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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| British Land Company Plc | LSE:BLND | London | Ordinary Share | GB0001367019 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -3.40 | -0.81% | 415.20 | 415.60 | 416.20 | 421.60 | 414.00 | 417.40 | 2,072,305 | 16:35:17 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 418M | -1.04B | -1.1194 | -3.72 | 3.86B |
From May 2019 to May 2024
TIDMBLND
RNS Number : 3485O
British Land Co PLC
17 May 2018
The British Land Company PLC Full Year Results
17 May 2018
Chris Grigg, Chief Executive said: "This has been another good year for British Land. Our financial performance has been robust following significant asset sales and we have made further strategic and operational progress. Leasing activity has been strong across our business. In London Offices, our unique campus offering is driving demand for our space, and we successfully launched Storey, our flexible workspace offer. In Retail, we remained focused on delivering best-in-class customer service and the highest quality modern space, and this drove another year of good leasing and operational outperformance. We completed over GBP1 billion of sales in the year and continued to make smart use of our capital. This included significant but low risk investment in our development pipeline, selective acquisitions and a GBP300 million share buyback, while further reducing net debt, with LTV now at 28%.
Looking forward, we are mindful of the uncertainties. In retail, market conditions are likely to remain challenging. In offices, demand for our space is healthy, with a range of businesses continuing to commit to London and the supply of high quality new space relatively constrained in the short term. As the ways in which businesses and people use space evolves, our strong and flexible balance sheet means we can capitalise on the opportunities we have created, which broaden the type of space we offer and further enhance the mix of uses and occupiers at our places to deliver enduring growth and returns."
Highlights
-- Robust financial performance -- EPRA NAV 967 pence, up 5.7%; valuation up 2.2% with buyback contributing 15 pence
-- Underlying Profit GBP380 million, down 2.6% following GBP1.5 billion net sales of income producing assets, in the last two financial years
-- Full year dividend 30.08 pence, up 3.0% with a payout ratio of 80%; final dividend of 7.52 pence
-- Total accounting return of +8.9% (2016/17: +2.7%) -- London Offices: strong leasing activity driven by campus strategy and good market demand -- Portfolio value up 4.5% reflecting quality of our assets and leasing success -- 1.2 million sq ft of leasing activity; up four times on last year; 5.6% ahead of ERV -- Under offer or in negotiations on a further 548,000 sq ft, to a wide range of occupiers -- Storey successfully launched across all campuses, with 77% of space now let -- Retail: quality space driving operational outperformance in polarising markets -- Portfolio value up 0.3%, with ERV growth offsetting yield expansion -- 1.2 million sq ft of leasing activity; 10.3% ahead of ERV with incentives unchanged
-- 90% of leases reaching expiry were either retained or replaced; occupancy maintained at 98%
-- Continued operational outperformance vs benchmarks: footfall 340bps ahead; retailer sales 130bps ahead
-- GBP419 million disposals; GBP2.3 billion over the last four years as we proactively reshape the portfolio
-- Strong progress on developments to drive future growth, with risk carefully managed -- Committed pipeline doubled to 1.6 million sq ft with speculative exposure low at 4.5% -- Generating estimated future rent of GBP63 million, of which 55% pre-let or under offer
-- Committed construction costs to come substantially covered by Clarges residential receipts
-- 1.9 million sq ft of planning consents in the year including Meadowhall Leisure extension -- Canada Water Master Development Agreement signed and planning application submitted -- Strong performance on sustainability indices, including DJSI, FTSE4Good, GRESB and MSCI
Summary
Hot Features
Premium
Year ended 31 March 2017 2018 Change
Income statement
Underlying Profit GBP390m GBP380m (2.6)%
Diluted underlying earnings
per share (2) 37.8p 37.4p (1.1)%
IFRS profit before tax GBP195m GBP501m
IFRS basic earnings per share 18.8p 48.7p
Dividend per share 29.20p 30.08p +3.0%
---------------------------------------- ------------- ------------- ---------
Balance sheet
Portfolio at valuation (proportionally
consolidated) GBP13,940m GBP13,716m +2.2%(1)
EPRA Net Asset Value per share(2) 915p 967p +5.7%
IFRS net assets GBP9,476m GBP9,506m
Loan to value ratio (proportionally
consolidated) 29.9% 28.4%
---------------------------------------- ------------- ------------- ---------
Total accounting return (2) 2.7% 8.9%
---------------------------------------- ------------- ------------- ---------
Operational Statistics 2017 2018
Lettings and renewals, sq
ft 1.7m 2.4m
Gross investment activity GBP1.3bn GBP1.8bn
Committed development, sq
ft 0.7m 1.6m
---------------------------------------- ------------- ------------- ---------
Sustainability Performance
MSCI ESG AAA rating AAA rating
GRESB 5* and Green 5* and Green
Star Star
---------------------------------------- ------------- ------------- ---------
(1) Valuation movement during the year (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 set of financial statements
Results Presentation and Investor Conference Call
A presentation of the results will take place at 9.30am on 17 May 2018, and will be broadcast live via webcast (www.britishland.com) and conference call. The details for the conference call are as follows:
UK Toll Free Number: 0808 109 0700 Passcode: British Land
A dial in replay will be available later in the day and will be available for 7 days. The details are as follows:
Replay number: 0208 196 1998 Passcode: 7151297#
A video replay of the event will be available at www.britishland.com from 2pm on 17 May 2018. The accompanying slides will be made available at www.britishland.com just prior to the event starting.
For Information Contact
Investor Relations David Walker, British Land 020 7467 3418 Media Cressida Curtis, British Land 020 7467 2938 Guy Lamming/Caroline Seton, Finsbury 020 7251 3801
CHIEF EXECUTIVE'S REVIEW
This has been another good year across our business. We let four times as much London office space as last year - a clear demonstration of the attractiveness of our unique campuses. In Retail, we let or renewed over 1 million sq ft of space, well ahead of ERV and at 98% occupancy our portfolio is effectively full. All of this helped drive NAV up 5.7% with values up 2.2%.
Our financial performance was robust with profits down 2.6% following GBP1.5 billion net sales of income producing assets over the last two years, of which GBP0.8 billion completed this year. We have maintained our capital discipline, completing a GBP300 million share buyback and increasing our dividend again by 3% while reducing LTV to 28%, further strengthening our financial position. At the same time, we have completed our super-prime Clarges Mayfair residential development and the GBP60 million refurbishment of Meadowhall, while doubling our committed development pipeline. All of this was done on a carefully risk managed basis, with 55% of committed developments already pre-let or under offer. This is a great achievement at an early stage and gives us confidence in both our strategy and in the quality of the space we are delivering.
Future British Land: continuing to evolve our business
The current strength of British Land is underpinned by the consistent strategic actions we have pursued over several years. We identify and invest behind the attractive long term trends which are driving our core business. In recent years this has included the development of our campus strategy, investments into locations which benefit from Crossrail, and most recently the launch of Storey, our flexible workspace offering.
Going forward, we are focused on building an increasingly mixed use business and continuing to evolve our model and respond to changing customer needs. Indicatively, future British Land will comprise:
-- A campus-focused London Office business: With a blend of core and flexible space, including the further build out of Storey, integrated alongside a strong retail and leisure offering at our campuses;
-- A further refined Retail business: including high quality, well located Regional and Local assets but focused on a smaller number of larger, multi-let places with mixed use potential;
-- Residential, primarily Build to Rent: will play an increasingly important role in our mixed use business. It is a structural growth market which is complementary to our core model. We will progress existing opportunities within our portfolio such as Canada Water and explore ways to build further meaningful exposure.
As we do this, we will remain disciplined regarding our use of capital, investing in our business and progressing development, while remaining mindful of the importance of shareholder returns.
Outlook
Businesses remain cautious but continue to commit to London and the supply of high quality new office space is relatively constrained, so we expect demand for our space to remain firm. In Retail, the market is more challenging with many occupiers facing short-term headwinds. Polarisation is accelerating but we are confident that the quality and range of our space meets retailers' evolving needs in the omni-channel retail world.
We are mindful of the current market environment, but the strengths of our business, including the scale, balance and quality of our portfolio, the opportunities we have created and our strong balance sheet mean we look to the future with confidence.
London Offices
Our Offices business had a strong year with values up 4.5%. Leasing activity covered more than 1.2 million sq ft, delivering GBP40 million of future rent - a strong endorsement of our campus strategy.
We secured several major lettings at Broadgate, including Sumitomo Mitsui Banking Corporation Europe Limited ("SMBCE") at 100 Liverpool Street, demonstrating the continued appeal of London to global financial institutions. Mimecast, the technology business, took space at 1 Finsbury Avenue (1FA), and Eataly, the Italian marketplace, will open their first UK site at 135 Bishopsgate. This broad range of activity demonstrates our focus on enhancing the mix of uses and occupiers on the campus to create a seven-day-a-week destination for London. Elsewhere, we signed the largest West End pre-let in 22 years at Regent's Place and our development at Paddington, 4 Kingdom Street was nearly 90% let ahead of launch in June 2017, significantly ahead of ERV.
We are also pleased with the progress of Storey, our flexible workspace offer launched in June 2017. It now covers 114,000 sq ft, with space at each of our three campuses and is now 77% let. We have allocated additional space at 1FA, 4 Kingdom Street and Wells Street, so total space will reach more than 230,000 sq ft in the short term with further long term plans for expansion.
Retail
In Retail, values were up 0.3%, with positive ERV growth offsetting yield expansion. Our leasing activity covered 1.2 million sq ft generating GBP7 million in additional rent, with incentives unchanged. At 98% occupancy, our portfolio is effectively full and is outperforming benchmarks on both footfall and sales.
We delivered this strong operating performance in the context of ongoing, long-term structural changes in the market. As online retail grows, many operators are evolving their models to focus on the optimal size, shape and nature of their physical store network. This year, these challenges were compounded by short-term trading headwinds, and several highly leveraged operators with challenged models applied for company voluntary arrangements (CVAs).
We recognise these trends, and so for a number of years we have been actively repositioning our portfolio to focus on well located, high quality space that reflects people's changing lifestyles and drives enduring demand for our assets. We have sold GBP2.3 billion of retail assets over the last four years, including GBP419 million this year, primarily single use assets but also multi-let space that does not fit our strategy. However, Retail remains a core part of our business. This year we made acquisitions in Woolwich, south east London and in Ealing, adjacent to our existing Ealing Broadway shopping centre; both are well-connected mixed use assets with development potential. In addition, we completed the GBP60 million refurbishment of Meadowhall to ensure it is well positioned to meet the changing demands of consumers into the future.
Development Activity
Development is an important part of how we deliver value. This year we made strong progress on our pipeline of opportunities, with committed developments more than doubling to 1.6 million sq ft, and risks carefully managed. 55% of the future rent from these developments, estimated at GBP63 million, is pre-let or under offer and our speculative exposure remains low at 4.5% of the portfolio value. Committed construction costs of GBP427 million are substantially covered by GBP373 million of Clarges Mayfair residential receipts to come post year end.
Looking further ahead, we have created a range of opportunities in our near and medium term pipelines, which we have the flexibility to progress when the time is right. This includes Canada Water, where our masterplan will create a new urban centre for London. We signed the Master Development Agreement with Southwark Council and submitted our outline planning application for the masterplan in May 2018.
Sustainability
This was our second year holding the Queen's Award for Enterprise, the UK's highest business accolade recognising our economic, social and environmental achievements. Our activity this year has supported 228 people into work, through Bright Lights, our skills and employment programme. 35 of our retail and leisure occupiers participated in "Starting out in Retail", helping 100 young people find employment, and building on this, we will be introducing Starting Out in Construction in 2019. In support of the Living Wage Foundation, we pay all Group employees at least the voluntary living wage rate and encourage our suppliers to do the same. This year, our three London campuses became Living Wage Accredited Employers, with everyone we employ to manage and maintain the campuses, including contractors, paid at least the London Living Wage.
Chris Grigg,
Chief Executive
BUSINESS REVIEW
Key metrics
Year ended 31 March 2017 2018
-----------
Portfolio valuation GBP13,940m GBP13,716m
Occupancy 98.0% 97.4%
Weighted average lease length 8.3 yrs 7.7 yrs
to first break
Total property return +3.1% +7.0%
+15 bps +1 bps
* Yield shift
* ERV growth +1.1% +1.8%
* Valuation movement (1.4)% +2.2%
Lettings/renewals (sq ft) 1.7m 2.4m
Lettings/renewals vs ERV +8.0% +8.2%
Gross investment activity(1) GBP1,251m GBP1,766m
GBP103m GBP206m
* Acquisitions(2)
(GBP856)m GBP(1,308)m
* Disposals(1)
GBP292m GBP252m
* Capital investment
Net investment/(divestment) (GBP461)m GBP(850)m
------------------------------- ----------- ------------
On a proportionally consolidated basis including the Group's share of joint ventures and funds
(1) Current period figures include GBP575 million Leadenhall Building disposal that exchanged during the year ended 31 March 2017 and completed this financial year
(2) Prior period figures restated to exclude GBP92 million purchases completed after 1 April 2017
Market backdrop
The economic environment remained uncertain across the year, with consumer spending more subdued, as inflation (measured by CPI) reached a high of 3.1% in November. The impact of political and economic uncertainty relating to the ongoing Brexit negotiations weighed on investment decisions for UK businesses and in November 2017, we saw the first interest rate rise in ten years. However, at 4.2%, unemployment is at its lowest in more than 40 years and inflation is slowing, as the impact of sterling weakness moderates. So while UK GDP growth forecasts remain below other major economies, the relative strength of the global economy is supportive for UK businesses.
The investment market
The London investment market proved resilient, with real estate continuing to offer good relative returns, and the unique attractions of London remaining persuasive, particularly for overseas investors. However, buyers have become more selective, with well-let, best-in-class assets still generating good interest while pricing on other assets has softened, driving further polarisation. The picture is similar in retail, where higher quality assets, both large and small continue to see demand, although the market remains cautious with investors generally demanding a higher yield to compensate for a perceived increase in risk.
The Office occupational market
Demand for the best quality space has remained firm, with businesses continuing to make long term commitments to London despite wider uncertainty. Initial estimates for Brexit-related job losses in the financial sector have been substantially lowered and financial services companies have continued to take space, although media and technology companies are now a more significant source of demand. Flexible workspace was another important driver, with its share of take up increased from an average of 7% in 2012-16 to 21% in 2017. This represents a shift towards more collaborative workplaces on more flexible terms. This is largely driven by the growth of small and medium sized businesses, but also many larger corporates, who increasingly require flexible workspace in addition to their core office space.
The supply pipeline has moderated substantially since the referendum, and nearly 50% of all space under construction is currently pre-let, including nearly 60% of space due for completion in 2018. As a result, occupiers with relatively large space requirements have limited options in the coming years, which should support rents on the best quality space.
The Retail occupational market
In Retail, the occupational market became more challenging as the year progressed. The long term structural impact of online continues to affect operators, and these issues have been exacerbated by short term factors, notably rising costs and subdued consumer confidence. Retailers continue to rationalise their store networks, and several highly leveraged operators with challenged models have applied for CVAs (company voluntary arrangements). However, this negative sentiment obscures healthy performances from operators with strong and differentiated offerings, who are evolving the role of their stores to reflect the changing way people shop.
In the casual dining sector, operators who over-expanded in recent years have been similarly impacted by short term cost pressures, although the overall leisure market remains strong. Spending on leisure has continued to grow and this year is expected to reach nearly GBP130 billion, a 17% increase compared to five years ago.
As a result, polarisation is accelerating rapidly. The best quality retail schemes, which meet a much broader mix of uses, including leisure and entertainment and which support the important role physical retail can play in an omni-channel strategy are still generating good rental tension and delivering income growth.
Our strategy
Our strategy is to create outstanding places, which reflect the changing lifestyles of the people who work, live or spend time in our space - we call this creating Places People Prefer. We do this by understanding and responding to the evolving needs and expectations of our customers. Increasingly people want to combine working, shopping, socialising, and entertainment in a single place. Across our business we are responding to this trend by curating the environment inside and outside our buildings to create more of these opportunities, which include a mix of activities. As our markets evolve, we will continue to position our business to benefit from the long term trends to drive enduring demand for our space.
London Offices
Our campus approach enables us to successfully differentiate our space by creating neighbourhoods we can enhance and enliven through placemaking. 78% of our offices are located on our three Central London campuses at Broadgate, Paddington Central and Regent's Place. At each, we are delivering a growing mix of uses alongside our offices, including dining, shopping, leisure and entertainment as well as events and activities people can enjoy seven days a week. Our newest buildings reflect the changing ways people are working, with more collaborative space, distinctive features such as roof terraces and smart technology, and sustainable characteristics, all of which is driving good demand from a wide range of occupiers.
Storey, our flexible workspace business is an integral part of that approach, helping to attract new occupiers to our campuses and allowing us to meet the evolving needs of existing customers. Importantly, our campuses benefit from excellent connectivity and transport infrastructure, which will be further enhanced by Crossrail at Broadgate and Paddington Central. This makes them accessible and convenient, and will drive footfall, providing a strong rationale for extending the retail and leisure offer.
Retail
We believe that physical stores have a key role as a part of a successful omni-channel retail strategy, but that the market is polarising towards the best locations. Size should be appropriate to the catchment and quality of space and services are key. Placemaking is an important part of how we can add value as owners and managers of property: by curating our space to meet the needs of our customers, we can support the way the role of the store
is changing. This is where our investment is focused.
There are typically three phases to a modern consumer journey: "discovery", "transaction" and "fulfilment". Our Regional centres typically support the "discovery" phase; they attract visitors from a wide catchment so we are enhancing the nature of this space to encourage people to stay longer and spend more by enlivening our space with more leisure and entertainment. Our data shows that when customers engage with our catering offer, their retail spend is typically 27% higher.
The second stage is the actual "transaction", which may take place in store or online. For retailers, transactions which are made (or fulfilled) instore are preferred, as they do not incur the cost of last mile delivery, reducing pressure on margins.
The third stage is "fulfilment". Retailers are focused on rightsizing their store networks, but are committed to maintaining good coverage, with stores increasingly playing a role in logistics and distribution. Across our portfolio 27% of shoppers now use click and collect up from 19% three years ago, and here, our Local centres, which provide convenient shopping for local communities, have a particular role to play.
Broadgate Estates
In May 2018, we announced the sale of the third-party portfolio of Broadgate Estates, our property management business, to international real estate advisor Savills. This transaction enables us to focus exclusively on our own assets and enhance the service we provide to our customers as our business becomes increasingly mixed-use.
Portfolio performance
YE 31 March Valuation Valuation ERV growth Yield Total property
2018 GBPm movement % shift return
% bps %
---------- ---------- ----------- -------
Offices 6,705 4.5 2.1 (7) 9.0
Retail 6,596 0.3 1.6 6 5.7
Residential 132 1.6 n/a n/a 4.6
Canada Water 283 (7.0) n/a n/a (3.9)
-------------- ---------- ---------- ----------- ------- ---------------
Total 13,716 2.2 1.8 1 7.0
-------------- ---------- ---------- ----------- ------- ---------------
The portfolio value was up 2.2%, driven primarily by our leasing activity, in particular the pre-letting of our developments which saw a valuation gain of 9.6%. ERV growth was positive in Retail and Offices, but was stronger in the first half, particularly in Retail. Office yields contracted 7 bps mostly in the first half reflecting our leasing success, whilst Retail saw yield expansion of 6 bps, which was more pronounced in our Local centres. Overall, the portfolio equivalent yield was broadly flat at 4.8%.
The portfolio underperformed the IPD all property total return index by 310 bps over the year, largely reflecting the continued strength of the industrial sector within the index, where we have no exposure. Offices outperformed the sector benchmark by 70 bps on a total returns basis while Retail underperformed by 50 bps.
We have completed the first phase of our valuer appointment policy, which restricts the engagement of valuers on individual assets to ten years. As a result, this year, 45% of the portfolio was subject to a change in valuer. Despite some variations on individual assets, there was no material impact at a subsector level, and therefore overall. All of these changes were reported at half year and full details on our policy can be found in the Governance section of our website.
Investment and development
From 1 April Retail Offices Residential Canada Water Total
2017
GBPm GBPm GBPm GBPm GBPm
------------------ ------- -------- ------------ ------------- --------
Purchases 199 - - 7 206
Sales(1,2) (419) (577) (312) - (1,308)
Development
Spend 31 82 54 23 190
Capital Spend 57 5 - - 62
------------------ ------- -------- ------------ ------------- --------
Net Investment (132) (490) (258) 30 (850)
------------------ ------- -------- ------------ ------------- --------
Gross Investment 706 664 366 30 1,766
------------------ ------- -------- ------------ ------------- --------
On a proportionally consolidated basis including the Group's share of joint ventures and funds
(1) Includes GBP575 million Leadenhall Building disposal exchanged during the year ended 31 March 2017 and completed this year. Includes sale of Richmond which exchanged during the year and completed post year end
(2) Includes GBP193 million of Clarges completions which exchanged prior to FY18, of which GBP168 million completed after the year end
The gross value of our investment activity since 1 April 2017, as measured by our share of acquisitions, disposals, capital spend on developments and other capital projects was GBP1.8 billion. This includes our share from the sale of the Leadenhall Building of GBP575 million (100%: GBP1.15 billion) which completed in the year, GBP419 million retail sales in line with book value and more than GBP200 million of asset purchases.
