TIDMBLND
RNS Number : 6488F
British Land Co PLC
18 November 2020
The British Land Company PLC Half Year Results
18 November 2020
Chris Grigg, CEO said: "I am immensely proud of what we have
achieved in my time at British Land. Today, despite the
unprecedented situation brought about by Covid, our business is
more financially resilient, our focus on mixed use London campuses
is clear and we have an unrivalled pipeline of opportunities. We
are closer to our customers and our expertise in creating and
managing space that reflects their needs has never been more
important. Under Simon's leadership the business is well placed to
build on these advantages, navigate the short term challenges and
thrive in the long term."
Simon Carter, incoming CEO said: "I take on the role of CEO at a
unique time, but what I've seen since returning to British Land,
especially over the last six months, reinforces my belief in the
strength of our business and gives me confidence in the future.
The quality of our office business has been clearly
demonstrated, with rent collection of 97% and occupancy of 95%.
Many of our customers have seen that their people can work more
flexibly, but they are clear that great office space, such as we
deliver at our mixed use campuses, will continue to play a crucial
role in their success, by promoting innovation, collaboration,
training and culture. Investors are increasingly taking a similar
long term perspective, looking through Covid, to acquire prime
London offices at pricing close to pre-pandemic levels.
Our first half results naturally reflect the challenges in
retail. Against this backdrop, we remain focused on active asset
management, working to maximise rent collection and keeping our
units occupied with successful retailers. There is a clear
preference from shoppers and retailers for out of town, open air
retail parks. Our approach and attractive asset mix means that
prior to the November lockdown, we were delivering significant
outperformance on footfall and retailer sales and a steady
improvement in rent collection levels.
We remain thoughtful and active in terms of capital allocation,
executing GBP675m of sales since April, enhancing the strength and
resilience of our balance sheet. We have also resumed the dividend
on the basis of a fixed percentage payout of underlying earnings to
provide maximum strategic and financial flexibility.
Going forward, we have four clear priorities for our business:
realising the potential of mixed use; progressing value accretive
development; addressing the challenges in retail; and active
capital recycling."
Performance summary
-- Financial performance: reflecting the impact of Covid-19
-- Underlying EPS reduced 34.8% primarily reflecting an increase
in provisions for rent receivables
-- Portfolio value down 7.3%; Offices down 3.1%; Retail down
14.9%; Developments broadly flat
-- EPRA Net Tangible Assets (NTA) reduced 10.3% to 693p
-- Strong and flexible balance sheet, dividend resumed
-- GBP456m retail assets sold since April 2020, 6.7% ahead of book value
-- GBP219m of standalone offices sold in November, including
Clarges Mayfair for GBP177m (which was 7.6% ahead of book
value)
-- GBP1bn undrawn facilities and cash with no requirement to refinance until 2024
-- LTV at 35.7%; 42% headroom to Group debt covenants
-- Interim dividend of 8.4p per share, representing 80% of underlying EPS
-- Fitch Ratings affirmed unsecured credit rating at 'A'
-- Continued strong performance on Sustainability benchmarks
-- 100 Liverpool Street completed, with embodied carbon under
400 kg CO(2) e per m(2) , ahead of 2030 targets
-- GRESB 4* and awarded a green star rating for the 10th consecutive year
-- AAA MSCI rating, ranking within the top 9% overall
Strategic priorities
We will remain focused on enhancing our core mixed use, London
business. We have four clear priorities:
-- Realising the potential of mixed use:
-- Offices portfolio 95% occupied; 65,000 sq ft of deals greater
than one year; lettings and renewals on the standing portfolio 9%
ahead of ERV
-- Under offer on 313,000 sq ft of leasing and in negotiation on a further 361,000 sq ft
-- Recently completed and committed developments 57% pre-let
(89% ex. Norton Folgate); generating GBP65m of future rent when 100
Liverpool Street, 1 Triton Square and Norton Folgate are fully
let
-- 97% of September quarter office rent collected
-- Storey operational across 325,000 sq ft; first stand-alone
location launched at Haggerston
-- Progressing value accretive development
-- Commitment to develop 336,000 sq ft mixed use scheme at
Norton Folgate, adjacent to Broadgate
-- Secured planning for our 53 acre scheme at Canada Water;
headlease drawdown expected end 2020
-- Commenced enabling works for first phase of our Canada Water masterplan
-- Addressing the challenges in retail
-- All retail assets open, 86% of stores open prior to regional
restrictions and the November lockdown
-- Portfolio 95% occupied; 161,000 sq ft of deals greater than
one year; 11% below previous passing rent
-- 278,000 sq ft of short and temporary deals
-- Footfall in September and October 82% of the same period last
year; retailer sales 85% of last year
-- 48% of retail assets are open air retail parks: significantly outperforming benchmarks
-- 62% of September quarter rent collected
-- Active capital recycling
-- GBP2.1bn assets sold since 2018, including GBP1.2bn in retail
-- Innovative transactions including superstore carve outs at retail centres
-- Reinvesting proceeds into development opportunities including
Norton Folgate and Canada Water
Summary performance
HY 2019/20 HY 2020/21 Change
Income statement
Underlying earnings per share(2) 16.1p 10.5p (34.8)%
Underlying Profit GBP152m GBP107m (29.6)%
IFRS (loss) after tax GBP(404)m GBP(730)m
IFRS basic earnings per share (42.9)p (78.7)p
Dividend per share 15.97p 8.40p
---------------------------------------- ------------- ------------- ----------
Total accounting return(2) (3.7)% (10.3)%
---------------------------------------- ------------- ------------- ----------
Balance sheet 31 Mar 2020 30 Sept 2020
Portfolio at valuation (proportionally
consolidated) GBP11,157m GBP10,315m (7.3)%(1)
EPRA Net Tangible Assets per
share(2) 773p 693p (10.3)%
IFRS net assets GBP7,147m GBP6,373m
Loan to value ratio (proportionally
consolidated) 34.0% 35.7%
---------------------------------------- ------------- ------------- ----------
Operational Statistics HY 2019/20 HY 2020/21
Lettings and renewals over 0.8m sq ft 0.2m sq ft
1 year
Total lettings and renewals 1.2m sq ft 0.6m sq ft
Gross investment activity GBP0.5bn GBP0.6bn
Committed and recently completed 1.6m sq ft 1.2m sq ft
development
---------------------------------------- ------------- ------------- ----------
Sustainability Performance
MSCI ESG AAA rating AAA rating
GRESB 4* and Green 4* and Green
Star Star
---------------------------------------- ------------- ------------- ----------
(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 set of financial
statements
Results Presentation Conference Call
A presentation of the results will be broadcast via conference
call and slides to accompany the call will be displayed along with
a live audio broadcast via the website (Britishland.com) at 8.30am
on 18 November 2020. The details for the conference call and
weblink are as follows:
UK Toll Free
Number: 0800 640 6441
Access code: 194307
Click for access: Audio weblink
A dial in replay will be available later in the day for 7 days.
The details are as follows:
Replay number: 020 3936 3001
Passcode: 345194
The accompanying slides will be made available at
britishland.com just prior to the event starting.
For Information Contact
Investor Relations
David Walker, British Land 07753 928382
Media
Charlotte Whitley, British Land 07887 802535
Guy Lamming/Gordon Simpson, Finsbury 020 7251 3801 britishland@finsbury.com
CHIEF EXECUTIVE'S REVIEW
Throughout this unprecedented time, the safety and wellbeing of
our colleagues, customers, suppliers and local communities has been
our priority. Across our business, our team have worked tirelessly
to provide secure environments for people to work, shop, live and
visit and we thank them all for their commitment and effort
throughout the last six months.
Covid Impact & Response
Since the start of the pandemic, we have focused on supporting
our customers and the communities in which we operate. We benefit
from an in-house property management team, who have kept our
campuses and retail places safe and secure, both inside and outside
the buildings and across the broader environment.
In Offices, we worked with our occupiers to help them return
over the summer so they are now well placed to adjust as and when
the restrictions which were introduced in November are relaxed.
Rent collection has been strong, at 97% for September. In Retail,
our targeted approach included forgiving rents to those most
affected, primarily smaller, independent customers with strong
underlying businesses but who were negatively impacted by Covid-19.
This support, and the flexibility provided to some larger occupiers
through commercial negotiation, totalled GBP14m of rents. We have
supported retailers with their reopening plans and today all of our
assets remain open to provide access to essential stores or those
providing click and collect services. We have now collected 62% of
retail rent due for the September quarter, putting the figure for
the whole portfolio at 77%. We have seen a significant improvement
in June rent collection figures which now stand at 81% with offices
at 98% and retail at 69%.
We are working proactively with those customers who continue to
have rent outstanding to maximise collection rates but recognise
that some rent due may not be recovered. Accordingly, we have made
provisions in the period totalling GBP32m against outstanding rents
and service charges with a further GBP13m against rent deferred in
March and June.
The work we have done over many years to establish strong
relationships with our local communities has been clearly evident
over recent months. We have provided specific support by increasing
our charitable donations to grassroots organisations such as Time
& Talents, to support their food bank close to Canada Water and
The 1928 Project at St Mary's Hospital Paddington, supplying NHS
workers with quality food. We have also funded strategic coaching
and advice through The Business School (formerly Cass) to selected
community partners to help them navigate the impact of Covid-19 and
supported the work of the National Literacy Trust. As the wider
impact on employment has become clearer, we are adapting our
approach, for example through virtual re-employment training and
are scoping five projects at our places. One example of this
virtual approach is at Regent's Place, where we brought local
schoolchildren together with professionals from the campus and the
surrounding area for a week long work experience programme,
including interactive seminars and group sessions.
Leasing & Operational Performance
Occupancy at our London Offices remains high at 95% and
following our commitment to the development of Norton Folgate,
completed and committed developments are 57% pre let by ERV.
Excluding Norton Folgate, 89% are pre-let. However, leasing
activity was understandably subdued, with occupiers more focused on
the short-term operational challenges. In London, we leased 65,000
sq ft of office space, with lettings and renewals on our standing
portfolio 9% ahead of March ERV. Of the 220,000 sq ft we had under
offer in May, 136,000 sq ft remains under offer and 37,500 sq ft
has exchanged, with a further 29,000 sq ft of short term deals
agreed. Only 17,000 sq ft has fallen away and we have gone under
offer on a further 177,000 sq ft. In total therefore, we are
currently under offer on 313,000 sq ft and in negotiations on a
further 361,000 sq ft. We are seeing good interest from legal and
financial businesses on our new space and these are typically
businesses which face lease events in 3-5 years' time.
Covid-19 will undoubtedly cause many businesses to consider how
to use their offices most productively and safely. So far, our
conversations suggest that high quality, sustainable and well
managed space enables companies to perform at their best and will
therefore remain key. Our focus on campuses and our ability to
safely manage the space inside and between our buildings is a key
advantage in that respect. However, in the context of significant
macro headwinds, occupiers are understandably postponing
commitments to new space and reflecting these concerns, we saw a
3.1% decline in the value of our Offices portfolio. However, values
within the investment market have proved resilient, with pricing of
prime London offices close to pre-pandemic levels as investors look
through the pandemic and remain positive on the long term role of
the office and global appeal of London.
Covid-19 has had a significant impact on retail, which was
already facing structural challenges as a result of the growth of
online. Accordingly, the value of the Retail portfolio was down
14.9%. Over the half, a further 16 of our occupiers have entered
CVA or administration accounting for 80 units. Of these, 13 units
have closed, 62 have seen reduced rents and 5 were unaffected,
overall resulting in a GBP11.6m reduction in annualised rents.
Occupancy across our retail portfolio remains high at 95%, with all
assets open; 86% of stores were open prior to the regional
restrictions and November lockdown and we were encouraged by the
pace at which footfall recovered, which in September and October,
was 82% of the same period last year. Leasing activity has been
understandably subdued, with 161,000 sq ft of deals greater than
one year signed 11% below previous passing rent and 8% below ERV.
Our approach has been both pragmatic and proactive to maximise
occupancy and rent collection. We are working with successful,
financially strong retailers who are additive to our places to
agree leasing structures that are appropriate to their business
models, potentially including an element of turnover-linked rent
and deliver sustainable, long term cash flows. Whilst rents on new
lettings and renewals are below previous passing levels, in a very
low interest rate environment, this approach of improving the
quality of our cash flow will in the long run underpin the appeal
of our assets to buyers.
At Canada Water, we were delighted to secure full planning
permission for our 53-acre mixed use scheme. However, the September
valuation does not reflect the drawdown of the headlease which is
expected by the end of the calendar year. As a result, and due to
valuation falls across the existing assets - which are
predominately retail - and an increase in anticipated masterplan
costs, the value of Canada Water fell 6.0%. We successfully
overcame the Judicial Review process with the claim being dismissed
by the High Court in October. Onsite, we have maintained momentum,
with enabling works for the first phase underway and we would
expect to be in a position to place the main build contract in
Spring 2021, market conditions permitting.
Capital Allocation & Investments
Our financial position remains strong. Our leverage has
increased marginally to 35.7% as valuation falls were partially
offset by asset disposals and retained earnings, and we continue to
benefit from the focus we have had for several years on the
strength of our balance sheet. We have GBP1bn in undrawn facilities
and cash and no requirement to refinance until 2024. We retain
significant headroom to our debt covenants, meaning the Group could
withstand a further fall in asset values across the portfolio of
42% prior to taking any mitigating actions. Fitch Ratings affirmed
our unsecured credit rating ' A ' in August, with stable
outlook.
We are focused on recycling capital out of retail and mature
office assets into value accretive development. We have sold
GBP456m of retail assets since 1 April, on average 6.7% ahead of
book value. Part of these proceeds will be recycled into Norton
Folgate, a 336,000 sq ft office led, mixed use development close to
our Broadgate campus. In a market focused on high quality, modern
and sustainable space, we expect Norton Folgate will let up well
closer to completion and are therefore confident progressing this
on a speculative basis.
Management Changes
As we announced in September, our CFO, Simon Carter, assumes the
role of CEO today. The Board are well progressed in their search
for a new CFO and we will announce the outcome of this process in
due course. In the meantime, we are pleased to announce the
appointment of David Walker as Interim CFO; David will perform this
role and join ExCo until a new CFO joins. David is currently the
Head of Investor Relations, a role he has performed for over 3
years. Alongside this, we are also pleased to announce that our
Head of Investment, Kelly Cleveland, will join ExCo with immediate
effect, continuing to report to Simon Carter. Kelly has been at
British Land since 2011 and is responsible for all aspects of our
investment process across the business.
Rebecca Worthington who was appointed to the British Land Board
in January 2018 and became Chair of the Audit Committee in 2019
will step down on 31 December 2020 following her appointment as
Chief Financial Officer of Canary Wharf Group, commencing May 2021.
The Board is grateful for her contribution and wish her well for
the future. The Board will now commence a search for a replacement
and Preben Prebensen will join and chair the Audit Committee in the
interim period beginning 1 January 2021. Irvinder Goodhew and Laura
Wade-Gery will both join the Nomination Committee with effect from
18 November 2020.
Outlook & Dividend
In Offices, as a result of Covid-19 and Brexit related
uncertainty, leasing volumes are likely to be lower as we expect
customers to continue to defer decisions and extend existing leases
where they can. Longer term, occupiers will focus on modern, high
quality and sustainable space which allows people to work more
flexibly, collaborate more effectively and supports training,
innovation and culture. Already, we are seeing good interest in
potential new space, from occupiers with demands three to five
years in the future where supply is limited. In this context, our
focus on mixed use London campuses, with a range of space and uses
and where we are continuing to develop, positions us well for this
opportunity. We are seeing encouraging signs that overseas
investors are looking through the pandemic and are positive on
London as a place to invest and the long-term role of offices. We
see increasing activity in investment markets for prime stock and
would expect this to strengthen as and when travel restrictions are
lifted.
Retail occupational markets are tough. Occupiers will remain
under pressure and will continue to focus only on the best quality
space which supports an online offer. We will continue to be
pragmatic in our approach to maximise occupancy and improve the
sustainability of rents, which we expect longer term to restore
investor confidence in the asset class. This is more easily
achieved at retail parks, which are aligned to retailers' online
and reopening strategies, and where operational performance is
ahead of market. With retail parks accounting for 48% of our retail
portfolio, we are relatively well positioned in this respect.
Despite the macro backdrop, there are already clear signs that
investment markets are rewarding long term, secure income. To that
end, we will continue to engage proactively but pragmatically with
occupiers, to maximise occupancy, deliver sustainable cashflows and
progress our strategy of reducing our retail exposure.
In March, we took the difficult decision to temporarily suspend
the dividend, given the unprecedented circumstances and the
uncertainty of outlook. Like many businesses, we continue to face
challenges as a result of Covid-19, but we also recognise the
importance of the dividend to shareholders and our obligations as a
REIT. We benefit from a strong financial position and a world-class
portfolio of real estate and have been reassured by the
productivity of our assets when restrictions were relaxed. As a
result, we are pleased to confirm that we will be resuming dividend
payments with an interim dividend of 8.4p per share, which is set
at 80% of Underlying EPS. Going forward, dividends will be paid
semi-annually as opposed to quarterly, to be announced at the
interim and full year results based on the most recently completed
six-month period. This policy ensures dividends will reflect the
impact of development completions, acquisitions, disposals and
trading conditions as they change over time. Crucially, it
maximises future strategic and financial flexibility.
Finally, it has been a privilege to lead British Land over the
last 11 years and I am immensely proud of what we have achieved in
that time. Today, our business is more resilient, our focus on
London is clear and we have an unrivalled pipeline of
opportunities. We are closer to our customers and our expertise in
creating and managing space that reflects their needs has never
been more important. Simon is the right person to build on these
advantages. He is a proven, growth-oriented business leader, with
significant real estate experience and expertise across various
asset classes and I wish him and the team all the best.
MARKET BACKDROP
Macro-economic context
The lockdown which started in March severely impacted economic
activity in the UK, with GDP falling by 20% in the quarter to June
but rallying 15.5% in the September quarter as restrictions were
lifted. This uptick in activity was reflected in stronger retail
sales which increased for the five consecutive months to September.
Since September however, following a rise in cases, a series of
regional restrictions were put in place followed by a one month
national lockdown in England in November. As a result, consumer
confidence remains fragile and, although unemployment has been
somewhat controlled to date by the Government's job retention
schemes, it has increased to 4.8%. The Bank of England's projection
is for unemployment to peak at 7.75% in 2021 and interest rates
have fallen to all-time lows. Over and above Covid-19 related
issues, uncertainty related to Brexit continues, with terms of the
UK's departure yet to be agreed.
London office market
The London investment market was understandably subdued over the
period with transactions of GBP2bn, around one third of the long
term average of GBP6.4bn. However, more recently, overseas
investors have shown an increased readiness to look through the
pandemic and invest in prime central London real estate, reflecting
its long term, secure income stream, and attractive yields compared
to other global cities, particularly in the context of low interest
rates. This activity is in spite of the logistical challenges of
travelling and viewing properties. Pricing for deals in the period
has generally been within 5% of pre-Covid levels with prime yields
at around 4.0%.
In the occupational market, with businesses more focused on near
term operational challenges, and more cautious on the macro
environment, decisions regarding the take up of new space have been
delayed. Covid-19 related restrictions have also affected viewings
and as a result, Central London take up was 65% below the long term
average. Headline rents were generally flat, albeit on low volumes
and incentives have increased. "Grey" space has increased, and
vacancy is up to 6.5% in central London. However, there remains
good interest in new space, particularly from businesses with
requirements three to five years out, and 43% of development under
construction is currently pre-let. Looking forward, the pipeline is
expected to reduce as developers postpone commitments pending
greater clarity which should be supportive of rents for new
space.
Retail market
Activity in Retail investment markets was subdued, with total
volumes of GBP1.5bn. However, the pandemic has underlined the
important role that out of town retail can play in online
fulfilment and investor interest in this space has started to
increase. In particular, the market for assets which are
small-to-medium in lot size, with secure, sustainable income
streams, has seen more activity. Demand for standalone superstores
was good throughout the period, again reflecting their security of
income, and there remains good investor appetite for assets with
alternative use potential. The market for shopping centres, which
are typically, of a larger lot size, remains subdued.
The impact of Covid-19 on the retail occupational market has
been significant, compounding the structural challenge of the
growth of online shopping. As a result, more operators have entered
CVA or administration and stronger retailers have been more
cautious on committing to new space given the uncertainty of
outlook. Retailers are increasingly focused on how best to align
their models to the growth of online, with many, including Next and
M&S identifying out of town retail park stores as playing a key
role.
BUSINESS REVIEW
Key metrics
As at: 31 Mar 2020 30 Sept 2020
-------------
Portfolio valuation GBP11,157m GBP10,315m
Occupancy 96.6%(1) 95.1%(1)
Weighted average lease length 5.8 yrs 5.5 yrs
to first break
6 months to: 30 Sept 2019 30 Sept 2020
------------------------------- ------------- -------------
Total property return (2.3)% (5.5)%
+17 bps +17 bps
* Yield shift
* ERV growth (2.3)% (4.9)%
* Valuation movement (4.3)% (7.3)%
Lettings/renewals (sq ft)
over 1 year 806,000 239,000
Lettings/renewals over 1
year vs ERV +1.9% (4.3)%
Gross investment activity GBP517m GBP565m
GBP51m -
* Acquisitions
GBP(292)m GBP(456)m
* Disposals
GBP174m GBP109m
* Capital investment
Net investment/(divestment) GBP(67)m GBP(347)m
------------------------------- ------------- -------------
On a proportionally consolidated basis including the Group's
share of joint ventures and funds
(1) Where occupiers have entered CVA or administration but are
still liable for rates, these are treated as occupied. If units
expected to become vacant are treated as vacant, then the occupancy
rate would reduce from 95.1% to 93.7%
Portfolio performance
At 30 September Valuation Valuation ERV movement Yield Total property
2020 GBPm movement % shift return
% bps %
---------- ------------- -------
Offices 6,651 (3.1) 0.7 +8 (1.6)
Retail 3,175 (14.9) (10.9) +33 (12.2)
Residential 135 (9.1) (7.8) +17 (9.7)
Canada Water 354 (6.0) na na (4.7)
----------------- ---------- ---------- ------------- ------- ---------------
Total 10,315 (7.3) (4.9) +17 (5.5)
----------------- ---------- ---------- ------------- ------- ---------------
The value of the portfolio was down 7.3%. The value of the
Offices portfolio was down 3.1%, primarily due to concerns about
future occupier demand, given the uncertainty of economic outlook
and potential changes due to Covid-19. Coupled with lower
investment market activity, yields therefore moved out 8 bps
although ERV was marginally up. Developments again outperformed the
standing portfolio but values were marginally down 0.9%.
Retail values were down 14.9%, driven by a 10.9% fall in ERV
reflecting ongoing negative sentiment around the sector as well as
the elevated level of CVAs and administrations. Shopping centres,
which have been particularly impacted by Covid-19 were down 18.1%
and Retail Parks were down 13.1%. Yields expanded by 33 bps.
The value of Canada Water was down 6.0% reflecting a fall in the
value of the existing assets - which are predominately retail - as
well as a higher anticipated masterplan costs.
Our offices underperformed both All Offices and Central London
Offices in the MSCI benchmark due to the relative strength of
provincial offices, and weaker performance in the West End (which
accounts for more than 60% of our offices portfolio). Our Retail
also underperformed the MSCI All Retail benchmark as superstores
continued to perform strongly and shopping centres underperformed.
As a result, and reflecting the continued strength of industrials
where we have no exposure, the portfolio underperformed the MSCI
All Property total return index by 390 bps over the period.
Rent collection - September quarter(1)
Our active discussions with retailers have led to an increase in
the rent collection for the September quarter over the past month
and we expect to see continued improvement in the coming weeks. As
at 10 November, we have collected 77% of rent due between 29
September and 10 November. Of the remainder, 2% is being paid
monthly and 21% is outstanding.
See supplementary tables for full disclosure on rent collection
for the June and March quarters.
