued income) (B-D)/C
Overhead and operating expenses capitalised (including share of joint 3 3
ventures)
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 ended Six months ended
30 September 2022
30 September 2021
£m
£m
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 £29m 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 September 2022 Year ended 31 March 2022
Group Joint ventures Total Group Joint ventures Total
£m £m £m £m £m £m
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 £2m (31 March 2022: £5m).
Table E: EPRA LTV
Six months ended 30 September 2022 Year ended 31 March 2022
Proportionately consolidated Proportionately consolidated
Group Share Non-controlling interests Total Group Share Non-controlling interests Total
£m
of Joint
£m
£m
of Joint
£m
£m
Ventures £m
Ventures
£m
£m
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%
£95m £131m £226m
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%
£43m £51m £94m
Purchases
Since 1 April 2022 Sector Price Price Annualised
(100%)
(BL Share)
Net Rents
£m
£m
£m1
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
Since 1 April 2022 Sector Price Price Annualised
(100%)
(BL Share)
Net Rents
£m
£m
£m1
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
At 30 September 2022 Group Joint ventures Total % £m
£m
£m
£m
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 2022 Annualised as at 30 September 2022
Accounting Basis £m 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
As at 30 September 2022 EPRA net EPRA topped up net initial yield Overall topped up net initial yield Net equivalent yield Net equivalent yield movement Net reversionary yield ERV Growth
initial yield
%3
%4
%
bps
%
%5
%
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 Land(2) MSCI British Land(2) MSCI British 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
As at 30 September 2022 % of As at 30 September 2022 % of
Retail & Fulfilment rent Campuses 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
As at 30 September 2022 BL Share Sq ft Rent (100%) Occupancy Lease
%
'000
£m pa1,4
rate %2,4
length 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 yrs Occupancy rate %
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
As at 30 September 2021 2022 2022
%
%
£m
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 basis) ERV Average rent
£m1
£psf
£m
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. £psf metrics shown for office space only
4. Standalone residential
Rent Subject to Open Market Rent Review
For year to 31 March 2023 2024 2025 2026 2027 2023-25 2023-27
As at 30 September 2022
£m
£m
£m
£m
£m
£m
£m
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 2023 2024 2025 2026 2027 2023-25 2023-27
As at 30 September 2022
£m
£m
£m
£m
£m
£m
£m
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 September 2022 Sector BL Share 100% sq ft PC Calendar Year Current Value Cost to come ERV Pre-let & under offer Forecast IRR %
%
'000
£m
£m1
£m2
£m(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 Way, A13 Mixed Use 50 276 Q4 2024 26 100 3.6 - 11
blended
The Dock Shed, A23 Mixed 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 September 2022 Sector BL Share 100% sq ft Earliest Start on Site Current Value Cost to come ERV Planning Status
%
'000
£m
£m1
£m2
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 BL Share 100% Sq ft Planning Status
%
'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,
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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
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forward-looking statements involve inherent known and unknown risks,
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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,
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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
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competition, (e) the behaviour of other market participants, (f) government,
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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
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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
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