We exchanged or completed residential sales of GBP119 million in the year, on average 16% ahead of most recent valuations. In addition, we have completed on GBP193 million of Clarges sales which exchanged prior to 1 April 2017, of which GBP168 million completed post year end. This brings total completed and exchanged sales at Clarges to GBP344 million to date.
This year, development spend has totalled GBP190 million, with the majority relating to Broadgate developments and Clarges. Capital expenditure of GBP62 million relates to income enhancing investment and more general asset enhancement initiatives including at Meadowhall, Glasgow Fort, Peterborough and Teesside.
Development activity
At 31 March 2018 Sq ft Current Cost to ERV ERV Resi Exchanged
Value complete let/under
offer
'000 GBPm GBPm GBPm GBPm GBPm
------------------ ------ -------- ---------- ----- ------------ ---------------
Completed in
year 170 488 17 2 1 344(2)
------------------ ------ -------- ---------- ----- ------------ ---------------
Committed 1,614 572 427 63 35 -
------------------ ------ -------- ---------- ----- ------------ ---------------
Near term 578 55 436 30 - -
------------------ ------ -------- ---------- ----- ------------ ---------------
Medium term 2,992
------------------ ------ -------- ---------- ----- ------------ ---------------
Canada Water
Phase 1(1) 1,848
------------------ ------ -------- ---------- ----- ------------ ---------------
On a proportionally consolidated basis including the Group's share of joint ventures and funds (except area which is shown at 100%)
(1) Total site area is 5 million sq ft
(2) of which GBP193 million completed to date including GBP168 million post year end
Across our portfolio, we have created attractive development opportunities in line with our strategy, giving us the optionality to progress when the time is right. This is a unique advantage in the current environment, where we see limited opportunity to make accretive acquisitions, given the continuing strength of investment markets.
We believe that space which meets a broader range of needs will be most successful long term, so our development pipeline focuses on our London campuses where we see the potential to further enhance the mix of uses, with retail and residential in addition to our core office space.
In line with our disciplined approach to capital allocation, we carefully manage our development risk, and pre-letting our space is an important part of that approach. 55% of the GBP63 million ERV in our committed pipeline is already pre-let or under offer and our total speculative exposure is just 4.5% of portfolio gross asset value (GAV), well below our internal risk threshold for speculative development of 8%. In addition, costs to come on our committed pipeline of GBP427 million are substantially covered by residential receipts to come of GBP373 million from our Clarges Mayfair development.
Looking forward, our medium term pipeline comprises a broad mix of opportunities including mixed use schemes at Eden Walk, Kingston and Ealing where we see potential to deliver sizeable residential schemes alongside an improved retail offer. At Canada Water, we are creating a new urban centre for London, which will comprise offices, retail and leisure as well as residential. We signed a Master Development Agreement with Southwark Council and submitted our outline planning application for the masterplan in May 2018. In total, our medium term pipeline covers 4.8 million sq ft, with the majority of projects currently income producing or held at low cost.
Construction cost forecasts continue to suggest that the rate of growth has moderated from the level in recent years. However, pressure on labour costs and limited capacity in the industry indicate the rate of cost inflation will increase in 2019/20 back to closer to 3-4% per annum. To manage this, 89% of the costs on our committed development programme have been fixed.
London Offices: Strong leasing activity driven by campus strategy and good market demand
Key metrics
As at: 2017 2018
----------
Portfolio Valuation (BL share) GBP6,844m GBP6,705m
GBP4,960m GBP5,250m
* Of which campuses
Occupancy 97.7% 96.7%
Weighted average lease length 7.8 yrs 7.3 yrs
to first break
Total property return +2.8% +9.0%
+15 bps (7) bps
* Yield shift
* ERV growth +0.5% +2.1%
* Valuation movement (0.7)% +4.5%
Lettings/renewals (sq ft) 279,000 1,221,000
Lettings/renewals vs ERV 1.4% 5.6%
-------------------------------- ---------- ----------
On a proportionally consolidated basis including the Group's share of joint ventures and funds
Highlights
-- Portfolio value up 4.5%, with the West End up 5.8% and the City up 2.8%
-- Yield contraction of 7 bps overall, with 13 bps contraction in the West End, weighted towards the first half and 2 bps expansion in the City
-- ERV growth of 2.1%, with the West End up 2.5% and the City up 1.5%
-- 70 bps ahead of IPD on a total return basis, 100 bps ahead on a capital basis, with ERV growth 100 bps ahead
-- Leasing activity covered 1.2 million sq ft, four times the area achieved last year, adding GBP40 million to future rents; under offer or in negotiations on a further 548,000 sq ft
-- Rent reviews, covered 226,000 sq ft, 10% ahead of passing rent -- Activity generating like-for-like income growth of 2.4%
-- GBP664 million (excluding residential sales at Clarges) of gross capital activity, including our share of the Leadenhall Building (GBP575 million)
Campus Review
78% of our offices are located on our three central London campuses, Broadgate, Regent's Place and Paddington Central. Each benefit from excellent transport links, as well as vibrant local neighbourhoods, which supports our placemaking initiatives and makes them more dynamic and interesting places to work and visit.
Broadgate
At Broadgate, our leasing activity covered nearly 590,000 sq ft, including 160,000 sq ft at 100 Liverpool Street, to SMBCE, the European subsidiary of SMBC (Sumitomo Mitsui Banking Corporation). Having committed to this building on a speculative basis at the end of 2016, we are now 37% let on the office space by area, and are seeing good levels of interest on the remaining space. A key focus remains increasing the mix of uses at our campuses, and this year we signed a major deal with Eataly, the Italian marketplace at 135 Bishopsgate, where they will open their first UK location covering 42,000 sq ft. This is an important letting for the campus, in line with our objective to make Broadgate an internationally recognised centre for new food, retail and culture. We are under offer or in negotiations on a further 269,000 sq ft of office space at this development, together accounting for around 80% of the space. At 1 and 2 Finsbury Avenue (1FA and 2FA), we are building Broadgate's reputation as a centre for innovation and finance. We have let 79,000 sq ft to Mimecast at 1FA and are under offer on a cinema (11,000 sq ft), together representing more than one third of the building. At 2FA, we have let 14,500 sq ft on a short term basis to Starling Bank, as well as a host of lettings in the technology and creative sectors through Storey, our flexible workspace business which covers 60,000 sq ft at Broadgate at 2FA and Appold Street.
This year, we were pleased that Broadgate was the winner of two Revo Opal Awards. The first recognised how our commercialisation strategy had helped transform and positively enhance the environment at Broadgate, and the second recognising our Winter Forest as a best in class build, execution and visitor experience.
Regent's Place
At Regent's Place, our leasing activity covered 411,000 sq ft, with our pre-let to Dentsu Aegis of all the office space at 1 Triton Square accounting for 310,000 sq ft, the largest pre-let in the West End for 22 years. As part of this letting, Dentsu Aegis have an option to return their existing space at 10 Triton Street in 2021, which if exercised, would have a compensating adjustment covering the rent free period of the letting at 1 Triton Square.
Facebook reaffirmed their commitment to the campus, taking a further 39,400 sq ft at 10 Brock Street, bringing their total occupation to 213,000 sq ft across two buildings, doubling their initial requirement. This is a good example of how we have been able to accommodate the needs of our occupiers as their business expands or needs change, so we are pleased that Storey is now operational across 23,000 sq ft at 338 Euston Road. We also signed Flykick, a new kick-boxing gym at 350 Euston Road, which opened in March 2018 in line with our focus on enlivening our spaces and diversifying the mix.
The Regent's Place Community Fund is also entering its second year, bringing together occupiers to support local charities and make a positive local difference. In its first year, over 2,600 people benefited from projects addressing employability, social cohesion and health and wellbeing.
Paddington Central
Paddington was our best performing campus, up in value more than 7% in the year as we benefitted from the placemaking activities we have undertaken across our five years of ownership. This has delivered a total unlevered return of 12% per annum. 4 Kingdom Street (147,000 sq ft), reached practical completion in April 2017 and was nearly 90% let ahead of launch in June; to occupiers including Vertex, Sasol and Mars, whose activities span pharmaceuticals, energy and food products. Storey is now operational across 15,000 sq ft and a further 25,000 sq ft has been allocated.
Pergola, an outdoor drinking and dining experience which welcomed 179,000 people in 2017 reopened for the summer season at the end of April. We are continuing to improve the food and beverage, and leisure offering at Paddington with six operators, including a gym, barbers and a number of independent cafés, together covering 12,500 sq ft signed in the period. We completed stage one of our public realm improvement programme and are now underway with stage two, which will enhance and enliven the canal-side space.
Storey
Since its launch in June 2017, Storey, our flexible workspace brand has made good progress. We introduced the concept in response to changing customer needs, and to broaden the range of services we offer campus occupiers. It is now operational at all three of our campuses, as well as International House, Ealing, covering a total of 114,000 sq ft, of which 77% is now let. We are differentiating our offer to appeal to innovative businesses that have outgrown conventional co-working space, as well as larger organisations seeking additional space on more flexible terms in addition to their core requirement. Marketing and fit out are tailored accordingly, so our occupiers are able to create their own brand within our space, but benefit from shared facilities in the building as well as the advantages that our campuses provide.
The average size of occupier is 52 employees and the average lease length is 27 months (21 months term certain), with existing occupiers from our campuses accounting for more than half of the space taken. AIM-listed robotic software company Blue Prism have taken space at 338 Euston Road and at Broadgate our activity is supporting the campus's emergence as a centre of technology and innovation, with lettings to Wipro's strategic and digital arm, Digital +Designit, Tantalum, an automotive technology innovator and Rotageek, which offers data-driven employee scheduling services.
The premium to ERV we are achieving is at or above target, and we have allocated a further 119,000 sq ft to Storey from within the portfolio, of which 73,000 sq ft will be at 1FA. 10,000 sq ft will be "club" space at 4 Kingdom Street, where customers will be able to host events and meetings and benefit from collaboration with fellow Storey and other campus occupiers. This brings total space committed to Storey to more than 230,000 sq ft.
Residential
Clarges Mayfair, our super prime residential development reached practical completion in December 2017. To date we have completed or exchanged on 24 residential units totalling GBP344 million and will commence marketing of the remaining ten valued at GBP141 million, this summer. This scheme, which has delivered profits of more than GBP200 million to date, (of which residential accounts for over GBP150 million) demonstrates our expertise in residential. The offices element of this scheme reached practical completion in June 2016 and is nearly 90% let.
Offices development
Over the year, we have committed to nearly 1 million sq ft of development opportunities on our London campuses, more than doubling our development commitments, but without a material increase in our speculative exposure. 56% of the ERV in our committed office developments is pre-let or under offer.
We achieved planning consents covering more than 1 million sq ft across our three campuses, and are already on site on more than 90% of this space.
Committed pipeline
Our committed pipeline covers 1.5 million sq ft. This includes 366,000 sq ft at 1 Triton Square, Regent's Place, but the majority is at Broadgate.
We are making good progress at 100 Liverpool Street, our 522,000 sq ft development adjacent to the Crossrail station at Liverpool Street station. The building targets the Platinum WiredScore certification for connectivity, a BREEAM Excellent rating for sustainability and the WELL Gold certification for wellbeing; our plans include 20,000 sq ft of outdoor terraces on five levels providing outside spaces for office workers to come together. We have pre-let 37% of the office space to SMBCE and are seeing good interest on the 90,000 sq ft of retail space here. Also at Broadgate, we are on site at 1FA, (291,000 sq ft), which will include a cinema and roof terrace, and 135 Bishopsgate (328,000 sq ft), with 42,000 sq ft of retail, pre-let to Italian marketplace Eataly. In total we are delivering more than 1 million sq ft at Broadgate, of which 15% of the space will be retail or leisure, with 32% of the total ERV pre-let or under offer.
Near-Term pipeline
Looking ahead, our near term pipeline covers 445,000 sq ft of opportunities we would look to progress in the next twelve months. It includes the Gateway Building at Paddington Central, and our option at Blossom Street in Shoreditch.
In line with our strategic focus on expanding the mix of uses at our campuses, we were pleased to achieve planning consent for the Gateway, a 105,000 sq ft premium hotel at Paddington Central.
At Blossom Street, Shoreditch, we have an option over two-acres of land which expires in February 2019. We have consent for a 340,000 sq ft mixed use development, integrating 258,000 sq ft of character office space, with retail and residential, to create a mixed use development, that builds on the historic fabric of the area. Our plans envisage a mix of floorplates, to appeal to small and growing businesses, particularly in the technology and creative sectors, with the potential for some space to be allocated to Storey. We will make a decision on this development before the end of this calendar year.
Medium-Term Pipeline
Looking further ahead, we have created options across our portfolio, which provide opportunities to grow and develop our business well into the future. Our medium term office pipeline covers 1.4 million sq ft, of which three-quarters is at Broadgate.
At 2-3 Finsbury Avenue (2FA and 3FA), we have consent for a 563,000 sq ft development, adding 374,000 sq ft to the existing space, but would seek a significant pre-let before making any commitment. In the meantime, the space is generating a good income through short term more flexible lets and is proving particularly successful amongst technology and creative occupiers. 20,000 sq ft has been let to TMT and creative occupiers through our core business at 2FA, and a further 60,000 sq ft by Storey at 2FA and Appold Street. We recently achieved vacant possession at 3FA, and the space is enjoying similar success, with 44,000 sq ft of short term lets agreed as well as 1,700 sq ft of events space which we expect to launch in the coming months. This short term activity provides us with options over when we commence development. We are progressing our plans at 1-2 Broadgate, in total covering 507,000 sq ft, including a significant retail, leisure and dining element. Vacant possession is not expected until the end of 2019 but we expect to make a planning application towards the end of this year.
At 5 Kingdom Street, at Paddington Central, we have existing consent for a 240,000 sq ft office-led scheme; our plans will increase this to more than 332,000 sq ft and we expect to submit a revised application later this year. The site sits above the Box, a 70,000 sq ft site which will become redundant on the completion of Crossrail, when ownership reverts to British Land. This represents an interesting opportunity to create an alternative use, potentially retail, leisure conference or events space, which will further differentiate our campus offering.
Retail: Quality space driving operational outperformance in polarising markets
Key metrics
As at: 2017 2018
----------
Portfolio valuation (BL share) GBP6,654m GBP6,596m
* Of which multi-let GBP5,102m GBP5,328m
Occupancy 98.3% 98.0%(1)
Weighted average lease length 8.6 yrs 7.9 yrs
to first break
Total property return +3.5% +5.7%
+14 bps +6 bps
* Yield shift
* ERV growth +1.6% +1.6%
* Multi-let ERV growth +2.4% +1.9%
* Valuation movement (1.8)% +0.3%
Lettings/renewals (sq ft) 1,272,000 1,156,000
Lettings/renewals vs ERV +10.8% +10.3%
-------------------------------- ---------- ----------
On a proportionally consolidated basis including the Group's share of joint ventures and funds
1 Occupancy reduces to 97.5% treating space as vacant where occupiers have gone into liquidation post 31 March 2018
Highlights
-- Portfolio value up 0.3%, with the multi-let portfolio down 0.5% offset by positive movements on our solus and leisure assets
-- In the multi-let portfolio, Regionals were marginally up in value whilst Locals were down 1.5%
-- Yield expansion of 6 bps overall, with 9 bps expansion in the multi-let portfolio, more pronounced in the Local portfolio
-- ERV growth of 1.6%, with 1.9% growth in the multi-let portfolio reflecting our successful leasing activity
-- Underperformed IPD by 50 bps on a total return basis and 70 bps below on a capital basis; ERV growth was 70 bps ahead of the index
-- Leasing activity covered 1.2 million sq ft, adding GBP7 million to future rents -- Virtually full with occupancy at 98% -- Completed more than 100 rent reviews, 4.2% ahead of passing rent
-- Nearly 90% of leases reaching expiry were either retained or replaced on terms ahead of ERV, with a further 5% re-let in the short term
-- Activity generating like-for-like income growth of 1.2%
-- Footfall up 0.3%, 340bps ahead of benchmark; retailer sales down 1.6%, 130bps ahead of benchmark
-- Gross investment activity of GBP706 million, with sales of GBP419 million, overall in line with book value; GBP199 million of acquisitions, including GBP152 million of regeneration opportunities in London, benefitting from Crossrail
Operational Review
We have a focused leasing strategy, informed by our insights, which keeps our offer relevant in today's market; this means we are targeting growth subsectors and meeting customer needs. Compared with 2015, we have undertaken 8.8% more leasing to 'health and beauty' operators, and 5.6% more in 'outdoor and sports clothing'. At the same time, we have reduced leasing to sectors where sales have declined, notably general fashion is down more than 10%.
We are also leveraging our insights to demonstrate the attractions of our assets to potential occupiers. This year for example, we signed Decathlon at Ealing after providing compelling research on the strategic fit between its demographic profile and the local catchment and at Broughton, Chester, Footasylum opened its first out of town store, having demonstrated to the occupier that a physical store was an opportunity to enhance their previously low brand awareness to over one million residents in the catchment. Early indications are that it is trading well. This approach is integral to our leasing strategy across the portfolio and instrumental in encouraging operators to open out of town stores, with recent examples including Lush, Ann Summers, Disney and Joules all opening at Glasgow Fort, and Hotel Chocolat at Teesside, Stockton. In addition, our rent to sales ratio remains attractive at 11%.
At Meadowhall, we have seen a strong response to our GBP60 million refurbishment, with nearly 80 occupiers investing GBP46 million upgrading their stores. We have signed 28 new occupiers, including online retailer Joe Browns' first physical store, and Australian homewares brand, House who opened one of their first UK stores here. We have strengthened the premium offering to reflect the improving catchment, with Godiva, Michael Kors, Flannels, Tag Heuer, Neal's Yard, Joules and Nespresso all signing. We have relocated or upsized a further 21 occupiers and renewed or re-geared leases on another 14. This year, deals were signed 13% ahead of ERV, and our activity has generated ERV growth of 2.8%. We are also pleased that our investment has benefited the local community, with 69% of construction spend going to local businesses and 24 people supported into apprenticeships.
Across the market, sales and footfall are down but our assets have continued to outperform. Footfall was up 0.3% across the multi-let portfolio, outperforming the market by 340 bps with the scale of our outperformance continuing to grow. A number of our centres performed particularly well, including Stockton, Teesside, where we are on site with a GBP30 million refurbishment, and SouthGate Bath, where the dining offer has been revitalised, introducing new brands like Comptoir Libanais, Thaikhun, Franco Manca and Absurd Bird. Retailer sales (which only capture instore sales) were down 1.6% at our centres, but were ahead of market by 130 bps.
In what has been a more challenging occupier market, we are confident in the relative strength of our portfolio. The combined impact of administrations and CVAs during the year was 0.6% of total gross income or GBP3.7 million and the portfolio is virtually full with occupancy of 98%.
Capital activity
We are committed to reshaping our retail portfolio to focus on assets which best align with our strategy. This has been ongoing for some time: in the last four years, we have made GBP2.3 billion of retail asset disposals. This year, we sold GBP419 million of assets (GBP662 million on a gross basis), in line with book value, of which GBP122 million were made in the second half, 7.6% ahead of book value, and we are now under offer on a further GBP72 million.
Acquisitions of GBP199 million in the period included a Tesco JV swap, which resulted in a net GBP73 million of superstore disposals. We also acquired the Woolwich Estate and 10-40 The Broadway in Ealing for a total of GBP152 million. These acquisitions are in line with our focus on well-connected assets with mixed use potential, strong or improving local demographics and where we can put our placemaking expertise to work. Both areas benefit from Crossrail, and have already seen significant regeneration ahead of that. This brings total gross activity, including development and capital spend, to more than GBP700 million.
We have invested GBP88 million into the portfolio, of which 70% is income producing capex, and the remainder focusing on improvements to the public realm. We have a strong track record of delivering value with assets benefitting from material investment (more than 5% of value) delivering a total return outperformance of c.80 bps, over the last three years, driven by ERV growth.
Retail development
Across the retail portfolio, we achieved 44 planning consents covering nearly 800,000 sq ft.
We completed our 66,000 sq ft leisure extension at New Mersey, Speke, which added an 11-screen cinema, pre-let to Cineworld and six restaurant units. Overall, the scheme is 80% let or under offer, and will open in summer 2018. .
Committed pipeline
We are on site with a 107,000 sq ft leisure extension at Drake Circus, Plymouth which will add a 12 screen cinema and 15 restaurants. We expect to reach practical completion towards the end of 2019 and are already 38% let or under offer.
Near term pipeline
Our near term pipeline includes leisure extensions at Stockton, Teesside (84,000 sq ft) and Forster Square, Bradford (49,000 sq ft). At Teesside, we received a resolution to grant planning for our masterplan, which includes a redevelopment of the existing terrace, the introduction of smaller retail and restaurant units and improvements to the public realm, overall adding 51,000 sq ft, but we will seek a significant pre-let before committing to this development. We expect to submit a planning application for our plans at Bradford this year.
Medium term pipeline
Our medium term pipeline includes our 330,000 sq ft leisure extension at Meadowhall, where we secured a resolution to grant planning consent. Our plans will transform the centre's leisure offer with new dining and entertainment options, a new cinema, café court, gym, open-air terrace and space for leisure, event and community use. We also submitted planning for a 208,000 sq ft leisure extension at Serpentine Green, Peterborough, which will add 139,000 sq ft. Our mixed use opportunities include a GBP400 million redevelopment of Eden Walk, Kingston, where we have consent for 380 new homes, 28 new retail units, 12 restaurants and cafés and 35,000 sq ft of flexible office space. At Ealing, we are working up plans for a wider mixed use development.