Rent due between 29 Offices Retail(2) Total
September and 10 November
-------- ----------
Received 97% 62% 77%
Rent deferrals - - -
Rent forgiven - 1% -
Customer paid monthly 1% 2% 2%
Outstanding 2% 35% 21%
---------------------------- -------- ---------- --------
Total(4) 100% 100% 100%
----------------------------
GBP48m GBP64m GBP112m
---------------------------- -------- ---------- --------
Collection of adjusted
billing(3) 98% 64% 78%
---------------------------- -------- ---------- --------
(1) As at 10 November
(2) Includes non-office customers located within our London
campuses
(3) Total billed rents exclusive of rent deferrals, rent
forgiven and tenants moved to monthly payments
(4) The amount billed is less than what was billed in March and
June due to the exclusion of Scottish quarter date amounts which
are due to be billed on 28 November and monthly amounts due for
December which will be billed later in the quarter.
Capital activity
From 1 April Offices Retail Residential Canada Water Total
2020
GBPm GBPm GBPm GBPm GBPm
------------------ -------- ------- ------------ ------------- ------
Purchases - - - - -
Sales - (456) - - (456)
Development
Spend 57 2 - 11 70
Capital Spend 21 18 - - 39
------------------ -------- ------- ------------ ------------- ------
Net Investment 78 (436) - 11 (347)
------------------ -------- ------- ------------ ------------- ------
Gross Investment 78 476 - 11 565
------------------ -------- ------- ------------ ------------- ------
On a proportionally consolidated basis including the Group's
share of joint ventures and funds
The total gross value of our investment activity since 1 April
2020 was GBP565m with retail disposals accounting for GBP456m
overall 6.7% ahead of book, on a blended NIY of 6.3%. The most
significant transactions were the sale of two Tesco superstores at
our centres in Milton Keynes and Peterborough together totalling
GBP149m and four standalone B&Q stores totalling GBP100m. We
sold part of our Beaumont Leys shopping centre, comprising a Tesco
and Aldi supermarket for GBP63m, as well as our share of a
portfolio of reversionary interests in Sainsbury's superstores for
GBP102m and a standalone Tesco in Brislington for GBP42m.
We are also under offer on the final residential unit at
Clarges. In addition to the above, in November, we completed on the
sale of the offices and retail building at Clarges, Mayfair for
GBP177m. This scheme has delivered profits of more than GBP200m and
is an excellent example of our ability to source and manage complex
projects and deliver exceptional products. Also, in November we
sold Yalding House for GBP42m.
Strategic priorities
Going forward, we will remain focused on enhancing our core
mixed use, London business. We will remain alert to address
challenges in our markets while positioning the business to
capitalise on new opportunities to drive sustainable long term
growth.
In doing so, we build on a number of key attributes which
clearly differentiate our business. We have a best in class, fully
integrated operating platform, with skills across planning and
development, asset management, property management, sustainability,
finance and technology. We have a proven ability to innovate at
pace; the way in which we have built out Storey and repositioned
Broadgate are good examples of that. We are the partner of choice
for international capital; our joint ventures with GIC at Broadgate
and Norges at Meadowhall are just two examples. Finally, but
critically, our unique London mixed use campuses and attractive
development pipeline are a key advantage.
Building on this, we have identified four clear priorities for
our business:
-- Realising the potential of mixed use - mixed use is highly
complementary to our skill set; it's what our customers want and it
enables us to tilt our offer to sectors that are in demand. We have
done this successfully at Broadgate, where we have attracted a
broader range of occupier across media and technology, including
FinTech, and will explore similar opportunities at Regent's Place,
which is well placed in London's Knowledge Quarter, to benefit from
demand from life sciences.
-- Progressing value accretive development - we have created
attractive options for development we can progress when market
conditions are favourable. Our commitment to Norton Folgate is the
latest example of this but we are also on site with enabling works
at Canada Water and would expect to be in a position to place
building contracts in Spring 2021.
-- Addressing the challenges in retail - we have a clear plan to
reduce our exposure to retail and have made good progress since
April with GBP456m of asset sales. At the same time, we are focused
on managing these assets, keeping them full with the right
occupiers to drive footfall and sales and deliver sustainable cash
flows, underpinning their liquidity.
-- Active capital recycling - we will crystallise value from
mature assets or those not aligned to our campus focus and will
explore the sales of standalone offices as well as retail assets.
This will allow us to further progress our London development.
Sustainability
Sustainability is fundamental to how we do business at British
Land. In May, building on the success of our 2020 strategy, we
launched our 2030 Sustainability Strategy, focusing on two key
commitments: making our whole portfolio net zero carbon and
partnering to maximise social value and wellbeing in the
communities in which we operate.
100 Liverpool Street, is our lowest ever embodied carbon
building at 390 kg CO(2) e per m(2) , comfortably below our 2030
target of 500 kg CO(2) e per m(2) , reflecting our ability to
retain much of the previous structure. We are now targeting a
BREEAM Outstanding certification on this building; we are on track
for a Well Gold certification for wellbeing and achieved a
Wiredscore Platinum rating for internet connectivity. At 1 Triton
Square, which completes in April 2021 we are on track for a BREEAM
Outstanding rating; it is a great example of our policy to recycle
first. We retained much of the façade, including refurbishing
3,500m(2) of glass panels, which contributed to avoiding c.62,000
tonnes of carbon over 20 years.
At Norton Folgate, we will also re-use part of the existing
structure, meaning that embodied carbon is low at 540kg CO(2) e per
m(2) . The development also compares well on an operational basis.
We are targeting an operational performance in landlord areas of 80
kWh(eq) per m(2) (based on net lettable area), benchmarking well
against the UK GBC energy performance targets for 2020- 2025 of 90
kWh(eq) per m(2) (net lettable area).
To support our transition to a net zero carbon portfolio, we
established an innovative Transition Vehicle, to finance the
retrofitting of our standing portfolio. This will be funded by an
internal carbon price of GBP60 per tonne of embodied carbon in new
developments; around one third of this will be used to offset the
residual embodied carbon of each development, with the majority
allocated to the Transition Vehicle. To date, GBP2m has been
allocated from 100 Liverpool Street and 1 Triton Square with a
further GBP1.4m to come from Norton Folgate. Following the internal
launch of the Transition Vehicle in October GBP317,000 of projects
have been identified, generating GBP118,000 annual energy savings
and saving 460 tonnes of carbon pa. In the coming months, we will
commence asset level audits to highlight opportunities for
retrofitting and two pilot projects have already been undertaken.
At our London campuses, we have also started to transition our gas
contracts to renewable tariffs.
We have commissioned research to deepen our understanding of the
social and economic issues in the communities around 25 of our
places. This will help shape our place-based approach at each of
our places, bringing people and organisations together around
priority issues and opportunities where we can create greater value
for more people. To deepen our understanding of local challenges
and strengths further, we have interviewed over 50 people at our
places and in our local communities including Estate Directors,
Centre Managers, community partners, and local community champions.
These interviews have identified opportunities to embed our
place-based approach into our business operations and highlighted
potential initiatives for our asset management, marketing, leasing,
procurement, HR and community teams to pilot. We will be completing
the research later this year and sharing the findings across our
business.
We have provided support to grassroots organisations dealing
with the immediate impact of Covid-19, funded by the decision of
the Board to waive a portion of their salaries. We have supported
the work of the National Literacy Trust at 22 British Land
locations, provided strategic coaching for community partners to
help them navigate the crisis through The Business School (formerly
Cass); and increased our charitable donations to provide direct
support to grassroots organisations supporting local responses to
Covid-19. We have also donated to organisations such as Time &
Talents, to support their food bank close to Canada Water and The
1928 Project at St Mary's Hospital Paddington, supplying NHS
workers with quality food.
Recognising that the ways in which we can support our local
communities have changed in the wake of Covid-19, we are scoping
three programmes at our retail places and two at our campuses,
focusing on virtual re-employment training for those who have
become unemployed or are struggling to re-enter the job market as a
result of the pandemic. One example of this virtual approach is at
Regent's Place, where we brought together experienced professionals
from local businesses and the wider area, with students from local
schools for a week long work experience programme; we explored
areas like planning, marketing, community engagement, risk
assessment and budgeting through an imagined campus event.
REAL ESTATE PERFORMANCE REVIEW
Campus focused London Offices
Key metrics
As at: 31 March 2020 30 Sept 2020
--------------
Portfolio Valuation (BL share) GBP6,773m GBP6,651m
GBP5,518m GBP5,436m
* Of which campuses
Occupancy 97.3% 94.7%
Weighted average lease length 5.7 yrs 5.6 yrs
to first break
6 months to: 30 Sept 2019 30 Sept 2020
-------------------------------- -------------- --------------
Total property return +2.1% (1.6)%
0 bps +8 bps
* Yield shift
* ERV growth +0.9% +0.7%
* Valuation movement +0.4% (3.1)%
Total lettings/renewals (sq 553,000 sq ft 130,000 sq ft
ft)
Lettings/renewals (sq ft) over 420,000 sq ft 65,000 sq ft
1 year
Lettings/renewals over 1 year
vs ERV +6.8% +9.4%
-------------------------------- -------------- --------------
On a proportionally consolidated basis including the Group's
share of joint ventures and funds
Campus operational and financial highlights
-- Offices down 3.1%, with the City down 4.0% and the West End down 2.5%
-- 8 bps yield expansion, more pronounced in the West End (+11 bps); City (+3 bps)
-- ERVs marginally up, up 2.2% in the West End, down 1.7% in the City
-- Activity generating like-for-like income growth of 4.0%
-- Leasing activity subdued at 65,000 sq ft (deals greater than one year)
-- Total lettings and renewals at 130,000 sq ft
-- Under offer on a further 313,000 sq ft and in negotiations on a further 361,000 sq ft
-- Investment lettings and renewals over 1 year 9.4% ahead of ERV
-- 247,000 sq ft rent reviews agreed 10% ahead of passing rent adding GBP1.1m to rents
-- Occupancy of 95%
-- Rent collection high at 97% for the September quarter; 98% for both March and June quarters
Campus operational review
82% of our Offices are located on our three central London
campuses, which we manage through our in-house property management
business to deliver modern, safe and engaging environments. As we
work with our occupiers to make our places Covid-safe, this
important advantage will enable people to return to work
confidently, when they can. Importantly, each campus benefits from
excellent transport infrastructure, including numerous underground
and mainline stations, enabling many to arrive at their office in a
single journey. As the way people work changes and the nature of
demand evolves our mixed use campuses position us well to tilt our
offer towards sectors of growth, for example at Broadgate where we
have attracted a broader range of occupier across media and
technology, including FinTech and at Regent's Place, where we are
well positioned to benefit from the strength of life sciences.
The offices portfolio is virtually full, with occupancy of 95%.
We benefit from a diverse portfolio of high quality occupiers and
their focus on financial, corporate and media & technology
sectors has meant they were typically less impacted by Covid-19. As
a result, rent collection rates have been high, at 97% for the
September quarter.
Broadgate
In an understandably subdued six months, leasing activity
covered 38,000 sq ft across three deals. TP ICAP signed for a
further 20,000 sq ft at 135 Bishopsgate, as they relocate from
their existing space, further underlining their commitment to
Broadgate. Western Asset Management signed for 12,000 sq ft at 10
Exchange Square. Both deals were under offer at the time of our
full year results and have signed during the pandemic. We also
renewed a 6,000 sq ft lease at 10 Exchange Square to the London
Grid for Learning Trust, a community of schools and local
authorities committed to using technology to enhance teaching and
learning across London. Rent reviews were agreed on 99,000 sq ft,
2.3% ahead of passing rent.
At 100 Liverpool Street, we had already made good progress
letting the retail space, with 17 out of 19 retail units pre let. A
number of these were due to open ahead of Christmas, but that will
now be dependent upon Government restrictions.
We continue to modernise our existing space with asset
management initiatives across the campus, the largest of which is
at 155 Bishopsgate (GBP35m our share). Other projects are at
Exchange House, Broadwalk House and 10 Exchange Square, together
totalling GBP34m (our share). This investment ensures that existing
as well as new space is well positioned as demand further polarises
towards high quality, modern offices. We are also investing in the
public realm, with plans to transform Exchange Square into a new
public park covering 1.5 acres. Enabling works are underway and the
site works will commence in December.
The campus saw a valuation fall of 3.4% reflecting mild yield
expansion of 3 bps and ERV decline of 1.5%. Occupancy is 93.6%.
We have seen our Broadgate occupiers collaborate to share their
experiences of working through the pandemic. The Mental Health
Network, which includes 21 of our occupiers has continued to meet
monthly on a virtual basis, providing guidance and support on the
challenges of working from home and impact on mental health. Forums
such as these are increasingly part of our campus appeal to new
occupiers.
Paddington Central
At Paddington, cyber security software company Trend Micro
extended their 7,000 sq ft lease at 2 Kingdom Street by a further
two years.
The campus is virtually full with occupancy of 96.4%. It saw a
valuation fall of 2.1%, reflecting yield expansion of 7 bps but ERV
growth of 0.6%.
Following their discussions on the Black Lives Matter movement,
our occupier-led Diversity and Inclusion Network set up a working
group specifically focusing on Black History Month, allowing
customers to collaborate, cross-promote plans and share knowledge
and insights. Two thirds of customers at Paddington Central are
involved in this diversity and inclusion network, which meets
quarterly.
Regent's Place
At Regent's Place, no new leases were signed, but rent reviews
were agreed on 33,000 sq ft, 21% ahead of passing rent.
Our proposed public realm improvements were given full planning
consent earlier this year. This coincided with the rebranding of
Regent's Place as a more sustainable campus drawing on its links to
London's Knowledge Quarter. This unique part of London, between
Kings Cross, Euston Road and Bloomsbury is home to over 100
academic, cultural, research, scientific and media organisations.
Here, we are well positioned to benefit from the growing demand
from life sciences businesses for space in London.
The campus was down 2.0% in value, reflecting yield expansion of
15 bps partially offset by ERV growth of 3.7%. Occupancy is
96.2%.
As part of REGEN, the Sustainability Network at Regent's Place,
we partnered with Dentsu Aegis Network and the WWF in the delivery
of an exclusive workshop called on 'Our Planet, Our Business'. The
event included a virtual panel Q&A and attracted almost 150
attendees from over 50 different organisations.
Storey: our flexible workspace brand
Storey is now operational across 325,000 sq ft, with the
addition of 6 Orsman Road in Haggerston adding 40,000 sq ft. A
further 48,000 sq ft is in development at 100 Liverpool Street, of
which 13,000 sq ft will be our second Storey Club, offering meeting
and events space for Broadgate.
The Storey concept was launched in 2017 as a response to the
changing ways of working and has proved resilient in the face of
today's challenges. Inevitably activity slowed during lockdown as
some occupiers postponed decision-making pending further clarity,
but the deals we are signing are on attractive terms and we have a
healthy pipeline of enquiries. 37,000 sq ft of leasing activity
occurred during the 6 months, comprising 33,000 sq ft of completed
deals (of which 20,000 sq ft were over one year) with a further
4,000 sq ft under offer. The leasing activity comprised 40%
lettings to new occupiers with the remaining 60% to existing Storey
occupiers renewing or extending their leases.
Occupancy on the stabilised portfolio reduced to 78% from 92% as
at March. This reflected a combination of planned move outs and
some customers making a short term decision to leave as a result of
Covid-19, but often with a longer term expectation of returning
when the outlook has stabilised. At the same time we continued to
achieve rents on new lettings and renewals of more than 30% ahead
of traditional leases, with an average lease length of 26 months
term certain.
We benefit from a strong customer base, with corporate HQs,
representing 77% of total space. As a result, rent collection at
Storey space is high at 97%. A small number of rent deferrals were
agreed in exchange for either the removal of break options or the
extension of the lease term. We agreed two rent reductions for our
smaller occupiers to help them survive this challenging period.
Smaller, more focused Retail
Key metrics
As at: 31 Mar 2020 30 Sept 2020
-------------
Portfolio valuation (BL share) GBP3,873m GBP3,175m
GBP1,839m GBP1,506m
* Of which Retail Parks
GBP1,510m GBP1,248m
* Of which Shopping Centres
Occupancy(1) 95.7% 95.5%
Weighted average lease length 5.9 yrs 5.4 yrs
to first break
6 months to: 30 Sept 2019 30 Sept 2020
--------------------------------------- ------------- -------------
Total property return (8.4)% (12.2)%
+37 bps +33 bps
* Yield shift
* ERV growth (4.8)% (10.9)%
* Valuation movement (10.7)% (14.9)%
Total lettings/renewals (sq ft) 605,000 439,000
Lettings/renewals (sq ft) over
1 year 382,000 161,000
Lettings/renewals over 1 year
vs ERV (11.0)% (7.8)%
--------------------------------------- ------------- -------------
On a proportionally consolidated basis including the Group's
share of joint ventures and funds
(1) Where occupiers have entered CVA or administration but are
still liable for rates, these are treated as occupied. If units
expected to become vacant are treated as vacant, then the occupancy
rate for Retail would reduce from 95.5% to 92.7%
Retail operational and financial highlights
-- Total Retail portfolio value down 14.9% reflecting the
ongoing impact of Covid-19 and higher vacancies due to CVA and
administrations
-- Yield expansion of 33 bps overall; ERVs down 10.9%
-- Like for like income down 10.3% including the impact of CVAs and administrations
-- Lettings and renewals over 1 year covering 161,000 sq ft;
deals under one year 278,000 sq ft; Lettings and renewals 11% below
passing rent
-- Under offer on a further 495,000 sq ft and in negotiations on a further 557,000 sq ft
-- Further 92,000 sq ft of rent reviews agreed 5.8% ahead of passing rent
-- High occupancy maintained at 95.5%
-- Footfall for September and October, 82% of the period last
year, 21 pp ahead of benchmark; like for like sales 85% of the
period last year, 11 pp ahead of benchmark
-- GBP456m non-core assets sold since April 2020
-- 62% of September rent collected; 69% of June quarter rent and
46% of March quarter rent now collected
Performance review
Operational performance
Our priority in Retail, has been on keeping our centres full
with the right mix of retailers who are additive to our places. We
are pragmatic and proactive in our approach, working with
successful, financially strong retailers to ensure leasing
structures are appropriate and deliver sustainable cash flows. At
times, this has meant accepting lower rents which are below
previous passing rents, but in a very low interest rate
environment, this approach underpins the liquidity of our
assets.
Retail leasing volumes are low compared to last year, with
161,000 sq ft of lettings and renewals, on average 11% below
previous passing rent and 8% below ERV. The average lease term is
6.6 years, with incentives of 6 months, but we also have done a
greater proportion of temporary deals (less than one year)
particularly where retailers have been impacted by CVA or
administration, leasing 278,000 sq ft of space (63% of total
leasing). Deals in the half include new leases to Tapi Carpets at
Nugent, Orpington (10,000 sq ft) and Iceland at Studlands,
Newmarket (10,000 sq ft). We re-negotiated a 40,000 sq ft lease to
Currys at Elk Mill, Oldham, securing the income over the next ten
years. We renegotiated four leases with Sports Direct, at
Woodfields, Bury (15,000 sq ft), St. Peter's, Mansfield (12,000 sq
ft) and Broughton, Chester (7,000 sq ft) and Deepdale Preston
(15,000 sq ft), extending lease terms.
As of 12 November, all of our retail assets were open, and 42%
of our retail stores were open including retail deemed essential
and those providing click and collect services. Prior to the
regional restrictions and November lockdown, 86% of our retail
stores were open. We have been encouraged by the pace at which
footfall recovered over the summer, which in September and October
stood at 82% of the same period last year (21pp ahead of
benchmark), with like-for-like retail sales 85% of the same period
last year, 11pp ahead of benchmark (based on stores that were open
as well as temporarily closed for trading). For stores that have
continued to trade during lockdown, sales in our portfolio were 87%
of the period last year. For the half year as a whole, footfall was
56% of the same period last year, 17pp ahead of benchmark and
retail sales were 57% of the same period last year, 14 pp ahead of
benchmark.
Out-of-town retail parks, which comprise 48% of our retail
assets have played a key role in retailers' reopening strategies
post-lockdown. Next reported that their retail park stores were
significantly less impacted by the pandemic than their shopping
centre or city centre stores and saw them as a "relative strength",
and this is reflected in our own experience. Our retail parks are
well connected and affordable to retailers so they play an
important role in a successful online strategy by facilitating
click & collect and enabling returns as well as supporting
mission-based shopping. We have seen this trend accelerate, as
rates of online shopping have increased, with shoppers more
confident visiting open-air locations they can access by car, where
social distancing can be more easily managed. As a result, in
September and October, prior to the November lockdown, footfall on
our retail parks was 88% of the same period last year and like for
like sales were 86% of the same period last year (based on stores
that were open as well as temporarily closed for trading). For
stores that have continued to trade during lockdown, sales at our
retail parks were 92% of the same period last year.
Inevitably, Covid-19 and related restrictions affected the cash
flow of many of our occupiers and hence their ability to pay rent.
We are pleased that in the September quarter, 62% of rents have now
been collected (see Supplementary Tables for full disclosure). We
have engaged, on a case by case basis with customers who have
strong businesses but have been disproportionately affected by
Covid-19. We have agreed pragmatic solutions which typically
involved moves to monthly rents, deferrals and partial settlement
of outstanding rents for the period of closure in return for lease
extensions, reduced incentives, commitments to additional space and
the removal of lease breaks.
CVAs and administrations
Over the six months, there has been an increase in CVAs and
Administrations across the retail market. We have seen 16 occupiers
enter into CVAs or Administration accounting for 80 units. Of these
units, 13 have closed, 62 have seen reduced rents and 5 were
unaffected. Overall, this has resulted in a GBP11.6m reduction in
annualised rents.
DEVELOPMENT
At 30 September Sq ft Current Cost to ERV ERV
2020 Value complete Let
'000 GBPm GBPm GBPm GBPm
-------------------- ------ -------- ---------- ----- ------
Recently completed 520 400 - 19.3 15.5
-------------------- ------ -------- ---------- ----- ------
Committed 701 525 290 46.0 21.8
-------------------- ------ -------- ---------- ----- ------
Near term 682 121 318 27 -
-------------------- ------ -------- ---------- ----- ------
Medium term 6,935
-------------------- ------ -------- ---------- ----- ------
On a proportionally consolidated basis including the Group's
share of joint ventures and funds (except area which is shown at
100%)
Portfolio
Developments are a key element of our investment case as a
fundamental driver of sustainable value and growth for the long
term. In this context, we are delighted to have committed to our
Norton Folgate development, covering 336,000 sq ft, adjacent to our
Broadgate campus. Recently completed and committed developments now
total 1.2m sq ft and are 57% pre let, securing GBP37m of future
rent. Excluding Norton Folgate, which we are progressing on a
speculative basis, completed and committed developments are 89% pre
let. Total development exposure is now 7.3% of portfolio gross
asset value with speculative exposure still low at 3.7%.
The majority of space in our development pipeline is either
income producing or held at low cost, enhancing our flexibility, so
we have attractive options we can progress as and when appropriate.
If we were to commit to our near term pipeline, our speculative
exposure would increase to 8.3% of portfolio gross asset value. We
continue to create options for development across our portfolio
with 1.4m sq ft of planning permissions achieved in the period (in
addition to the Canada Water Masterplan) and a further 700,000 sq
ft under consideration.
Despite ongoing disruption to the global supply chains,
construction cost inflation remains relatively low at c.1%, with
volatility typically project specific. Looking forward, the
pipeline is expected to shift outwards, with competition driving
down prices, but with some upward pressure likely given reduced
labour availability and fluctuating material costs as a result of
Covid-19 and Brexit. Overall, inflation is expected to be flat for
2021. In terms of our own development pipeline, we are planning for
a range of possible outcomes with respect to Brexit.
Campus developments: further enhancing the mix of uses
Our long term strategy focuses on our London campuses.
Development is an important part of how we deliver that, enabling
us to provide modern space, in new or refurbished buildings, built
around the evolving needs of our customers. More than ever, the
ability to deliver this into environments which are safe and
engaging will be an advantage, generating a positive impact beyond
the individual buildings.