Canada Water
At Canada Water, we are working with the London Borough of Southwark on one of London's most significant development projects. Our long term vision for the area, spanning 53 acres will deliver a major new mixed use urban centre for this part of London, just one stop on the Jubilee Line from Canary Wharf, in Zone 2.
In March 2018, we were delighted to receive Southwark Cabinet approval to enter into a Master Development Agreement with Southwark Council, which was signed in May 2018. Under the terms of the agreement, we have negotiated a new headlease, which consolidates our holdings (including the Printworks, the Surrey Quays Shopping Centre and the Mast Leisure Centre) into a single 500 year headlease, with Southwark Council as the Lessor. This structure effectively aligns the ownership of these assets, with British Land owning 80% and Southwark Council owning the remaining 20%. Southwark Council will have the opportunity to participate in the development of the individual plots, up to a maximum of 20% and returns will be pro-rated accordingly.
This agreement enabled us to submit our planning application in May 2018, which included a detailed application for the project's first three buildings, comprising workspace, retail, homes (of which 35% will be affordable) and a new leisure centre. These buildings are part of a major first phase of the development covering a total of 1.8 million sq ft of mixed use space. This includes one million sq ft of workspace, 250,000 sq ft of retail and leisure space and 650 homes. The overall Masterplan, of which Phase 1 forms part, is expected to deliver up to 3,000 new homes, two million sq ft of workspace and one million sq ft of retail, leisure, entertainment and community space.
Subject to planning approvals, construction of the first detailed plots could begin in spring 2019. Potential structures will be explored when we have greater visibility on timing, but we are already seeing interest in the space from a range of sectors and discussions are underway on several buildings.
In the meantime, the success of the Printworks, our award-winning entertainment space in the old Daily Mail Printworks is building awareness of the area. With capacity for 5,000, it has welcomed more than 250,000 visitors since launch, and has hosted bands including So Solid Crew and Django Django as well as the Beavertown Brewery Extravaganza bringing over 70 of the world's best breweries together. The space has proved to be such a commercial success, as well as an effective driver of footfall, that it has now been incorporated into our development plans.
While the gross valuation of Canada Water was marginally up to GBP283 million, the net valuation was down 7%, reflecting feasibility costs incurred over the year which were not recoverable through the valuation, pending achievement of planning.
FINANCE REVIEW
Year ended 31 March 2017 2018
----------
Underlying Profit(1,2) GBP390m GBP380m
Underlying earnings per
share(1) 37.8p 37.4p
IFRS profit before tax GBP195m GBP501m
Dividend per share 29.20p 30.08p
Total accounting return(1,3) +2.7% +8.9%
------------------------------ ---------- ----------
EPRA net asset value
per share(1,2) 915p 967p
IFRS net assets GBP9,476m GBP9,506m
------------------------------ ---------- ----------
LTV (1,4,5) 29.9% 28.4%
Weighted average interest
rate (5) 3.1% 2.8%
------------------------------ ---------- ----------
(1) See Glossary for definitions. (2) See Table B within supplementary disclosure for reconciliations to IFRS metrics. (3) See Note 2 within condensed financial statements for calculation. (4) See Note 14 within condensed 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 year was robust with underlying earnings per share down 1.1% at 37.4 pence and Underlying Profit down 2.6% at GBP380 million, despite significant sales. EPRA net asset value per share (NAV) increased by 5.7% reflecting a portfolio valuation gain of 2.2% on a proportionally consolidated basis and the impact of the GBP300 million share buyback programme.
We have continued to reposition the portfolio with GBP1.8 billion of gross capital activity (GBP0.8 billion of net capital activity) since 1 April 2017. This comprises GBP1.0 billion of disposals of income producing assets representing 7% of the total portfolio, primarily single-let Retail assets and our 50% interest in The Leadenhall Building which exchanged in the previous financial year. Sales were made at an average yield of 4%. We completed or exchanged on residential sales of GBP0.1 billion during the year and completed GBP0.2 billion of further residential sales at Clarges post year end.
The net proceeds from this activity provide capacity for reinvestment into our portfolio, particularly through the development opportunities we are now progressing with a forecast yield on cost of around 6%. We have maintained a disciplined approach to capital and completed our GBP300 million share buyback programme in February 2018, purchasing 47.6 million ordinary shares at an average price of 630 pence. This has increased NAV by 15 pence and added 0.4 pence to EPS this year. During the period we have also reinvested GBP0.3 billion in our developments and capital expenditure across the portfolio, and made GBP0.2 billion of acquisitions.
Underlying Profit was down 2.6% reflecting the impact of net sales over the past two years and lease expiries at properties going into development. This has been largely offset by leasing success at our developments, like-for-like rental growth and financing activity, as well as one-off surrender premia received. IFRS profit before tax was GBP501 million, up from GBP195 million in the prior year, primarily due to the positive property valuation movement in the period.
Our financial metrics remain strong. LTV has decreased 150 bps to 28.4% from 29.9% at 31 March 2017, primarily through net sales, offset by the share buyback. Our weighted average interest rate is at its lowest level at 2.8%. This financial strength provides us with the capacity to progress opportunities, including our development pipeline whilst retaining significant headroom to our covenants. We have been active in debt markets, including issuing our GBP300 million Sterling unsecured bond. Our senior unsecured credit rating has been upgraded to 'A' by Fitch.
Shareholder returns remain a priority. We increased the dividend 3% to 30.08 pence for the year ended 31 March 2018, resulting in a dividend payout ratio of 80%. The Board propose a further increase of 3% next year to 31.00 pence, a quarterly dividend of 7.75 pence.
Presentation of financial information
The Group financial statements are prepared under IFRS where the Group's interests in joint ventures and funds are shown as a single line item on the income statement and balance sheet and all subsidiaries are consolidated at 100%.
Management considers the business principally on a proportionally consolidated basis when setting the strategy, determining annual priorities, making investment and financing decisions and reviewing performance. This includes the Group's share of joint ventures and funds on a line-by-line basis and excludes non-controlling interests in the Group's subsidiaries. The financial key performance indicators are also presented on this basis.
A summary income statement and summary balance sheet which reconcile the Group income statements to British Land's interests on a proportionally consolidated basis are included in Table A within the supplementary disclosures.
Management monitors Underlying Profit as this more accurately reflects the Group's financial performance and the underlying recurring performance of our core property rental activity, as opposed to IFRS metrics 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 NAV as this provides a transparent and consistent basis to enable comparison between European property companies. Linked to this, the use of Total Accounting Return allows management to monitor return to shareholders based on movements in a consistently applied metric, being EPRA NAV, 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 is used internally to assess income performance. No company adjustments have been made in the current or prior year and therefore this is the same as the pre-tax EPRA earnings measure which includes a number of adjustments to the IFRS reported profit before tax. This is presented below on a proportionally consolidated basis:
Section 2017 2018
GBPm GBPm
----------------------------------------- -------- ------- -------
Gross rental income 643 613
Property operating expenses (33) (37)
----------------------------------------- -------- ------- -------
Net rental income 1.1 610 576
Net fees and other income 17 15
Administrative expenses 1.2 (86) (83)
Net financing costs 1.3 (151) (128)
----------------------------------------- -------- ------- -------
Underlying Profit 390 380
----------------------------------------- -------- ------- -------
Non-controlling interests in Underlying
Profit 14 14
EPRA adjustments(1) (209) 107
----------------------------------------- -------- ------- -------
IFRS profit before tax 2 195 501
----------------------------------------- -------- ------- -------
Underlying EPS 1.4 37.8p 37.4p
IFRS basic EPS 2 18.8p 48.7p
Dividend per share 3 29.20p 30.08p
----------------------------------------- -------- ------- -------
(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 Net rental income
GBPm
Net rental income for the year ended 31 March 2017 610
Net divestment (44)
Expiries on developments (22)
Surrender premia 20
Development lettings 6
Like-for-like rental growth 6
Net rental income for the year ended 31 March 2018 576
The GBP34 million decrease in net rental income during the year was the result of divestment activity and development expiries partially offset by surrender premia, leasing of developments and like-for-like rental growth.
Net sales of income producing assets of GBP1.5 billion over the last two years have reduced rents by GBP44 million in the year.
Lease expiries relating to properties in our development pipeline reduced net rents by GBP22 million, including GBP6 million at 100 Liverpool Street where we are on site and progressing well with development, GBP5 million at the substantially pre-let 1 Triton Square scheme, GBP5 million at 1FA where we started on site in August 2017, and GBP6 million at 135 Bishopsgate where we are now committed having let 42,000 sq ft to Eataly. These are partially offset by one off surrender premia received, the majority being a GBP15 million surrender premium received from Royal Bank of Scotland in June 2017.
Development lettings, notably at 4 Kingdom Street and Clarges, have contributed GBP6 million to rents in addition to like-for-like rental growth of 1.8%, excluding the impact of surrender premia. Retail growth was 1.2% driven by asset management activities, such as splitting units, as well as leasing of vacant space. In Offices, like-for-like growth was 2.4% driven by fixed uplifts at rent reviews as well as leasing of completed developments that are now in the like-for-like portfolio.
1.2 Administrative expenses
Administrative expenses decreased by a further GBP3 million this year as a result of lower variable pay. Due to the impact of sales on rents, the Group's operating cost ratio increased by 130 bps to 16.9% (2016/17: 15.6%).
1.3 Net financing costs
GBPm
Net financing costs for the year ended 31
March 2017 (151)
Financing activity 19
Net divestment 15
Developments (9)
Share buyback (2)
Net financing costs for the year ended 31
March 2018 (128)
Financing costs have come down by GBP23 million this year.
Debt transactions undertaken over the last two years reduced financing costs by GBP19 million in the year. This includes repayment of BLT debt following the net sales of five properties and exit from the joint venture in April 2017, and early redemption of our 6.75% and 9.125% 2020 debentures. In December 2017 we also successfully tendered and repaid GBP84 million of our 5.357% 2028 and 5.0055% 2035 Debentures. Prior year activity includes early repayment of the GBP295 million TBL Properties Limited secured loan and close-out of related swaps.
In September 2017, the 1.5% convertible bond was cash settled using existing bank facilities. This has proven to be highly efficient financing since its issue in September 2012: we estimate that it has saved GBP40 million in financing costs compared to a fixed rate Sterling bond at the time.
Also in September we issued a GBP300 million unsecured Sterling bond for 12 years at a coupon of 2.375%, the lowest for a UK real estate company in this market. As well as diversifying both our sources of funding and our maturity profile, it also established a benchmark for us in the unsecured Sterling market.
During the year we agreed a new GBP100 million bi-lateral bank revolving unsecured credit facility ('RCF') and extended GBP225 million of existing facilities. In May, following the year end, we completed an amendment and extension of our largest syndicated RCF at GBP735 million, with 12 banks, at an initial margin of 90 bps and new maturity of five years, which may be extended by a further two years at our request and on each bank's approval. This facility, together with the bi-laterals, adds further liquidity and flexibility to our debt portfolio.
Net divestment activity reduced costs by a further GBP15 million, the impact of which is partially offset by development spend.
At 31 March 2018 we had interest rate hedging on 80% of our debt (spot), and on 60% of our projected debt on average over the next five years.
1.4 Underlying Earnings Per Share
Underlying EPS is 37.4 pence based on Underlying Profit after tax of GBP380 million. EPS decline of 1.1% against the Underlying Profit decline of 2.6% was driven by the 0.4 pence benefit of the share buyback programme, which would be 1.4 pence on an annualised basis.
2. IFRS profit before tax
The main difference between IFRS profit before tax and Underlying Profit is that it includes the valuation movement on investment and development properties and the fair value movements on financial instruments. In addition, the Group's investments in joint ventures and funds are equity accounted in the IFRS income statement but are included on a proportionally consolidated basis within Underlying Profit.
The IFRS profit before tax for the year was GBP501 million, compared with a profit before tax for the prior year of GBP195 million. This reflects the positive valuation movement on the Group's properties which was GBP346 million more than the prior year and the valuation movement on the properties held in joint ventures and funds which was GBP145 million more than the prior year, resulting from ERV growth of 1.8% in the current year. This was partially offset by higher capital financing costs of GBP176 million more than the prior year primarily due to recycling of cumulative losses within the hedging and translation reserve in relation to a hedging instrument which is no longer hedge accounted. The recognition of these amounts in capital financing charges in the income statement has a limited impact on EPRA NAV, with financing and debt management activity undertaken in the year leading to a 5 pence reduction in EPRA NAV per share.
IFRS basic EPS was 48.7 pence per share, compared to 18.8 pence per share in the prior year, driven principally by positive property valuation movements. The basic weighted average number of shares in issue during the year was 1,013 million (2016/17: 1,029 million).
3. Dividends
The fourth interim dividend payment for the quarter ended 31 March 2018 will be 7.52 pence to give a full year dividend of 30.08 pence, an increase of 3.0%. Payment will be made on 3 August 2018 to shareholders on the register at close of business on 29 June 2018. The final dividend will be a Property Income Distribution and no SCRIP alternative will be offered.
This results in an increase in the dividend pay-out ratio to 80% for the year (2016/17: 77%).
The Board propose to increase the dividend by 3.0% in 2018/19 to 31.0 pence per share, with a quarterly dividend of 7.75 pence per share. The Board have taken into account future profit shape, our preferred payout range and the external environment.
Balance sheet
Section 2017 2018
GBPm GBPm
------------------------------- -------- -------- --------
Properties at valuation 13,940 13,716
Other non-current assets 156 185
------------------------------- -------- -------- --------
14,096 13,901
Other net current liabilities (364) (368)
Adjusted net debt 6 (4,223) (3,973)
Other non-current liabilities (11) -
------------------------------- -------- -------- --------
EPRA net assets 9,498 9,560
------------------------------- -------- -------- --------
EPRA NAV per share 4 915p 967p
------------------------------- -------- -------- --------
Non-controlling interests 255 254
Other EPRA adjustments(1) (277) (308)
------------------------------- -------- -------- --------
IFRS net assets 5 9,476 9,506
------------------------------- -------- -------- --------
Proportionally consolidated basis
(1) EPRA net assets exclude the mark-to-market on derivatives and related debt adjustments, the mark-to-market on the convertible bonds as well as deferred taxation on property and derivative revaluations. They include the trading properties at valuation (rather than lower of cost and net realisable value) and are adjusted for the dilutive impact of share options. No dilution adjustment is made for the GBP350 million zero coupon convertible bond maturing in 2020. Details of the EPRA adjustments are included in Table B within the supplementary disclosures.
4. EPRA net asset value per share
pence
EPRA NAV per share at 31 March 2017 915
Valuation performance 32
Underlying Profit 37
Dividends (29)
Financing and debt management costs (5)
Share buyback 15
Other 2
EPRA NAV per share at 31 March 2018 967
EPRA NAV per share has increased 5.7%, reflecting a valuation increase of 2.2% for the year (H1: +1.4%, H2: +0.9%). This is the result of stable yields and ERV growth of 1.8% resulting from healthy leasing activity and investor appetite for long term, secure income streams. In addition, property performance includes the benefit of completing the sale of The Leadenhall Building ahead of book value, which contributed GBP32 million to capital profit and an uplift of GBP59 million following completion of Clarges.
Retail valuations are up 0.3% with marginal outward yield movement of 6 bps and ERV growth of 1.6%: the multi-let portfolio, which accounts for 81% of our Retail assets, was down 0.5% but saw ERV growth of 1.9% driven by leasing success.
Office valuations were up 4.5% driven by inward yield movement of 7 bps and ERV growth of 2.1%. Valuation increases are driven by successful leasing, developments (up 10.6%) and strong sales activity. The campuses account for 78% of the Offices portfolio and all delivered strong performance, reflecting the attractiveness of our campus approach.
The 5 pence impact of financing and debt management costs primarily relates to early repayment of debentures, term debt and termination of interest rate swaps. Our share buyback programme has contributed 15 pence to EPRA NAV.
5. IFRS net assets
IFRS net assets at 31 March 2018 were GBP9,506 million, an increase of GBP30 million from 31 March 2017. This was primarily due to IFRS profit before tax of GBP501 million and other comprehensive income of GBP141 million, partially offset by GBP302 million of dividends paid as well as GBP300 million of share purchases under the share buyback scheme.
Cash flow, net debt and financing
6. Adjusted net debt(1)
GBPm
Adjusted net debt at 31 March 2017 (4,223)
Disposals 1,015
Acquisitions (206)
Development and capex (209)
Net cash from operations 353
Dividends (302)
Share buyback (300)
Other (101)
-------------------------------------- --------------------------
Adjusted net debt at 31 March 2018 (3,973)
-------------------------------------- --------------------------
(1) Adjusted net debt is a proportionally consolidated measure. It represents the Group net debt as disclosed in Note 14 to the 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 GBP0.8 billion in the year. Completed disposals during the year included the sale of The Leadenhall Building for GBP575 million (BL share) and, in line with our strategy of focusing on multi-let assets, 20 superstores totalling GBP302 million (BL share). We completed purchases of GBP206 million during the year, including The Woolwich Estate.
We've also spent GBP122 million on developments and a further GBP87 million on capital expenditure related to asset management on the standing portfolio. The value of committed developments is GBP572 million, with GBP427 million costs to come. Speculative development exposure is 4.5% of the portfolio after taking into account residential pre-sales. There are 578,000 sq ft of developments in our near term pipeline with anticipated cost of GBP436 million.
7. Financing
Group Proportionally consolidated
2017 2018 2017 2018
Net debt / adjusted net debt GBP3,094m GBP3,046m GBP4,223m GBP3,973m
(1)
Principal amount of gross GBP3,069m GBP3,007m GBP4,520m GBP4,265m
debt
Loan to value 22.6% 22.1% 29.9% 28.4%
Weighted average interest
rate 2.4% 2.0% 3.1% 2.8%
Interest cover 4.5 5.3 3.6 4.0
Weighted average maturity 6.9 years 8.1 years 7.7 years 8.6 years
of drawn debt
---------- ---------- -------------- --------------
(1) Group data as presented in note 14 of the condensed 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.
Our balance sheet remains strong. LTV and weighted average interest on drawn debt have been reduced since 31 March 2017. At 31 March 2018, our proportionally consolidated LTV was 28.4%, down 150 bps from 29.9% at 31 March 2017 due to net disposals, offset by the share buyback. This is positioned to support investment into our development pipeline as well as maintain significant headroom. Note 14 of the condensed financial statements sets out the calculation of the Group and proportionally consolidated LTV.
The strength of our business is reflected in British Land's senior unsecured credit rating which was upgraded by Fitch to 'A' in February 2018. The long-term issuer default rating was also upgraded to 'A-'.
We maintained focus on ensuring our debt is cost effective. Our weighted average interest rate is at an all time low of 2.8% driven by proactive financing and debt management actions, together with market rates. Our interest cover has also improved to 4.0x at 31 March 2018 from 3.6x at 31 March 2017.
Our weighted average debt maturity is almost nine years following issuance of the GBP300 million unsecured Sterling bond, and maturity of the convertible.
At 31 March 2018, British Land has GBP1.8 billion of committed unsecured revolving bank facilities, GBP1.2 billion undrawn. These facilities have maturities of more than two years. Based on our current commitments, these facilities and debt maturities, we have no requirement to refinance until early 2021.
Further information on our approach to financing is provided in the financial policies and principles section of the audited annual report for the year ended 31 March 2018.
Chris Grigg
Chief Executive
Notes to Editors
About British Land
Our portfolio of high quality UK commercial property is focused on Retail around the UK and London Offices. We own or manage a portfolio valued at GBP18.2 billion (British Land share: GBP13.7 billion) as at 31 March 2018 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 Retail portfolio is focused on Regional and Local multi-let centres, and accounts for 48% of our portfolio. Our Offices portfolio comprises three office-led campuses in central London as well as high quality standalone buildings and accounts for 49% 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. Our industry-leading sustainability performance led to British Land being awarded a five star rating in the 2017 Global Real Estate Sustainability Benchmark for the second year running.
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
Statement of directors' responsibilities in respect of the financial statements
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 "Reduced Disclosure Framework", and applicable law).
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for that period. In preparing the financial statements, the directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable IFRSs as adopted by the European Union have been followed for the Group financial statements and United Kingdom Accounting Standards, comprising FRS 101, have been followed for the parent Company financial statements, subject to any material departures disclosed and explained in the financial statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
The directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and the Company's performance, business model and strategy.
Each of the directors, whose names and functions are listed in the Board of Directors on pages 58-61 of the annual report confirm that, to the best of their knowledge:
-- the company financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 "Reduced Disclosure Framework", and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the company;
-- the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
the Strategic Report and the Directors' Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.
Principal risks
External risks
Risks and How we monitor and Change in risk assessment
impacts manage the risk in the year
Economic The UK economic - The Risk Committee <-->The decision
outlook climate and reviews the economic to leave the EU continues
Responsible future movements environment in which to impact the economic
executive: in we operate quarterly outlook. Nonetheless,
Chris Grigg interest rates to assess whether UK economic
present risks any changes to the growth has remained
and opportunities economic outlook justify relatively resilient
in a re-assessment of and has fared better
property and the risk appetite than many expected,
financing markets of the business. albeit growing at
and the businesses levels lower than
of our customers - Key indicators including other major economies.
which can impact forecast GDP growth,
both the delivery employment rates, Consumer spending
of our strategy business and consumer has softened as inflation
and our financial confidence, interest has
performance. rates and inflation/deflation squeezed household
are spending, although
considered, as well there are some early
as central bank guidance signs that inflation
and government policy is moderating. There
updates. has,
however, been some
- We stress test our offset from a stronger
business plan against global economy. Equity
a downturn in economic and foreign exchange
outlook to ensure markets have
our financial position been less volatile
is sufficiently flexible in the year, although
and resilient. remain sensitive
to external shocks.
- Our resilient business
model focuses on a The Bank of England
high quality portfolio, increased interest
with secure income rates for the first
streams and robust time in a decade,
finances. with the prospect
of more rises to
come. Increases are
expected to be limited
and gradual and to
remain low by historical
standards.
We are mindful of
the ongoing political
and economic
uncertainties; however
we are confident
that the resilience
of our business with
our sustainable long
term income streams
and balance sheet
strength, together
with the actions
we have taken, leaves
our business well
positioned.
---------------------- --------------------------------- ------------------------------
Political Significant - Whilst we are not Whilst a Brexit
and regulatory political events able to influence transition period
outlook and regulatory the outcome of has been agreed
Responsible changes, including significant political to 2020, uncertainty
executive: the decision events, we do take remains over the
Chris Grigg to leave the the uncertainty related outcome of
EU, bring risks to such events and negotiations on our
principally the range of possible future relationship
in two areas: outcomes into account with the EU,
- Reluctance when making strategic including crucial
of investors investment and financing issues of market
and businesses decisions. access, labour
to movement and trade.
make investment - Internally we review Furthermore, the
and occupational and monitor proposals global
decisions whilst and geopolitical and
the outcome emerging policy and trade environments
remains uncertain legislation to ensure remain uncertain.
and that we take the necessary The present hung
- On determination steps to ensure compliance parliament also creates
of the outcome, if applicable. Additionally domestic policy uncertainty.
the impact we engage public affairs
on the case consultants to ensure In terms of significant
for investment that we are properly regulatory changes,
in the UK, briefed General
and on on the potential policy Data Protection Regulation
specific policies and regulatory implications (GDPR) comes into
and regulation of political events. force
introduced, We also monitor public on 25 May 2018 and
particularly trust in business. will control and
those Where appropriate, govern the use of
which directly we act with other personal data, affecting
impact real industry participants operations across
estate or our and representative the business.
customers bodies to contribute
to policy and regulatory In these more volatile
debate. We monitor times, we will benefit
and respond to social from our
and political reputational long term, secure
challenges relevant rental income, with
to the industry. 97% of our
portfolio occupied
and our financial
capacity and flexibility
to adjust to evolving
conditions.
---------------------- --------------------------------- ------------------------------
Commercial Reduction in - The Risk Committee Overall property
property investor demand reviews the property transaction volumes
investor for UK real market quarterly to held up relatively
demand estate may assess whether any well in 2017, however,
Responsible result in falls changes to the market investors are becoming
executives: in asset valuations outlook present risks increasingly selective
Charles and could arise and opportunities and market pricing
Maudsley, from variations which should be reflected polarised, with continued
Tim Roberts in: in the execution of softening in demand
- The health our strategy and our for more secondary
of the UK economy capital allocation assets.
- The attractiveness plan. The Committee
of considers indicators The historically
investment such as margin between wide gap between
in the UK property yields and property yields and
- Availability borrowing costs and interest rates has
of finance property capital growth continued to underpin
- Relative forecasts, which are demand for UK
attractiveness considered alongside real estate, albeit
of other asset the Committee members' interest rates are
classes knowledge and experience expected to rise
of market activity slightly in the medium
and trends. term.
- We focus on prime In terms of our sectors:
assets and sectors - Office investment
which we believe will volumes continue
be less susceptible to benefit from
over the medium term demand from overseas
to a reduction in investors, but investors
occupier and investor are
demand. increasingly selective
in terms of their
- Strong relationships requirements, often
with agents and direct seeking well-let,
investors best-in-class stock
active in the market. or opportunities
with an achievable
- We stress test our growth story. Supply
business plan for of high quality new
the effect of a change space across both
in property yields. the West End and
City markets is relatively
constrained in the
short term. London
office prime yields
have been stable
throughout 2017.
- Retail investment
volumes remain subdued,
albeit
activity increased
towards the end of
2017, particularly
for retail parks.
Investor demand for
retail increasingly
focused on smaller
lot sizes with secure
income streams. Retail
prime yields remain
stable, but secondary
asset prices are
expected to weaken
further as polarisation
in retail continues.
We have continued
to be active and
successfully sold
GBP1.3 billion of
assets, overall above
valuation.
---------------------- --------------------------------- ------------------------------
Occupier Underlying - The Risk Committee In the more uncertain
demand income, reviews indicators environment, we are
and tenant rental growth of occupier demand seeing
default and capital quarterly including polarisation of occupier
Responsible performance consumer demand accelerating
executives: could be adversely confidence surveys with an increasing
Charles affected by and employment and focus on the best
Maudsley, weakening occupier ERV growth forecasts, quality space. In
Tim Roberts demand and alongside the Committee this context, our
occupier failures members' knowledge leasing activity
resulting from and experience of has been good, with
variations occupier plans, trading 2.4 million sq ft
in the health performance and leasing of space let or renewed
of the UK economy activity in guiding across the portfolio,
and execution of our strategy. at rates well ahead
corresponding of ERV, and our portfolio
weakening of - We have a high quality, remains virtually
consumer confidence, diversified occupier full with 97% occupancy.
business activity base and
and investment. monitor concentration In terms of our sectors:
of exposure to individual - In the London office
Changing consumer occupiers or sectors. market, occupiers
and business We perform rigorous are more thoughtful
practices including occupier covenant about their requirements
the growth checks ahead of approving as a result of political
of internet deals and on an ongoing and economic uncertainty.
retailing, basis so that we can However, we continue
flexible working be proactive in managing to see both international
practices and exposure to weaker and British
demand for occupiers. companies making
energy efficient commitments in London,
buildings, - Ongoing engagement confident of its
new technologies, with our customers. enduring status as
new legislation Through our Key Occupier a global city in
and alternative Account programme which the world's
locations may we work together with leading organisations
result in earlier our occupiers to find want to do business.
than anticipated ways to best meet Take-up has remained
obsolescence their evolving requirements. resilient partly
of our buildings underpinned by strong
if evolving - Our sustainability demand for flexible
occupier and strategy links action workspace, demonstrating
regulatory on occupier health the changing occupier
requirements and wellbeing, energy market, as well as
are not met. efficiency, community good demand for Grade
and sustainable design A space.
to our business strategy. - With retailers
Our social and environmental facing economic and
targets help us comply structural
with new legislation challenges, the wider
and respond to customer occupational market
demands; for example, has been more cautious
we expect all our with polarisation
office developments of occupier demand
to be BREEAM Excellent. continuing. Whilst
more recently, we
have seen a number
of operators apply
for company voluntary
arrangements, as
some retailers struggle
to compete
with the rise of
online shopping and
increased costs,
there are many retailers
which continue to
trade well and grow
sales. The growth
in importance of
online means the
way in which occupiers
and their customers
are using physical
space is changing.
However the store
and its value is
still integral to
support retailers'
omni-channel approach,
and there remains
demand for the best
space, where retailers
can grow sales with
lower occupancy costs.
---------------------- --------------------------------- ------------------------------
Availability Reduced availability - Market borrowing <--> Although there
and cost of finance rates and real estate has continued to
of finance may adversely credit availability be market
Responsible impact ability are monitored by the volatility reacting
executive: to refinance Risk Committee quarterly to macro-economic
Lucinda debt and/or and reviewed regularly and political
Bell drive up cost. in order to guide uncertainties, debt
(until January These factors our financing actions markets have remained
2018), may also result in executing our strategy. open. There
Chris Grigg in weaker investor continues to be good
(after January demand for - We monitor our projected availability of finance
2018 real estate. LTV and our debt requirements in debt and capital
using several internally markets (unsecured
Regulation generated reports and secured) from
and capital focused on borrowing a range of lenders
costs of lenders levels, debt maturity, for UK REITs and
may available facilities other good quality
increase cost and interest rate real estate investors.
of finance. exposure. Development finance
is more difficult
- We maintain good to obtain with fewer
long term relationships lenders participating.
with our key financing Projects without
partners. pre-lets require
strong sponsors.
- The scale and quality
of our business enables Interest margins/spreads
us to have been relatively
access a diverse range stable,
of sources of finance but market/gilt rates
with a spread of repayment have increased, pushing
dates. We aim always overall
to have a good level debt pricing up (although
of undrawn, committed, still low by historical
unsecured standards).
revolving facilities
to ensure we have We have continued
adequate financing to access the debt
availability to support markets and during
business the year raised GBP400
requirements and opportunities. million of new finance
including a GBP300
- We work with industry million unsecured
bodies and other relevant Sterling bond, as
organisations to participate well as extending
in debate on emerging GBP225 million of
finance regulations revolving credit
where our interests facilities.
and those of our industry
are affected.
---------------------- --------------------------------- ------------------------------
Catastrophic An external - We maintain a comprehensive <-->The evaluation
business event such crisis response plan of the likely impact
event as a civil across all business of this risk has
Responsible emergency, units as well as a not changed notably
executive: including a head office business since the prior year.
Chris Grigg large-scale continuity plan. The Home Office threat
terrorist attack, level from international
cyber - The Risk Committee terrorism remains
crime, extreme monitors the Home 'Severe'. During
weather occurrence, Office terrorism threat the year, we have
environmental levels and we have carried out a crisis
disaster or access to security simulation exercise
power shortage threat information and enhanced our
could services. procedures where
severely disrupt appropriate.
global markets - Asset emergency
(including procedures are regularly We are mindful of
property and reviewed and scenario cyber security risks,
finance) and tested. Physical security particularly
cause significant measures are in place following a number
damage and at properties and of recent high-profile
disruption development sites. hacks, and
to British have continued to
Land's portfolio - Our Sustainability enhance our security
and operations. Committee monitors position and provide
environmental and employee training
climate change risks. and awareness on
Asset risk cyber security.
assessments are carried
out to assess a range
of risks including
security, flood, environmental,
health and safety.
- We have implemented
corporate cyber security
systems which are
supplemented by incident
management, disaster
recovery and business
continuity plans,
all of which are regularly
reviewed to be able
to respond to changes
in the threat landscape
and organisational
requirements.
- We also have appropriate
insurance in place
across the portfolio.
---------------------- --------------------------------- ------------------------------
Internal risks
Risks and How we monitor and manage Change in risk assessment
impacts the risk in the year
Investment In order -Our investment strategy <--> Our strategy
strategy to meet our is determined to be is aligned to long
Responsible strategic consistent with term trends, and
executives: objectives our target risk appetite our high quality
Chris Grigg, we and is based on the portfolio is
Charles Maudsley, aim to invest evaluation of the external positioned to benefit
Tim Roberts in and exit environment. from increasing
from the polarisation and
right properties - Progress against the to attract a broader
at the right strategy and continuing range of occupiers.
time. alignment with our risk
appetite is discussed We have continued
Underperformance at each Risk Committee to be active in
could result with reference to the executing our
from changes property markets and capital allocation
in market the external plans and have sold
sentiment economic environment. GBP1.3 billion of
as well asset disposals
as inappropriate - The Board carries in the year overall
determination out an annual review ahead of valuation,
and execution of the overall corporate primarily mature
of our strategy including the and off-strategy
property current and prospective assets. The retail
investment asset portfolio allocation. market faces structural
strategy, challenges and we
including: - Individual investment have continued to
- Sector decisions are subject reshape our Retail
selection to robust risk evaluation portfolio with GBP419
and weighting overseen by our Investment million of sales
- Timing Committee including in the year; in
of investment consideration of returns total GBP2.3 billion
and divestment relative to risk adjusted over the last four
decisions hurdle rates. years.
- Exposure
to - Review of prospective We have maintained
developments performance of individual strong capital discipline,
- Asset, assets and their business and have focused
tenant, region plans. resources on progressing
concentration our unique development
- Co-investment - We foster collaborative programme, selective
arrangements relationships with our acquisitions and
co-investors and enter a GBP300 million
into ownership agreements share buyback.
which balance the interests Overall we were
of the parties. a net divestor of
GBP0.8 billion of
properties over
the course of the
year.
------------------------ --------------------------------- -----------------------------
Development Development - We manage our levels <--> Development
strategy provides of total and speculative is an important
Responsible an opportunity development part of our business
executives: for exposure as a proportion and has delivered
Chris Grigg, outperformance of the investment portfolio some of our strongest
Charles Maudsley, but usually value returns, but is
Tim Roberts brings with within a target range inherently higher
it elevated taking into account risk,
risk. associated risks and particularly when
the impact on key financial pursued on a speculative
This is reflected metrics. This is monitored basis. We limit
in our decision-making quarterly by the Risk our development
process Committee along with exposure to 15%
around which progress of developments of the total investment
schemes to against plan. portfolio by value,
develop, with a maximum of
the timing - Prior to committing 8% to be developed
of the to a development a detailed speculatively.
development, appraisal is undertaken.
as well as This includes consideration During the year,
the execution of returns relative we have doubled
of these to risk adjusted hurdle our committed development
projects. rates and is overseen pipeline, representing
by our Investment Committee. a total development
Development exposure of 8.9%,
strategy - Pre-lets are used whilst carefully
addresses to reduce development managing the risk
several letting risk where considered by securing substantial
development appropriate. pre-lets; as such
risks that there has been only
could adversely - Competitive tendering a minor increase
impact of construction contracts in speculative exposure,
underlying and, where appropriate, which now stands
income and fixed price contracts at 4.5% of the portfolio
capital performance entered into. GAV. Committed construction
including: costs are substantially
- Development - Detailed selection covered by residential
letting exposure and close monitoring receipts to come.
- Construction of contractors including
timing and covenant reviews.
costs (including
construction - Experienced development
cost management team closely
inflation) monitors design, construction
- Major contractor and overall delivery
failure process.
- Adverse
planning - Early engagement and
judgements strong relationships
with planning authorities.
- We also actively engage
with the communities
in which we operate,
as detailed in our Local
Charter, to ensure that
our development activities
consider the interests
of all stakeholders.
- We manage environmental
and social risks across
our development supply
chain by engaging with
our suppliers, including
through our Supplier
Code of Conduct, Sustainability
Brief for Developments
and Health and Safety
Policy.
------------------------ --------------------------------- -----------------------------
Capital structure Our capital - We manage our use Our balance sheet
- leverage structure of debt and equity finance metrics remain strong;
Responsible recognises to balance the benefits both the proportionally
executives: the balance of leverage against consolidated loan
Lucinda Bell between performance, the risks. to value (LTV) and
(until January risk and weighted average
2018), flexibility. - We aim to manage our interest rate have
Chris Grigg - Leverage loan to value (LTV) been reduced alongside
(after January magnifies through the property improved interest
2018) capital returns, cycle such that our cover. We have decreased
both financial position would LTV by a further
positive remain robust in the 150 bps to 28.4%
and negative event of a significant from 29.9% at 31
- An increase fall in property values. March 2017, primarily
in leverage This means we do not through net disposals.
increases adjust our approach This financial strength
the risk to leverage based on provides us with
of a breach changes in property the capacity to
of covenants market yields. progress opportunities
on including our development
borrowing - We manage our investment pipeline whilst
facilities activity, the size and retaining significant
and may increase timing of which can headroom to our
finance costs be uneven, as well as covenants.
our development commitments
to ensure that our LTV
level remains appropriate.
- We leverage our equity
and achieve benefits
of scale while
spreading risk through
joint ventures and funds
which are typically
partly financed by debt
without recourse to
British Land.
------------------------ --------------------------------- -----------------------------
Finance Finance strategy - Five key principles <--> The scale of
strategy addresses guide our financing, our business, quality
Responsible risks both employed together to of our
executives: to continuing manage the risks in assets and security
Lucinda Bell solvency this area: diversify of our rental streams
(until January and profits our sources of finance, enable us to access
2018), generated. phase maturity of debt a broad range of
Chris Grigg portfolio, maintain debt finance on
(after January Failure to liquidity, maintain attractive terms.
2018) manage flexibility, and maintain Following issuance
refinancing strong balance sheet of the GBP300 million
requirements metrics. unsecured Sterling
may result bond, our weighted
in a shortage - We monitor the period average debt maturity
of funds until financing is required, is almost nine years,
to sustain which is a key determinant and based on current
the of financing activity. commitments and
operations Debt and capital market available debt facilities,
of the business conditions are reviewed we have no requirement
or repay regularly to identify to refinance until
facilities financing opportunities early 2021. Our
as they fall that meet our business committed bank facilities
due. requirements. total GBP1.8 billion
of which GBP1.2
- Financial covenant billion were undrawn
headroom is evaluated at 31 March 2018.
regularly and in conjunction The strength of
with transactions. our business is
reflected in our
- We are committed to senior unsecured
maintaining and enhancing credit rating which
relationships with our was upgraded by
key financing partners. Fitch to A (from
A-) during the year.
- We are mindful of
relevant emerging regulation
which has the potential
to impact the way that
we finance the business.
------------------------ --------------------------------- -----------------------------
People A number - Our HR strategy is <--> Expert People
Responsible of critical designed to minimise is one of the four
executive: business risk through: core focus areas
Chris Grigg processes - informed and skilled of our strategy
and recruitment processes; and a key factor
decisions - talent performance in our performance.
lie in the management and succession We continue to empower
hands of planning for key roles; our people to make
a few people. -highly competitive the most of
compensation and benefits; their potential
Failure to and though training
recruit, - people development and development.
develop and and training.
retain staff We are focused on
and Directors - The risk is measured building a supportive
with the through employee engagement and inclusive culture
right surveys (including the for our people and
skills and 'Best Companies' survey), we were the first
experience employee turnover and listed property
may retention metrics. We company to achieve
result in monitor this through the
significant the number of unplanned National Equality
underperformance executive departures Standard accreditation
or impact in addition to conducting in the year.
the effectiveness exit interviews.
of operations During the year,
and decision - We engage with our staff turnover has
making, in employees and suppliers remained relatively
turn impacting to make clear our requirements low at 15% and our
business in managing key risks high level of staff
performance. including health and engagement was recognised
safety, fraud and bribery by achieving a
and other social and Two Star rating
environmental risks, in the Sunday Times
as detailed in our policies Best Companies to
and codes of conduct. Work For survey.
------------------------ --------------------------------- -----------------------------
Income We are mindful - We undertake comprehensive We are mindful
sustainability of profit and cash flow of the challenges
Responsible maintaining forecasting incorporating facing the Retail
executives: sustainable scenario analysis to market which has
Lucinda Bell income streams model the impact of seen a number of
(until January which underpin proposed transactions. operators apply
2018), a stable for company voluntary
Chris Grigg and - Pro-active asset management arrangements. We
(after January growing dividend approach to maintain continue to actively
2018) and provide strong occupier line-up. monitor our exposure
Charles Maudsley, the platform We monitor our market to occupiers at
Tim Roberts from which letting exposure including risk of default
to grow the vacancies, upcoming and administration
business. expiries and breaks and are selective
We consider and speculative development about the sectors
sustainability as well as our weighted and operators we
of our income average unexpired lease target.
streams in: term.
- Execution We also recognise
of - We have a high quality that in delivering
investment and diversified occupier our investment strategy
strategy base and monitor concentration and selling some
and capital of exposure to individual of our mature assets,
recycling, occupiers or sectors. we have had to be
notably timing conscious of the
of reinvestment - We are proactive in impact on our income
of addressing key lease in the short term.
sale proceeds breaks and expiries
- Nature to minimise periods However, our income
and structure of vacancy. streams are underpinned
of leasing by a high quality,
activity - We actively engage diverse occupier
- Nature with the communities base with high occupancy,
and timing in which we operate, and looking forward
of asset as detailed in our Local our development
management Charter, to ensure we pipeline offers
and provide buildings that significant potential
development meet the needs of all to generate future
activity relevant stakeholders. income.
------------------------ --------------------------------- -----------------------------
Key
Change from last year
Risk exposure has
increased
<--> No significant change
in risk exposure
----------------------
Risk exposure has
reduced
----------------------
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 MARCH 2018
2018 2017
============================= =============================
Capital Capital
and and
Underlying(1) other Total Underlying(1) other Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
=================================== ===== ============= ======= ===== ============= ======= =====
Revenue 3 561 78 639 556 33 589
Costs 3 (136) (64) (200) (122) (26) (148)
=================================== ===== ============= ======= ===== ============= ======= =====
3 425 14 439 434 7 441
Joint ventures and funds (see
also below) 8 115 36 151 132 (80) 52
Administrative expenses (82) - (82) (84) - (84)
Valuation movement 4 - 202 202 - (144) (144)
Profit (loss) on disposal of
investment properties
and investments - 18 18 - (5) (5)
Net financing costs
* financing income 5 1 - 1 2 42 44
* financing charges 5 (65) (163) (228) (80) (29) (109)
============= ======= ===== ============= ======= =====
(64) (163) (227) (78) 13 (65)
=================================== ===== ============= ======= ===== ============= ======= =====
Profit on ordinary activities
before taxation 394 107 501 404 (209) 195
Taxation 6 - 6 6 1 1
=================================== ===== ============= ======= ===== ============= ======= =====
Profit for the year after taxation 507 196
=================================== ===== ============= ======= ===== ============= ======= =====
Attributable to non-controlling
interests 14 - 14 14 (11) 3
Attributable to shareholders of
the Company 380 113 493 390 (197) 193
=================================== ===== ============= ======= ===== ============= ======= =====
Earnings per share:
* basic 2 48.7p 18.8p
===== =====
* diluted 2 48.5p 14.7p
===== =====
All results derive from continuing operations.