Completed developments
We reached practical completion at 100 Liverpool Street (520,000
sq ft) in the period. The building is 89% let including 48,000 sq
ft allocated to Storey (80% excluding Storey), with occupiers
including SMBC Europe, Peel Hunt and Milbank Tweed. Space has been
handed over to occupiers, with fit out to be completed over the
course of next year.
Committed developments
Our committed pipeline now stands at 701,000 sq ft, comprising 1
Triton Square at Regent's Place and Norton Folgate, adjacent to our
Broadgate campus which we have now committed to. It is a 336,000 sq
ft scheme, comprising 258,000 sq ft of offices space, alongside
retail and leisure space creating a mixed use development which is
in keeping with the historic fabric of the area. Benefitting from
its location in Shoreditch, close to Shoreditch High Street and
Spitalfields market, this building is ideally suited to technology
and media firms and we expect to generate higher rents closer to
completion when the building can be viewed. The building will be
one of the most sustainable we have delivered, with embodied carbon
l ow at 540 kg CO(2) e per m(2) , in line with our 2030 target.
This building will also be one of our most operationally efficient,
with an expected base build operational efficiency of 80 kWh(eq)
per m(2) (based on net lettable area). Demolition has been
completed and pre-construction and enabling works are at an
advanced stage; we expect to place the main build contract in the
coming months.
At 1 Triton Square, Regent's Place, we are fully pre-let on the
office space to Dentsu Aegis Network on a 20-year lease. Working
within social distancing guidelines we have managed to increase
productivity and are now targeting completion in April 2021.
Near Term pipeline
Our near term pipeline now covers 682,000 sq ft of which 1
Broadgate, on our Broadgate campus accounts for 539,000 sq ft. This
building is designed flexibly to accommodate changes in demand but
currently envisages c.50,000 sq ft of retail, leisure and dining
space with a further 45,000 sq ft available for retail or flexible
office use. Embodied carbon is above our 2030 target at 950 kg
CO(2) e per m (2) but we would aim to improve on this during
construction and its design dramatically improves the building's
operational efficiency. Energy efficiency is expected to be around
45 kWh(eq) per m (2) for landlord areas which is in line with our
2030 targets. Consistent with our approach to re-use wherever
possible, we will be repurposing granite from the façade for use in
the flooring throughout the offices. We are actively seeking a pre
let and would most likely secure one before committing to this
development.
Phase 2 of our mixed use development at Aldgate accounts for the
remaining 143,000 sq ft. This phase will deliver 159 homes with
19,000 sq ft of offices space as well as retail accommodation. We
have planning consent for the building and will be in a position to
start on site in mid-2021.
Medium Term Pipeline
We have three campus developments in the medium term pipeline,
together covering more than 1m sq ft. These buildings progress our
mixed use campus vision and support future income growth.
The most significant scheme is 2-3 Finsbury Avenue at Broadgate
where we have consent for a 563,000 sq ft office-led scheme, adding
313,000 sq ft to the existing space. However, we recently submitted
a revised application, with a new design covering around 700,000 sq
ft. This will be consistent with the goals set out under our 2030
Sustainability Strategy and will target the BREEAM 'Outstanding'
certification in construction. The building is currently generating
an income through short term, more flexible lettings, including
40,000 sq ft allocated to Storey.
At 5 Kingdom Street, Paddington Central, our planning
application to increase our consented scheme from 206,000 sq ft to
438,000 sq ft was approved by the Mayor in October. The scheme
includes the opportunity to develop a former Crossrail works site
which reverts to British Land on completion of Crossrail, providing
80,000 sq ft of community, retail, leisure and one of London's
biggest affordable workspaces, reflecting feedback from focus
groups and residents who we consulted on how this space could best
be used. At the Gateway Building, Paddington, we have consent for a
105,000 sq ft premium hotel.
Retail & mixed use development: enhancing and repositioning
our portfolio for the future
Reflecting our longer term view on retail, we are unlikely to
undertake standalone retail development in the near term. However,
we have a number of mixed use opportunities at our retail centres
which align well to our strategy and we continue to progress these
opportunities to preserve optionality and enhance value.
Mixed use opportunities, medium term pipeline
At Ealing Broadway, we will complete the refurbishment of 54 The
Broadway, our first office scheme in Ealing, at the end of the
calendar year. We are working up plans for a refurbishment of
International House, which is returned to us next year as well as a
more comprehensive redevelopment of 10-40 The Broadway, an office
led mixed use scheme covering 303,000 sq ft that will sit adjacent
to our Ealing Broadway shopping centre, outside the new Crossrail
entrance. At Eden Walk, Kingston (jointly owned with USS) our
consented mixed use development plans include 380 new homes,
alongside shops, restaurants and 35,000 sq ft of flexible office
space.
We are scoping the broader retail portfolio for alternative and
additional use opportunities. Our initial assessment is that there
is scope to convert c. 460,000 sq ft of retail space and 620,000 sq
ft of surrounding land into 2.4m sq ft of logistics, residential
and office space. The surrounding land at Meadowhall is one such
example, where 440,000 sq ft of land could potentially be
repurposed as logistics space. This project is at an early stage
and we would not expect to progress all these opportunities
ourselves; some may be more suitably progressed in partnership or
by other parties.
Canada Water: 53 acre masterplan for a new urban centre in
Central London
Highlights
-- Secured planning for our Canada Water Masterplan, a 5m sq ft mixed use scheme in May 2020
-- Successfully overcame the Judicial Review process; claim
dismissed in the High Court in October
-- Expect to draw down the headlease by the end of the calendar year
-- Net valuation movement down 6.0% to GBP354m due to lower
values on existing assets and additional costs associated with the
masterplan
At Canada Water, we are working with the London Borough of
Southwark to deliver a 5m sq ft mixed use scheme, including 3,000
new homes alongside a mix of commercial, retail and community
space. The site is located on the Jubilee line and the London
Overground, making it easily accessible from London Bridge, the
West End, Canary Wharf, Shoreditch and South West London. It will
also be an indirect beneficiary of Crossrail, which will free up
capacity on the Jubilee Line between Canary Wharf and Bond Street.
It covers 53 acres including the dock area, providing 48 acres of
developable land.
In May 2020 we secured outline planning permission on the entire
5m sq ft masterplan, including detailed consent on the first three
buildings, covering 580,000 sq ft. The only JR claim was dismissed
by the High Court in October. We anticipate drawing down the
headlease by the end of the calendar year. The headlease will
combine the ownership of our assets at Canada Water into a single
500-year headlease, with Southwark Council as the Lessor. At that
point, British Land will own 80% of the scheme with Southwark
Council owning the remaining 20% and going forward, they will be
able to participate in the development, up to a maximum of 20% with
returns pro-rated accordingly.
The first three buildings will deliver 265 homes, of which 35%
will be affordable (split 70:30 between social rent and
intermediate housing), as well as offices, retail, a new leisure
centre, public spaces and improved pedestrian connections. As part
of our commitment to the early delivery of affordable housing,
building K1 (62,000 sq ft) which is solely residential forms part
of Phase 1. There are two other buildings in the first phase which
will follow: A1 (272,000 sq ft) is a mixed use building comprising
flexible workspace over five floors, and a 35 storey residential
tower. Here, we are targeting a Wiredscore Platinum rating on the
residential as well as the offices element and a BREEAM Outstanding
certification. A2 (246,000 sq ft) is a modern, waterfront offices
building, providing adaptable workspace on large, flexible
floorplates and includes the new leisure centre for Southwark
Council. This building targets a Wiredscore Platinum rating and a
BREEAM Excellent certification.
We have commenced enabling works for the first phase and are
likely to commit to the first building in the Spring, market
conditions permitting. In parallel, we will advance plans to bring
in partners to support the delivery of the wider scheme. We are
exploring a range of alternative uses, including healthcare, senior
living and higher education, and already our higher education
provider, TEDI-London a global partnership with King's College
London, Arizona State University and UNSW Sydney, is delivering
their engineering curriculum from here. Our planning permission at
Canada Water is deliberately flexible to take account of changes in
demand through the cycle, so we can amend our offices, residential
and retail allocations as appropriate. It is also well placed to
respond to challenges posed by Covid-19 in terms of the future of
cities, the role of the workplace and increasing demand for
development which supports health and wellbeing.
We are excited to be making progress at Canada Water and we
recognise that developing such a large part of London carries real
responsibilities to the community that lives and works in and
around the area, as well as the environment. We worked with
Southwark Council to develop a Social Regeneration Charter to
capture local residents' priorities for the development, which
commits us to working in partnership to deliver on these. This
approach is now a model for development across the Borough. We are
already delivering on a range of initiatives to support the local
community and grassroots organisations like Thrive, our partnership
with Tree Shepherd to deliver affordable workspace to help people
trying to start and grow new businesses and support local
start-ups. Our partnership with Construction Youth Trust has
enabled over 1,000 individual students from eight local secondary
schools to have meaningful interaction with employers which aim to
raise awareness of careers in the built environment and build the
skills to access these. In addition, we have continued to support
local charities such as Time & Talents, who run a food bank
close to Canada Water.
The net valuation movement for Canada Water over the year showed
a fall of 6.0% to GBP354m due to lower values on existing assets
and an increase in costs associated with the masterplan. The
September valuation does not reflect the drawdown of the
headlease.
FINANCE REVIEW
Six months to 30 September 2019 30 September 2020
------------------
Underlying earnings per
share(1,2) 16.1p 10.5p
Underlying Profit(1,2) GBP152m GBP107m
IFRS profit/(loss) after GBP(404)m GBP(730)m
tax
Dividend per share 15.97p 8.40p
Total accounting return(1,3) (3.7%) (10.3%)
------------------------------ ------------------ ------------------
As at 31 March 2020 30 September 2020
EPRA Net Tangible Assets
per share(1,2) 773p 693p
IFRS net assets GBP7,147m GBP6,373m
------------------------------ ------------------ ------------------
LTV (1,4,5) 34.0% 35.7%
Weighted average interest
rate (5) 2.5% 2.5%
------------------------------ ------------------ ------------------
(1) See Glossary on website for definitions. (2) See Table B
within supplementary disclosure for reconciliations to IFRS
metrics. (3) See Note 2 within condensed interim financial
statements for calculation. (4) See Note 11 within condensed
interim financial statements for calculation and reconciliation to
IFRS metrics. (5) On a proportionally consolidated basis including
the Group's share of joint ventures and funds.
Overview
Financial performance for the period has been significantly
impacted by Covid-19 and an already challenged retail environment.
Underlying earnings per share (EPS) are down 34.8% at 10.5p, while
Underlying Profit is down 29.6% at GBP107m.
Underlying Profit
GBPm
Underlying Profit for the six months ended 30 September 2019 152
Like-for-like rent (incl. CVA and administrations) (6)
Provisions for outstanding rents, service charge and deferred rents(1) (44)
Provisions for tenant incentives (2)
Cost savings 8
Net divestment (2)
Developments 2
Other income (1)
Underlying Profit for the six months ended 30 September 2020 107
(1) The period on period impact of provisions for outstanding
rents, service charge and deferred rents was GBP44m. This reflects
the difference between the GBP45m charge to the income statement in
the six-month period to 30 September 2020 (as disclosed in Note 1
of condensed interim financial statements) and the GBP1m charge in
the six-month period to 30 September 2019.
Underlying Profit decreased by GBP45m, primarily due to
provisions for outstanding rent, service charge and rent deferrals
made in light of Covid-19 and like for like decline in income. Cost
control, lower market interest rates and financing activities
increased underlying profit by GBP8m.
The impact of sales was fully offset by income from developments
as proceeds from sales are deployed into our value accretive
development programme. The recently completed and committed schemes
are expected to generate earnings accretion of GBP41m, of which 57%
is already pre-let. Excluding Norton Folgate, which we are
progressing on a speculative basis, completed and committed
developments are 89% pre let.
Since April 2020, we have completed GBP0.6bn of gross capital
activity. This includes GBP456m of retail disposals, primarily the
sale of three Tesco superstores totalling GBP191m and four
standalone B&Q stores totalling GBP100m. We sold part of our
Beaumont Leys shopping centre, comprising a Tesco and Aldi
supermarket for GBP63m, as well as our share of a portfolio of
reversionary interests in Sainsbury's superstores for GBP102m.
In addition to the above, in November, we completed on the sale
of the offices and retail building at Clarges, Mayfair for GBP177m.
This scheme has delivered profits of more than c.GBP200m and is an
excellent example of our ability to source and manage complex
projects and deliver exceptional products. Also, in November we
sold Yalding House for GBP42m.
This period, the Group has adopted the new EPRA NAV metrics; Net
Reinvestment Value (NRV), Net Tangible Assets (NTA) and Net
Disposal Value (NDV). We are reporting NTA in place of the previous
EPRA net asset value (NAV). Similarly, NDV replaces the previous
EPRA triple net asset value measure (NNNAV). The total accounting
return is now calculated based on EPRA NTA. Definitions of these
metrics are shown in Table B of supplementary disclosures.
Valuations have reduced by 7.3% on a proportionally consolidated
basis resulting in an overall EPRA NTA per share decline of
10.3%.
Our financial position remains strong with GBP1bn of undrawn
facilities and cash and no requirement to refinance until 2024. We
retain significant headroom to our debt covenants, meaning the
Group could withstand a further fall in asset values across the
portfolio of 42% prior to taking any mitigating actions. LTV has
increased by 170bps during the period to 35.7%. The primary drivers
of the movement were valuation declines contributing 270bps and
development spend contributing 70bps. These movements are partially
offset by the impact of asset disposals and retained earnings which
reduced LTV by 200bps.
Fitch Ratings as part of the annual review in August 2020
affirmed all our credit ratings, including our senior unsecured
rating as 'A', with a Stable Outlook.
Presentation of financial information
The Group financial statements are prepared under IFRS where the
Group's interests in joint ventures and funds are shown as a single
line item on the income statement and balance sheet and all
subsidiaries are consolidated at 100%.
Management considers the business principally on a
proportionally consolidated basis when setting the strategy,
determining annual priorities, making investment and financing
decisions and reviewing performance. This includes the Group's
share of joint ventures and funds on a line-by-line basis and
excludes non-controlling interests in the Group's subsidiaries. The
financial key performance indicators are also presented on this
basis.
A summary income statement and summary balance sheet which
reconcile the Group income statement and balance sheet to British
Land's interests on a proportionally consolidated basis are
included in Table A within the supplementary disclosures.
Management monitors Underlying Profit as this more accurately
reflects the underlying recurring performance of our core property
rental activity, as opposed to IFRS metrics which include the
non-cash valuation movement on the property portfolio. It is based
on the Best Practices Recommendations of the European Public Real
Estate Association (EPRA) which are widely used alternate metrics
to their IFRS equivalents.
Management also monitors EPRA 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.
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 have been made in the
current or prior period and therefore this is the same as the
pre-tax EPRA earnings measure which includes a number of
adjustments to the IFRS reported profit before tax.
Six months to Section 30 September 30 September
2019 2020
GBPm GBPm
----------------------------------------- -------- ------------- -------------
Gross rental income 275 268
Property operating expenses (32) (77)
----------------------------------------- -------- ------------- -------------
Net rental income 1.2 243 191
Net fees and other income 7 6
Administrative expenses 1.3 (41) (38)
Net financing costs 1.4 (57) (52)
Underlying Profit 152 107
-------- -------------
Underlying tax charge - (9)
Non-controlling interests in Underlying
Profit 6 3
EPRA adjustments(1) (562) (831)
----------------------------------------- -------- ------------- -------------
IFRS profit/(loss) after tax 2 (404) (730)
----------------------------------------- -------- ------------- -------------
Underlying EPS 1.1 16.1p 10.5p
IFRS basic EPS 2 (42.9)p (78.7)p
Dividend per share 3 15.97p 8.40p
----------------------------------------- -------- ------------- -------------
(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 and associated close out costs. These items are
presented in the 'capital and other' column of the consolidated
income statement.
1.1 Underlying EPS
Underlying EPS is 10.5p, a decline of 34.8% on the prior period.
This reflects the Underlying Profit decline of 29.6% and an
underlying tax charge of GBP9m, partially offset by the impact of
share buybacks which added 0.2p in the period. The tax charge
follows the temporary suspension of the dividend which is
anticipated to result in a shortfall in our REIT property income
distributions, creating a corporation tax liability.
1.2 Net rental income
GBPm
Net rental income for the six months ended 30 September 2019 243
Net divestment (3)
Developments and other 3
Like-for-like rent (incl. CVA and administrations) (6)
Provisions for outstanding rents and service charge(1) (31)
Provisions for deferred rents (13)
Provisions for tenant incentives (2)
Net rental income for the six months ended 30 September 2020 191
(1) The period on period impact of provisions for outstanding
rents and service charge was GBP31m. This reflects the difference
between the GBP32m charge to the income statement in the six-month
period to 30 September 2020 (as disclosed in Note 1 of condensed
interim financial statements) and the GBP1m charge in the six-month
period to 30 September 2019.
Net sales of income producing assets over the last 18 months
reduced rents by GBP3m in the period. Proceeds from sales are being
reinvested in the development pipeline which is expected to deliver
GBP65m in rents in future years and including the recent commitment
of Norton Folgate, is already 57% pre-let (GBP37m).
Retail like-for-like net rental decline is 10.3% in the period.
This reflects the impact of CVAs and admins, declining ERVs, longer
void periods and reduced car park income over the closure period.
The offices portfolio saw like-for-like growth of 4.0%, which was
primarily driven by letting activity at 1 Finsbury Avenue and 338
Euston Road. In addition, office developments contributed a further
GBP3m of new income, with 135 Bishopsgate completing earlier in the
year.
In light of Covid-19, provisions made against rental debtors and
service charge increased by GBP31m compared to the prior period.
This primarily relates to outstanding rents due over period from
March to September, as well as GBP5m of impairments against
outstanding service charge income. The March quarter rent we
deferred is held as accrued income, and an impairment of GBP13m was
made to account for risk to recoverability over the next five
quarters
We take a systematic approach to provisioning for rental
receivables, based on both aging profile and credit quality. We are
provided at 39% on rent receivables and 32% for service charge
based on balances outstanding at period end. When taking into
account post period end receipts of GBP46m this increases to 60%
for rent receivables and 70% for service charge. Further detail on
balances, provisions and the charge in HY21 made against them are
set out in the table below:
Receivables Balance sheet Debtor balance Provision % provided HY 21
category balance for impact
--------------- --------------- ---------- ----------
Less than 90 days Trade debtor GBP48m GBP12m 25% GBP12m
90 - 190 days Trade debtor GBP41m GBP18m 44% GBP15m
Over 190 days Trade debtor GBP7m GBP7m 100% -
------------------ --------------- --------------- ---------- ---------- -------
Outstanding rent GBP96m GBP37m 39% GBP27m
----------------------------------- --------------- --------- ---------- -------
Service charge Trade debtor GBP22m GBP7m 32% GBP5m
------------------ --------------- --------------- ---------- ---------- -------
Trade debtors GBP118m GBP44m 37% GBP32m
----------------------------------- --------------- --------- ---------- -------
Deferred rents Accrued income GBP25m GBP13m 52% GBP13m
------------------ --------------- --------------- ---------- ---------- -------
Total GBP143m GBP57m 40% GBP45m
----------------------------------- --------------- --------- ---------- -------
A further GBP2m was provided against tenant incentive balances
primarily within the retail portfolio.
1.3 Administrative expenses
Administrative expenses decreased 7.3% in the period. The
Group's operating cost ratio increased to 38.7% (2019/20: 21.7%) as
a result of a significant increase in property outgoing expenses
due to provisions made in respect of rental debtors and accrued
income as well as lower rental income following sales activity.
Excluding provisions made in respect of tenant debtors, accrued
income and tenant incentives, the Group's operating cost ratio is
20.3%.
1.4 Net financing costs
GBPm
Net financing costs for the six months ended
30 September 2019 (57)
Financing activity 1
Finance impact of lower market rates 4
Net divestment 1
Other (1)
Net financing costs for the six months ended
30 September 2020 (52)
Financing activity undertaken over the last 18 months has
reduced costs by GBP1m in the period, predominantly as a result of
prior year debt liability management, partially offset by the
maturity of the GBP350m zero coupon convertible bond in June.
We have a balanced approach to interest rate risk management. At
30 September 2020, we had interest rate hedging on 88% of our debt
(spot), and on 73% of our projected debt on average over the next
five years. Our use of interest rate caps as part of our hedging
means that around half of our debt benefits if market rates remain
low and, compared to the prior period, we've seen a GBP4m reduction
in finance costs from the impact of lower market rates. As a result
our weighted average interest rate remained low at 2.5%.
The reduction in finance costs as a result of proceeds from net
divestment includes the repayment of GBP86m (BL share)
of secured Sainsbury's JV bonds on the sale of a portfolio of
superstores.
2. IFRS profit before tax
The main difference between IFRS profit before tax and
Underlying Profit is that IFRS includes the valuation movement on
investment and trading properties, fair value movements on
financial instruments and capital financing costs. In addition, the
Group's investments in joint ventures and funds 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 year was GBP730m, compared with
a loss after tax for the prior period of GBP404m. As a result, IFRS
basic EPS was (78.7)p per share, compared to (42.9)p per share in
the prior period. This primarily reflects an increase in downward
valuation movement on the Group's properties to GBP625m, and an
increase in the capital and other income loss from joint ventures
and funds to GBP250m. This was driven principally by outward yield
shift of 17bps and ERV decline of 4.9% in the portfolio resulting
in a valuation a decline of 7.3%. In addition, prior period sales
at Clarges generated profits of GBP10m compared with nil in this
period.
The basic weighted average number of shares in issue during the
period was 927m (H1 2019/20: 941m).
3. Dividends
In October we announced the intention to resume paying dividends
semi-annually, fixed at 80% of Underlying EPS based on the most
recently completed six-month period. Today the Board are declaring
an interim dividend for the six-month period ending 30 September
2020 of 8.40 pence per share. Payment will be made on Friday 19
February 2021 to shareholders on the register at close of business
on Friday 8 January 2021. The interim dividend will be a Property
Income Distribution and no SCRIP alternative will be offered.
Balance sheet
As at Section 31 March 30 September
2020 2020
GBPm GBPm
------------------------------- -------- --------- -------------
Property assets 11,177 10,328
Other non-current assets 131 6
------------------------------- -------- --------- -------------
11,308 10,334
Other net current liabilities (252) (173)
Adjusted net debt 6 (3,854) (3,696)
Other non-current liabilities - -
------------------------------- -------- --------- -------------
EPRA Net Tangible Assets 7,202 6,465
------------------------------- -------- --------- -------------
EPRA NTA per share 4 773p 693p
------------------------------- -------- --------- -------------
Non-controlling interests 112 78
Other EPRA adjustments(1) (167) (170)
------------------------------- -------- --------- -------------
IFRS net assets 5 7,147 6,373
------------------------------- -------- --------- -------------
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 2020 773
Valuation performance (91)
Underlying Profit 11
Property disposals 2
Other (2)
EPRA NTA per share at 30 September 2020 693
The 10.3% decrease in EPRA NTA per share reflects a valuation
decrease of 7.3%.
Office valuations were down 3.1%, primarily due to concerns
about future occupier demand, given the uncertainty of economic
outlook and potential changes as a result of Covid-19. As a result,
and coupled with less investment market activity, yields moved out
8bps although ERV was marginally up. Developments again
outperformed the standing portfolio and delivered a small valuation
loss of 0.9%.
Valuations in Retail are down 14.9%, with outward yield shift of
33 bps and ERV decline of 10.9%. These values reflect ongoing
structural challenges faced by occupiers, compounded by Covid-19.
Across our largest assets, yields have moved between 20-50bps. For
smaller retail parks, we are seeing signs of liquidity in the
market which have provided some valuation evidence.