2018 2017
================================ ================================
Capital Capital
Underlying(1) and other Total Underlying(1) and other Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
======================================= ===== ============= ========== ===== ============= ========== =====
Results of joint ventures and funds
accounted
for using the equity method
Underlying Profit 115 - 115 132 - 132
Valuation movement 4 - 52 52 - (93) (93)
Capital financing costs - (13) (13) - (6) (6)
(Loss) profit on disposal of investment
properties,
trading properties and investments - (3) (3) - 18 18
Taxation - - - - 1 1
======================================= ===== ============= ========== ===== ============= ========== =====
115 36 151 132 (80) 52
======================================= ===== ============= ========== ===== ============= ========== =====
(1) See definition in note 2.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MARCH 2018
2018 2017
GBPm GBPm
=========================================================== ===== =====
Profit for the year after taxation 507 196
Other comprehensive income (loss):
Items that will not be reclassified subsequently to profit
or loss:
Net actuarial gain (loss) on pension schemes 9 (12)
Valuation movements on owner-occupied properties (3) -
===== =====
6 (12)
===== =====
Items that may be reclassified subsequently to profit or
loss:
Gains (losses) on cash flow hedges
* Group 12 (21)
* Joint ventures and funds 8 1
===== =====
20 (20)
===== =====
Transferred to the income statement (cash flow hedges)
* Interest rate derivatives 120 16
Deferred tax on items of other comprehensive income (5) -
Other comprehensive income (loss) for the year 141 (16)
=========================================================== ===== =====
Total comprehensive income for the year 648 180
=========================================================== ===== =====
Attributable to non-controlling interests 16 3
Attributable to shareholders of the Company 632 177
=========================================================== ===== =====
CONSOLIDATED BALANCE SHEET
AS AT 31 MARCH 2018
2018 2017
Note GBPm GBPm
=================================================== ==== ======= =======
ASSETS
Non-current assets
Investment and development properties 7 9,507 9,073
Owner-occupied properties 7 90 94
======= =======
9,597 9,167
Other non-current assets
Investments in joint ventures and funds 8 2,822 2,766
Other investments 9 174 154
Deferred tax assets 13 4 4
Interest rate and currency derivative assets 14 115 217
======= =======
12,712 12,308
======= =======
Current assets
Joint venture held for sale - 540
Trading properties 7 328 334
Debtors 10 35 171
Cash and short term deposits 14 105 114
======= =======
468 1,159
=================================================== ==== ======= =======
Total assets 13,180 13,467
=================================================== ==== ======= =======
LIABILITIES
Current liabilities
Short term borrowings and overdrafts 14 (27) (464)
Creditors 11 (324) (458)
Corporation tax (22) (30)
======= =======
(373) (952)
======= =======
Non-current liabilities
Debentures and loans 14 (3,101) (2,817)
Other non-current liabilities 12 (62) (78)
Interest rate and currency derivative liabilities 14 (138) (144)
======= =======
(3,301) (3,039)
=================================================== ==== ======= =======
Total liabilities (3,674) (3,991)
=================================================== ==== ======= =======
Net assets 9,506 9,476
=================================================== ==== ======= =======
EQUITY
Share capital 248 260
Share premium 1,300 1,298
Merger reserve 213 213
Other reserves 33 (97)
Retained earnings 7,458 7,547
=================================================== ==== ======= =======
Equity attributable to shareholders of the Company 9,252 9,221
=================================================== ==== ======= =======
Non-controlling interests 254 255
Total equity 9,506 9,476
=================================================== ==== ======= =======
EPRA NAV per share(1) 2 967p 915p
=================================================== ==== ======= =======
1 As defined in note 2.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 MARCH 2018
2018 2017
Note GBPm GBPm
======================================================================== ==== ===== =====
Rental income received from tenants 446 464
Fees and other income received 78 64
Operating expenses paid to suppliers and employees (173) (149)
===== =====
Cash generated from operations 351 379
===== =====
Interest paid (73) (92)
Interest received 4 8
Corporation taxation (payments) repayments (7) 9
Distributions and other receivables from joint ventures and funds 8 78 59
===== =====
Net cash inflow from operating activities 353 363
===== =====
Cash flows from investing activities
Development and other capital expenditure (190) (225)
Purchase of investment properties (165) (87)
Sale of investment and trading properties 212 761
Payments received in respect of future trading property sales 8 8
Disposal of joint venture held-for-sale 568 -
Disposal of Tesco joint venture 68 -
Purchase of investments (9) (19)
Indirect taxes paid in respect of investing activities (7) (1)
Investment in and loans to joint ventures and funds (175) (50)
Capital distributions and loan repayments from joint ventures and funds 36 83
===== =====
Net cash inflow from investing activities 346 470
===== =====
Cash flows from financing activities
Issue of ordinary shares 2 3
Unit issues attributable to non-controlling interests 2 -
Purchase of own shares (301) (8)
Dividends paid (304) (295)
Dividends paid to non-controlling interests (15) (14)
Acquisition of units in Hercules Unit Trust (4) (11)
Payments on closeout of interest rate derivative liabilities (18) (13)
Receipts on closeout of interest rate derivative assets 27 -
Decrease in bank and other borrowings (626) (526)
Drawdowns on bank and other borrowings 529 31
===== =====
Net cash outflow from financing activities (708) (833)
===== =====
Net decrease in cash and cash equivalents (9) -
Cash and cash equivalents at 1 April 114 114
======================================================================== ==== ===== =====
Cash and cash equivalents at 31 March 105 114
======================================================================== ==== ===== =====
Cash and cash equivalents consists of:
Cash and short term deposits 14 105 114
======================================================================== ==== ===== =====
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2018
Hedging
and Re-
Share Share translation valuation Merger Retained Non-controlling Total
capital premium reserve(1) reserve reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
====================================== ======= ======= =========== ========= ======= ======== ===== =============== ======
Balance at 1 April 2017 260 1,298 (112) 15 213 7,547 9,221 255 9,476
====================================== ======= ======= =========== ========= ======= ======== ===== =============== ======
Profit for the year after
taxation - - - - - 493 493 14 507
Revaluation of owner-occupied
property - - - (3) - - (3) - (3)
Gains on cash flow hedges
- group - - 10 - - - 10 2 12
Gains on cash flow hedges
- joint ventures
and funds - - - 8 - - 8 - 8
Transferred to the income
statement (cash flow hedges)
* Interest rate derivatives - - 120 - - - 120 - 120
Net actuarial gain on pension
schemes - - - - - 9 9 - 9
Reserves transfer - - (2) 2 - - - - -
Deferred tax on items of other
comprehensive income - - (5) - - - (5) - (5)
======= ======= =========== ========= ======= ======== ===== =============== ======
Other comprehensive income - - 123 7 - 9 139 2 141
====================================== ======= ======= =========== ========= ======= ======== ===== =============== ======
Total comprehensive income
for the year - - 123 7 - 502 632 16 648
====================================== ======= ======= =========== ========= ======= ======== ===== =============== ======
Share issues - 2 - - - - 2 - 2
Unit issues attributable to
non-controlling interests - - - - - - - 2 2
Purchase of own shares (12) - - - - (289) (301) - (301)
Purchase of units from non-controlling
interests - - - - - - - (4) (4)
Dividends payable in year
(29.64p per share) - - - - - (302) (302) - (302)
Dividends payable by subsidiaries - - - - - - - (15) (15)
====================================== ======= ======= =========== ========= ======= ======== ===== =============== ======
Balance at 31 March 2018 248 1,300 11 22 213 7,458 9,252 254 9,506
====================================== ======= ======= =========== ========= ======= ======== ===== =============== ======
Balance at 1 April 2016 260 1,295 (107) 14 213 7,667 9,342 277 9,619
====================================== ======= ======= =========== ========= ======= ======== ===== =============== ======
Profit for the year after
taxation - - - - - 193 193 3 196
Losses on cash flow hedges - - (21) - - - (21) - (21)
Exchange and hedging movements
in joint ventures
and funds - - - 1 - - 1 - 1
Reclassification of gains
on cash flow hedges
* Interest rate derivatives - - 16 - - - 16 - 16
Net actuarial loss on pension
schemes - - - - - (12) (12) - (12)
======= ======= =========== ========= ======= ======== ===== =============== ======
Other comprehensive (loss)
income - - (5) 1 - (12) (16) - (16)
====================================== ======= ======= =========== ========= ======= ======== ===== =============== ======
Total comprehensive income
for the year - - (5) 1 - 181 177 3 180
====================================== ======= ======= =========== ========= ======= ======== ===== =============== ======
Share issues - 3 - - - - 3 - 3
Fair value of share and share
option awards - - - - - 2 2 - 2
Purchase of own shares - - - - - (8) (8) - (8)
Purchase of units from non-controlling
interests - - - - - - - (11) (11)
Gain on purchase of units
from non-controlling interests - - - - - 1 1 - 1
Dividends payable in year
(28.78p per share) - - - - - (296) (296) - (296)
Dividends payable by subsidiaries - - - - - - - (14) (14)
====================================== ======= ======= =========== ========= ======= ======== ===== =============== ======
Balance at 31 March 2017 260 1,298 (112) 15 213 7,547 9,221 255 9,476
====================================== ======= ======= =========== ========= ======= ======== ===== =============== ======
(1) The balance at the beginning of the current year includes GBP15m in relation to translation and (GBP127)m in relation to hedging (2016/17: GBP9m and (GBP116m)).
NOTES TO THE ACCOUNTS
1 Basis of preparation, significant accounting policies and accounting judgements
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 March 2018 or 2017, but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for 2018 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of Companies Act 2006 or equivalent preceding legislation.
The financial statements for the year ended 31 March 2018 have been prepared on a historical cost basis, except for the revaluation of properties, investments held for trading and derivatives. The financial statements have also been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation.
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in June 2018.
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.
Certain standards which could be expected to have an impact on the consolidated financial statements are discussed in further detail below. The Group conducted an impact assessment of the new standards which are effective next year based on the Group's current activities and have quantified the impact. The results of the impact assessment confirm that the new standards will lead to limited changes to presentation and disclosure and will have an immaterial impact on the consolidated financial statements.
IFRS 9 - Financial instruments (effective year ending March 2019).
- The new standard addresses the classification and measurement of financial assets.
- The alignment of the classification and measurement model under IFRS 9 will result in changes in the classification of all financial assets excluding derivatives. These changes will not have a quantitative impact on the financial statements.
- IFRS 9 introduces an expected credit loss model, requiring an expected credit loss to be recognised on all financial assets held at amortised cost. The quantitative impact based on balances as at 31 March 2018 will result in the recognition of an expected credit loss of GBP5m, with a corresponding reduction in financial assets held at amortised cost of GBP5m. The Group has previously provided for a materially similar balance against trade and other receivables and therefore the resulting reclassification of existing provisions will not have a material impact on the net assets of the Group.
- IFRS 9 introduces changes to the qualifying criteria for hedge accounting and expands the financial and non-financial instruments which may be designated as hedged items and hedging instruments in order to align hedge accounting with business strategy. The changes to hedge accounting under IFRS 9 will result in qualitative enhancements to the interest rate and foreign currency risk management disclosures. The changes introduced by IFRS 9 will not have a quantitative impact on the consolidated financial statements of the Group.
IFRS 15 - Revenue from contracts with customers (effective year ending 31 March 2019).
- The new standard combines a number of previous standards, setting out a five step model for the recognition of revenue and establishing principles for reporting useful information to users of financial statements about the nature, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The new standard does not apply to rental income, which is in the scope of IAS 17, but does apply to service charge income, management and performance fees and trading property disposals. The changes introduced by IFRS 15 will result in minimal qualitative changes to the revenue disclosure and will not have a quantitative impact on the consolidated financial statements of the Group.
IFRS 16 - Leases (effective year ending 31 March 2020).
- For lessees, IFRS 16 will result in almost all operating leases being brought on balance sheet, as the distinction between operating and finance leases will be removed. The accounting for lessors will however not significantly change. As a result, on adoption of the new standard, these changes will have an immaterial impact on the consolidated financial statements of the Group.
Accounting judgements and estimates
In applying the Group's accounting policies, the Directors are required to make judgements and estimates that affect the financial statements.
Significant areas of estimation are:
Valuation of properties and investments held for trading: The Group uses external professional valuers to determine the relevant amounts. The primary source of evidence for property valuations should be recent, comparable market transactions on an arms-length basis. However, the valuation of the Group's property portfolio and investments held for trading are inherently subjective, as they are made on the basis of assumptions made by the valuers which may not prove to be accurate.
Other less significant areas of estimation include the valuation of fixed rate debt and interest rate derivatives, the determination of share-based payment expense, the actuarial assumptions used in calculating the Group's retirement benefit obligations and taxation provisions.
The key areas of accounting judgement are:
REIT status: British Land is a Real Estate Investment Trust (REIT) and does not pay tax on its property income or gains on property sales, provided that at least 90% of the Group's property income is distributed as a dividend to shareholders, which becomes taxable in their hands. In addition, the Group has to meet certain conditions such as ensuring the property rental business represents more than 75% of total profits and assets. Any potential or proposed changes to the REIT legislation are monitored and discussed with HMRC. It is management's intention that the Group will continue as a REIT for the foreseeable future.
Accounting for joint ventures and funds: In accordance with IFRS 10 'Consolidated financial statements', IFRS 11 'Joint arrangements', and IFRS 12 'Disclosures of interests in other entities' an assessment is required to determine the degree of control or influence the Group exercises and the form of any control to ensure that the financial statement treatment is appropriate. The assessment undertaken by management includes a consideration of the structure, legal form, contractual terms and other facts and circumstances in relation to the entity in question, prior to reaching a conclusion. This assessment is updated annually and there have been no changes in the judgement reached in relation to the degree of control the Group exercises within the current or prior year. Group shares in joint ventures and funds resulting from this process are disclosed in note 8 to the financial statements.
Interest in the Group's joint ventures is commonly driven by the terms of the partnership agreements which ensure that control is shared between the partners. All significant joint venture arrangements of the Group are held in structures in which the Group has 50% of the voting rights. Joint ventures are accounted for under the equity method, whereby the consolidated balance sheet incorporates the Group's share of the net assets of its joint ventures and associates. The consolidated income statement incorporates the Group's share of joint venture and associate profits after tax.
Accounting for transactions: Property transactions are complex in nature and can be material to the financial statements. Judgements made in relation to transactions include whether an acquisition is a business combination or an asset; whether held for sale criteria have been met for transactions not yet completed; and accounting for transaction costs and contingent consideration. Management consider each transaction separately in order to determine the most appropriate accounting treatment, and, when considered necessary, seek independent advice.
2 Performance measures
Earnings per share
The Group measures financial performance with reference to underlying earnings per share, the European Public Real Estate Association (EPRA) earnings per share and IFRS earnings per share. The relevant earnings and weighted average number of shares (including dilution adjustments) for each performance measure are shown below, and a reconciliation between these is shown within the supplementary disclosures (Table B).
EPRA earnings per share is calculated using EPRA earnings, which is the IFRS profit after taxation attributable to shareholders of the Company excluding investment and development property revaluations, gains/losses on investing and trading property disposals, changes in the fair value of financial instruments and associated close-out costs and their related taxation. The 2012 convertible bond was repaid in the current year. In the prior year diluted EPRA earnings per share did not include the dilutive impact of the 2012 convertible bond, as the Group's share price was below the exchange price of 693 pence. IFRS diluted earnings per share included the dilutive impact as IAS 33 ignores this hurdle to conversion. In the current and prior year, both EPRA and IFRS measures exclude the dilutive impact of the 2015 convertible bond as the Company's share price had not exceeded the level required for the convertible conditions attached to the bond to trigger conversion into shares.
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 year.
2018 2017
================================= =================================
Relevant Relevant
Relevant number Earnings Relevant number Earnings
earnings of shares per share earnings of shares per share
Earnings per share GBPm million pence GBPm million pence
=================== ========= ========== ========== ========= ========== ==========
Underlying
Underlying basic 380 1,013 37.5 390 1,029 37.9
Underlying diluted 380 1,016 37.4 390 1,033 37.8
=================== ========= ========== ========== ========= ========== ==========
EPRA
EPRA basic 380 1,013 37.5 390 1,029 37.9
EPRA diluted 380 1,016 37.4 390 1,033 37.8
=================== ========= ========== ========== ========= ========== ==========
IFRS
Basic 493 1,013 48.7 193 1,029 18.8
Diluted 493 1,016 48.5 160 1,091 14.7
=================== ========= ========== ========== ========= ========== ==========
Net asset value
The Group measures financial position with reference to EPRA net asset value (NAV) per share and EPRA triple net asset value (NNNAV) per share. The net asset value and number of shares for each performance measure are shown below. A reconciliation between IFRS net assets and EPRA net assets, and the relevant number of shares for each performance measure, is shown within the supplementary disclosures (Table B). EPRA net assets is a proportionally consolidated measure that is based on IFRS net assets excluding the mark-to-market on derivatives and related debt adjustments, the mark-to-market on the convertible bonds as well as deferred taxation on property and derivative valuations. They include the valuation surplus on trading properties and are adjusted for the dilutive impact of share options.
The 2012 convertible bond was repaid in the current year. In the prior year EPRA NAV and EPRA NNNAV did not include the dilutive impact of the 2012 convertible bond, as the Group's share price was below the exchange price of 693 pence. In the current and prior year, both EPRA and IFRS measures exclude the dilutive impact of the 2015 convertible bond as the Company's share price had not exceeded the level required for the convertible conditions attached to the bond to trigger conversion into shares.
2018 2017
================================== ==================================
Net asset Net asset
Relevant value Relevant value
Relevant number per Relevant number per
net assets of shares share net assets of shares share
Net asset value per share GBPm million pence GBPm million pence
========================== =========== ========== ========= =========== ========== =========
EPRA
EPRA NAV 9,560 989 967 9,498 1,038 915
EPRA NNNAV 9,044 989 914 8,938 1,038 861
========================== =========== ========== ========= =========== ========== =========
IFRS
Basic 9,506 983 967 9,476 1,029 921
Diluted 9,506 989 961 9,876 1,096 901
========================== =========== ========== ========= =========== ========== =========
Total accounting return
The Group also measures financial performance with reference to total accounting return. This is calculated as the increase in EPRA net asset value per share and dividend paid in the year as a percentage of the EPRA net asset value per share at the start of the year.
2018 2017
=================================== =================================
Dividend
Increase Dividend Decrease per
in NAV per share Total in NAV share Total
per share paid accounting per share paid accounting
pence pence return pence pence return
======================== ========== ========== =========== ========== ======== ===========
Total accounting return 52 29.64 8.9% (4) 28.78 2.7%
======================== ========== ========== =========== ========== ======== ===========
3 Revenue and costs
2018 2017
============================= =============================
Capital Capital
Underlying and other Total Underlying and other Total
GBPm GBPm GBPm GBPm GBPm GBPm
====================================================== ========== ========== ===== ========== ========== =====
Rent receivable 441 - 441 449 - 449
Spreading of tenant incentives and guaranteed rent
increases (6) - (6) (9) - (9)
Surrender premia 6 - 6 2 - 2
====================================================== ========== ========== ===== ========== ========== =====
Gross rental income 441 - 441 442 - 442
====================================================== ========== ========== ===== ========== ========== =====
Trading property sales proceeds - 78 78 - 33 33
Service charge income 66 - 66 62 - 62
Management and performance fees (from joint ventures
and funds) 6 - 6 9 - 9
Other fees and commissions 48 - 48 43 - 43
====================================================== ========== ========== ===== ========== ========== =====
Revenue 561 78 639 556 33 589
====================================================== ========== ========== ===== ========== ========== =====
Trading property cost of sales - (64) (64) - (26) (26)
Service charge expenses (66) - (66) (62) - (62)
Property operating expenses (29) - (29) (25) - (25)
Other fees and commissions expenses (41) - (41) (35) - (35)
====================================================== ========== ========== ===== ========== ========== =====
Costs (136) (64) (200) (122) (26) (148)
====================================================== ========== ========== ===== ========== ========== =====
425 14 439 434 7 441
====================================================== ========== ========== ===== ========== ========== =====
The cash element of net rental income recognised during the year ended 31 March 2018 from properties which were not subject to a security interest was GBP301m (2016/17: GBP276m). Property operating expenses relating to investment properties that did not generate any rental income were GBP2m (2016/17: GBP2m). Contingent rents of GBP4m (2016/17: GBP2m) were recognised in the year.