Our external valuers have now removed the "material valuation
uncertainty" declaration present in our valuation reports at 31
March 2020, concluding that there was an adequate quantum of market
evidence upon which to base their opinions of value. They have
highlighted the market context under which their opinions have been
prepared and, in recognition of the uncertainty of Covid-19, the
importance of the valuation date. The current market uncertainty
has been reflected in the valuations in a number of ways, depending
on the relevant property sub-market. For retail, as well as
adjusting yields and reflecting agreed concessions, our valuers
have reduced assumed turnover rent and deducted 3-6 months rent as
a capital sum where no concessions have been agreed. For offices,
the uncertainty has principally been reflected through assumed void
periods and incentive packages.
5. IFRS net assets
IFRS net assets at 30 September 2020 were GBP6,373m, a decrease
of GBP774m from 31 March 2020. This was primarily due to IFRS loss
after tax of GBP730m.
Cash flow, net debt and financing
6. Adjusted net debt(1)
GBPm
Adjusted net debt at 31 March 2020 (3,854)
Disposals 250
Acquisitions -
Development and capex (124)
Net cash from operations 62
Withholding tax (10)
Other (20)
------------------------------------------ --------
Adjusted net debt at 30 September 2020 (3,696)
------------------------------------------ --------
(1) Adjusted net debt is a proportionally consolidated measure.
It represents the Group net debt as disclosed in Note 11 to the
interim financial statements and the Group's share of joint venture
and funds' 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.
Net sales reduced debt by GBP250m whilst development spend
totalled GBP80m with a further GBP44m on capital expenditure
related to asset management on the standing portfolio. The value of
recently completed and committed developments is GBP925m, with
GBP290m costs to come. Speculative development exposure is 3.7% of
the portfolio. There are 682,000 sq ft of developments in our near
term pipeline with anticipated cost of GBP318m.
Post period end, we completed three retail asset sales
contributing a further GBP212m of cash proceeds.
7. Financing
Group Proportionally consolidated
31 March 30 September 31 March 30 September
2020 2020 2020 2020
Net debt / adjusted net GBP3,247m GBP3,079m GBP3,854m GBP3,696m
debt (1)
Principal amount of gross GBP3,294m GBP3,128m GBP4,158m GBP3,985m
debt
Loan to value 28.9% 30.2% 34.0% 35.7%
Weighted average interest
rate 1.9% 1.9% 2.5% 2.5%
Interest cover 5.8 4.6 3.8 3.1
Weighted average maturity 6.8 years 7.4 years 7.5 years 7.8 years
of drawn debt
---------- ------------- ------------- ---------------
(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 venture and funds' net debt and
exclude the mark-to-market on derivatives and related debt
adjustments and non-controlling interests.
At 30 September 2020, our proportionally consolidated LTV was
35.7%, up from 34.0% at 31 March 2020. Valuation declines
contributed 270 bps of this increase, and development spend
contributed 70bps. This was partially offset by the impact of asset
disposals and retained earnings which reduced LTV by 200 bps. Note
11 of the condensed interim financial statements sets out the
calculation of the Group and proportionally consolidated LTV.
During the period, we extended GBP650m of RCFs with 10 banks, by
a further year to 2025. Our GBP350m convertible bond was repaid at
its scheduled maturity in June as planned using RCFs.
Fitch Ratings, as part of their annual review in August 2020
affirmed all our credit ratings, including our senior unsecured
rating as 'A', with a Stable Outlook.
In May 2020, one of the bank facilities in HUT which was due to
mature in September 2020 was refinanced with an extended GBP200m
facility to December 2023.
Our debt management activity and interest rate management
approach has enabled us to maintain our weighted average interest
rate at a low of 2.5%. Our use of interest rate caps as part of our
hedging means that around half of our debt benefits while market
rates remain low.
At 30 September 2020, British Land had GBP1.8bn of committed
unsecured revolving bank facilities; undrawn facilities and cash
amounted to GBP1.0bn. Based on our current commitments, these
facilities and debt maturities, we have no requirement to refinance
until 2024.
The current uncertain environment reinforces the importance of a
strong balance sheet.
Simon Carter
Chief Financial Officer
Notes to Editors
About British Land
Our portfolio of high quality UK commercial property is focused
on London Offices and Retail around the UK. We own or manage a
portfolio valued at GBP13.7bn (British Land share: GBP10.3bn) as at
30 September 2020 making us one of Europe's largest listed real
estate investment companies.
Our strategy is to provide places which meet the needs of our
customers and respond to changing lifestyles - Places People
Prefer. We do this by creating great environments both inside and
outside our buildings and use our scale and placemaking skills to
enhance and enliven them. This expands their appeal to a broader
range of occupiers, creating enduring demand and driving
sustainable, long term performance.
Our Offices portfolio comprises three office-led campuses in
central London as well as high quality standalone buildings and
accounts for 65% of our portfolio. Our Retail portfolio is focused
on retail parks and shopping centres, and accounts for 31% of our
portfolio. Increasingly our focus is on providing a mix of uses and
this is most evident at Canada Water, our 53 acre redevelopment
opportunity where we have plans to create a new neighbourhood for
London.
Sustainability is embedded throughout our business. Our places,
which are designed to meet high sustainability standards, become
part of local communities, provide opportunities for skills
development and employment and promote wellbeing. In April 2016
British Land received the Queen's Award for Enterprise: Sustainable
Development, the UK's highest accolade for business success for
economic, social and environmental achievements over a period of
five years.
Further details can be found on the British Land website at
www.britishland.com
RISK MANAGEMENT AND PRINCIPAL RISKS
At British Land, effective risk management is fundamental to how
we do business and represents a cornerstone of executing our
strategy and delivering sustainable long term value for all of our
stakeholders. The Group's risk appetite and its integrated approach
to managing risk is unchanged from that set out on pages 78-80 of
the Annual Report and Accounts published in May 2020.
The last six months has been one of the most uncertain and
challenging operating environments business has had to face. In
May, due to the onset of the Covid-19 crisis and risk associated
with the ongoing Brexit process, we assessed the majority of our
principal risks as having increased to elevated levels. Most of the
principal risks continue to be elevated today and the risks related
to political and regulatory outlook, income sustainability and
occupier demand and tenant default are slightly more raised, as a
result of the challenging external environment; particularly as the
pandemic and associated restrictions have lasted longer than
initially anticipated, with a second lockdown in England. Covid-19
is an overarching risk rather than a single principal risk and has
had a material negative impact on our business, in particular
resulting in reduced rent collection in our Retail business, an
increase in failures amongst our retailer customer base and reduced
physical occupancy at our office-led assets. Changes in Government
regulation and their intervention in leasing contracts have
occurred which also present a risk to our business, such as the
rent moratorium. We have also seen changes in the way businesses
and their people use their office space, with a significant number
of people working from home for sustained periods of time. These
challenges are exacerbated by the continued political and economic
uncertainty associated with the UK's departure from the European
Union, currently expected to happen on 31 December 2020, but with
no deal for the terms of the exit yet agreed.
Having taken account of these factors, the Board believes that,
despite, the continuing heightened risk environment, the existing
mitigating factors and actions remain appropriate (as set out on
pages 82-87 of the Annual Report and Accounts 2020).
Whilst it is not possible to predict fully the impact Brexit
will have on our business and our markets, the Board has undertaken
a comprehensive Brexit review to understand the key risks to our
business. The Board and executive team have taken appropriate
action to ensure our business is both resilient and responsive in
the short term, and well positioned for the long term. The key
operational steps taken include maintaining sufficient liquidity
and financial resilience, working with our development contractors
to minimise cost and delay risk to our development programme,
increasing stocks of spare parts to ensure the continued operation
of our assets and updating our Crisis Management Plans to improve
our response to unpredictable events.
In response to the Covid-19 crisis, we took significant steps to
safeguard our assets, our people, the supply chain and financial
resilience. We implemented our robust Crisis Management Plans with
the Executive Committee meeting regularly to assess the risks and
set up appropriate Covid-19 working groups across the business to
co-ordinate the Group's response to mitigate the impact on our
business. The Board met fortnightly in the initial period of the
pandemic and continues to receive regular updates. The key actions
taken to mitigate the effect on the Group and our stakeholders
include:
-- Preparation and implementation of detailed plans at each
asset to manage the closure of non-essential stores, whilst
ensuring that customers could continue to access essential
stores.
-- Prepared and implemented a comprehensive plan to enable
reopening of stores safely in accordance with Government
restrictions. Comprehensive guidelines for reoccupation were
developed working closely with our occupiers to ensure these were
successfully implemented on a site by site basis with no major
issues. We have worked with our occupiers to help them return to
the office over the Summer so they are now well placed to adjust as
and when the current restrictions are relaxed.
-- Implemented arrangements to enable effective working from
home for all our employees who did not need to be on-site.
Government guidance has been followed and our offices have been
made Covid-19 secure with new procedures put in place to manage a
gradual return to work.
-- We continue to carefully monitor employees' mental and
physical wellbeing and the health and safety of our employees
remains a top priority.
-- For committed developments, construction teams prepared
actions plans with contingency to deal with material imports and
maintain programmes already underway with a clear focus on social
distancing and safety procedures.
-- We have undertaken extensive forecasting, stress testing and
modelling of various scenarios to ensure our financial position
remains strong and we keep various strategic actions under
review.
-- Active capital recycling, executing GBP456m sales in the
period, enhancing the strength and resilience of our balance sheet.
We have also enhanced our financial strength and flexibility by
extending GBP650m of our unsecured Revolving Credit Facilities
(RCF) by a further year to 2025.
-- Our asset management approach has been pragmatic and
proactive to maximise occupancy and rent collection.
-- Worked closely with our customers, partners, local
communities and organisations associated with our places so we are
able to respond quickly and effectively providing help where it is
most needed.
-- Temporarily suspended dividend payments to ensure we could
best support our customers, while protecting the financial position
of the business.
We are mindful of the continued high levels of uncertainty; in
this context we will benefit from the resilience of our business,
the quality of our portfolio and the strength of our financial
position.
A summary of the Group's principal risks for the second half of
the year is provided below.
Principal External Risks
Economic outlook - The UK economic climate and future movements
in interest rates present risks and opportunities in property and
financing markets and the businesses of our occupiers which can
impact both the delivery of our strategy and our financial
performance.
Political and regulatory outlook - Significant political events
and regulatory changes, including the UK's decision to leave the
EU, or potential Government policy response to the pandemic, bring
risks both in terms of uncertainty until the outcome is known, and
the impact of policies introduced. This could impact the businesses
of our occupiers as well as our own business.
Commercial property investor demand - Reduction in investor
demand for UK real estate may result in falls in asset valuations
and could arise from variations in the health of the UK economy,
the attractiveness of investment in the UK, availability of finance
and the relative attractiveness of other asset classes.
Occupier demand and tenant default - Underlying income, rental
growth and capital performance could be adversely affected by
weakening occupier demand and occupier failures resulting from
variations in the health of the UK economy and corresponding
weakening of consumer confidence, business activity and investment.
Changing consumer and business practices including the growth of
internet retailing, flexible working practices (including more
working from home) and demand for energy efficient buildings, new
technologies, new legislation and alternative locations may result
in earlier than anticipated obsolescence of our buildings if
evolving occupier and regulatory requirements are not met. Some or
all of these trends could be accelerated by the pandemic.
Availability and cost of finance - Reduced availability of
finance may adversely impact British Land's ability to refinance
debt and/or drive up cost. These factors may also result in weaker
investor demand for real estate. Regulation and capital costs of
lenders may increase cost of finance, as could increased risk in
terms of the UK economic outlook.
Catastrophic business event - An external event such as a civil
emergency, including a large-scale terrorist attack, pandemic
disease, cyber crime, extreme weather occurrence, environmental
disaster or power shortage could severely disrupt global markets
(including property and finance) and cause significant damage and
disruption to British Land's portfolio, operations, customers and
people.
Principal Internal Risks
Investment strategy - In order to meet our strategic objectives,
we aim to invest in and exit from the right properties at the right
time. Underperformance could result from changes in market
sentiment as well as inappropriate determination and execution of
our property investment strategy, including sector selection and
weighting; timing of investment and divestment decisions; exposure
to developments; asset, tenant, region concentration; and
co-investment arrangements.
Development strategy - Development provides an opportunity for
outperformance but usually involves elevated risk. This is
reflected in our decision-making process around which schemes to
develop, the timing of the development, as well as the execution of
these projects. Development strategy addresses several development
risks that could adversely impact underlying income and capital
performance including: development letting exposure; construction
timing and costs (including construction cost inflation); major
contractor failure; and adverse planning judgements.
Capital structure - leverage - Our capital structure recognises
the balance between performance, risk and flexibility. Leverage
magnifies capital returns, both positive and negative. An increase
in leverage increases the risk of a breach of covenants on
borrowing facilities and may increase finance costs.
Finance strategy - Finance strategy addresses risks both to
continuing solvency and profits generated. Failure to manage
refinancing requirements may result in a shortage of funds to
sustain the operations of the business or repay facilities as they
fall due.
People - A number of critical business processes and decisions
lie in the hands of a few people. Failure to recruit, develop and
retain staff and Directors with the right skills and experience may
result in significant underperformance or impact the effectiveness
of operations and decision making, in turn impacting business
performance.
Income sustainability - We are mindful of maintaining
sustainable income streams which underpin shareholder returns and
provide the platform from which to grow the business. We consider
sustainability of our income streams in: execution of investment
strategy and capital recycling, notably timing of reinvestment of
sale proceeds; nature and structure of leasing activity; and nature
and timing of asset management and development activity.
Statement of directors' responsibilities
The directors confirm that these condensed interim financial
statements have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
-- An indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- Material related party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of British Land plc are listed on the company
website www.britishland.com
By order of the Board
Simon Carter
Chief Financial Officer
17 November 2020
Independent review report to British Land Company PLC
Report on the interim financial statements
Our conclusion
We have reviewed British Land Company PLC's interim financial
statements (the "interim financial statements") in the Half year
results for the six months ended 30 September 2020 of British Land
Company PLC for the 6 month period ended 30 September 2020. Based
on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in
all material respects, in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Consolidated balance sheet as at 30 September 2020;
-- the Consolidated Income Statement and Consolidated Statement
of Comprehensive Income for the period then ended;
-- the Consolidated Statement of Cash Flows for the period then ended;
-- the Consolidated Statement of Changes in Equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half year
results for the six months ended 30 September 2020 have been
prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and
the Disclosure Guidance and Transparency Rules sourcebook of the
United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half year results for the six months ended 30 September
2020, 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 for
the six months ended 30 September 2020 in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Half year results for the six months
ended 30 September 2020 based on our review. This report, including
the conclusion, has been prepared for and only for the company for
the purpose of complying with the Disclosure 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.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
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 for the six months ended 30 September 2020 and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial
statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
17 November 2020
Financial Statements
Consolidated Income Statement
For the six months ended 30 September 2020
Six months ended Six months ended
30 September 2020 30 September 2019
Unaudited Unaudited
================================ ================================
Note Underlying Capital Total Underlying Capital Total
pre-tax(1) and GBPm pre-tax(1) and GBPm
GBPm other GBPm other
GBPm GBPm
================================= ===== ============ ======== ======== ============ ======== ========
Revenue 3 255 - 255 275 53 328
----- ------------ -------- -------- ------------ -------- --------
Costs(2) 3 (105) - (105) (81) (43) (124)
--------------------------------- ----- ------------ -------- -------- ------------ -------- --------
Operating profit 3 150 - 150 194 10 204
----- ------------ -------- -------- ------------ -------- --------
Joint ventures and funds
(see also below) 8 29 (250) (221) 38 (154) (116)
----- ------------ -------- -------- ------------ -------- --------
Administrative expenses (38) - (38) (41) - (41)
----- ------------ -------- -------- ------------ -------- --------
Valuation movement 4 - (625) (625) - (436) (436)
----- ------------ -------- -------- ------------ -------- --------
Profit on disposal of
investment properties
and investments - 19 19 - 10 10
----- ------------ -------- -------- ------------ -------- --------
Net financing costs
----- ------------ -------- -------- ------------ -------- --------
- financing income 5 - - - - 3 3
----- ------------ -------- -------- ------------ -------- --------
- financing charges 5 (31) (11) (42) (33) (31) (64)
----- ------------ -------- -------- ------------ -------- --------
(31) (11) (42) (33) (28) (61)
--------------------------------- ----- ------------ -------- -------- ------------ -------- --------
Profit (loss) on ordinary
activities before taxation 110 (867) (757) 158 (598) (440)
----- ------------ -------- -------- ------------ -------- --------
Taxation 6 (6) (1) (1)
----- ------------ -------- -------- ------------ -------- --------
Loss for the period
after taxation (763) (441)
--------------------------------- ----- ------------ -------- -------- ------------ -------- --------
Attributable to non-controlling
interests 3 (36) (33) 6 (43) (37)
----- ------------ -------- -------- ------------ -------- --------
Attributable to shareholders
of the Company 107 (837) (730) 152 (556) (404)
--------------------------------- ----- ------------ -------- -------- ------------ -------- --------
Earnings per share:
----- ------------ -------- -------- ------------ -------- --------
- basic 2 (78.7)p (42.9p)
----- ------------ -------- -------- ------------ -------- --------
- diluted 2 (78.7)p (42.9p)
----- ------------ -------- -------- ------------ -------- --------
All results derive from continuing operations.
Six months ended Six months ended
30 September 2020 30 September 2019
Unaudited Unaudited
============================== ==============================
Note Underlying Capital Total Underlying Capital Total
pre-tax(1) and GBPm pre-tax(1) and GBPm
GBPm other GBPm other
GBPm GBPm
=========================== ===== ============ ======== ====== ============ ======== ======
Results of joint ventures
and funds accounted
for using the equity
method
----- ------------ -------- ------ ------------ -------- ------
Underlying Profit 29 - 29 38 - 38
----- ------------ -------- ------ ------------ -------- ------
Valuation movement 4 - (250) (250) - (140) (140)
----- ------------ -------- ------ ------------ -------- ------
Capital financing costs - - - - (15) (15)
----- ------------ -------- ------ ------------ -------- ------
Profit on disposal of
investment properties,
trading properties and
investments - - - - 1 1
----- ------------ -------- ------ ------------ -------- ------
Taxation - - - - - -
--------------------------- ----- ------------ -------- ------ ------------ -------- ------
8 29 (250) (221) 38 (154) (116)
----- ------------ -------- ------ ------------ -------- ------
1. See definition in note 2 and a reconciliation between
underlying profit and IFRS profit in note 13.
2. Included within 'Costs' is a provision charge against trade
receivables and accrued income of GBP38m (Six months ended 30
September 2019: GBP1m). This is disclosed in further detail in note
3 to the income statement.
Consolidated Statement
of Comprehensive Income
For the six months ended 30 September 2020
Six months Six months
ended ended
30 September 30 September
2020 2019
Unaudited Unaudited
GBPm GBPm
========================================================== ============== ==============
Loss for the period after taxation (763) (441)
-------------- --------------
Other comprehensive (expense) income:
-------------- --------------
Items that will not be reclassified subsequently to
profit or loss:
-------------- --------------
Net actuarial (loss) gain on pension scheme (2) 1
-------------- --------------
Contribution to pension scheme (10) -
-------------- --------------
Valuation movements on owner-occupied properties (2) (2)
-------------- --------------
(14) (1)
-------------- --------------
Items that may be reclassified subsequently to profit
or loss:
-------------- --------------
Gains on cash flow hedges
-------------- --------------
2 -
* Group
-------------- --------------
- -
* Joint ventures and funds
-------------- --------------
2 -
-------------- --------------
Items recycled through the consolidated income statement
(cash flow hedges)
-------------- --------------
* Interest rate derivatives - joint ventures - (1)
-------------- --------------
- (1)
-------------- --------------
Deferred tax on items of other comprehensive income (1) -
-------------- --------------
Other comprehensive expense for the period (13) (2)
---------------------------------------------------------- -------------- --------------
Total comprehensive expense for the period (776) (443)
---------------------------------------------------------- -------------- --------------
Attributable to non-controlling interests (33) (37)
-------------- --------------
Attributable to shareholders of the Company (743) (406)
---------------------------------------------------------- -------------- --------------
Consolidated balance sheet
As at 30 September 2020
Note 30 September 31 March
2020 2020
Unaudited Audited
GBPm GBPm
==================================================== ===== ============= =========
ASSETS
----- ------------- ---------
Non-current assets
----- ------------- ---------
Investment and development properties 7 7,512 8,188
----- ------------- ---------
Owner-occupied property 7 63 68
----- ------------- ---------
7,575 8,256
----- ------------- ---------
Other non-current assets
----- ------------- ---------
Investments in joint ventures and funds 8 2,171 2,358
----- ------------- ---------
Other investments 9 18 125
----- ------------- ---------
Property, plant and equipment 6 6
----- ------------- ---------
Interest rate and currency derivative assets 11 219 231
----- ------------- ---------
9,989 10,976
----- ------------- ---------
Current assets
----- ------------- ---------
Trading properties 7 20 20
----- ------------- ---------
Debtors 10 101 56
----- ------------- ---------
Cash and short term deposits 11 196 193
----- ------------- ---------
317 269
---------------------------------------------------- ----- ------------- ---------
Total assets 10,306 11,245
---------------------------------------------------- ----- ------------- ---------
LIABILITIES
----- ------------- ---------
Current liabilities
----- ------------- ---------
Short term borrowings and overdrafts 11 (170) (637)
----- ------------- ---------
Creditors (262) (253)
----- ------------- ---------
Corporation tax (20) (17)
----- ------------- ---------
(452) (907)
----- ------------- ---------
Non-current liabilities
----- ------------- ---------
Debentures and loans 11 (3,145) (2,865)
----- ------------- ---------
Other non-current liabilities (155) (156)
----- ------------- ---------
Deferred tax liabilities (2) (1)
----- ------------- ---------
Interest rate and currency derivative liabilities 11 (179) (169)
----- ------------- ---------
(3,481) (3,191)
---------------------------------------------------- ----- ------------- ---------
Total liabilities (3,933) (4,098)
---------------------------------------------------- ----- ------------- ---------
Net assets 6,373 7,147
---------------------------------------------------- ----- ------------- ---------
EQUITY
----- ------------- ---------
Share capital 234 234
----- ------------- ---------
Share premium 1,307 1,307
----- ------------- ---------
Merger reserve 213 213
----- ------------- ---------
Other reserves 37 38
----- ------------- ---------
Retained earnings 4,504 5,243
---------------------------------------------------- ----- ------------- ---------
Equity attributable to shareholders of the Company 6,295 7,035
---------------------------------------------------- ----- ------------- ---------
Non-controlling interests 78 112
----- ------------- ---------
Total equity 6,373 7,147
---------------------------------------------------- ----- ------------- ---------
EPRA NTA per share* 693p 774p
---------------------------------------------------- ----- ------------- ---------
* See definition in note 2.
Consolidated Statement of Cash Flows
For the six months ended 30 September 2020
Note Six months Six months
ended ended
30 September 30 September
2020 2019
Unaudited Unaudited
GBPm GBPm
====================================================== ===== ============== ==============
Rental income received from tenants 138 211
----- -------------- --------------
Fees and other income received 17 30
----- -------------- --------------
Operating expenses paid to suppliers and employees (64) (90)
----- -------------- --------------
Sale of trading properties - 50
----- -------------- --------------
Cash generated from operations 91 201
----- -------------- --------------
Interest paid (38) (40)
----- -------------- --------------
Interest received - 4
----- -------------- --------------
Corporation tax payments (1) (4)
----- -------------- --------------
Distributions and other receivables from joint
ventures and funds 8 10 24
----- -------------- --------------
Net cash inflow from operating activities 62 185
----- -------------- --------------
Cash flows from investing activities
----- -------------- --------------
Development and other capital expenditure (74) (130)
----- -------------- --------------
Sale of investment properties 142 21
----- -------------- --------------
Sale of investments 108 5
----- -------------- --------------
Purchase of investments (2) (4)
----- -------------- --------------
Purchase of remaining share of Aldgate JV - (21)
----- -------------- --------------
Investment in and loans to joint ventures and
funds (52) (80)
----- -------------- --------------
Capital distributions from joint ventures and
funds 4 90
----- -------------- --------------
Indirect taxes (paid) received in respect of
investing activities (4) 4
----- -------------- --------------
Net cash inflow (outflow) from investing activities 122 (115)
----- -------------- --------------
Cash flows from financing activities
----- -------------- --------------
Issue of ordinary shares - 4
----- -------------- --------------
Purchase of ordinary shares - (125)
----- -------------- --------------
Dividends paid - (132)
----- -------------- --------------
Withholding tax paid (10) (20)
----- -------------- --------------
Dividends paid to non-controlling interests - (7)
----- -------------- --------------
Decrease in lease liabilities (3) -
----- -------------- --------------
Capital payments in respect of interest rate
derivatives (1) (6)
----- -------------- --------------
Decrease in bank and other borrowings (475) (550)
----- -------------- --------------
Drawdown on bank and other borrowings 308 684
----- -------------- --------------
Net cash outflow from financing activities (181) (152)
----- -------------- --------------
Net increase (decrease) in cash and cash equivalents 3 (82)
----- -------------- --------------
Cash and cash equivalents at 1 April 193 242
------------------------------------------------------ ----- -------------- --------------
Cash and cash equivalents at 30 September 196 160
------------------------------------------------------ ----- -------------- --------------
Cash and cash equivalents consists of:
----- -------------- --------------
Cash and short-term deposits 196 160
------------------------------------------------------ ----- -------------- --------------
Consolidated Statement of Changes in Equity
For the six months ended 30 September 2020
Six month movements in equity
Share Share Hedging Re- Merger Retained Total Non-controlling Total
capital premium and valuation reserve earnings GBPm interests equity
GBPm GBPm translation reserve GBPm GBPm GBPm GBPm
reserve GBPm
GBPm
==================== ======== ======== ============ ========== ======== ========= ====== ================ =======
Balance at 1 April
2020 234 1,307 12 26 213 5,243 7,035 112 7,147
-------------------- -------- -------- ------------ ---------- -------- --------- ------ ---------------- -------
Total comprehensive
expense
for the period - - 2 (3) - (742) (743) (33) (776)
-------- -------- ------------ ---------- -------- --------- ------ ---------------- -------
Fair value of share
and share
option awards - - - - - 3 3 - 3
-------- -------- ------------ ---------- -------- --------- ------ ---------------- -------
Dividends paid to
non-controlling
interests - - - - - - - (1) (1)
-------------------- -------- -------- ------------ ---------- -------- --------- ------ ---------------- -------
Balance at 30
September 2020 234 1,307 14 23 213 4,504 6,295 78 6,373
-------------------- -------- -------- ------------ ---------- -------- --------- ------ ---------------- -------
Balance at 1 April
2019 240 1,302 11 26 213 6,686 8,478 211 8,689
-------------------- -------- -------- ------------ ---------- -------- --------- ------ ---------------- -------
Total comprehensive
expense
for the period - - - (3) - (403) (406) (37) (443)
-------- -------- ------------ ---------- -------- --------- ------ ---------------- -------
Share issues - 3 - - - - 3 - 3
-------- -------- ------------ ---------- -------- --------- ------ ---------------- -------
Purchase of own
shares (6) - - - - (119) (125) - (125)
-------- -------- ------------ ---------- -------- --------- ------ ---------------- -------
Dividends paid in
period
(15.50p per share) - - - - - (147) (147) - (147)
-------- -------- ------------ ---------- -------- --------- ------ ---------------- -------
Dividends paid to
non-controlling
interests - - - - - - - (6) (6)
-------------------- -------- -------- ------------ ---------- -------- --------- ------ ---------------- -------
Balance at 30
September 2019 234 1,305 11 23 213 6,017 7,803 168 7,971
-------------------- -------- -------- ------------ ---------- -------- --------- ------ ---------------- -------
Prior year movements in equity
Share Share Hedging Re- Merger Retained Total Non-controlling Total
capital premium and valuation reserve earnings GBPm interests equity
GBPm GBPm translation reserve GBPm GBPm GBPm GBPm
reserve GBPm
GBPm
==================== ======== ======== ============ ========== ======== ========= ======== ================ ========
Balance at 1 April
2019 240 1,302 11 26 213 6,686 8,478 211 8,689
-------------------- -------- -------- ------------ ---------- -------- --------- -------- ---------------- --------
Total comprehensive
expense
for the period - - 1 - - (1,027) (1,026) (86) (1,112)
-------- -------- ------------ ---------- -------- --------- -------- ---------------- --------
Share issues - 5 - - - - 5 - 5
-------- -------- ------------ ---------- -------- --------- -------- ---------------- --------
Fair value of share
and share
option awards - - - - - (2) (2) - (2)
-------- -------- ------------ ---------- -------- --------- -------- ---------------- --------
Purchase of own
shares (6) - - - - (119) (125) - (125)
-------- -------- ------------ ---------- -------- --------- -------- ---------------- --------
Dividends paid in
period
(31.47p per share) - - - - - (295) (295) - (295)
-------- -------- ------------ ---------- -------- --------- -------- ---------------- --------
Dividends paid to
non-controlling
interests - - - - - - - (13) (13)
-------------------- -------- -------- ------------ ---------- -------- --------- -------- ---------------- --------
Balance at 31 March
2020 234 1,307 12 26 213 5,243 7,035 112 7,147
-------------------- -------- -------- ------------ ---------- -------- --------- -------- ---------------- --------
Notes to the Accounts
For the six months ended 30 September 2020
1 Basis of preparation
The financial information for the period ended 30 September 2020
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 2020 has been delivered to the Registrar of
Companies. The auditors' report on those accounts was not
qualified, but included a reference to matters to which the auditor
drew attention by way of emphasis without qualifying the report, in
relation to the material uncertainty clause attached to the
valuation of investment and development properties, either held
directly or through joint ventures as at 31 March 2020. The
auditors' report did not contain statements under section 498(2) or
(3) of the Companies Act 2006.
The financial information included in this announcement has been
prepared on a going concern basis using accounting policies
consistent with International Financial Reporting Standards (IFRS)
as adopted by the European Union, in accordance with IAS 34 Interim
Financial Reporting, and in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority. The current
period financial information presented in this document has been
reviewed, not audited.
The condensed interim financial statements should be read in
conjunction with the annual financial statements for the year ended
31 March 2020, which have been prepared in accordance with IFRS as
adopted by the European Union.
The same accounting policies are followed in the half year
report as applied in the Group's latest annual audited financial
statements, with the exception of the tax policy, which for the
interim period is as follows: The current tax charge is calculated
on profits arising in the period and in accordance with legislation
which has been enacted or substantially enacted at the balance
sheet date.
The Group has considered amendments to standards endorsed by the
European Union effective for the current accounting period and
determined that these do not have a material impact on the
consolidated financial statements of the Group in the period ended
30 September 2020. These amendments are as follows: References to
Conceptual Framework in IFRSs (amended); IAS 1 and IAS 8 (amended)
- Definition of Material; IFRS 3 (amended) - Definition of a
Business; and IFRS 16 (amended) - Covid-19 related Rent
Concessions.
A number of new standards and amendments to standards and
interpretations have been issued but are not yet effective for the
current accounting period. None of these are expected to have a
material impact on the consolidated financial statements of the
Group. The new standards and amendments are as follows:
IFRS 17 - Insurance Contracts; IAS 1 (amended) - Classification
of liabilities as current or non-current; and IFRS 10 and IAS 28
(amended) - sale of contribution of assets between an investor and
its associate of joint venture.
The general risk environment in which the Group operates
remained heightened during the period, which is largely due to the
continued level of uncertainty associated with the impact of
Covid-19, the impact of the UK's exit from the EU, the significant
deterioration in the UK retail market and relatively weak
investment markets.
The Group's key sources of estimation uncertainty are consistent
with those disclosed in the Group's latest audited financial
statements, with the exception of impairment testing of trade
receivables and tenant incentives which are now considered to be a
significant estimate. The impact of Covid-19 has given rise to an
increase in rental debtors due from tenants as a result of delays
in receiving payment. Consequently, the impairment provisions,
calculated using the expected credit loss model within IFRS 9, are
higher than in previous periods.
The key assumptions within the expected credit loss model
include tenants' risk categories and the probability of default
assumed for each risk category. The probability of default for a
given risk category is also dependent on the ageing profile of
outstanding debtors, however, in the current environment, as a
result of Covid-19, more weighting is given to risk rating when
determining expected credit losses. Risk ratings are determined by
management, taking into consideration information available
surrounding a tenant's credit rating, financial position,
historical default rates, the current impact of Covid-19, and its
potential impact over the next 12 months, on their business and
industry trends. Tenants are classified as high, medium or low risk
based on this information. The probabilities of default for these
risk categories are reviewed at each balance sheet date.
The first table below summarises the ageing profile for debtors
outstanding from tenants and amounts provided against these
outstanding balances at the balance sheet date. The second table
below summarises the movement in provisioning in the six months
ended 30 September 2020.
Provisions against bad and Group Proportionally
debts consolidated
================================= ============================================ ===============
Service < 90 90 - > 190 Total Total
charge days 190 days days GBPm GBPm
GBPm past past past
due due due
GBPm GBPm GBPm
================================= ======== ====== ========== ====== ====== ===============
Tenant debtors 14 39 33 6 92 118
-------- ------ ---------- ------ ------ ---------------
Provisions made against tenant
debtors (5) (9) (17) (6) (37) (44)
-------- ------ ---------- ------ ------ ---------------
Net tenant debtors 9 30 16 - 55 74
-------- ------ ---------- ------ ------ ---------------
Accrued income1 - - 20 - 20 25
-------- ------ ---------- ------ ------ ---------------
Provisions made against accrued
income - - (11) - (11) (13)
-------- ------ ---------- ------ ------ ---------------
Net accrued income - - 9 - 9 12
--------------------------------- -------- ------ ---------- ------ ------ ---------------
1. Accrued income relates to concessions offered to tenants in
the form of the deferral of rental payments. Rental income relating
to the six months ended 30 September 2020, which has not yet been
invoiced, is recognised on an accruals basis in accordance with the
underlying lease.
Group Proportionally
GBPm consolidated
GBPm
========================================================= ====== ===============
Movement in provisions against bad debts
------ ---------------
Provisions against rental debtors and accrued income
as at 31 March 2020 14 17
------ ---------------
Write-offs of rental debtors (4) (5)
------ ---------------
Increase in provision against rental debtors 23 27
------ ---------------
Increase in provision against service charge debtors 4 5
------ ---------------
Increase in provision against accrued income 11 13
------ ---------------
Total increase in provision charge recognised in income
statement 38 45
------ ---------------
Provisions against rental debtors and accrued income
as at 30 September 2020 48 57
------ ---------------
The financial statements are prepared on a going concern basis.
The balance sheet shows that the company has net current
liabilities, mainly as a result of the Senior Loan notes of $220m
that are reaching maturity within the next twelve months. The
Directors have worked consistently over several years to ensure
that British Land has a strong and robust financial footing and the
Group is now benefiting from this. As the Group has access to
GBP1.0bn of undrawn facilities and cash in addition to proceeds
from sales completed post period end, the Directors believe that
the Group will be able to meet these current liabilities as they
fall due. In making this assessment the directors took into account
the headroom on Group debt covenants, equivalent to a 42% 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 also 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 financial statements at 30 September
2020.
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 uncertain 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 information was approved by the Board on
17 November 2020.
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 loss 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. The 2015 convertible bond was
repaid in the current period. In the prior period, diluted EPRA
earnings per share did not include the dilutive impact of the 2015
convertible bond, as the Group's share price was below the exchange
price. IFRS diluted earnings per share would have included the
dilutive impact as IAS 33 ignores this hurdle to conversion,
however due to the prior period loss, this would have been
anti-dilutive and therefore no adjustment was made.
Underlying earnings per share is calculated using Underlying
Profit adjusted for underlying taxation (see note 6). Underlying
Profit is the pre-tax EPRA earnings measure, with additional
Company adjustments. No Company adjustments were made in either the
current or prior period.
Six months ended Six months ended 30
30 September 2020 September 2019
================================== ==================================
Relevant Relevant Earnings Relevant Relevant Earnings
earnings number per earnings number per
GBPm of shares share GBPm of shares share
million pence million pence
============== ========== =========== ========= ========== =========== =========
Underlying
---------- ----------- --------- ---------- ----------- ---------
Underlying
pre-tax
profit
attributable
to
shareholders
of the
Company -
income
statement 107 - - 152 - -
---------- ----------- --------- ---------- ----------- ---------
Tax charge (9) - - - - -
relating to
underlying
profit
---------- ----------- --------- ---------- ----------- ---------
Underlying
basic 98 927 10.6 152 941 16.2
---------- ----------- --------- ---------- ----------- ---------
Underlying
diluted 98 930 10.5 152 944 16.1
-------------- ---------- ----------- --------- ---------- ----------- ---------
EPRA
---------- ----------- --------- ---------- ----------- ---------
EPRA basic 98 927 10.6 152 941 16.2
---------- ----------- --------- ---------- ----------- ---------
EPRA diluted 98 930 10.5 152 944 16.1
-------------- ---------- ----------- --------- ---------- ----------- ---------
IFRS
---------- ----------- --------- ---------- ----------- ---------
Basic (730) 927 (78.7) (404) 941 (42.9)
---------- ----------- --------- ---------- ----------- ---------
Diluted (730) 927 (78.7) (404) 941 (42.9)
-------------- ---------- ----------- --------- ---------- ----------- ---------
Net asset value
The Group adopted the EPRA issued new best practice reporting
guidelines in the period ending 30 September 2020, incorporating
the three new measures of net asset value: EPRA Net Tangible Assets
(NTA), Net Reinvestment Value (NRV) and Net Disposal Value (NDV).
EPRA NTA is considered to be the most relevant measure for the
Group and is now the primary measure of net assets, replacing the
previously reported EPRA Net Asset Value metric. The total
accounting return is now calculated based on EPRA NTA. Further
detail on the adopted metrics is included in the Additional
Disclosures.
The 2015 convertible bond was repaid in the current period. In
the prior period, the EPRA net asset metrics did not include the
dilutive impact of the 2015 convertible bond, as the Group's share
price was below the exchange price.
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, 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.
30 September 2020 31 March 2020
================================== ==================================
Relevant Relevant Net asset Relevant Relevant Net asset
net number value net number value
assets of shares per assets of shares per
GBPm million share GBPm million share
pence pence
========== ========= =========== ========== ========= =========== ==========
EPRA
--------- ----------- ---------- --------- ----------- ----------
EPRA NTA 6,465 933 693 7,202 932 773
--------- ----------- ---------- --------- ----------- ----------
EPRA NDV 6,003 933 643 6,762 932 726
--------- ----------- ---------- --------- ----------- ----------
EPRA NRV 7,082 933 759 7,872 932 845
--------- ----------- ---------- --------- ----------- ----------
IFRS
--------- ----------- ---------- --------- ----------- ----------
Basic 6,373 927 687 7,147 927 771
--------- ----------- ---------- --------- ----------- ----------
Diluted 6,373 933 683 7,147 932 767
---------- --------- ----------- ---------- --------- ----------- ----------
Total accounting return
The Group also measures financial performance with reference to
total accounting return. This is calculated as the movement in EPRA
Net Tangible Assets per share and dividend paid in the period as a
percentage of the EPRA Net Tangible Assets per share at the start
of the period.
Six months ended 30 Six months ended 30
September 2020 September 2019
====================================== ======================================
Decrease Dividend Total Decrease Dividend Total
in NTA per share accounting in NTA per share accounting
per share paid return per share paid return
pence pence pence pence
========================= =========== =========== ============ =========== =========== ============
Total accounting return (80) - (10.3%) (49) 15.50 (3.7%)
------------------------- ----------- ----------- ------------ ----------- ----------- ------------
3 Revenue and costs
Six months ended Six months ended
30 September 2020 30 September 2019
============================= =============================
Underlying Capital Total Underlying Capital Total
GBPm and GBPm GBPm and GBPm
other other
GBPm GBPm
================================== =========== ======== ====== =========== ======== ======
Rent receivable 200 - 200 221 - 221
----------- -------- ------ ----------- -------- ------
Spreading of tenant incentives
and guaranteed
rent increases 1 - 1 (8) - (8)
----------- -------- ------ ----------- -------- ------
Surrender premia 1 - 1 - - -
----------- -------- ------ ----------- -------- ------
Gross rental income 202 - 202 213 - 213
---------------------------------- ----------- -------- ------ ----------- -------- ------
Trading property sales proceeds - - - - 53 53
----------- -------- ------ ----------- -------- ------
Service charge income 40 - 40 47 - 47
----------- -------- ------ ----------- -------- ------
Management and performance
fees
----------- -------- ------ ----------- -------- ------
(from joint ventures and
funds) 4 - 4 5 - 5
----------- -------- ------ ----------- -------- ------
Other fees and commissions 9 - 9 10 - 10
---------------------------------- ----------- -------- ------ ----------- -------- ------
Revenue 255 - 255 275 53 328
---------------------------------- ----------- -------- ------ ----------- -------- ------
Trading property cost of
sales - - - - (43) (43)
----------- -------- ------ ----------- -------- ------
Service charge expenses (38) - (38) (47) - (47)
----------- -------- ------ ----------- -------- ------
Property operating expenses (22) - (22) (25) - (25)
----------- -------- ------ ----------- -------- ------
Provisions for trade receivables
and accrued income (38) - (38) (1) - (1)
----------- -------- ------ ----------- -------- ------
Other fees and commissions
expenses (7) - (7) (8) - (8)
---------------------------------- ----------- -------- ------ ----------- -------- ------
Costs (105) - (105) (81) (43) (124)
---------------------------------- ----------- -------- ------ ----------- -------- ------
150 - 150 194 10 204
---------------------------------- ----------- -------- ------ ----------- -------- ------
The provision for doubtful debts is calculated as an expected
credit loss on trade and other debtors recognised at the balance
sheet date in accordance with IFRS 9. The charge to the income
statement for the period in relation to provisions for trade
receivables and accrued income was GBP38m (Six months ended 30
September 2019: GBP1m). Within this charge, GBP5m (Six months ended
30 September 2019: GBPnil) represents provisions made against
receivable balances related to billed rental income due on the
29(th) September rent quarter day. Rental income is recognised on a
straight line basis over the lease term in accordance with IFRS 16.
The majority of rental income relating to the 29(th) September rent
quarter day has therefore, not yet been recognised in the income
statement in the current period and is instead recognised as
deferred income, within current liabilities as at 30 September
2020. As the rent due on the 29(th) September has been billed to
the tenant, however, the Group is required to provide for expected
credit losses at the balance sheet date in accordance with IFRS 9.
This creates a mismatch in the period between the recognition of
rental income and the impairment of the associated rent
receivable.
The expected credit loss is recognised on initial recognition of
a debtor and is reassessed at each reporting period. In order to
calculate the expected credit loss, the Group applies a
forward-looking outlook to historic default rates. In the current
reporting period, the forward-looking outlook has also considered
the likely impacts that Covid-19 and the current status of Brexit
negotiations have had on our tenants and subsequently, the
recoverability of debtors.
A 10% increase / decrease in the charge in the period would
result in a GBP4m decrease / increase in Underlying Profit and
GBP3m increase / decrease in the Group's loss after tax.
4 Valuation movements on property
Six months Six months
ended ended
30 September 30 September
2020 2019
GBPm GBPm
====================================================== ============== ==============
Consolidated income statement
-------------- --------------
Revaluation of properties (625) (436)
-------------- --------------
Revaluation of properties held by joint ventures and
funds accounted for using the equity method (250) (140)
------------------------------------------------------ -------------- --------------
(875) (576)
------------------------------------------------------ -------------- --------------
Consolidated statement of comprehensive income
-------------- --------------
Revaluation of owner-occupied properties (2) (2)
------------------------------------------------------ -------------- --------------
(877) (578)
------------------------------------------------------ -------------- --------------
5 Net financing costs
Six months Six months
ended ended
30 September 30 September
2020 2019
GBPm GBPm
======================================================== ============== ==============
Underlying
-------------- --------------
Financing charges
-------------- --------------
Bank loans and overdrafts (12) (12)
-------------- --------------
Derivatives 17 15
-------------- --------------
Other loans (38) (38)
-------------- --------------
Obligations under head leases (2) (2)
-------------- --------------
(35) (37)
-------------- --------------
Development interest capitalised 4 4
-------------- --------------
(31) (33)
-------------- --------------
Financing income
-------------- --------------
Deposits, securities and liquid investments - -
-------------------------------------------------------- -------------- --------------
Net financing charges - underlying (31) (33)
-------------------------------------------------------- -------------- --------------
Capital and other
-------------- --------------
Financing charges
-------------- --------------
Valuation movements on fair value debt 19 (55)
-------------- --------------
Valuation movements on fair value derivatives (18) 56
-------------- --------------
Close-out of derivatives (1) -
-------------- --------------
Fair value movement on convertible bonds (3) (3)
-------------- --------------
Fair value movement on non-hedge accounted derivatives (8) (29)
-------------- --------------
(11) (31)
-------------- --------------
Financing income
-------------- --------------
Capital financing income - 3
-------------- --------------
- 3
-------------------------------------------------------- -------------- --------------
Net financing charges - capital (11) (28)
-------------------------------------------------------- -------------- --------------
Total financing income - 3
-------------- --------------
Total financing charges (42) (64)
-------------------------------------------------------- -------------- --------------
Net financing costs (42) (61)
-------------------------------------------------------- -------------- --------------
Interest on development expenditure is capitalised at the
Group's weighted average interest rate of 1.9% (Six months ended 30
September 2019: 2.1%). The weighted average interest rate on a
proportionately consolidated basis at 30 September 2020 was 2.5%
(Six months ended 30 September 2019: 2.7%).
6 Taxation
Six months Six months
ended ended
30 September 30 September
2020 2019
GBPm GBPm
============================================================ ============== ==============
Taxation expense
-------------- --------------
Current taxation
-------------- --------------
Underlying profit
-------------- --------------
Current period UK corporation taxation (30 September (5) -
2020: 19%; 30 September 2019: 19%)1
-------------- --------------
Underlying profit adjustments in respect of prior periods2 (4) -
-------------- --------------
Total current underlying profit taxation expense (9) -
-------------- --------------
Capital profit:
-------------- --------------
Current period UK corporation taxation (30 September
2020: 19%; 30 September 2019: 19%) - (1)
-------------- --------------
Capital profit adjustments in respect of prior periods 3 -
-------------- --------------
Total current capital profit taxation expense 3 (1)
-------------- --------------
Total current taxation expense (6) (1)
-------------- --------------
Deferred taxation on revaluations and derivatives (1) -
------------------------------------------------------------ -------------- --------------
Group total taxation (7) (1)
-------------- --------------
Attributable to joint ventures and funds - -
------------------------------------------------------------ -------------- --------------
Total taxation expense (7) (1)
-------------- --------------
1. Includes the GBP5m corporation tax charge in relation to the
six months ended 30 September 2020, discussed below.
2. Includes the GBP10m corporation tax charge in relation to the
year ended 31 March 2020, discussed below, offset by other credits
in respect of prior periods of GBP6m. The GBP6m release relates to
tax provisions in respect of historic taxation matters and points
of uncertainty.
Taxation expense attributable to Underlying Profits for the six
months ended 30 September 2020 was GBP9m (Six months ended 30
September 2019: GBPnil). Taxation income attributable to Capital
and other profits was GBP3m (Six months ended 30 September 2019:
expense of GBP1m).
A REIT is required to pay Property Income Distributions (PIDs)
of at least 90% of the taxable profits from its UK property rental
business within twelve months of the end of each accounting
period.