4 Valuation movements on property
2018 2017
GBPm GBPm
=========================================================== ===== =====
Consolidated income statement
Revaluation of properties 202 (144)
Revaluation of properties held by joint ventures and funds
accounted for using the equity method 52 (93)
=========================================================== ===== =====
254 (237)
=========================================================== ===== =====
Consolidated statement of comprehensive income
Revaluation of owner-occupied properties (3) -
=========================================================== ===== =====
251 (237)
=========================================================== ===== =====
5 Net financing costs
2018 2017
GBPm GBPm
================================================================== ===== =====
Underlying
Financing charges
Bank loans and overdrafts (21) (26)
Derivatives 28 23
Other loans (76) (83)
Obligations under head leases (2) (2)
===== =====
(71) (88)
Development interest capitalised 6 8
===== =====
(65) (80)
Financing income
Deposits, securities and liquid investments 1 2
===== =====
1 2
================================================================== ===== =====
Net financing charges - underlying (64) (78)
================================================================== ===== =====
Capital and other
Financing charges
Valuation movements on translation of foreign currency net assets (1) -
Hedging reserve recycling(1) (106) -
Valuation movements on fair value derivatives (79) 51
Valuation movements on fair value debt 80 (48)
Recycling of fair value movement on close-out of derivatives (14) (10)
Capital financing costs(2) (27) (15)
Valuation movement on non-hedge accounted derivatives (16) (7)
===== =====
(163) (29)
===== =====
Financing income
Fair value movement on convertible bonds - 42
===== =====
- 42
================================================================== ===== =====
Net financing (charges) income - capital (163) 13
================================================================== ===== =====
Net financing costs
Total financing income 1 44
Total financing charges (228) (109)
================================================================== ===== =====
Net financing costs (227) (65)
================================================================== ===== =====
Interest payable on unsecured bank loans and related interest rate derivatives was GBP9m (2016/17: GBP13m). Interest on development expenditure is capitalised at the Group's weighted average interest rate of 2.0% (2016/17: 2.4%). The weighted average interest rate on a proportionately consolidated basis at 31 March 2018 was 2.8% (2016/17: 3.1%).
(1) Represents a reclassification of cumulative losses within the hedging and translation reserve to capital profit and loss, in relation to hedging instruments which have been closed out or are no longer hedge accounted.
(2) Primarily debenture bonds redemption and tender offer and purchase costs.
6 Taxation
2018 2017
GBPm GBPm
=========================================================================================== ===== =====
Taxation income (expense)
Current taxation:
UK corporation taxation: 19% (2016/17: 20%) - (3)
Adjustments in respect of prior years 1 4
===== =====
Total current taxation income 1 1
Deferred taxation on revaluations and derivatives 5 -
=========================================================================================== ===== =====
Group total taxation 6 1
Attributable to joint ventures and funds - 1
=========================================================================================== ===== =====
Total taxation income 6 2
=========================================================================================== ===== =====
Taxation reconciliation
Profit on ordinary activities before taxation 501 195
Less: profit attributable to joint ventures and funds(1) (151) (52)
===== =====
Group profit on ordinary activities before taxation 350 143
===== =====
Taxation on profit on ordinary activities at UK corporation taxation rate of 19% (2016/17:
20%) (67) (29)
Effects of:
REIT exempt income and gains 71 28
Taxation losses (4) (2)
Deferred taxation on revaluations and derivatives 5 -
Adjustments in respect of prior years 1 4
=========================================================================================== ===== =====
Group total taxation income 6 1
=========================================================================================== ===== =====
(1) A current taxation expense of GBPnil (2016/17: GBPnil) and a deferred taxation credit of GBPnil (2016/17: GBP1m) arose on profits attributable to joint ventures and funds. The low tax charge reflects the Group's REIT status.
Taxation expense attributable to Underlying Profit for the year ended 31 March 2018 was GBPnil (2016/17: GBPnil). Corporation taxation payable at 31 March 2018 was GBP22m (2016/17: GBP30m) as shown on the balance sheet. During the year to 31 March 2018 various tax provisions in respect of historic taxation matters and current points of uncertainty in the UK have been released and provisions made. The net movement, which is included within the tax credit above, is not material.
7 Property
Property reconciliation for the year ended 31 March 2018
Investment
===================
Investment
Offices and
& Canada development Owner-
Retail residential Water Developments properties occupied
Level Level Level Level Level Trading Level
3 3 3 3 3 properties 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================================================ ====== =========== ====== ============ =========== ========== ======== =====
Carrying value at 1 April
2017 5,021 3,616 286 150 9,073 334 94 9,501
Additions
* property purchases 237 - 8 - 245 5 - 250
* development expenditure 5 15 22 44 86 46 - 132
* capitalised interest and staff costs - 1 3 1 5 5 - 10
* capital expenditure on asset management initiatives 29 - - 1 30 - - 30
====== =========== ====== ============ =========== ========== ======== =====
271 16 33 46 366 56 - 422
====== =========== ====== ============ =========== ========== ======== =====
Depreciation - - - - - - (1) (1)
Disposals (134) (2) - - (136) (62) - (198)
Reclassifications (4) (137) - 141 - - - -
Revaluations included
in income statement 40 165 (21) 18 202 - - 202
Revaluations included
in OCI - - - - - - (3) (3)
Movement in tenant incentives
and contracted rent uplift
balances 1 1 - - 2 - - 2
====== =========== ====== ============ =========== ========== ======== =====
Carrying value at 31 March
2018 5,195 3,659 298 355 9,507 328 90 9,925
====== =========== ====== ============ =========== ========== ======== =====
Head lease liabilities
(note 12) (62)
Valuation surplus on trading
properties 134 ================================================================ ====== =========== ====== ============ =========== ========== ======== ===== Group property portfolio valuation at 31 March 2018 9,997 Non-controlling interests (315) ================================================================ ====== =========== ====== ============ =========== ========== ======== ===== Group property portfolio valuation at 31 March 2018 attributable to shareholders 9,682 ======================================================================== =========== ====== ============ =========== ========== ======== =====
Property valuation
The different valuation method levels are defined below:
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).
These levels are specified in accordance with IFRS 13 'Fair Value Measurement'. Property valuations are inherently subjective as they are made on the basis of assumptions made by the valuer which may not prove to be accurate. For these reasons, and consistent with EPRA's guidance, we have classified the valuations of our property portfolio as Level 3 as defined by IFRS 13. The inputs to the valuations are defined as 'unobservable' by IFRS 13 and these are analysed in a table on the following page. There were no transfers between levels in the period.
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 Institution 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 Offices, the Head of Retail and the Chief Financial Officer (Chief Executive Officer post January 2018). The valuers meet with the external auditors and also present directly to the Audit Committee at the interim and year end review of results.
Investment properties, excluding properties held for development, are valued by adopting the 'investment method' of valuation. This approach involves applying capitalisation yields to current and future rental streams net of income voids arising from vacancies or rent-free periods and associated running costs. These capitalisation yields and future rental values are based on comparable property and leasing transactions in the market using the valuers' professional judgement and market observation. Other factors taken into account in the valuations include the tenure of the property, tenancy details and ground and structural conditions.
In the case of ongoing developments, the approach applied is the 'residual method' of valuation, which is the investment method of valuation as described above, with a deduction for all costs necessary to complete the development, including a notional finance cost, together with a further allowance for remaining risk. Properties held for development are generally valued by adopting the higher of the residual method of valuation, allowing for all associated risks, or the investment method of valuation for the existing asset.
Copies of the valuation certificates of Knight Frank LLP, CBRE, Jones Lang LaSalle and Cushman & Wakefield can be found at
www.britishland.com/reports
A breakdown of valuations split between the Group and its share of joint ventures and funds is shown below:
2018 2017
========================= =========================
Joint Joint
ventures ventures
Group and funds Total Group and funds Total
GBPm GBPm GBPm GBPm GBPm GBPm
============================================================== ===== ========== ====== ===== ========== ======
Knight Frank LLP 1,674 2,680 4,354 7,031 2,883 9,914
CBRE 4,511 1,403 5,914 2,489 1,380 3,869
Jones Lang LaSalle 561 - 561 - 538 538
Cushman & Wakefield 3,251 19 3,270 - - -
============================================================== ===== ========== ====== ===== ========== ======
Total property portfolio valuation 9,997 4,102 14,099 9,520 4,801 14,321
Non-controlling interests (315) (68) (383) (310) (71) (381)
============================================================== ===== ========== ====== ===== ========== ======
Total property portfolio valuation attributable to
shareholders 9,682 4,034 13,716 9,210 4,730 13,940
============================================================== ===== ========== ====== ===== ========== ======
Information about fair value measurements using unobservable inputs (Level 3) for the year ended 31 March 2018
Costs to complete
ERV per sq ft Equivalent yield per sq ft
=================== ==================== =====================
Fair value
at
31 March
2018 Valuation Min Max Average Min Max Average Min Max Average
Investment GBPm technique GBP GBP GBP % % % GBP GBP GBP
====================== ========== ============ ==== ==== ======= ==== ==== ======== ===== ===== =======
Investment
Retail 5,210 methodology 2 84 24 3 9 5 - 51 2
Investment
Offices(1) 3,617 methodology 8 117 58 4 5 4 - 323 53
Investment
Canada Water 283 methodology 38 38 38 4 4 4 - 1 1
Investment
Residential 70 methodology 15 29 22 2 6 4 - 2 (34)
Residual
Developments 355 methodology 18 66 61 2 6 5 - 614 541
====================== ========== ============ ==== ==== ======= ==== ==== ======== ===== ===== =======
Total 9,535
Trading properties
at fair value 462
====================== ========== ============ ==== ==== ======= ==== ==== ======== ===== ===== =======
Group property
portfolio valuation 9,997
====================== ========== ============ ==== ==== ======= ==== ==== ======== ===== ===== =======
(1) Includes owner-occupied.
8 Joint ventures and funds
Summary movement for the year of the investments in joint ventures and funds
Joint ventures Funds Total Equity Loans Total
GBPm GBPm GBPm GBPm GBPm GBPm
====================================================== ============== ===== ===== ====== ===== =====
At 1 April 2017 2,525 241 2,766 2,412 354 2,766
Additions 72 7 79 3 76 79
Share of profit on ordinary activities after taxation 149 2 151 151 - 151
Distributions and dividends:
* Capital (23) (13) (36) (36) - (36)
* Revenue (63) (15) (78) (78) - (78)
Hedging and exchange movements 8 - 8 8 - 8
Disposal of Tesco joint venture (68) - (68) (68) - (68)
====================================================== ============== ===== ===== ====== ===== =====
At 31 March 2018 2,600 222 2,822 2,392 430 2,822
====================================================== ============== ===== ===== ====== ===== =====
Additional investments in joint ventures and funds covenant information
At 31 March 2018 the investments in joint ventures included within the total investments in joint ventures and funds was GBP2,826m (2016/17: GBP3,299m), being the GBP2,822m total investment shown above, less the net investment of (GBP4m) (2016/17: GBP7m) in PREF, a property fund in Continental Europe.
The summarised income statements and balance sheets below and on the following page show 100% of the results, assets and liabilities of joint ventures and funds. Where necessary, these have been restated to the Group's accounting policies.
Joint ventures' and funds' summary financial statements for the year ended 31 March 2018
Hercules
Unit
Trust Other
MSC Property BL The joint joint Total
Broadgate Intermediate Sainsbury SouthGate USS ventures ventures Group
REIT Holdings Superstores Limited joint and and Total share
Ltd(1) Ltd Ltd Partnership ventures(2) sub-funds(3) funds(4) 2018 2018
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
Universities
Euro Norges Superannuation
Bluebell Bank Scheme
LLP Investment J Sainsbury Aviva Group
Partners (GIC) Management plc Investors PLC
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
City Shopping
Offices Centres Shopping Shopping Retail
Property sector Broadgate Meadowhall Superstores Centres Centres Parks
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
Group share 50% 50% 50% 50% 50% Various
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
Summarised
income
statements GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
Revenue(5) 255 102 39 18 13 36 6 469 235
Costs (64) (23) - (4) (4) (5) (2) (102) (51)
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
191 79 39 14 9 31 4 367 184
Administrative
expenses (1) - - (1) - - - (2) (1)
Net interest
payable (82) (33) (16) (1) - (4) - (136) (68)
========= ============ =========== =========== ============== ============ ======== ======= =======
Underlying
Profit 108 46 23 12 9 27 4 229 115
Net valuation
movement 105 21 (3) 10 - (28) - 105 52
Capital
financing
costs - - (26) - - - - (26) (13)
(Loss) profit
on disposal of
investment
properties and
investments (18) - 9 1 - - 2 (6) (3)
========= ============ =========== =========== ============== ============ ======== ======= =======
Profit (loss)
on ordinary
activities
before
taxation 195 67 3 23 9 (1) 6 302 151
Taxation - - - - - - - - -
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
Profit (loss)
on ordinary
activities
after taxation 195 67 3 23 9 (1) 6 302 151
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
Other
comprehensive
income
(expenditure) 13 3 - - - - - 16 8
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
Total
comprehensive
income 208 70 3 23 9 (1) 6 318 159
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
British Land
share of total
comprehensive
income
(expense) 104 35 2 11 5 (1) 3 159
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
British Land
share of
distributions
payable 35 4 31 5 4 14 - 93
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
Summarised
balance sheets GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
Investment and
trading
properties 4,668 1,895 523 275 250 590 - 8,201 4,100
Current assets 6 6 - 1 1 4 42 60 31
Cash and
deposits 291 39 90 9 7 10 8 454 227
========= ============ =========== =========== ============== ============ ======== ======= =======
Gross assets 4,965 1,940 613 285 258 604 50 8,715 4,358
========= ============ =========== =========== ============== ============ ======== ======= =======
Current
liabilities (107) (41) (24) (4) (5) (11) (15) (207) (105)
Bank and
securitised
debt (1,744) (641) (251) - - (140) - (2,776) (1,388)
Loans from
joint venture
partners (465) (364) - - (26) - (6) (861) (430)
Other
non-current
liabilities (41) (20) - (28) - (4) 5 (88) (43)
========= ============ =========== =========== ============== ============ ======== ======= =======
Gross
liabilities (2,357) (1,066) (275) (32) (31) (155) (16) (3,932) (1,966)
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
Net assets 2,608 874 338 253 227 449 34 4,783 2,392
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
British Land
share of net
assets less
shareholder
loans 1,304 437 169 127 113 226 16 2,392
=============== ========= ============ =========== =========== ============== ============ ======== ======= =======
(1) Included within the Broadgate REIT revenue is a GBP29m (GBP15m British Land share) payment received in June 2017 from the Royal Bank of Scotland in relation to their surrender of a lease at 135 Bishopsgate.
(2) USS joint ventures include the Eden Walk Shopping Centre Unit Trust and the Fareham Property Partnership.
(3) Hercules Unit Trust joint ventures and sub-funds includes 50% of the results of Deepdale Co-Ownership Trust, Gibraltar Limited Partnership and Valentine Co-Ownership Trust and 41.25% of Birstall Co-Ownership Trust. The balance sheet shows 50% of the assets of these joint ventures and sub-funds.
(4) Included in the column headed 'Other joint ventures and funds' are contributions from the following: BL Goodman Limited Partnership, The Aldgate Place Limited Partnership, Bluebutton Property Management UK Limited, City of London Office Unit Trust and Pillar Retail Europark Fund (PREF). The Group's ownership share of PREF is 65%, however as the Group is not able to exercise control over significant decisions of the fund, the Group equity accounts for its interest in PREF.
(5) Revenue includes gross rental income at 100% share of GBP385m (2016/17: GBP437m).
The borrowings of joint ventures and funds and their subsidiaries are non-recourse to the Group. All joint ventures are incorporated in the United Kingdom, with the exception of Broadgate REIT Limited and the Eden Walk Shopping Centre Unit Trust which are incorporated in Jersey. Of the funds, the Hercules Unit Trust (HUT) joint ventures and sub-funds are incorporated in Jersey and PREF in Luxembourg.
These financial statements include the results and financial position of the Group's interest in the Fareham Property Partnership, the Aldgate Place Limited Partnership, the BL Goodman Limited Partnership, the Auchinlea Partnership and the Gibraltar Limited Partnership. Accordingly, advantage has been taken of the exemptions provided by Regulation 7 of the Partnership (Accounts) Regulations 2008 not to attach the partnership accounts to these financial statements.
Operating cash flows of joint ventures and funds (Group share)
2018 2017
GBPm GBPm
==================================================================== ===== =====
Rental income received from tenants 199 207
Fees and other income received - -
Operating expenses paid to suppliers and employees (22) (20)
===== =====
Cash generated from operations 177 187
===== =====
Interest paid (73) (84)
Interest received 1 1
UK corporation tax paid (1) (2)
==================================================================== ===== =====
Cash inflow from operating activities 104 102
==================================================================== ===== =====
Cash inflow from operating activities deployed as:
Surplus cash retained within joint ventures and funds 26 43
Revenue distributions per consolidated statement of cash flows 78 59
Revenue distributions split between controlling and non-controlling
interests
==================================================================== ===== =====
Attributable to non-controlling interests 2 4
Attributable to shareholders of the Company 76 55
==================================================================== ===== =====
9 Other investments
2018 2017
===================================================== =====================================================
Investment Loans, Property, Investment Loans, Property,
held receivables plant held receivables plant
for and and Intangible for and and Intangible
trading other equipment assets Total trading other equipment assets Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================== ========== =========== ========= ========== ===== ========== =========== ========= ========== =====
At 1 April 93 41 11 9 154 101 26 12 3 142
Additions - - 15 4 19 - 14 1 7 22
Disposals - (2) - - (2) - (2) - - (2)
Revaluation 5 3 - - 8 (8) 3 - - (5)
Depreciation/amortisation - - (2) (3) (5) - - (2) (1) (3)
========================== ========== =========== ========= ========== ===== ========== =========== ========= ========== =====
At 31 March 98 42 24 10 174 93 41 11 9 154
========================== ========== =========== ========= ========== ===== ========== =========== ========= ========== =====
The investment held for trading comprises interests as a trust beneficiary. The trust's assets comprise freehold reversions in a pool of commercial properties, comprising Sainsbury's superstores. The interest is categorised as Level 3 in the fair value hierarchy, is subject to the same inputs as those disclosed in note 7, and its fair value was determined by the Directors, supported by an external valuation.
10 Debtors
2018 2017
GBPm GBPm
===================================================== ===== =====
Trade and other debtors 28 22
Deposits received relating to held for sale asset(1) - 144
Prepayments and accrued income 7 5
===================================================== ===== =====
35 171
===================================================== ===== =====
(1) Prior year balance relates to deposit received on held for sale joint venture transaction recognised as a financial asset, the realisation of which was conditional and not guaranteed as at the prior year balance sheet date.
Trade and other debtors are shown after deducting a provision for bad and doubtful debts of GBP14m (2016/17: GBP14m). The charge to the income statement in relation to bad and doubtful debts was GBP1m (2016/17: GBP1m).
The Directors consider that the carrying amount of trade and other debtors is approximate to their fair value. There is no concentration of credit risk with respect to trade debtors as the Group has a large number of customers who are paying their rent in advance.
As at 31 March, trade and other debtors outside their payment terms yet not provided for are as follows:
Outside credit terms
but not impaired
==========================
Within More
credit 0-1 1-2 than
Total terms month months 2 months
GBPm GBPm GBPm GBPm GBPm
===== ===== ======= ====== ======= =========
2018 28 18 6 4 -
===== ===== ======= ====== ======= =========
2017 22 7 9 4 2
===== ===== ======= ====== ======= =========
11 Creditors
2018 2017
GBPm GBPm
===================================================== ===== =====
Trade creditors 146 127
Deposits received relating to held for sale asset(1) - 144
Other taxation and social security 30 32
Accruals 73 83
Deferred income 75 72
===================================================== ===== =====
324 458
===================================================== ===== =====
(1) Prior year balance relates to deposit received on held for sale joint venture transaction recognised as a financial liability, the realisation of which was conditional and not guaranteed as at the prior year balance sheet date.
Trade creditors are interest-free and have settlement dates within one year. The Directors consider that the carrying amount of trade and other creditors is approximate to their fair value.
12 Other non-current liabilities
2018 2017
GBPm GBPm
======================== ===== =====
Other creditors - 1
Head leases 62 64
Net pension liabilities - 13
======================== ===== =====
62 78
======================== ===== =====
13 Deferred tax
The movement on deferred tax is as shown below:
Deferred tax assets year ended 31 March 2018
Transferred
1 April Credited Debited to joint 31 March
2017 to income to equity ventures 2018
GBPm GBPm GBPm GBPm GBPm
=================================================== ======= ========== ========== =========== ========
Interest rate and currency derivative revaluations 4 5 (5) - 4
Other timing differences 7 - - - 7
=================================================== ======= ========== ========== =========== ========
11 5 (5) - 11
=================================================== ======= ========== ========== =========== ========
Deferred tax liabilities year ended 31 March 2018
GBPm GBPm GBPm GBPm GBPm
===================================== ==== ==== ==== ==== ====
Property and investment revaluations (7) - - - (7)
===================================== ==== ==== ==== ==== ====
(7) - - - (7)
===================================== ==== ==== ==== ==== ====
Net deferred tax assets 4 5 (5) - 4
===================================== ==== ==== ==== ==== ====
Deferred tax assets year ended 31 March 2017
Transferred
1 April Credited Debited to joint 31 March
2016 to income to equity ventures 2017
GBPm GBPm GBPm GBPm GBPm
=================================================== ======= ========== ========== =========== ========
Interest rate and currency derivative revaluations 5 (1) - - 4
Other timing differences 6 1 - - 7
=================================================== ======= ========== ========== =========== ========
11 - - - 11
=================================================== ======= ========== ========== =========== ========
Deferred tax liabilities year ended 31 March 2017
GBPm GBPm GBPm GBPm GBPm
===================================== ==== ==== ==== ==== ====
Property and investment revaluations (7) - - - (7)
Other timing differences (1) - - 1 -
===================================== ==== ==== ==== ==== ====
(8) - - 1 (7)
===================================== ==== ==== ==== ==== ====
Net deferred tax assets 3 - - 1 4
===================================== ==== ==== ==== ==== ====
The following corporation tax rates have been substantively enacted: 19% effective from 1 April 2017 reducing to 17% effective from 1 April 2020. The deferred tax assets and liabilities have been calculated at the tax rate effective in the period that the tax is expected to crystallise.