Following the temporary suspension of dividends to best ensure
we could effectively support our customers who were hardest hit and
protect the long term value of the business as a result of
Covid-19, HMRC agreed to an extension of the required distribution
period in respect of the year to 31 March 2020. The anticipated
balance of the required PID not paid by the extended due date is
instead subject to corporation tax. Following the announced
resumption of the dividend, it is anticipated that there will be a
shortfall in PID distribution required for the 2020 and 2021 tax
years, resulting in an estimated corporate tax liability of GBP15m
of which GBP10m relates to 2020 and GBP5m relates to the six month
period ended 30 September 2020. A further GBP5m of corporate tax
liability is expected to be incurred on profits earned over the
remaining period to 31 March 2021 which will be accrued in the next
six months.
Following the resumption of the dividend, it is expected that
the full PID will be paid for the year to 31 March 2022 and
subsequent years.
7 Property
Property reconciliation
Six months ended 30 Year ended 31 March 2020
September 2020
================================================== ====================================================
Investment Trading Owner-occupied Total Investment Trading Owner-occupied Total
and properties Level GBPm and properties Level GBPm
development GBPm 3 development GBPm 3
properties GBPm properties GBPm
Level Level
3 3
GBPm GBPm
=================== ============ =========== =============== ====== ============ =========== =============== ========
Carrying value at
the
start of the
period/year 8,188 20 68 8,276 8,931 87 73 9,091
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Additions
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
- property
purchases - - - - 94 - - 94
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
- development
expenditure 45 - - 45 156 - - 156
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
- capitalised
interest
and staff costs 5 - - 5 9 - - 9
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
- capital
expenditure
on asset
management
initiatives 24 - - 24 92 - - 92
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
- right of use
assets 2 - - 2 74 - - 74
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
76 - - 76 425 - - 425
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Depreciation - - - - - - (1) (1)
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Disposals (133) - - (133) (58) (67) - (125)
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Reclassifications 3 - (3) - 5 - (5) -
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Revaluations
included
in income
statement (625) - - (625) (1,105) - - (1,105)
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Revaluations
included
in OCI - - (2) (2) - - 1 1
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Movement in tenant
incentives
and contracted
rent
uplift balances 3 - - 3 (10) - - (10)
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Carrying value at
the
end of the
period/year 7,512 20 63 7,595 8,188 20 68 8,276
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Lease liabilities (162) (163)
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Less valuation
surplus
on right of use
assets1 (13) (20)
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Valuation surplus
on
trading
properties 12 13
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Group property
portfolio
valuation at the
end
of the
period/year 7,432 8,106
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Non-controlling
interests (152) (185)
------------ ----------- --------------- ------ ------------ ----------- --------------- --------
Group property
portfolio
valuation at the
end
of the
period/year
attributable
to shareholders 7,280 7,921
------------------- ------------ ----------- --------------- ------ ------------ ----------- --------------- --------
1. Relates to properties held under leasing agreements. 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 GBP7,432m
above.
The Group's total property portfolio was valued by external
valuers on the basis of fair value, in accordance with the RICS
valuation - Professional Standards 2014, ninth edition, 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.
Property valuations are inherently subjective as they are made
on the basis of significant unobservable inputs, including
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. There were no transfers between levels in the
period. Inputs to the valuation, including equivalent yields,
rental values and costs to complete, are 'unobservable' as defined
by IFRS 13.
The general risk environment in which the Group operates
remained heightened during the period, which is largely due to the
impact of Covid-19, uncertainty regarding the impact of the UK's
exit from the EU, the significant deterioration in the UK retail
market and weak investment markets. This environment has had, and
may continue to have, a significant impact upon property
valuations.
The Covid-19 pandemic has continued to impact global financial
markets and market activity in many sectors, with some real estate
markets having experienced lower levels of transactional activity
and liquidity. Nevertheless, as at the valuation date some property
markets have started to function again, with transaction volumes
and other relevant evidence returning to levels which our valuers
consider to be an adequate quantum of market evidence upon which to
base their opinions of value. Accordingly, and for the avoidance of
doubt, our valuers have not reported their valuations as being
subject to `material valuation uncertainty` as defined by VPS 3 and
VPGA 10 of the RICS Valuation- Global Standards. Our valuers have,
however, highlighted the market context under which their opinions
have been prepared and, in recognition of the potential for market
conditions to move rapidly in response to changes in the control or
future spread of Covid-19, the importance of the valuation
date.
In preparing their valuations, our valuers have considered the
impact of concessions agreed with tenants at the balance sheet
date, which mainly relate to rent deferrals and rent free periods,
on valuations, primarily of retail assets. They have also given
consideration to occupiers in higher risk sectors, and those
assumed to be at risk of default, in determining the appropriate
yields to apply.
In light of market conditions, and in response to FRC guidance,
we include sensitivity tables, below, to illustrate the impact of
changes in unobservable inputs on the fair value of the Group's
property portfolio. At 31st March 2020 all of our external
valuation reports included a "material valuation uncertainty"
declaration, which emphasised that less certainty - and a higher
degree of caution - should be attached to the valuations than would
normally be the case. In light of this, we reviewed the ranges used
for our sensitivity analysis, and adopted expanded ranges to
reflect this increased uncertainty. No such declaration was
included in our valuation reports at 30 September 2020, with our
external valuers concluding that there was an adequate quantum of
market evidence upon which to base opinions of value. Consequently,
we have determined it appropriate to revert to the ranges adopted
in previous reporting periods, +/-5% for ERV, +/-25bps for NEY and
+/-5% for development costs.
There has been no change in the valuation methodology used for
investment property as a result of Covid-19.
A provision of GBP19m (31 March 2020: GBP17m) has been made
against tenant incentives and contracted rent uplift balances.
Information about the impact of changes in unobservable inputs
(Level 3) on the fair value of the Group's property portfolio
including share of joint ventures and funds for the six months
ended 30 September 2020
Fair Impact on Impact on Impact on
value valuations valuations valuations
at
30 September
2020
GBPm
============================== ============== ============== ================ ================
+5% -5% -25bps +25bps -5% +5%
ERV ERV NEY NEY costs costs
GBPm GBPm GBPm GBPm GBPm GBPm
============================== ============== ====== ====== ======= ======= ======= =======
Retail 3,150 140 (132) 128 (111) 2 (2)
-------------- ------ ------ ------- ------- ------- -------
Offices(1) 5,609 280 (284) 429 (379) 20 (19)
-------------- ------ ------ ------- ------- ------- -------
Canada Water 354 3 (3) 4 (3) 31 (31)
-------------- ------ ------ ------- ------- ------- -------
Residential 94 1 (1) 2 (2) - -
-------------- ------ ------ ------- ------- ------- -------
Developments 1,108 58 (60) 86 (78) 13 (13)
------------------------------ -------------- ------ ------ ------- ------- ------- -------
Group property portfolio
valuation including share
of joint ventures and funds 10,315 482 (480) 649 (573) 66 (65)
------------------------------ -------------- ------ ------ ------- ------- ------- -------
1. Includes trading properties at fair value
Information about the impact of changes in unobservable inputs
(Level 3) on the fair value of the Group's property portfolio
including share of joint ventures and funds for the year ended 31
March 2020
Fair Impact on Impact on Impact on
value valuations valuations valuations
at
31 March
2020
GBPm
============================== ========== ============== ================= ================
+10% -10% -50bps +50bps -10% +10%
ERV ERV NEY NEY costs costs
GBPm GBPm GBPm GBPm GBPm GBPm
============================== ========== ====== ====== ======= ======== ======= =======
Retail 3,848 297 (287) 322 (276) 4 (4)
---------- ------ ------ ------- -------- ------- -------
Offices(1) 5,800 553 (530) 878 (678) 26 (27)
---------- ------ ------ ------- -------- ------- -------
Canada Water 364 7 (7) 8 (6) 136 (133)
---------- ------ ------ ------- -------- ------- -------
Residential 99 2 (2) 4 (3) - -
---------- ------ ------ ------- -------- ------- -------
Developments 1,046 129 (128) 198 (155) 19 (19)
------------------------------ ---------- ------ ------ ------- -------- ------- -------
Group property portfolio
valuation including share
of joint ventures and funds 11,157 988 (954) 1,410 (1,118) 185 (183)
------------------------------ ---------- ------ ------ ------- -------- ------- -------
1. Includes trading properties at fair value
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
-- 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.
Additional property covenant information
Properties valued at GBP1,008m (year ended 31 March 2020:
GBP961m) were subject to a security interest and other properties
of non-recourse companies amounted to GBP641m (year ended 31 March
2020: GBP772m), totalling GBP1,649m (year ended 31 March 2020:
GBP1,733m).
8 Joint ventures and funds
Summary movement for the period of the investments in joint
ventures and funds
Joint Funds Total Equity Loans Total
ventures GBPm GBPm GBPm GBPm GBPm
GBPm
================================ ========== ====== ====== ======= ====== ======
At 1 April 2020 2,188 170 2,358 1,659 699 2,358
---------- ------ ------ ------- ------ ------
Additions 62 1 63 2 61 63
---------- ------ ------ ------- ------ ------
Share of loss after taxation (204) (17) (221) (221) - (221)
---------- ------ ------ ------- ------ ------
Distributions and dividends:
---------- ------ ------ ------- ------ ------
- Capital (4) - (4) (4) - (4)
---------- ------ ------ ------- ------ ------
- Revenue (22) (3) (25) (25) - (25)
---------- ------ ------ ------- ------ ------
Hedging and exchange movements - - - - - -
-------------------------------- ---------- ------ ------ ------- ------ ------
At 30 September 2020 2,020 151 2,171 1,411 760 2,171
-------------------------------- ---------- ------ ------ ------- ------ ------
Summary income statement for the period of the investments in
joint ventures and funds
Six months ended Six months ended
30 September 30 September
2020 2019
=================== ===================
GBPm GBPm GBPm GBPm
100% BL Share 100% BL Share
==================================================== ======= ========== ======= ==========
Revenue 191 94 198 99
------- ---------- ------- ----------
Costs (85) (42) (72) (37)
---------------------------------------------------- ------- ---------- ------- ----------
106 52 126 62
------- ---------- ------- ----------
Administrative expenses - - - -
------- ---------- ------- ----------
Net financing costs (46) (23) (48) (24)
------- ---------- ------- ----------
Underlying Profit before taxation 60 29 78 38
------- ---------- ------- ----------
Valuation movement (515) (250) (280) (140)
------- ---------- ------- ----------
Capital financing costs - - (30) (15)
------- ---------- ------- ----------
Profit on disposal of investment properties,
trading properties and investments - - 2 1
------- ---------- ------- ----------
Loss on ordinary activities before taxation (455) (221) (230) (116)
------- ---------- ------- ----------
Taxation - - - -
------- ---------- ------- ----------
Loss on ordinary activities after taxation (455) (221) (230) (116)
---------------------------------------------------- ------- ---------- ------- ----------
Loss split between controlling and non-controlling
interests
------- ---------- ------- ----------
Attributable to non-controlling interests (4) (5)
------- ---------- ------- ----------
Attributable to shareholders of the Company (217) (111)
---------------------------------------------------- ------- ---------- ------- ----------
Operating cash flows of joint ventures and funds (Group
share)
Six months Six months
ended ended
30 September 30 September
2020 2019
GBPm GBPm
======================================================== ============== ==============
Rental income received from tenants 52 68
-------------- --------------
Operating expenses paid to suppliers and employees (13) (17)
-------------- --------------
Cash generated from operations 39 51
-------------- --------------
Interest paid (23) (30)
-------------------------------------------------------- -------------- --------------
UK corporation tax paid (1) (2)
-------------------------------------------------------- -------------- --------------
Cash inflow from operating activities 15 19
-------------------------------------------------------- -------------- --------------
Cash inflow from operating activities deployed as:
-------------- --------------
Cash surplus (deficit) following revenue distributions 5 (5)
-------------- --------------
Revenue distributions per consolidated statement of
cash flows 10 24
-------------- --------------
Revenue distributions split between controlling and
non-controlling interests
-------------------------------------------------------- -------------- --------------
Attributable to non-controlling interests - 1
-------------- --------------
Attributable to shareholders of the Company 10 23
-------------------------------------------------------- -------------- --------------
9 Other investments
30 September 31 March
2020 2020
GBPm GBPm
=================================== ============= =========
Fair value through profit or loss 4 111
------------- ---------
Amortised cost 2 3
------------- ---------
Intangible assets 12 11
----------------------------------- ------------- ---------
18 125
----------------------------------- ------------- ---------
The amount included in the fair value through profit or loss
relates to private equity / venture capital investments of GBP4m
(2019/20: GBP2m) which are categorised as Level 3 in the fair value
hierarchy and government bonds of GBPnil (2019/20: GBP17m) which
are classified as Level 1. The fair value of private equity /
venture capital investments are determined by the Directors.
As at 31 March 2020, fair value through profit or loss included
GBP93m comprising interests as a trust beneficiary. The trust's
assets comprise freehold reversions in a pool of commercial
properties, comprising Sainsburys superstores. This interest was
sold for GBP102m in the current period ending 30 September
2020.
10 Debtors
30 September 31 March
2020 2020
GBPm GBPm
====================================== =========
Trade and other debtors 67 29
---- ---------
Prepayments and accrued income 17 10
---- ---------
Rental deposits 17 17
--------------------------------- ---- ---------
101 56
--------------------------------- ---- ---------
Trade and other debtors are shown after deducting a provision
for bad and doubtful debts of GBP37m (2019/20: GBP14m). Prepayments
and accrued income are shown after deducting a provision for bad
and doubtful debts of GBP11m (2019/20: GBPnil). The provision for
doubtful debts is calculated as an expected credit loss on trade
and other debtors in accordance with IFRS 9.
The charge to the income statement in relation to provisions
made against doubtful debts for the six months ended 30 September
2020 was GBP38m, as disclosed in note 3. The increase in provisions
against trade debtors and accrued income in the six months ended 30
September of GBP34m is equal to the charge to the income statement
of GBP38m, less write-offs of trade debtors of GBP4m.
11 Net debt
11.1 Fair value and book value of net debt
30 September 2020 31 March 2020
============================= =============================
Fair Book Difference Fair Book Difference
value value GBPm value value GBPm
GBPm GBPm GBPm GBPm
================================ ======= ======= =========== ======= ======= ===========
Debentures and unsecured
bonds 2,042 1,939 103 2,022 1,964 58
------- ------- ----------- ------- ------- -----------
Convertible bonds - - - 347 347 -
------- ------- ----------- ------- ------- -----------
Bank debt and other floating
rate debt 1,382 1,376 6 1,197 1,191 6
-------------------------------- ------- ------- ----------- ------- ------- -----------
Gross debt 3,424 3,315 109 3,566 3,502 64
-------------------------------- ------- ------- ----------- ------- ------- -----------
Interest rate and currency
derivative liabilities 179 179 - 169 169 -
------- ------- ----------- ------- ------- -----------
Interest rate and currency
derivative assets (219) (219) - (231) (231) -
------- ------- ----------- ------- ------- -----------
Cash and short term deposits (196) (196) - (193) (193) -
-------------------------------- ------- ------- ----------- ------- ------- -----------
Net debt 3,188 3,079 109 3,311 3,247 64
-------------------------------- ------- ------- ----------- ------- ------- -----------
Net debt attributable to
non-controlling interests (80) (80) - (107) (107) -
------- ------- ----------- ------- ------- -----------
Net debt attributable to
shareholders of the Company 3,108 2,999 109 3,204 3,140 64
------- ------- ----------- ------- ------- -----------
Lease liabilities 161 161 - 163 163 -
------- ------- ----------- ------- ------- -----------
Net debt (including lease
liabilities) 3,269 3,160 109 3,367 3,303 64
------- ------- ----------- ------- ------- -----------
Net debt attributable to
non-controlling interests
(including lease liabilities) (85) (85) - (112) (112) -
------- ------- ----------- ------- ------- -----------
Net debt attributable to
shareholders of the Company
(including lease liabilities) 3,184 3,075 109 3,255 3,191 64
-------------------------------- ------- ------- ----------- ------- ------- -----------
The fair values of debentures, unsecured bonds and the
convertible 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
Group loan to value (LTV)
30 September 31 March
2020 2020
GBPm GBPm
=============================================================== ============= =========
Group loan to value (LTV) 30.2% 28.9%
--------------------------------------------------------------- ------------- ---------
Principal value of gross debt 3,128 3,294
------------- ---------
Less debt attributable to non-controlling interests (86) (113)
------------- ---------
Less cash and short term deposits (balance sheet) (196) (193)
------------- ---------
Plus cash attributable to non-controlling interests 6 6
--------------------------------------------------------------- ------------- ---------
Total net debt for LTV calculation 2,852 2,994
--------------------------------------------------------------- ------------- ---------
Group property portfolio valuation (Note 7) 7,432 8,106
------------- ---------
Investments in joint ventures and funds (Note 8) 2,171 2,358
------------- ---------
Other investments and property, plant and equipment
(balance sheet) 24 131
------------- ---------
Less property and investments attributable to non-controlling
interests (189) (221)
--------------------------------------------------------------- ------------- ---------
Total assets for LTV calculation 9,438 10,374
--------------------------------------------------------------- ------------- ---------
Proportionally consolidated loan to value (LTV)
------------- ---------
30 September 31 March
2020 2020
GBPm GBPm
=============================================================== ============= =========
Proportionally consolidated loan to value (LTV) 35.7% 34.0%
--------------------------------------------------------------- ------------- ---------
Principal value of gross debt 4,072 4,271
------------- ---------
Less attributable to non-controlling interests (86) (113)
------------- ---------
Less cash and short term deposits (302) (322)
------------- ---------
Plus cash attributable to non-controlling interests 6 6
--------------------------------------------------------------- ------------- ---------
Total net debt for proportional LTV calculation 3,690 3,842
--------------------------------------------------------------- ------------- ---------
Group property portfolio valuation (Note 7) 7,432 8,106
------------- ---------
Share of property of joint ventures and funds 3,072 3,272
------------- ---------
Other investments and property, plant and equipment
(balance sheet) 24 131
------------- ---------
Less property attributable to non-controlling interests (189) (221)
--------------------------------------------------------------- ------------- ---------
Total assets for proportional LTV calculation 10,339 11,288
--------------------------------------------------------------- ------------- ---------
11.3 British Land Unsecured Financial Covenants
The two financial covenants applicable to the Group unsecured
debt including convertible bonds are shown below:
30 September 31 March
2020 2020
GBPm GBPm
================================================================ ============= =========
Net Borrowings not to exceed 175% of Adjusted Capital
and Reserves 43% 40%
---------------------------------------------------------------- ------------- ---------
Principal amount of gross debt 3,128 3,294
------------- ---------
Less the relevant proportion of borrowings of the partly-owned
subsidiary / non-controlling interests (86) (113)
------------- ---------
Less cash and deposits (balance sheet) (196) (193)
------------- ---------
Plus the relevant proportion of cash and deposits of
the partly-owned subsidiary / non-controlling interests 6 6
---------------------------------------------------------------- ------------- ---------
Net Borrowings 2,852 2,994
---------------------------------------------------------------- ------------- ---------
Share capital and reserves (balance sheet) 6,373 7,147
------------- ---------
EPRA deferred tax adjustment (EPRA Table A) 6 6
------------- ---------
Trading property surpluses (EPRA Table A) 12 13
------------- ---------
Exceptional refinancing charges (see below) 194 199
------------- ---------
Fair value adjustments of financial instruments (EPRA
Table A) 148 141
------------- ---------
Less reserves attributable to non-controlling interests
(balance sheet) (78) (112)
---------------------------------------------------------------- ------------- ---------
Adjusted Capital and Reserves 6,655 7,394
---------------------------------------------------------------- ------------- ---------
In calculating Adjusted Capital and Reserves for the purpose of
the unsecured debt financial covenants, there is an adjustment of
GBP194m
(31 March 2020: GBP199m) to reflect the cumulative net amortised
exceptional items relating to the refinancings in the years ended
31 March 2005, 2006 and 2007.
30 September 31 March
2020 2020
GBPm GBPm
============================================================== ============= =========
Net Unsecured Borrowings not to exceed 70% of Unencumbered
Assets 33% 30%
-------------------------------------------------------------- ------------- ---------
Principal amount of gross debt 3,128 3,294
------------- ---------
Less cash and deposits not subject to a security interest
(being GBP192m less the relevant proportion of cash
and deposits of the partly owned subsidiary of GBP5m) (187) (169)
------------- ---------
Less principal amount of secured and non-recourse borrowings (1,033) (1,156)
-------------------------------------------------------------- ------------- ---------
Net Unsecured Borrowings 1,908 1,969
-------------------------------------------------------------- ------------- ---------
Group property portfolio valuation (Note 7) 7,432 8,106
------------- ---------
Investments in joint ventures and funds (Note 8) 2,171 2,358
------------- ---------
Other investments and property, plant and equipment
(balance sheet) 24 131
------------- ---------
Less investments in joint ventures (Note 8) (2,171) (2,358)
------------- ---------
Less encumbered assets (Note 7) (1,649) (1,733)
-------------------------------------------------------------- ------------- ---------
Unencumbered Assets 5,807 6,504
-------------------------------------------------------------- ------------- ---------
11.4 Convertible bond
0% Convertible bond 2015 (maturity 2020)
On 9 June 2020, the GBP350 million convertible bonds were
redeemed at par in cash. On 9 June 2015 British Land (White) 2015
Limited (the 2015 Issuer), a wholly owned subsidiary of the Group,
issued GBP350 million zero coupon guaranteed convertible bonds due
2020 at par.
11.5 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).
30 September 2020 31 March 2020
=============================== ==============================
Level Level Level Total Level Level Level Total
1 2 3 GBPm 1 2 3 GBPm
GBPm GBPm GBPm GBPm GBPm GBPm
============================ ======= ====== ====== ====== ====== ====== ====== ======
Interest rate and currency
derivative assets - (219) - (219) - (231) - (231)
------- ------ ------ ------ ------ ------ ------ ------
Other investments -
fair value through profit
and loss - - (4) (4) (16) - (95) (111)
---------------------------- ------- ------ ------ ------ ------ ------ ------ ------
Assets - (219) (4) (223) (16) (231) (95) (342)
---------------------------- ------- ------ ------ ------ ------ ------ ------ ------
Interest rate and currency
derivative liabilities - 179 - 179 - 169 - 169
------- ------ ------ ------ ------ ------ ------ ------
Convertible bonds - - - - 347 - - 347
---------------------------- ------- ------ ------ ------ ------ ------ ------ ------
Liabilities - 179 - 179 347 169 - 516
---------------------------- ------- ------ ------ ------ ------ ------ ------ ------
Total - (40) (4) (44) 331 (62) (95) 174
---------------------------- ------- ------ ------ ------ ------ ------ ------ ------
There have been no transfers between levels in the period.
Further disclosures in relation to the valuation of the other
investments are included within note 9.
12 Dividend
As announced on 9 October 2020, the dividend has resumed
following its temporary suspension in March. The dividend will be
paid semi-annually, fixed at 80% of Underlying EPS based on the
most recently completed six-month period.
The interim dividend payment for the six-month period ending 30
September 2020 will be 8.40p. Payment will be made on 19 February
2021 to shareholders on the register at close of business on 8
January 2021. The interim dividend will be a Property Income
Distribution and no SCRIP alternative will be offered.
A REIT is required to pay Property Income Distributions (PIDs)
of at least 90% of the taxable profits from its UK property rental
business within twelve months of the end of each accounting period
and we have agreed an extension to this deadline for the year ended
31 March 2020 with HMRC. We have agreed with HMRC that we will
remain compliant with the REIT regime requirements through the
payment of corporation tax at 19% on any underpayment of the PID
requirement, provided that it arises as a consequence of Covid-19.
The corporation tax anticipated to be due for the years ended 31
March 2020 and the six months ended 30 September 2020 has therefore
been provided for (see Note 6 Taxation). The Group comfortably
passes all other REIT tests and intends to remain a REIT for the
foreseeable future.
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.
Its three principal sectors are Offices, Retail and Canada
Water. The Retail sector includes leisure, as this is often
incorporated into Retail schemes. The Other/unallocated sector
includes residential properties.