The Group has recognised a deferred tax asset calculated at 17% (2016/17: 17%) of GBP7m (2016/17: GBP5m) in respect of capital losses from previous years available for offset against future capital profit. Further unrecognised deferred tax assets in respect of capital losses of GBP123m (2016/17: GBP129m) exist at 31 March 2018.
The Group has recognised deferred tax assets on derivative revaluations to the extent that future matching taxable profits are expected to arise.
At 31 March 2018, the Group had an unrecognised deferred tax asset calculated at 17% (2016/17: 17%) of GBP43m (2016/17: GBP50m) in respect of UK revenue tax losses from previous years.
Under the REIT regime, development properties which are sold within three years of completion do not benefit from tax exemption. At 31 March 2018, the value of such properties is GBP176m (2016/17: GBP176m) and if these properties were to be sold and no tax exemption was available, the tax arising would be GBP13m (2016/17: GBP13m).
14 Net debt
2018 2017
Footnote GBPm GBPm
===================================================== ======== ===== =====
Secured on the assets of the Group
9.125% First Mortgage Debenture Stock 2020 1.1 - 34
5.264% First Mortgage Debenture Bonds 2035 369 377
5.0055% First Mortgage Amortising Debentures 2035 95 99
5.357% First Mortgage Debenture Bonds 2028 255 348
Bank loans 1.2 512 475
Loan notes 2 2
===== =====
1,233 1,335
Unsecured
5.50% Senior Notes 2027 100 102
3.895% Senior US Dollar Notes 2018 2 27 32
4.635% Senior US Dollar Notes 2021 2 156 181
4.766% Senior US Dollar Notes 2023 2 97 113
5.003% Senior US Dollar Notes 2026 2 63 73
3.81% Senior Notes 2026 110 114
3.97% Senior Notes 2026 112 117
1.5% Convertible Bond 2017 - 406
0% Convertible Bond 2020 337 331
2.375% Sterling Unsecured Bond 2029 298 -
Bank loans and overdrafts 595 477
===== =====
1,895 1,946
===================================================== ======== ===== =====
Gross debt 3 3,128 3,281
===================================================== ======== ===== =====
Interest rate and currency derivative liabilities 138 144
Interest rate and currency derivative assets (115) (217)
Cash and short term deposits 4,5 (105) (114)
===================================================== ======== ===== =====
Total net debt 3,046 3,094
===================================================== ======== ===== =====
Net debt attributable to non-controlling interests (109) (103)
===================================================== ======== ===== =====
Net debt attributable to shareholders of the Company 2,937 2,991
===================================================== ======== ===== =====
(1) These are non-recourse borrowings with no recourse for repayment to other companies or assets in the Group:
2018 2017
GBPm GBPm
============================== ===== =====
1.1 BLD Property Holdings Ltd - 34
1.2 Hercules Unit Trust 512 475
============================== ===== =====
512 509
============================== ===== =====
(2) Principal and interest on these borrowings were fully hedged into Sterling at a floating rate at the time of issue.
(3) The principal amount of gross debt at 31 March 2018 was GBP3,007m (2016/17: GBP3,069m). Included in this is the principal amount of secured borrowings and other borrowings of non-recourse companies of GBP1,159m of which the borrowings of the partly-owned subsidiary, Hercules Unit Trust, not beneficially owned by the Group are GBP119m.
(4) Included within cash and short term deposits is the cash and short term deposits of Hercules Unit Trust, of which GBP10m is the proportion not beneficially owned by the Group.
(5) Cash and deposits not subject to a security interest amount to GBP91m (2016/17: GBP99m).
Maturity analysis of net debt
2018 2017
GBPm GBPm
========================================= ===== =====
Repayable: within one year and on demand 27 464
Between: one and two years 163 31
two and five years 1,194 1,283
five and ten years 803 783
ten and fifteen years 305 332
fifteen and twenty years 636 388
===== =====
3,101 2,817
===== =====
Gross debt 3,128 3,281
===== =====
Interest rate and currency derivatives 23 (73)
Cash and short term deposits (105) (114)
========================================= ===== =====
Net debt 3,046 3,094
========================================= ===== =====
1.5% Convertible bond 2012 (maturity 2017)
On 10 September 2012, British Land (Jersey) Limited (the 2012 Issuer), a wholly-owned subsidiary of the Group, issued GBP400 million 1.5% guaranteed convertible bonds due 2017 (the 2012 bonds) at par. On 10 September 2017, the convertible bonds were redeemed at par.
0% Convertible bond 2015 (maturity 2020)
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 (the 2015 bonds) at par. The 2015 Issuer is fully guaranteed by the Company in respect of the 2015 bonds.
Subject to their terms, the 2015 bonds are convertible into preference shares of the 2015 Issuer which are automatically transferred to the Company in exchange for ordinary shares in the Company or, at the Company's election, any combination of ordinary shares and cash. From 20 July 2015 up to and including 29 June 2018, a bondholder may exercise its conversion right if the share price has traded at a level exceeding 130% of the exchange price for a specified period. Thereafter, and up to but excluding the 7th dealing day before 9 June 2020 (the maturity date), a bondholder may convert at any time.
The initial exchange price was 1103.32 pence per ordinary share. The exchange price is adjusted based on certain events (such as the Company paying dividends in any quarter above 3.418 pence per ordinary share). As at 31 March 2018 the exchange price was 1036.52 pence per ordinary share.
From 30 June 2018, the Company has the option to redeem the 2015 bonds at par if the Company's share price has traded above 130% of the exchange price for a specified period, or at any time once 85% by nominal value of the 2015 bonds have been converted, redeemed, or purchased and cancelled. The 2015 bonds will be redeemed at par on 9 June 2020 (the maturity date) if they have not already been converted, redeemed or purchased and cancelled.
Fair value and book value of net debt
2018 2017
========================== ==========================
Fair Book Fair Book
value value Difference value value Difference
GBPm GBPm GBPm GBPm GBPm GBPm
===================================================== ====== ====== ========== ====== ====== ==========
Debentures and unsecured bonds 1,783 1,682 101 1,682 1,590 92
Convertible bonds 337 337 - 737 737 -
Bank debt and other floating rate debt 1,116 1,109 7 963 954 9
===================================================== ====== ====== ========== ====== ====== ==========
Gross debt 3,236 3,128 108 3,382 3,281 101
===================================================== ====== ====== ========== ====== ====== ==========
Interest rate and currency derivative liabilities 138 138 - 144 144 -
Interest rate and currency derivative assets (115) (115) - (217) (217) -
Cash and short term deposits (105) (105) - (114) (114) -
===================================================== ====== ====== ========== ====== ====== ==========
Net debt 3,154 3,046 108 3,195 3,094 101
===================================================== ====== ====== ========== ====== ====== ==========
Net debt attributable to non-controlling interests (110) (109) (1) (105) (103) (2)
Net debt attributable to shareholders of the Company 3,044 2,937 107 3,090 2,991 99
===================================================== ====== ====== ========== ====== ====== ==========
The fair values of debentures, unsecured bonds and the convertible bond 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 have been excluded from the disclosures on the basis that the fair value is equivalent to the book value. The fair value hierarchy level of debt held at amortised cost is level 2 (as defined in note 7).
Group loan to value (LTV)
2018 2017
GBPm GBPm
======================================================================== ====== ======
Group loan to value (LTV) 22.1% 22.6%
======================================================================== ====== ======
Principal amount of gross debt 3,007 3,069
Less debt attributable to non-controlling interests (119) (112)
Less cash and short term deposits (balance sheet) (105) (114)
Plus cash attributable to non-controlling interests 10 9
======================================================================== ====== ======
Total net debt for LTV calculation 2,793 2,852
======================================================================== ====== ======
Group property portfolio valuation (note 7) 9,997 9,520
Investments in joint ventures and funds (note 8) 2,822 2,766
Joint venture held for sale - 540
Other investments (note 9) 174 154
Less property and investments attributable to non-controlling interests (366) (364)
======================================================================== ====== ======
Total assets for LTV calculation 12,627 12,616
======================================================================== ====== ======
Proportionally consolidated loan to value (LTV)
2018 2017
GBPm GBPm
================================================================ ====== ======
Proportionally consolidated loan to value (LTV) 28.4% 29.9%
================================================================ ====== ======
Principal amount of gross debt 4,399 4,649
Less debt attributable to non-controlling interests (135) (128)
Less cash and short term deposits (331) (323)
Plus cash attributable to non-controlling interests 10 9
================================================================ ====== ======
Total net debt for proportional LTV calculation 3,943 4,207
================================================================ ====== ======
Group property portfolio valuation (note 7) 9,997 9,520
Share of property of joint ventures and funds (note 7) 4,102 4,801
Other investments (note 9) 174 154
Less other investments attributable to joint ventures and funds (2) (3)
Less property attributable to non-controlling interests (383) (381)
================================================================ ====== ======
Total assets for proportional LTV calculation 13,888 14,091
================================================================ ====== ======
British Land Unsecured Financial Covenants
The two financial covenants applicable to the Group unsecured debt including convertible bonds are shown below:
2018 2017
GBPm GBPm
================================================================================================= ===== =====
Net Borrowings not to exceed 175% of Adjusted Capital and Reserves 29% 29%
================================================================================================= ===== =====
Principal amount of gross debt 3,007 3,069
Less the relevant proportion of borrowings of the partly-owned subsidiary/non-controlling
interests (119) (112)
Less cash and deposits (balance sheet) (105) (114)
Plus the relevant proportion of cash and deposits of the partly-owned subsidiary/non-controlling
interests 10 9
================================================================================================= ===== =====
Net Borrowings 2,793 2,852
================================================================================================= ===== ===== Share capital and reserves (balance sheet) 9,506 9,476 EPRA deferred tax adjustment (EPRA Table A) 5 3 Trading property surpluses (EPRA Table A) 134 83 Exceptional refinancing charges (see below) 233 274 Fair value adjustments of financial instruments (EPRA Table A) 137 155 Less reserves attributable to non-controlling interests (balance sheet) (254) (255) ================================================================================================= ===== ===== Adjusted Capital and Reserves 9,761 9,736 ================================================================================================= ===== =====
In calculating Adjusted Capital and Reserves for the purpose of the unsecured debt financial covenants, there is an adjustment of GBP233m (2016/17: GBP274m) to reflect the cumulative net amortised exceptional items relating to the refinancings in the years ended 31 March 2005, 2006 and 2007.
2018 2017
GBPm GBPm
============================================================================================= ======= =======
Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets 23% 26%
============================================================================================= ======= =======
Principal amount of gross debt 3,007 3,069
Less cash and deposits not subject to a security interest (being GBP91m less the relevant
proportion of cash and deposits of the partly-owned subsidiary/non-controlling interests of
GBP7m) (84) (96)
Less principal amount of secured and non-recourse borrowings (1,159) (1,238)
============================================================================================= ======= =======
Net Unsecured Borrowings 1,764 1,735
============================================================================================= ======= =======
Group property portfolio valuation (note 7) 9,997 9,520
Investments in joint ventures and funds (note 8) 2,822 2,766
Joint venture held for sale - 540
Other investments (note 9) 174 154
Less investments in joint ventures and joint venture held for sale (note 8) (2,822) (3,299)
Less encumbered assets (note 7) (2,447) (3,040)
============================================================================================= ======= =======
Unencumbered Assets 7,724 6,641
============================================================================================= ======= =======
Reconciliation of movement in Group net debt for the year ended 31 March 2018
Arrangement
Cash Foreign Fair costs
2017 flows Transfers(3) exchange value amortisation 2018
=============================================== ===== ====== ============ ========= ====== ============= =====
Short term borrowings 464 (458) 27 - (6) - 27
Long term borrowings 2,817 361 (27) (40) (10) - 3,101
Derivatives(1) (73) 29 - 40 27 - 23
=============================================== ===== ====== ============ ========= ====== ============= =====
Total liabilities from financing activities(4) 3,208 (68) - - 11 - 3,151
Cash and cash equivalents (114) 9 - - - - (105)
=============================================== ===== ====== ============ ========= ====== ============= =====
Net debt 3,094 (59) - - 11 - 3,046
=============================================== ===== ====== ============ ========= ====== ============= =====
Reconciliation of movement in Group net debt for the year ended 31 March 2017
Arrangement
Cash Foreign Fair costs
2016 flows Transfers(3) exchange value amortisation 2017
============================================ ===== ====== ============ ========= ====== ============= =====
Short term borrowings 74 (74) 464 - - - 464
Long term borrowings 3,687 (423) (464) 49 (36) 4 2,817
Derivatives(2) (30) 1 - (48) 4 - (73)
Total liabilities from financing activities 3,731 (496) - 1 (32) 4 3,208
Cash and cash equivalents (114) - - - - - (114)
============================================ ===== ====== ============ ========= ====== ============= =====
Net debt 3,617 (496) - 1 (32) 4 3,094
============================================ ===== ====== ============ ========= ====== ============= =====
1 Cash flows on derivatives include GBP20m of net receipts on derivative interest.
2 Cash flows on derivatives include GBP14m of net receipts on derivative interest.
3 Transfers comprises debt maturing from long term to short term borrowings.
4 Cash flows of GBP68m shown above represents net cash flows on interest rate derivative closeouts of GBP9m, decrease of bank and other borrowings of GBP626m and drawdowns on bank and other borrowings of GBP529m shown in the consolidated statement of cash flows, along with GBP20m of net receipts on derivative interest.
Fair value hierarchy
The table below provides an analysis of financial instruments carried at fair value, by the valuation method. The fair value hierarchy levels are defined in note 7.
2018 2017
========================== ==========================
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================================== ===== ===== ===== ===== ===== ===== ===== =====
Interest rate and currency derivative assets - (115) - (115) - (217) - (217)
Other investments - available for sale (14) - - (14) (14) - - (14)
Other investments - held for trading - - 98 98 - - (93) (93)
================================================== ===== ===== ===== ===== ===== ===== ===== =====
Assets (14) (115) 98 (31) (14) (217) (93) (324)
================================================== ===== ===== ===== ===== ===== ===== ===== =====
Interest rate and currency derivative liabilities - 138 - 138 - 144 - 144
Convertible bonds 337 - - 337 737 - - 737
================================================== ===== ===== ===== ===== ===== ===== ===== =====
Liabilities 337 138 - 475 737 144 - 881
================================================== ===== ===== ===== ===== ===== ===== ===== =====
Total 323 23 98 444 723 (73) (93) 557
================================================== ===== ===== ===== ===== ===== ===== ===== =====
Categories of financial instruments
2018 2017
GBPm GBPm
============================================================= ======= =======
Financial assets
Fair value through income statement
Other investments - held for trading 98 93
Derivatives in designated hedge accounting relationships 110 215
Derivatives not in designated hedge accounting relationships 5 2
Loans and receivables
Trade and other debtors 28 166
Cash and short term deposits 105 114
Other investments - loans and receivables 42 61
============================================================= ======= =======
388 651
Financial liabilities
Fair value through income statement
Convertible bonds (337) (737)
Derivatives in designated hedge accounting relationships (5) (143)
Derivatives not in designated accounting relationships (133) (1)
Amortised cost
Gross debt (2,791) (2,544)
Head leases payable (62) (64)
Creditors (237) (373)
============================================================= ======= =======
(3,565) (3,862)
============================================================= ======= =======
Total (3,177) (3,211)
============================================================= ======= =======
Gains and losses on financial instruments, as classed above, are disclosed in note 5 (net financing costs), note 10 (debtors), the consolidated income statement and the consolidated statement of comprehensive income. The Directors consider that the carrying amounts of other investments and head leases payable are approximate to their fair value, and that the carrying amounts are recoverable.
Maturity of committed undrawn borrowing facilities
2018 2017
GBPm GBPm
======================================================== ===== =====
Maturity date: over five years 60 125
between four and five years 90 1,110
between three and four years 1,010 58
======================================================== ===== =====
Total facilities available for more than three years 1,160 1,293
======================================================== ===== =====
Between two and three years 85 149
Between one and two years 86 -
Within one year - 2
======================================================== ===== =====
Total 1,331 1,444
======================================================== ===== =====
The above facilities are comprised of British Land undrawn facilities of GBP1,245m excluding the extension of the GBP735m facility, plus undrawn facilities of Hercules Unit Trust totalling GBP86m.
15 Dividend
The fourth quarter interim dividend of 7.52 pence per share, totalling GBP74m (2016/17: 7.30 pence per share, totalling GBP75m), was approved by the Board on 16 May 2018 and is payable on 3 August 2018 to shareholders on the register at the close of business on 29 June 2018.
The Board will announce the availability of the Scrip Dividend Alternative, if available, via the Regulatory News Service and on its website (www.britishland.com/dividends), no later than four business days before the ex-dividend date of 28 June 2018. The Board expects to announce the split between Property Income Distributions (PID) and non-PID income at that time. Any Scrip Dividend Alternative will not be enhanced. PID dividends are paid, as required by REIT legislation, after deduction of withholding tax at the basic rate (currently 20%), where appropriate. Certain classes of shareholders may be able to elect to receive dividends gross. Please refer to our website www.britishland.com/dividends for details.
2018 2017
Payment date Dividend Pence per share GBPm GBPm
====================================== ================= =============== ===== =====
Current year dividends
03.08.2018 2018 4th interim 7.52
04.05.2018 2018 3rd interim 7.52
09.02.2018 2018 2nd interim 7.52 75
10.11.2017 2018 1st interim 7.52 77
===============
30.08
===============
Prior year dividends
04.08.2017 2017 4th interim 7.30 75
05.05.2017 2017 3rd interim 7.30 75
10.02.2017 2017 2nd interim 7.30 75
11.11.2016 2017 1st interim 7.30 75
===============
29.20
===============
05.08.2016 2016 4th interim 7.09(1) 73
06.05.2016 2016 3rd interim 7.09 73
====================================== ================= =============== ===== =====
Dividends in consolidated statement
of changes in equity 302 296
Dividends settled in shares - -
====================================== ================= =============== ===== =====
Dividends settled in cash 302 296
Timing difference relating to payment
of withholding tax 2 (1)
========================================================= =============== ===== =====
Dividends in cash flow statement 304 295
========================================================= =============== ===== =====
(1) Dividend split half PID, half non-PID.
16 Share capital and reserves
2018 2017
============================================== ============= ==============
Number of ordinary shares in issue at 1 April 1,041,035,058 1,040,562,323
Share issues 429,206 472,735
Repurchased and cancelled (47,607,139) -
============================================== ============= ==============
At 31 March 993,857,125 1, 041,035,058
============================================== ============= ==============
Of the issued 25p ordinary shares, 7,376 shares were held in the ESOP trust (2016/17: 7,783), 11,266,245 shares were held as treasury shares (2016/17: 11,266,245) and 982,583,504 shares were in free issue (2016/17: 1,029,761,030). No treasury shares were acquired by the ESOP trust during the year. All issued shares are fully paid. In the year ended 31 March 2018 the Company repurchased and cancelled 47,607,139 ordinary shares at a weighted average price of 630 pence.
17 Segment information
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. Residential properties were included within Offices in the prior year, but have been reclassified within Other/unallocated in the current year, with the prior year comparatives represented.
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 year.