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 and funds 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
=====================================================================================
Offices Retail Canada Water Other/unallocated Total
============== ============== =============== ==================== ==============
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
===================== ====== ====== ====== ====== ======= ====== ========= ========= ====== ======
Gross rental income
------ ------ ------ ------ ------- ------ --------- --------- ------ ------
British Land Group 83 82 105 117 4 4 2 2 194 205
------ ------ ------ ------ ------- ------ --------- --------- ------ ------
Share of joint
ventures and funds 40 34 32 36 - - - - 72 70
--------------------- ------ ------ ------ ------ ------- ------ --------- --------- ------ ------
Total 123 116 137 153 4 4 2 2 266 275
--------------------- ------ ------ ------ ------ ------- ------ --------- --------- ------ ------
Net rental income
------ ------ ------ ------ ------- ------ --------- --------- ------ ------
British Land Group 72 69 62 106 3 4 - 2 137 181
------ ------ ------ ------ ------- ------ --------- --------- ------ ------
Share of joint
ventures and funds 32 29 20 33 - - - - 52 62
--------------------- ------ ------ ------ ------ ------- ------ --------- --------- ------ ------
Total 104 98 82 139 3 4 - 2 189 243
--------------------- ------ ------ ------ ------ ------- ------ --------- --------- ------ ------
Operating result
------ ------ ------ ------ ------- ------ --------- --------- ------ ------
British Land Group 70 69 62 107 1 2 (24) (25) 109 153
------ ------ ------ ------ ------- ------ --------- --------- ------ ------
Share of joint
ventures and funds 32 26 18 30 - - - - 50 56
--------------------- ------ ------ ------ ------ ------- ------ --------- --------- ------ ------
Total 102 95 80 137 1 2 (24) (25) 159 209
--------------------- ------ ------ ------ ------ ------- ------ --------- --------- ------ ------
Reconciliation to Underlying Profit before taxation Six months Six months
ended ended
30 30 September
September 2019
2020 GBPm
GBPm
============================================================= =========== ==============
Operating result 159 209
----------- --------------
Net financing costs (52) (57)
------------------------------------------------------------- ----------- --------------
Underlying Profit 107 152
------------------------------------------------------------- ----------- --------------
Reconciliation to profit on ordinary activities before
taxation
------------------------------------------------------------- ----------- --------------
Underlying Profit 107 152
----------- --------------
Capital and other (867) (598)
----------- --------------
Underlying Profit attributable to non-controlling interests 3 6
----------- --------------
Total loss on ordinary activities before taxation (757) (440)
------------------------------------------------------------- ----------- --------------
Of the operating result above, GBPnil (six months ended 30
September 2019: GBPnil) was derived from outside the UK.
Segment assets
Offices Retail Canada Water Other / Total
unallocated
=================== =================== =================== =================== ===================
30 31 30 31 30 31 30 31 30 31
September March September March September March September March September March
2020 2020 2020 2020 2020 2020 2020 2020 2020 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========== ========== ======= ========== ======= ========== ======= ========== ======= ========== =======
Property
assets
---------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- -------
British
Land
Group 4,380 4,470 2,424 2,960 354 364 135 147 7,293 7,941
---------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- -------
Share of
funds
and
joint
ventures 2,284 2,323 751 913 - - - - 3,035 3,236
---------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- -------
Total 6,664 6,793 3,175 3,873 354 364 135 147 10,328 11,177
---------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- -------
Reconciliation to net assets - Unaudited
British Land Group 30 September 31 March
2020 2020
GBPm GBPm
=============================== ============= =========
Property assets 10,328 11,177
------------- ---------
Other non-current assets 6 131
------------------------------- ------------- ---------
Non-current assets 10,334 11,308
------------------------------- ------------- ---------
Other net current liabilities (173) (252)
------------- ---------
Adjusted net debt (3,696) (3,854)
------------- ---------
Other non-current liabilities - -
------------------------------- ------------- ---------
EPRA net tangible assets 6,465 7,202
------------------------------- ------------- ---------
Non-controlling interests 78 112
------------- ---------
EPRA adjustments (170) (167)
------------------------------- ------------- ---------
Net assets 6,373 7,147
------------------------------- ------------- ---------
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, joint ventures and funds 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
GBPm Ordinary
shares
of 25p
each
=============================== ===== ============
Issued, called and fully paid
----- ------------
At 1 April 2020 234 937,938,097
----- ------------
Issues - 19,887
----- ------------
Repurchased and cancelled - -
------------------------------- ----- ------------
At 30 September 2020 234 937,957,984
------------------------------- ----- ------------
At 30 September 2020, of the issued 25p ordinary shares, 7,376
shares were held in the ESOP trust (31 March 2020: 7,376),
11,266,245 shares were held as treasury shares (31 March 2020:
11,266,245) and 926,684,363 shares were in free issue (31 March
2020: 926,664,476). No treasury shares were acquired by the ESOP
trust during the year. All issued shares are fully paid.
17 Subsequent events
After the period end, the Group exchanged and completed on the
sale of a number of properties within the Retail and Offices
segments. In Retail, the Group exchanged and completed on the sale
of three properties for a total consideration of GBP212m. In
Offices, the Group exchanged and completed on the sale of Clarges,
Mayfair for GBP177m and the sale of Yalding House for GBP42m.
Supplementary Disclosures
Unaudited
Table A: Summary income statement and balance sheet
Summary income statement based on proportional consolidation for
the six months ended 30 September 2020
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 and funds included on a line by line
basis and excluding non-controlling interests.
Six months ended 30 September Six months ended 30 September
2020 2019
==================================================== ====================================================
Group Joint Less Proportionally Group Joint Less Proportionally
GBPm ventures non-controlling consolidated GBPm ventures non-controlling consolidated
and interests GBPm and interests GBPm
funds GBPm funds GBPm
GBPm GBPm
================ ====== ========= ================ =============== ====== ========= ================ ===============
Gross rental
income(2) 204 72 (8) 268 213 70 (8) 275
------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
Property
operating
expenses (60) (20) 3 (77) (26) (8) 2 (32)
------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
Net rental
income 144 52 (5) 191 187 62 (6) 243
------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
Administrative
expenses (38) - - (38) (41) - - (41)
------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
Net fees and
other
income 6 - - 6 7 - - 7
------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
Ungeared Income
Return 112 52 (5) 159 153 62 (6) 209
------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
Net financing
costs (31) (23) 2 (52) (33) (24) - (57)
---------------- ------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
Underlying
Profit 81 29 (3) 107 120 38 (6) 152
---------------- ------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
Underlying
taxation (9) - - (9) - - - -
---------------- ------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
Underlying
Profit
after taxation 72 29 (3) 98 120 38 (6) 152
---------------- ------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
Valuation
movement (875) (576)
------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
Other capital
and taxation
(net)
(1) 145 172
------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
Result
attributable
to
shareholders
of the Company (730) (404)
---------------- ------ --------- ---------------- --------------- ------ --------- ---------------- ---------------
1. Includes other comprehensive income, movement in dilution of
share options and the movement in items excluded for EPRA NAV
2. Group gross rental income includes GBP2m of all inclusive
rents relating to service charge income
Summary balance sheet based on proportional consolidation as at
30 September 2020
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 and funds included on a line-by-line
basis and excluding non-controlling interests.
Group Share Less Share Deferred Mark-to-market Head Valuation Intangibles EPRA EPRA
GBPm of non-controlling options tax on derivatives leases surplus GBPm NTA NTA
joint interests GBPm GBPm and GBPm on trading 30 31
ventures GBPm related properties September March
& funds debt GBPm 2020 2020
GBPm adjustments GBPm GBPm
GBPm
=============== ======== ========= ================ ======== ========= =============== ======= =========== ============ ========== ========
Retail
properties 2,635 803 (189) - - - (74) - - 3,175 3,873
-------- --------- ---------------- -------- --------- --------------- ------- ----------- ------------ ---------- --------
Office
properties 4,435 2,285 - - - - (68) 12 - 6,664 6,793
-------- --------- ---------------- -------- --------- --------------- ------- ----------- ------------ ---------- --------
Canada Water
properties 390 - - - - - (36) - - 354 364
-------- --------- ---------------- -------- --------- --------------- ------- ----------- ------------ ---------- --------
Other
properties 135 - - - - - - - - 135 147
-------- --------- ---------------- -------- --------- --------------- ------- ----------- ------------ ---------- --------
Total
properties(1) 7,595 3,088 (189) - - - (178) 12 - 10,328 11,177
-------- --------- ---------------- -------- --------- --------------- ------- ----------- ------------ ---------- --------
Investments
in joint
ventures
and funds 2,171 (2,171) - - - - - - - - -
-------- --------- ---------------- -------- --------- --------------- ------- ----------- ------------ ---------- --------
Other
investments 18 - - - - - - - (12) 6 125
-------- --------- ---------------- -------- --------- --------------- ------- ----------- ------------ ---------- --------
Other net
(liabilities)
assets (332) (42) 1 16 6 - 178 - - (173) (246)
-------- --------- ---------------- -------- --------- --------------- ------- ----------- ------------ ---------- --------
Net debt (3,079) (875) 110 - - 148 - - - (3,696) (3,854)
--------------- -------- --------- ---------------- -------- --------- --------------- ------- ----------- ------------ ---------- --------
Net assets 6,373 - (78) 16 6 148 - 12 (12) 6,465 7,202
--------------- -------- --------- ---------------- -------- --------- --------------- ------- ----------- ------------ ---------- --------
EPRA NTA per
share (Note
2) 693p 773p
--------------- -------- --------- ---------------- -------- --------- --------------- ------- ----------- ------------ ---------- --------
1. Included within the total property value of GBP10,328m are
right-of-use assets net of lease liabilities of GBP13m, 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.
30 September 31 March
2020 2020
=============== =================
GBPm Pence GBPm Pence
per per
share share
======================== ====== ======= ======== =======
Opening EPRA NTA 7,202 773 8,639 904
------ ------- -------- -------
Income return 98 11 306 33
------ ------- -------- -------
Capital return (835) (91) (1,323) (139)
------ ------- -------- -------
Dividend paid - - (295) (31)
------ ------- -------- -------
Purchase of own shares - - (125) 6
------------------------ ------ ------- -------- -------
Closing EPRA NTA 6,465 693 7,202 773
------------------------ ------ ------- -------- -------
Table B: EPRA Performance measures
EPRA Performance measures summary table
Six months Six months
ended ended
30 September 30 September
2020 2019
================ ================
GBPm Pence GBPm Pence
per per
share share
====================== =============== ====== ======== ====== ========
EPRA Earnings - basic 98 10.6 152 16.2
--------------- ------ -------- ------ --------
- diluted 98 10.5 152 16.1
-------------------------------------- ------ -------- ------ --------
EPRA Net Initial Yield 4.5% 4.5%
------ -------- ------ --------
EPRA 'topped-up' Net Initial Yield 5.0% 4.8%
------ -------- ------ --------
EPRA Vacancy Rate 8.0% 5.6%
--------------------------------------- ------ -------- ------ --------
30 September 31 March
2020 2020
==================== ====================
Net Net Net Net
tangible assets tangible assets
assets per assets per
GBPm share GBPm share
pence pence
========== ========== ======== ========== ========
EPRA NTA 6,465 693p 7,202 773p
---------- -------- ---------- --------
EPRA NRV 7,082 759p 7,872 845p
---------- -------- ---------- --------
EPRA NDV 6,003 643p 6,762 726p
---------- ---------- -------- ---------- --------
Calculation and reconciliation of EPRA/IFRS earnings and
EPRA/IFRS earnings per share
Six months Six months
ended ended
30 September 30 September
2020 2019
GBPm GBPm
=============================================================== ============== ==============
Loss attributable to the shareholders of the Company (730) (404)
-------------- --------------
Exclude:
-------------- --------------
Group - non-underlying taxation (3) 1
-------------- --------------
Group - valuation movement 625 436
-------------- --------------
Group - profit on disposal of investment properties
and investments (19) (10)
-------------- --------------
Group - profit on disposal of trading properties - (10)
-------------- --------------
Joint ventures and funds - valuation movement (including
result on disposals) 250 139
-------------- --------------
Joint ventures and funds - capital financing costs - 15
-------------- --------------
Changes in fair value of financial instruments and associated
close-out costs 11 28
-------------- --------------
Non-controlling interests in respect of the above (36) (43)
--------------------------------------------------------------- -------------- --------------
EPRA earnings - basic 98 152
--------------------------------------------------------------- -------------- --------------
Dilutive effect of 0% convertible bond - -
--------------------------------------------------------------- -------------- --------------
EPRA earnings - diluted 98 152
--------------------------------------------------------------- -------------- --------------
Loss attributable to the shareholders of the Company (730) (404)
-------------- --------------
Dilutive effect of 0% convertible bond - -
--------------------------------------------------------------- -------------- --------------
IFRS earnings - diluted (730) (404)
--------------------------------------------------------------- -------------- --------------
Six months Six months
ended ended
30 September 30 September
2020 2019
Number Number
million million
======================================================= ============== ==============
Weighted average number of shares 938 952
-------------- --------------
Adjustment for Treasury shares (11) (11)
------------------------------------------------------- -------------- --------------
IFRS/EPRA weighted average number of shares (basic) 927 941
------------------------------------------------------- -------------- --------------
Dilutive effect of share options - -
-------------- --------------
Dilutive effect of ESOP shares 3 3
------------------------------------------------------- -------------- --------------
EPRA weighted average number of shares (diluted) 930 944
------------------------------------------------------- -------------- --------------
Remove dilutive effect of anti-dilutive share options (3) (3)
------------------------------------------------------- -------------- --------------
IFRS weighted average number of shares (diluted) 927 941
------------------------------------------------------- -------------- --------------
Net assets per share
EPRA published its latest Best Practices Recommendations in
October 2019 which included three new Net Asset Valuation metrics,
EPRA Net Reinstatement Value (NRV), EPRA Net Tangible Assets (NTA)
and EPRA Net Disposal Value (NDV). These metrics are effective from
1 January 2020 and have been adopted in the current period. A
reconciliation between the new EPRA net asset valuation metrics and
the previous measures is shown on the following page.
30 September 31 March
2020 2020
=============== ===============
GBPm Pence GBPm Pence
per per
share share
================================================ ====== ======= ====== =======
Balance sheet net assets 6,373 7,147
------------------------------------------------ ------ ------- ------ -------
Deferred tax arising on revaluation movements 6 6
------ ------- ------ -------
Mark-to-market on derivatives and related debt
adjustments 148 141
------ ------- ------ -------
Dilution effect of share options 16 18
------ ------- ------ -------
Surplus on trading properties 12 13
------ ------- ------ -------
Intangible assets (12) (11)
------ ------- ------ -------
Less non-controlling interests (78) (112)
------------------------------------------------ ------ ------- ------ -------
EPRA Net Tangible Assets (NTA) 6,465 693 7,202 773
------ ------- ------ -------
Intangible assets 12 11
------ ------- ------ -------
Purchasers' costs 605 659
------ ------- ------ -------
EPRA Net Reinstatement Value (NRV) 7,082 759 7,872 845
------ ------- ------ -------
Deferred tax arising on revaluation movements (8) (9)
------ ------- ------ -------
Purchasers' costs (605) (659)
------ ------- ------ -------
Mark-to-market on derivatives and related debt
adjustments (148) (141)
------ ------- ------ -------
Mark-to-market on debt (318) (301)
------ ------- ------ -------
EPRA Net Disposal Value (NDV) 6,003 643 6,762 726
------------------------------------------------ ------ ------- ------ -------
EPRA NTA is considered to be the most relevant measure for the
Group and is now the primary measure of net assets, replacing the
previously reported EPRA NAV metric. EPRA NTA 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, in accordance with the second
recommended option per EPRA Best Practice Recommendations. EPRA NRV
reflects what would be needed to recreate the Group through the
investment markets based on its current capital and financing
structure.
30 September 31 March
2020 2020
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
--------------------------------------- ------------- ---------
Reconciliation of new EPRA net asset valuation metrics to
previous metrics
30 September 31 March
2020 2020
GBPm GBPm
========================== ============= =========
EPRA Net Tangible Assets 6,465 7,202
------------- ---------
Adjustment for:
------------- ---------
Intangibles 12 11
------------- ---------
EPRA Net Asset Value 6,477 7,213
-------------------------- ------------- ---------
Per share measure 694p 774p
-------------------------- ------------- ---------
30 September 31 March
2020 2020
GBPm GBPm
============================== ============= =========
EPRA Net Reinstatement Value 7,082 7,872
------------- ---------
Adjustment for:
------------- ---------
Purchasers' costs (605) (659)
------------- ---------
EPRA Net Asset Value 6,477 7,213
------------------------------ ------------- ---------
Per share measure 694p 774p
------------------------------ ------------- ---------
As the Group's EPRA NDV is the same as the EPRA NNNAV, there are
no reconciling items.
30 September 31 March
2020 2020
GBPm GBPm
========================= ============= =========
EPRA Net Disposal Value 6,003 6,762
------------------------- ------------- ---------
EPRA NNNAV 6,003 6,762
------------------------- ------------- ---------
Per share measure 643p 726p
------------------------- ------------- ---------
EPRA Net Initial Yield and 'topped-up' Net Initial Yield
30 September 30 September
2020 2019
GBPm GBPm
============================================================ ============= =============
Investment property - wholly-owned 6,791 8,434
------------- -------------
Investment property - share of joint ventures and funds 3,524 3,289
------------- -------------
Less developments, residential and land (801) (1,255)
------------- -------------
Completed property portfolio 9,514 10,468
------------- -------------
Allowance for estimated purchasers' costs 684 673
------------------------------------------------------------ ------------- -------------
Gross up completed property portfolio valuation (A) 10,198 11,141
------------------------------------------------------------ ------------- -------------
Annualised cash passing rental income 485 521
------------- -------------
Property outgoings (27) (17)
------------------------------------------------------------ ------------- -------------
Annualised net rents (B) 458 504
------------------------------------------------------------ ------------- -------------
Rent expiration of rent-free periods and fixed uplifts(1) 50 35
------------------------------------------------------------ ------------- -------------
'Topped-up' net annualised rent (C) 508 539
------------- -------------
EPRA Net Initial Yield (B/A) 4.5% 4.5%
------------- -------------
EPRA 'topped-up' Net Initial Yield (C/A) 5.0% 4.8%
------------------------------------------------------------ ------------- -------------
Including fixed/minimum uplifts received in lieu of rental
growth 8 5
------------------------------------------------------------ ------------- -------------
Total 'topped-up' net rents (D) 516 544
------------- -------------
Overall 'topped-up' Net Initial Yield (D/A) 5.1% 4.9%
------------------------------------------------------------ ------------- -------------
'Topped-up' net annualised rent 508 539
------------- -------------
ERV vacant space 47 34
------------- -------------
Reversions 24 22
------------------------------------------------------------ ------------- -------------
Total ERV (E) 579 595
------------- -------------
Net Reversionary Yield (E/A) 5.7% 5.3%
------------------------------------------------------------ ------------- -------------
1. The weighted average period over which rent-free periods
expire is 1 year (30 September 2019: 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 2020, 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
2020 2019
GBPm GBPm
============================================================== ============= =============
Annualised potential rental value of vacant premises 47 34
------------- -------------
Annualised potential rental value for the completed property
portfolio 586 605
------------- -------------
EPRA Vacancy Rate 8.0% 5.6%
-------------------------------------------------------------- ------------- -------------
EPRA Cost Ratios
Six months Six months
ended ended
30 September 30 September
2020 2019
GBPm GBPm
============================================================= ============== ==============
Property operating expenses 57 24
-------------- --------------
Administrative expenses 38 41
-------------- --------------
Share of joint ventures and funds expenses 20 8
-------------- --------------
Less: Performance & management fees (from joint ventures
and funds) (4) (5)
-------------- --------------
Net other fees and commissions (2) (2)
-------------- --------------
Ground rent costs and operating expenses de facto included
in rents (10) (8)
------------------------------------------------------------- -------------- --------------
EPRA Costs (including direct vacancy costs) (A) 99 58
-------------- --------------
Direct vacancy costs (17) (12)
------------------------------------------------------------- -------------- --------------
EPRA Costs (excluding direct vacancy costs) (B) 82 46
-------------- --------------
Gross Rental Income less ground rent costs and operating
expenses de facto included in rents 184 197
-------------- --------------
Share of joint ventures and funds (Gross Rental Income
less ground rent costs) 72 70
------------------------------------------------------------- -------------- --------------
Total Gross Rental Income (C) 256 267
-------------- --------------
EPRA Cost Ratio (including direct vacancy costs) (A/C) 38.7% 21.7%
-------------- --------------
EPRA Cost Ratio (excluding direct vacancy costs) (B/C) 32.0% 17.2%
-------------- --------------
Impairment of tenant debtors, tenant incentives and accrued
income (D) 47 4
-------------- --------------
Adjusted Cost ratio (including direct vacancy costs and
excluding impairment of tenant debtors, tenant incentives
and accrued income) (A-D)/C 20.3% 20.2%
-------------- --------------
Overhead and operating expenses capitalised (including
share of joint ventures and funds) 3 3
------------------------------------------------------------- -------------- --------------
In the current and prior periods employee costs in relation to
staff time on development projects are capitalised into the base
cost of relevant development assets.
Table C: Gross rental income
Six months Six months
ended ended
30 September 30 September
2020 2019
GBPm GBPm
============================================================== ============== ==============
Rent receivable 262 284
-------------- --------------
Spreading of tenant incentives and guaranteed rent increases 2 (10)
-------------- --------------
Surrender premia 4 1
-------------------------------------------------------------- -------------- --------------
Gross rental income 268 275
-------------------------------------------------------------- -------------- --------------
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 Year ended 31 March
30 September 2020 2020
========================== ==========================
Group Joint Total Group Joint Total
ventures ventures
and and
funds funds
===================================== ====== ========== ====== ====== ========== ======
Acquisitions - - - 94 54 148
------ ---------- ------ ------ ---------- ------
Development 45 25 70 156 126 282
------ ---------- ------ ------ ---------- ------
Investment properties
------ ---------- ------ ------ ---------- ------
Incremental lettable space 1 - 1 1 - 1
------ ---------- ------ ------ ---------- ------
No incremental lettable space 21 17 38 82 20 102
------ ---------- ------ ------ ---------- ------
Tenant incentives 2 1 3 9 6 15
------ ---------- ------ ------ ---------- ------
Other material non-allocated types
of expenditure 3 - 3 5 1 6
------ ---------- ------ ------ ---------- ------
Capitalised interest 2 2 4 4 4 8
------------------------------------- ------ ---------- ------ ------ ---------- ------
Total property related capex 74 45 119 351 211 562
------------------------------------- ------ ---------- ------ ------ ---------- ------
Conversion from accrual to cash
basis 5 - 5 9 11 20
------------------------------------- ------ ---------- ------ ------ ---------- ------
Total property related capex on
cash basis 79 45 124 360 222 582
------------------------------------- ------ ---------- ------ ------ ---------- ------
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 GBP3m (31 March 2020:
GBP6m).
SUPPLEMENTARY TABLES
Data includes Group's share of Joint Ventures and Funds
(includes Hercules Unit Trust)
September rent collection(1)
Rent due between 29 Offices Retail(2) Total
September and 10 November
-------- ----------
Received 97% 62% 77%
Rent deferrals - - -
Rent forgiven - 1% -
Customer paid monthly 1% 2% 2%
Outstanding 2% 35% 21%
---------------------------- -------- ---------- --------
Total(4) 100% 100% 100%
----------------------------
GBP48m GBP64m GBP112m
---------------------------- -------- ---------- --------
Collection of adjusted
billing(3) 98% 64% 78%
---------------------------- -------- ---------- --------
June rent collection (1)
Rent due between 24 Offices Retail(2) Total
June and 28 September
-------- ----------
Received 98% 69% 81%
Rent deferrals 1% 4% 2%
Rent forgiven - 6% 4%
Moved to monthly - - -
Outstanding 1% 21% 13%
------------------------ -------- ---------- --------
Total 100% 100% 100%
------------------------
GBP57m GBP80m GBP137m
------------------------ -------- ---------- --------
Collection of adjusted
billing(3) 99% 77% 86%
------------------------ -------- ---------- --------
March rent collection(1)
Rent due between 2 March Offices Retail(2) Total
and 23 June
-------- ----------
Received 98% 46% 68%
Rent deferrals 1% 28% 17%
Rent forgiven 1% 12% 7%
Moved to monthly - - -
Outstanding - 14% 8%
-------------------------- -------- ---------- --------
Total 100% 100% 100%
--------------------------
GBP58m GBP77m GBP135m
-------------------------- -------- ---------- --------
Collection of adjusted
billing(3) 100% 77% 89%
-------------------------- -------- ---------- --------
(1) As at 10 November
(2) Includes non-office customers located within our London
campuses
(3) Total billed rents exclusive of rent deferrals, rent
forgiven and tenants moved to monthly payments
(4) The amount billed is less than what was billed in March and
June due to the exclusion of Scottish quarter date amounts which
are due to be billed on 28 November and monthly amounts due for
December which will be billed later in the quarter.
Since 1 April 2020 Price Price Annual Passing
(100%) (BL Share) Rent
Sales Sector GBPm GBPm GBPm (1)
---------------------------------------- ------- ------- ----------- --------------
Completed
Portfolio of Sainsbury's stores(2) Retail 102 102 -
Tesco, Brislington Retail 42 42 3
B&Qs, Various Retail 100 100 8
Tescos, Milton Keynes & Peterborough(3) Retail 149 149 9
Beaumont Leys (part-sale)(3) Retail 63 63 5
Total 456 456 25
------- -----------
(1) BL share of annualised rent topped up for rent frees
(2) The portfolio was the indirect ownership (25.5%) of the reversionary
interest of 26 Sainsbury's stores.
(3) Exchanged and completed post period end.
Portfolio Valuation by Sector
---------------------------------------------------------------------------
At 30 September 2020 Group JVs & Total H1 Change(1)
Funds
GBPm GBPm GBPm % GBPm
West End 4,071 45 4,116 (2.5) (105)
City 297 2,238 2,535 (4.0) (106)
Offices 4,368 2,283 6,651 (3.1) (211)
Retail Parks 898 608 1,506 (13.1) (243)
Shopping Centre 634 614 1,248 (18.1) (276)
Superstores 46 - 46 (0.2) -
Department Stores 22 - 22 (34.3) (11)
High Street 116 - 116 (14.0) (19)
Leisure 218 19 237 (11.3) (30)
Retail 1,934 1,241 3,175 (14.9) (579)
--------------------------------- ------ ------- ------- ------- -----
Residential(2) 135 - 135 (9.1) (14)
--------------------------------- ------ ------- ------- ------- -----
Canada Water 354 - 354 (6.0) (23)
--------------------------------- ------ ------- ------- ------- -----
Total 6,791 3,524 10,315 (7.3) (827)
Standing Investments 6,010 3,512 9,522 (8.1) (816)
Developments 781 12 793 (0.9) (11)
--------------------------------- ------ ------- ------- ------- -----
(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) Stand-alone residential
Gross Rental Income(1)
--------------------------------------------------------------------------------------------------------------------
Accounting Basis GBPm 6 months to 30 September 2020 Annualised as at 30 September 2020
Group JVs & Total Group JVs & Total
Funds Funds
---------------------------------------- ---------- ----------- --------- ----------- ------------- ----------
West End 77 1 78 140 2 142
City 8 39 47 6 68 74
Offices 85 40 125 146 70 216
---------------------------------------- ---------- ----------- --------- ----------- ------------- ----------
Retail Parks 46 27 73 76 52 128
Shopping Centre 27 24 51 54 44 98
Superstores 2 1 3 3 1 4
Department Stores 1 - 1 2 - 2
High Street 2 - 2 6 - 6
Leisure 7 - 7 14 1 15
Retail 85 52 137 155 98 253
---------------------------------------- ---------- ----------- --------- ----------- ------------- ----------
Residential(2) 2 - 2 1 - 1
---------------------------------------- ---------- ----------- --------- ----------- ------------- ----------
Canada Water 4 - 4 7 - 7
---------------------------------------- ---------- ----------- --------- ----------- ------------- ----------
Total 176 92 268 309 168 477
---------------------------------------- ---------- ----------- --------- ----------- ------------- ----------
(1) Gross rental income will differ from annualised valuation rents due to accounting adjustments
for fixed & minimum contracted rental uplifts and lease incentives
(2) Stand-alone residential
Portfolio Net
Yields(1,2)
----------------------------------------------------------------------------
As at 30 EPRA net EPRA topped Overall Net Net Net ERV
September 2020 initial yield up net topped up equivalent equivalent reversionary Growth
% initial net initial yield yield yield %(5)
yield yield % movement bps %
%(3) %(4)
------------- ------------ ----------- ------------ ------------ ------------ -------
West End 3.5 4.1 4.2 4.4 11 5.0 2.2
City 2.9 3.8 3.8 4.5 3 5.2 (1.7)
Offices 3.3 4.0 4.0 4.4 8 5.1 0.7
---------------- ------------- ------------ ----------- ------------ ------------ ------------ -------
Retail Parks 7.6 7.8 7.9 7.3 26 7.2 (11.6)
Shopping Centre 6.4 6.5 6.7 6.8 41 6.8 (11.9)
Superstores 7.9 7.9 7.9 5.8 (12) 6.0 0.2
Department
Stores 8.3 8.3 8.3 9.4 (4) 12.1 (7.2)
High Street 4.3 4.5 4.5 5.7 27 6.1 (9.2)
Leisure 5.7 5.8 6.4 6.3 57 5.5 (1.2)
Retail 6.9 7.0 7.2 6.9 33 6.9 (10.9)
---------------- ------------- ------------ ----------- ------------ ------------ ------------ -------
Canada Water 3.3 3.2 3.2 4.0 3 4.0 (3.9)
---------------- ------------- ------------ ----------- ------------ ------------ ------------ -------
Total 4.5 5.0 5.1 5.3 17 5.7 (4.9)
---------------- ------------- ------------ ----------- ------------ ------------ ------------ -------
On a proportionally consolidated basis including the Group's share of joint ventures and funds
(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
Total Property Return (as calculated by MSCI)
-------------------------------------------------------------------------------
6 months to 30 September Offices Retail Total
2020
% British MSCI British MSCI British MSCI
Land Land Land
--------------------------- -------- ------ ------- ------ ------- ------
Capital Return (3.0) (2.4) (15.0) (8.4) (7.3) (3.7)
-------- ------ ------- ------ ------- ------
- ERV Growth 0.7 (0.5) (10.9) (5.4) (4.9) (2.0)
-------- ------ ------- ------ ------- ------
- Yield Movement(1) 8 bps 9 bps 33 bps 26 bps 17 bps 11 bps
-------- ------ ------- ------ ------- ------
Income Return 1.4 1.8 3.2 2.6 1.9 2.2
======== ====== ======= ====== ======= ======
Total Property Return (1.6) (0.6) (12.2) (6.0) (5.5) (1.6)
======== ====== ======= ====== ======= ======
On a proportionally consolidated basis including the Group's share
of joint ventures and funds
(1) Net equivalent yield movement
Top 20 Tenants by Sector
-----------------------------------------------------------------------------
As at 30 September % of retail % of office
2020 rent rent
----------------------- ------------ ------------------------ ------------
Retail Offices
----------------------- ------------ ------------------------ ------------
Tesco(1) 7.8 Facebook 7.4
Next 5.0 Government 6.2
Walgreens (Boots) 4.0 Dentsu Aegis(2) 4.3
M&S Plc 3.5 Visa 3.9
J Sainsbury 3.0 Herbert Smith Freehills 3.1
Dixons Carphone 2.8 TP ICAP Plc 3.0
JD Sports 2.4 Gazprom 2.5
Frasers Grp 2.4 Microsoft Corp 2.4
TJX (Tk Maxx) 2.4 SMBC 2.2
Asda Group 1.9 Vodafone 2.0
Arcadia Grp 1.8 Deutsche Bank 1.9
Virgin 1.8 Henderson 1.6
TGI Fridays 1.6 Reed Smith 1.6
The Interpublic Group
Hutchison Whampoa Ltd 1.6 (McCann) 1.5
H&M 1.5 Mayer Brown 1.4
DFS Furniture 1.5 Bank of Montreal 1.4
Primark 1.3 Ctrip.com (Skyscanner) 1.3
Homebase 1.3 Mimecast Ltd 1.2
Pets at Home 1.2 Capula Mgmnt 1.2
River Island 1.2 Credit Agricole 1.2
----------------------- ------------ ------------------------ ------------
(1) Includes GBP3.4m at Surrey Quays Shopping Centre
(2) Taking into account their pre-let of 310,000 sq ft at 1
Triton Square, % of contracted rent would rise to 8.7%.
Major Holdings
----------------------------------------------------------------------------------------------------------------------
As at 30 September 2020 BL Share Sq ft Rent (100%) Occupancy Lease
% '000 GBPm pa(1,4) rate %(2,4) length yrs(3,4)
----------------------------------------------------- ----------- ------ ------------ ----------- ---------------
Broadgate 50 4,468 187 93.6 7.5
Regent's Place 100 1,740 78 96.2 4.1
Paddington Central 100 958 45 96.4 5.4
Meadowhall, Sheffield 50 1,500 77 95.3 4.5
Drake's Circus, Plymouth 100 1,190 16 90.9 5.7
Glasgow Fort 78 510 19 97.8 5.5
Ealing Broadway 100 540 14 91.0 3.4
Portman Square 100 134 10 98.4 4.9
Teesside, Stockton 100 569 15 96.2 3.4
New Mersey, Speke 68 502 13 93.8 5.2
----------------------------------------------------- ----------- ------ ------------ ----------- ---------------
(1) Annualised EPRA contracted rent including 100% of Joint Ventures & Funds
(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
---------------------------------------------------------------------------------------------------------
As at 30 September 2020 Average lease length yrs Occupancy rate %
To expiry To break EPRA Occupancy Occupancy(1,2,3)
--------------------------------- -------------- ---------- ------------------- ---------------------
West End 6.0 4.6 96.3 96.4
City 8.6 7.2 82.3 92.2
Offices 7.0 5.6 90.6 94.7
--------------------------------- -------------- ---------- ------------------- ---------------------
Retail Parks 6.4 5.0 93.8 96.1
Shopping Centre 6.1 4.8 93.0 94.3
Superstores 7.0 6.8 100.0 100.0
Department Stores 15.3 7.7 98.1 98.1
High Street 4.7 3.9 92.9 93.6
Leisure 14.0 13.7 96.2 96.9
Retail 6.8 5.4 93.7 95.5
--------------------------------- -------------- ---------- ------------------- ---------------------
Canada Water 4.7 4.6 98.1 98.6
--------------------------------- -------------- ---------- ------------------- ---------------------
Total 6.8 5.5 92.1 95.1
--------------------------------- -------------- ---------- ------------------- ---------------------
(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 would rise from 95.1% to 96.2% 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. Reflecting units currently occupied but expected to become vacant,
then the occupancy rate for Retail would reduce from 95.5% to 92.7%, and total occupancy would
reduce from 95.1% to 93.7%
Portfolio Weighting
As at 30 September 2019 2020 2020
% % GBPm
-------------------- ----- ----- ------
West End 34.7 39.9 4,116
City 20.2 24.6 2,535
Offices 54.9 64.5 6,651
-------------------- ----- ----- ------
Retail Parks 19.5 14.6 1,506
Shopping Centre 16.0 12.1 1,248
Superstores 1.1 0.5 46
Department Stores 0.5 0.2 22
High Street 1.3 1.1 116
Leisure 2.5 2.3 237
Retail 40.9 30.8 3,175
-------------------- ----- ----- ------
Residential(1) 1.2 1.3 135
-------------------- ----- ----- ------
Canada Water 3.0 3.4 354
-------------------- ----- ----- ------
Total 100.0 100.0 10,315
-------------------- ----- ----- ------
London Weighting 65% 74% 7,664
-------------------- ----- ----- ------
(1) Stand-alone residential
Annualised Rent & Estimated Rental Value (ERV)
-----------------------------------------------------------------------------------------------------------------
As at 30 September 2020 Annualised rent ERV GBPm Average rent GBPpsf
(valuation basis) GBPm(1)
------------------------------------------------
Group JVs & Funds Total Total Contracted(2) ERV
------------------------------------------------ ------- ------------- ------ -------- --------------- ----
West End (3) 134 3 137 195 62.9 71.5
City (3) 7 70 77 135 53.8 58.6
Offices (3) 141 73 214 330 59.2 65.9
------------------------------------------------ ------- ------------- ------ -------- --------------- ----
Retail Parks 79 55 134 120 23.6 21.0
Shopping Centre 55 46 101 102 26.6 26.4
Superstores 4 - 4 3 18.9 14.4
Department Stores 3 - 3 4 2.9 4.2
High Street 6 - 6 8 12.7 16.8
Leisure 14 1 15 15 17.1 16.1
Retail 161 102 263 252 22.1 20.9
------------------------------------------------ ------- ------------- ------ -------- --------------- ----
Residential(4) 1 - 1 3 9.4 34.5
------------------------------------------------ ------- ------------- ------ -------- --------------- ----
Canada Water(5) 7 - 7 9 16.7 19.7
Total 310 175 485 594 29.6 32.9
------- ------------- ------ -------- ---------------
(1) Gross rents plus, where rent reviews are outstanding, any increases to ERV (as determined
by the Group's external valuers), less any ground rents payable under head leases, excludes
contracted rent subject to rent free and future uplift
(2) Annualised rent, plus rent subject to rent free
(3) GBPpsf metrics shown for office space only
(4) Stand-alone residential
(5) Reflects standing investment only
Rent Subject to Open Market Rent Review
-----------------------------------------------------------------------
For period to 31 March 2021 2022 2023 2024 2025 2021-23 2021-25
As at 30 September GBPm GBPm GBPm GBPm GBPm GBPm GBPm
2020
----------------------- ---- ---- ---- ---- ---- ------- -------
West End 1 8 23 7 15 32 54
City 9 1 1 15 11 11 37
Offices 10 9 24 22 26 43 91
----------------------- ---- ---- ---- ---- ---- ------- -------
Retail Parks 8 10 13 6 6 31 43
Shopping Centre 3 6 12 7 4 21 32
Superstores - - 1 1 - 1 2
Department Stores - - - - - - -
High Street - - 1 - - 1 1
Leisure - 1 - - 1 1 2
Retail 11 17 27 14 11 55 80
----------------------- ---- ---- ---- ---- ---- ------- -------
Residential - 1 - - - - 1
----------------------- ---- ---- ---- ---- ---- ------- -------
Canada Water(1) - - - - - - -
----------------------- ---- ---- ---- ---- ---- ------- -------
Total 21 27 51 36 37 99 172
----------------------- ---- ---- ---- ---- ---- ------- -------
On a proportionally consolidated basis including the Group's
share of joint ventures and funds
(1) Reflects standing investment only
Rent Subject to Lease Break or Expiry (1)
-------------------------------------------------------------------------------------------------------------
For period to 31 March 2021 2022 2023 2024 2025 2021-23 2021-25
As at 30 September 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- ------- ------- ------- ------- ------ ----------- -----------
West End 8 30 25 14 15 63 92
City 5 6 3 14 6 14 35
Offices 13 36 28 28 21 77 126
--------------------------------------- ------- ------- ------- ------- ------ ----------- -----------
Retail Parks 12 13 14 23 12 39 74
Shopping Centre 10 15 14 10 8 39 57
Superstores - - 2 - - 2 2
Department Stores - 1 - - 1 1 2
High Street 1 2 1 1 - 4 5
Leisure - - - - - - -
Retail 23 31 31 34 21 85 140
--------------------------------------- ------- ------- ------- ------- ------ ----------- -----------
Residential - - - - - - -
--------------------------------------- ------- ------- ------- ------- ------ ----------- -----------
Canada Water 1 1 1 2 - 3 5
----------- -----------
Total 37 68 60 64 42 165 271
% of contracted rent 6.8 12.3 11.2 11.7 7.6 30.3 49.6
--------------------------------------- ------- ------- ------- ------- ------ -----------
On a proportionally consolidated basis including the Group's share of joint ventures and funds
(1) Reflects standing investment only
Recently Completed and Committed Developments
--------------------------------------------------------------------------------------------------------------------
As at Sector BL Share 100% PC Calendar Year Current Value Cost to come ERV Pre-let
30 September 2020 sq ft
----------------------- ----------------
% '000 GBPm GBPm(1) GBPm(2) GBPm
----------------------- ------- -------- ------ ---------------- ------------- ------------ -------- -------
100 Liverpool Street Office 50 520 Q3 2020 400 - 19.3 15.5
----------------------- ------- -------- ------ ---------------- ------------- ------------ -------- -------
Total Recently Completed 520 400 - 19.3 15.5
------------------------------------------ ------ ---------------- ------------- ------------ -------- -------
1 Triton Square(3) Office 100 365 Q2 2021 426 38 22.6 21.8
Norton Folgate Office 100 336 Q3 2023 99 252 23.4 -
Total Committed 701 525 290 46.0 21.8
-------- ------ ---------------- ------------- ------------ --------
Other Capital Expenditure(4) 47
-------------------------------- -------- ------ ---------------- ------------- ------------ -------- -------
(1) From 1 October 2020. 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) ERV let & under offer of GBP21.8m represents space taken by Dentsu Aegis. As part of
this letting, Dentsu Aegis have an option to return their existing space at 10 Triton Street
in 2021. If this option is exercised, there is an adjustment to the rent free period in respect
of the letting at 1 Triton Square to compensate British Land
(4) Capex committed and underway within our investment portfolio relating to leasing and
asset management
Near Term Development Pipeline
----------------------------------------------------------------------------------------------------------------------
As at Sector BL Share 100% Earliest Current Cost to ERV Let & Planning
30 sq ft Start on Value Come Under Status
September Site Offer
2020
----------- ------------ ------------
% '000 GBPm GBPm(1) GBPm(2) GBPm
----------- ------------ --------- ------ ---------- ----------- ----------- ------- ----------- ------------
1 Broadgate Office 50 539 Q2 2021 91 224 20.0 - Consented
Aldgate
Place,
Phase 2 Residential 100 143 Q3 2021 30 94 7.0 - Consented
Total Near Term 682 121 318 27.0 -
------------------------- --------- ------ ---------- ----------- ----------- ------- ----------- ------------
Other Capital Expenditure
(3) 70
------------------------- --------- ------ ---------- ----------- ----------- ------- ----------- ------------
(1) From 1 October 2020. 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 Sector BL Share 100% Planning Status
30 September 2020 % Sq ft
------------------------------------------------- ---------------- ------------- ---------------
'000
------------------------------------------------ ---------------- ------------- ----------- ---------------
5 Kingdom Street Office 100 438 Consented
2-3 Finsbury Avenue Office 50 563 Consented
Eden Walk Retail & Residential Mixed Use 50 452 Consented
Ealing - 10-40 The Broadway Mixed Use 100 303 Pre-submission
Gateway Building Leisure 100 105 Consented
Canada Water - Plot A1(1) Mixed Use 100 272 Consented
Canada Water - Plot A2(1) Mixed Use 100 246 Consented
Canada Water - Plot K1(1) Mixed Use 100 62 Consented
Canada Water - Remaining plots(1) Mixed Use 100 4,494 Consented
------------------------------------------------- ---------------- ------------- ----------- ---------------
Total Medium Term 6,935
------------------------------------------------------------------- ------------- ----------- ---------------
(1) On drawdown of the Master Development Agreement, ownership reduces to 80% with LBS owning
20%. LBS ownership will adjust over time depending on level of investment by Southwark
Forward-looking statements
This Press Release contains certain (and we may make other
verbal or written) 'forward-looking' statements. These
forward-looking statements include all matters that are not
historical fact. Such statements reflect current views, intentions,
expectations, forecasts and beliefs of British Land concerning,
among other things, our markets, activities, projections, strategy,
plans, initiatives, objectives, performance, financial condition,
liquidity, growth and prospects, as well as assumptions about
future events. Such 'forward-looking' statements can sometimes, but
not always, be identified by their reference to a date or point in
the future, the future tense, or the use of 'forward-looking'
terminology, including terms such as 'believes', 'considers',
'estimates', 'anticipates', 'expects', 'forecasts', 'intends',
'continues', 'due', 'potential', 'possible', 'plans', 'seeks',
'projects', 'budget', 'goal', 'guidance', 'trends', 'future',
'outlook', 'schedule', 'target', 'aim', 'may', 'likely to', 'will',
'would', 'could', 'should' or similar expressions or in each case
their negative or other variations or comparable terminology. By
their nature, forward-looking statements involve inherent known and
unknown risks, assumptions and uncertainties because they relate to
future events and circumstances and depend on circumstances which
may or may not occur and may be beyond our ability to control,
predict or estimate. Forward-looking statements should be regarded
with caution as actual outcomes or results, or plans or objectives,
may differ materially from those expressed in or implied by such
statements. Recipients should not place reliance on, and are
cautioned about relying on, any forward-looking statements.
Important factors that could cause actual results (including the
payment of dividends), performance or achievements of British Land
to differ materially from any outcomes or results expressed or
implied by such forward-looking statements include, among other
things: (a) general business and political, social and economic
conditions globally, (b) the consequences of the referendum on
Britain leaving the EU, (c) industry and market trends (including
demand in the property investment market and property price
volatility), (d) competition, (e) the behaviour of other market
participants, (f) changes in government and other regulation
including in relation to the environment, health and safety and
taxation (in particular, in respect of British Land's status as a
Real Estate Investment Trust), (g) inflation and consumer
confidence, (h) labour relations and work stoppages, (i) natural
disasters and adverse weather conditions, (j) terrorism and 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) reliable
and secure IT infrastructure, (n) changes in occupier demand and
tenant default, (o) changes in financial and equity markets
including interest and exchange rate fluctuations, (p) changes in
accounting practices and the interpretation of accounting standards
(q) the availability and cost of finance and (r) the consequences
of the covid-19 pandemic . The Company's principal risks are
described in greater detail in the "Managing Risk" and "Principal
Risks" sections of the Company's latest annual report and accounts
(which can be found at www.britishland.com ) at pages 78 to 87
inclusive (as updated or supplemented by the section of this Press
Release headed "Risk Management and Principal Risks").
Forward-looking statements in this Press Release, or the British
Land website or made subsequently, which are attributable to
British Land or persons acting on its behalf, should therefore be
construed in light of all such factors.
Information contained in this Press Release relating to British
Land or its share price or the yield on its shares are not
guarantees of, and should not be relied upon as an indicator of,
future performance, and nothing in this Press Release should be
construed as a profit forecast or profit estimate, or be taken as
implying that the earnings of British Land for the current year or
future years will necessarily match or exceed the historical or
published earnings of British Land. Any forward-looking statements
made by or on behalf of British Land speak only as of the date they
are made. Such forward-looking statements are expressly qualified
in their entirety by the factors referred to above and no
representation, assurance, guarantee or warranty is given in
relation to them (whether by British Land or any of its associates,
Directors, officers, employees or advisers), including as to their
completeness, accuracy, fairness, reliability, the basis on which
they were prepared, or their achievement or reasonableness.
Other than in accordance with our legal and regulatory
obligations (including under the UK Financial Conduct Authority's
Listing Rules, Disclosure Guidance and Transparency Rules, the EU
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, circumstances or other information on which any
such statement is based (regardless of whether those
forward-looking statements are affected as a result). This document
shall not, under any circumstances, create any implication that
there has been no change in the business or affairs of British Land
since the date of this document or that the information contained
herein is correct as at any time subsequent to this date.
Nothing in this document shall constitute, in any jurisdiction,
an offer or solicitation to sell or purchase any securities or
other financial instruments, nor shall it constitute a
recommendation, invitation or inducement, or advice, in respect of
any securities or other financial instruments or any other
matter.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR BDLLFBFLEFBQ
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November 18, 2020 02:00 ET (07:00 GMT)
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