Segment result
Offices Retail Canada Water Other/unallocated Total
============ ============= ============= =================== ==============
2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================ ===== ===== ====== ===== ====== ===== ======== ========= ===== =======
Gross rental
income
British Land
Group 139 139 273 276 8 9 4 3 424 427
Share of joint
ventures and
funds 102 116 87 100 - - - - 189 216
================ ===== ===== ====== ===== ======= ===== ========= ========= ====== =====
Total 241 255 360 376 8 9 4 3 613 643
================ ===== ===== ====== ===== ======= ===== ========= ========= ====== =====
Net rental
income
British Land
Group 131 131 254 262 7 8 4 2 396 403
Share of joint
ventures and
funds 98 112 82 95 - - - - 180 207
================ ===== ===== ====== ===== ======= ===== ========= ========= ====== =====
Total 229 243 336 357 7 8 4 2 576 610
================ ===== ===== ====== ===== ======= ===== ========= ========= ====== =====
Operating result
British Land
Group 126 127 248 252 4 5 (42) (47) 336 337
Share of joint
ventures and
funds 95 109 79 96 - - (2) (1) 172 204
================ ===== ===== ====== ===== ======= ===== ========= ========= ====== =====
Total 221 236 327 348 4 5 (44) (48) 508 541
================ ===== ===== ====== ===== ======= ===== ========= ========= ====== =====
Reconciliation 2018 2017
to Underlying GBPm GBPm
Profit
================ ===== ===== ====== ===== ======= ===== ========= ========= ====== =====
Operating result 508 541
Net financing
costs (128) (151)
================ ===== ===== ====== ===== ======= ===== ========= ========= ====== =====
Underlying
Profit 380 390
================ ===== ===== ====== ===== ======= ===== ========= ========= ====== =====
Reconciliation
to profit on
ordinary
activities
before taxation
================ ===== ===== ====== ===== ======= ===== ========= ========= ====== =====
Underlying
Profit 380 390
Capital and
other 107 (209)
Underlying
Profit
attributable to
non-controlling
interests 14 14
================ ===== ===== ====== ===== ======= ===== ========= ========= ====== =====
Profit on
ordinary
activities
before taxation 501 195
================ ===== ===== ====== ===== ======= ===== ========= ========= ====== =====
Gross rental income per operating segment result 613 643
Less share of gross rental income of joint ventures and funds (189) (216)
Plus share of gross rental income attributable to non-controlling interests 17 15
============================================================================= ===== =====
Gross rental income (note 3) 441 442
============================================================================= ===== =====
Trading property sales proceeds 78 33
Service charge income 66 62
Management and performance fees (from joint ventures and funds) 6 9
Other fees and commissions 48 43
============================================================================= ===== =====
Revenue (Consolidated Income Statement) 639 589
============================================================================= ===== =====
A reconciliation between net financing costs in the consolidated income statement and net financing costs of GBP128m (2016/17: GBP151m) in the segmental disclosures above can be found within Table A in the supplementary disclosures. Of the total revenues above, GBPnil (2016/17: GBPnil) was derived from outside the UK.
Segment assets
Offices Retail Canada Water Other/unallocated Total
============ ============ ============== =================== ==============
2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================= ===== ===== ===== ===== ====== ====== ========= ======== ====== ======
Property assets
British Land Group 4,371 4,069 4,915 4,716 283 271 113 154 9,682 9,210
Share of joint ventures and
funds 2,334 2,776 1,681 1,938 - - 19 16 4,034 4,730
============================= ===== ===== ===== ===== ====== ====== ========= ======== ====== ======
Total 6,705 6,845 6,596 6,654 283 271 132 170 13,716 13,940
============================= ===== ===== ===== ===== ====== ====== ========= ======== ====== ======
Reconciliation to net assets
2018 2017
British Land Group GBPm GBPm
============================== ======= =======
Property assets 13,716 13,940
Other non-current assets 185 156
============================== ======= =======
Non-current assets 13,901 14,096
============================== ======= =======
Other net current liabilities (368) (364)
Adjusted net debt (3,973) (4,223)
Other non-current liabilities - (11)
============================== ======= =======
EPRA net assets (diluted) 9,560 9,498
Non-controlling interests 254 255
EPRA adjustments (308) (277)
============================== ======= =======
Net assets 9,506 9,476
============================== ======= =======
SUPPLEMENTARY DISCLOSURES
UNAUDITED UNLESS OTHERWISE STATED
Table A: Summary income statement and balance sheet (Unaudited)
Summary income statement based on proportional consolidation for the year ended 31 March 2018
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.
Year ended 31 March 2018 Year ended 31 March 2017
================================================ =================================================
Joint
ventures Less Joint Less
and non-controlling Proportionally ventures non-controlling Proportionally
Group funds interests consolidated Group and funds interests consolidated
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============== ===== ======== =============== ============== ===== ========= =============== ==============
Gross rental
income 441 193 (21) 613 442 220 (19) 643
Property
operating
expenses (29) (9) 1 (37) (25) (10) 2 (33)
===== ======== =============== ============== ===== ========= =============== ==============
Net rental
income 412 184 (20) 576 417 210 (17) 610
Administrative
expenses (82) (1) - (83) (84) (2) - (86)
Net fees and
other income 13 - 2 15 17 - - 17
===== ======== =============== ============== ===== ========= =============== ==============
Ungeared income
return 343 183 (18) 508 350 208 (17) 541
Net financing
costs (64) (68) 4 (128) (78) (76) 3 (151) Underlying Profit 279 115 (14) 380 272 132 (14) 390 Underlying taxation - - - - - - - - Underlying Profit after taxation 279 115 (14) 380 272 132 (14) 390 =============== ===== ======== =============== ============== ===== ========= =============== ============== Valuation movement 254 (237) Other capital and taxation (net)(1) 31 (433) =============== ===== ======== =============== ============== ===== ========= =============== ============== Capital and other 285 (670) Total return 665 (280) =============== ===== ======== =============== ============== ===== ========= =============== ==============
(1) Includes other comprehensive income, movement in dilution of share options and the movement in items excluded for EPRA NAV.
Summary balance sheet based on proportional consolidation as at 31 March 2018
The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. It presents the composition of the EPRA net assets of the Group, with its share of the net assets of the joint venture and fund assets and liabilities included on a line-by-line basis, and excluding non-controlling interests, and assuming full dilution.
Mark-to-market EPRA EPRA
on derivatives Net Net
Share and Valuation assets assets
of joint Less related surplus 31 31
ventures non-controlling Share Deferred debt Head on trading March March
Group & funds interests options tax adjustments leases properties 2018 2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============== ======= ======== =============== ======= ======== ============== ====== ========== ======= =======
Retail
properties 5,262 1,759 (383) - - - (42) - 6,596 6,654
Office
properties 4,265 2,334 - - - - (15) 121 6,705 7,015
Canada Water
properties 298 - - - - - (15) - 283 271
Other
properties 100 19 - - - - - 13 132 -
============== ======= ======== =============== ======= ======== ============== ====== ========== ======= =======
Total
properties 9,925 4,112 (383) - - - (72) 134 13,716 13,940
Investments in
joint
ventures and
funds 2,822 (2,822) - - - - - - - -
Other
investments 174 (2) - - - - - - 172 151
Other net
(liabilities)
assets (369) (99) 4 32 5 - 72 - (355) (370)
Net debt (3,046) (1,189) 125 - - 137 - - (3,973) (4,223)
============== ======= ======== =============== ======= ======== ============== ====== ========== ======= =======
Net assets 9,506 - (254) 32 5 137 - 134 9,560 9,498
============== ======= ======== =============== ======= ======== ============== ====== ========== ======= =======
EPRA NAV per
share (note
2) 967p 915p
============== ======= ======== =============== ======= ======== ============== ====== ========== ======= =======
EPRA Net assets movement
Year ended Year ended
31 March 2018 31 March 2017
================= ==================
Pence Pence
GBPm per share GBPm per share
======================= ===== ========== ====== ==========
Opening EPRA NAV 9,498 915 10,074 919
Income return 380 37 390 36
Capital return 285 29 (670) (13)
Dividend paid (302) (29) (296) (27)
Purchase of own shares (301) 15 - -
======================= ===== ========== ====== ==========
Closing EPRA NAV 9,560 967 9,498 915
======================= ===== ========== ====== ==========
Table B: PRA Performance measures
EPRA Performance measures summary table
2018 2017
===================== =====================
GBPm Pence per share GBPm Pence per share
======================================= ==== =============== ==== ===============
EPRA Earnings - basic 380 37.5 390 37.9
- diluted 380 37.4 390 37.8
======================================== ==== =============== ==== ===============
EPRA Net Initial Yield 4.3% 4.3%
EPRA 'topped-up' Net Initial Yield 4.6% 4.5%
EPRA Vacancy Rate 3.2% 4.8%
======================================== ==== =============== ==== ===============
2018 2017
================================== ==================================
Net assets Net asset Net assets Net asset
value per share pence value per share pence
=========== ========== ====================== ========== ======================
EPRA NAV 9,560 967 9,498 915
EPRA NNNAV 9,044 914 8,938 861
=========== ========== ====================== ========== ======================
Calculation and reconciliation of EPRA/IFRS earnings and EPRA/IFRS earnings per share (Audited)
2018 2017
GBPm GBPm
============================================================== ===== =====
Profit attributable to the shareholders of the Company 493 193
Exclude:
Group - current taxation (1) (1)
Group - deferred taxation (5) -
Joint ventures and funds - deferred taxation - (1)
Group - valuation movement (202) 144
Group - (profit) loss on disposal of investment properties
and investments (18) 5
Group - profit on disposal of trading properties (14) (7)
Joint ventures and funds - net valuation movement (including
result on disposals) (49) 75
Joint ventures and funds - capital financing costs 13 6
Changes in fair value of financial instruments and associated
close-out costs 163 (13)
Non-controlling interests in respect of the above - (11)
============================================================== ===== =====
Underlying Profit 380 390
============================================================== ===== =====
Group - underlying current taxation - -
============================================================== ===== =====
EPRA earnings - basic 380 390
============================================================== ===== =====
Dilutive effect of 2012 convertible bond - -
EPRA earnings - diluted 380 390
============================================================== ===== =====
Profit attributable to the shareholders of the Company 493 193
Dilutive effect of 2012 convertible bond - (33)
============================================================== ===== =====
IFRS earnings - diluted 493 160
============================================================== ===== =====
2018 2017
Number Number
million million
==================================================== ======== ========
Weighted average number of shares 1,024 1,040
Adjustment for treasury shares (11) (11)
==================================================== ======== ========
IFRS/EPRA Weighted average number of shares (basic) 1,013 1,029
==================================================== ======== ========
Dilutive effect of share options 1 1
Dilutive effect of ESOP shares 2 3
Dilutive effect of 2012 convertible bond - 58
==================================================== ======== ========
IFRS Weighted average number of shares (diluted) 1,016 1,091
==================================================== ======== ========
Dilutive effect of 2012 convertible bond - (58)
==================================================== ======== ========
EPRA Weighted average number of shares (diluted) 1,016 1,033
==================================================== ======== ========
Net assets per share (Audited)
2018 2017
================= =================
Pence Pence
GBPm per share GBPm per share
=============================================== ===== ========== ===== ==========
Balance sheet net assets 9,506 9,476
=============================================== ===== ========== ===== ==========
Deferred tax arising on revaluation movements 5 3
Mark-to-market on derivatives and related debt
adjustments 137 155
Dilution effect of share options 32 36
Surplus on trading properties 134 83
Less non-controlling interests (254) (255)
=============================================== ===== ========== ===== ==========
EPRA NAV 9,560 967 9,498 915
=============================================== ===== ========== ===== ==========
Deferred tax arising on revaluation movements (31) (19)
Mark-to-market on derivatives and related debt
adjustments (137) (155)
Mark-to-market on debt (348) (386)
=============================================== ===== ========== ===== ==========
EPRA NNNAV 9,044 914 8,938 861
=============================================== ===== ========== ===== ==========
EPRA NNNAV is the EPRA NAV adjusted to reflect the fair value of the debt and derivatives and to include the deferred taxation on revaluations and derivatives.
2018 2017
Number Number
million million
========================================= ======== ========
Number of shares at year end 994 1,040
Adjustment for treasury shares (11) (11)
========================================= ======== ========
IFRS/EPRA number of shares (basic) 983 1,029
========================================= ======== ========
Dilutive effect of share options 1 3
Dilutive effect of ESOP shares 5 6
Dilutive effect of 2012 convertible bond - 58
========================================= ======== ========
IFRS number of shares (diluted) 989 1,096
========================================= ======== ========
Dilutive effect of 2012 convertible bond - (58)
========================================= ======== ========
EPRA number of shares (diluted) 989 1,038
========================================= ======== ========
EPRA Net Initial Yield and 'topped-up' Net Initial Yield (Unaudited)
2018 2017
GBPm GBPm
================================================================== ======= ======
Investment property - wholly-owned 9,682 9,210
Investment property - share of joint ventures and funds 4,034 4,730
Less developments, residential and land (1,315) (798)
======= ======
Completed property portfolio 12,401 13,142
Allowance for estimated purchasers' costs 799 897
================================================================== ======= ======
Gross up completed property portfolio valuation (A) 13,200 14,039
================================================================== ======= ======
Annualised cash passing rental income 584 607
Property outgoings (11) (9)
================================================================== ======= ======
Annualised net rents (B) 573 598
================================================================== ======= ======
Rent expiration of rent-free periods and fixed uplifts(1) 28 30
================================================================== ======= ======
'Topped-up' net annualised rent (C) 601 628
EPRA Net Initial Yield (B/A) 4.3% 4.3%
EPRA 'topped-up' Net Initial Yield (C/A) 4.6% 4.5%
================================================================== ======= ======
Including fixed/minimum uplifts received in lieu of rental growth 11 11
================================================================== ======= ======
Total 'topped-up' net rents (D) 612 639
Overall 'topped-up' Net Initial Yield (D/A) 4.6% 4.6%
================================================================== ======= ======
'Topped-up' net annualised rent 601 628
ERV vacant space 21 34
Reversions 32 38
================================================================== ======= ======
Total ERV (E) 654 700
Net Reversionary Yield (E/A) 5.0% 5.0%
================================================================== ======= ======
(1) The weighted average period over which rent-free periods expire is 1 year (2016/17: 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 31 March 2018, 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 unrented, lettable space as a proportion of the total rental value of the completed property portfolio.
EPRA Vacancy Rate
2018 2017
GBPm GBPm
======================================================================= ===== =====
Annualised potential rental value of vacant premises 21 34
Annualised potential rental value for the completed property portfolio 664 710
EPRA Vacancy Rate 3.2% 4.8%
======================================================================= ===== =====
The above is stated for the UK portfolio only.
EPRA Cost Ratios (Unaudited)
2018 2017
GBPm GBPm
========================================================================================== ===== =====
Property operating expenses 28 23
Administrative expenses 82 84
Share of joint ventures and funds expenses 10 12
Less: Performance and management fees (from joint ventures and funds) (8) (9)
Net other fees and commissions (7) (8)
Ground rent costs (2) (2)
========================================================================================== ===== =====
EPRA Costs (including direct vacancy costs) (A) 103 100
Direct vacancy costs (12) (12)
========================================================================================== ===== =====
EPRA Costs (excluding direct vacancy costs) (B) 91 88
Gross Rental Income less ground rent costs 422 412
Share of joint ventures and funds (GRI less ground rent costs) 189 229
========================================================================================== ===== =====
Total Gross Rental Income less ground rent costs (C) 611 641
EPRA Cost Ratio (including direct vacancy costs) (A/C) 16.9% 15.6%
EPRA Cost Ratio (excluding direct vacancy costs) (B/C) 14.9% 13.7%
Overhead and operating expenses capitalised (including share of joint ventures and funds) 5 5
========================================================================================== ===== =====
In the current year, employee costs in relation to staff time on development projects have been capitalised into the base cost of relevant development assets.
Table C: Gross rental income
2018 2017
GBPm GBPm
============================================================= ===== =====
Rent receivable 604 633
Spreading of tenant incentives and guaranteed rent increases (12) 8
Surrender premia 21 2
============================================================= ===== =====
Gross rental income 613 643
============================================================= ===== =====
The current and prior year information is presented on a proportionally consolidated basis, excluding non-controlling interests.
Table D: Property related capital expenditure
2018 2017
======================= =======================
Joint Joint
ventures ventures
and and
Group funds Total Group funds Total
============================= ===== ========= ===== ===== ========= =====
Acquisitions 250 - 250 88 - 88
Development 132 52 184 131 14 145
Like-for-like portfolio 23 27 50 67 47 114
Other 17 5 22 20 2 22
============================= ===== ========= ===== ===== ========= =====
Total property related capex 422 84 506 306 63 369
============================= ===== ========= ===== ===== ========= =====
The above is presented on a proportionally consolidated basis, excluding non-controlling interests and business combinations. The 'Other' category contains amounts owing to tenant incentives of GBP10m (2016/17: GBP10m), capitalised staff costs of GBP5m (2016/17: GBP5m) and capitalised interest of GBP7m (2016/17: GBP7m).
SUPPLEMENTARY TABLES
(Data includes Group's share of Joint Ventures and Funds)
Since 1 April 2017 Price Price Annual Passing
(100%) (BL Share) Rent
Purchases Sector GBPm GBPm GBPm(2)
------------------------------------ ------------- ------- ----------- --------------
Completed
Tesco, Brislington - Tesco exchange
transaction(1) Retail 46 23 2
Harlech, Newport - Tesco exchange
transaction(1) Retail 41 20 1
10 - 40 The Broadway, Ealing Retail 49 49 2
Hercules Unit Trust units(3) Retail 4 4 -
The Woolwich Estate Retail 103 103 4
Rotherhithe Police Station Canada Water 7 7 -
------------------------------------ ------------- ------- ----------- --------------
Total 250 206 9
--------------------------------------------------- ------- ----------- --------------
(1) Part of a Tesco JV swap transaction resulting in a net GBP73m
disposal of superstore assets
(2) BL share of annualised rent topped up for rent frees
(3) Units purchased representing GBP4m purchased GAV
Since 1 April 2017 Price Price Annual Passing
(100%) (BL Share) Rent
Sales Sector GBPm GBPm GBPm(5)
--------------------------- --------------- ------- ----------- --------------
Completed
The Leadenhall Building(1) Offices 1,150 575 17
Superstores(2) Retail 545 302 18
B&Q, Bury & Grimsby Retail 56 56 4
Virgin Actives, Sunderland
& Coventry Retail 8 8 1
Richmond Homebase(3) Retail 45 45 1
Other Retail/Offices 10 10 1
The Hempel Collection Residential 52 52 -
Clarges, Mayfair(4) Residential 193 193 -
Aldgate Place Residential 2 1 -
Exchanged
Clarges, Mayfair Residential 66 66 -
Total 2,127 1,308 42
------- -----------
(1) Exchanged during the year ended 31 March 2017
(2) Of which GBP116m (BL share) was part of a Tesco JV swap transaction
resulting in a net GBP73m disposal of superstore assets
(3) Exchanged in year and completed post year end
(4) Exchanged prior to FY18. Of which GBP168m completed post period
end
(5) BL share of annualised rent topped up for rent frees
Portfolio Valuation by Sector
At 31 March 2018 Group JVs & Total Change
Funds %(1)
GBPm GBPm GBPm H1 H2 FY
Regional 1,132 1,898 3,030 0.1 0.2 0.2
Local 1,840 458 2,298 (0.9) (0.6) (1.5)
Multi-let 2,972 2,356 5,328 (0.4) (0.2) (0.5)
Department Stores
and Leisure 593 1 594 2.4 2.6 5.1
Superstores 99 261 360 0.8 (1.5) (0.3)
Solus and Other 314 - 314 5.8 0.7 6.5
Retail 3,978 2,618 6,596 0.3 - 0.3
West End 4,255 - 4,255 3.2 2.6 5.8
City 116 2,334 2,450 1.7 1.3 2.8
Offices 4,371 2,334 6,705 2.6 2.1 4.5
------------------------ ------- -------- -------- ------ ------- ------
Residential(2) 113 19 132 3.6 (2.6) 1.6
Canada Water 283 - 283 (4.5) (3.0) (7.0)
------- -------- -------- ------ -------
Total 8,745 4,971 13,716 1.4 0.9 2.2
Standing Investments 8,349 4,583 12,932 1.2 0.4 1.6
Developments 396 388 784 3.3 6.4 9.6
------------------------ ------- -------- -------- ------ ------- ------
(1) Valuation movement during the year (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 12 months to 31 March Annualised as at 31
GBPm 2018 March 2018
Group JVs & Total Group JVs & Total
Funds Funds
---------------------- ------- --------- ------- ------- -------- ------
Regional 62 89 151 61 88 149
Local 92 29 121 90 26 116
Multi-let 154 118 272 151 114 265
Department Stores
and Leisure 43 - 43 40 - 40
Superstores 4 22 26 4 18 22
Solus and Other 19 - 19 17 - 17
Retail 220 140 360 212 132 344
---------------------- ------- --------- ------- ------- -------- ------
West End 133 - 133 134 - 134
City 6 102 108 5 80 85
Offices 139 102 241 139 80 219
---------------------- ------- --------- ------- ------- -------- ------
Residential(2) 4 - 4 5 - 5
---------------------- ------- --------- ------- ------- -------- ------
Canada Water(3) 8 - 8 8 - 8
---------------------- ------- --------- ------- ------- -------- ------
Total 371 242 613 364 212 576
---------------------- ------- --------- ------- ------- -------- ------
(1) Gross rental income will differ from annualised rents due
to accounting adjustments for fixed & minimum contracted rental
uplifts and lease incentives
(2) Stand-alone residential
(3) Reflects standing investment only
Portfolio Yield & ERV Movements(1)
-------------------------------------------------------------------------------------
At 31 March 2018 NEY ERV Growth %(2,4) NEY Yield Movement
bps(3,4)
% H1 H2 FY H1 H2 FY
---------------------------- ------ ------ ------ ------ ------- ------
Regional 5.0 1.2 1.1 2.3 4 3 7
Local 5.5 1.1 0.1 1.2 11 2 13
Multi-let 5.2 1.1 0.7 1.9 7 2 9
Department Stores and
Leisure 5.7 5.9 0.3 6.2 (11) 4 (7)
Superstores 5.4 (1.2) (1.1) (2.3) (7) (3) (9)
Solus and Other 5.2 (5.8) (0.0) (5.8) 16 (9) 7
Retail 5.3 1.0 0.5 1.6 5 2 6
---------------------------- ------
West End 4.3 1.0 1.5 2.5 (11) (2) (13)
City 4.5 1.3 0.2 1.5 1 1 2
Offices 4.4 1.2 1.0 2.1 (6) (1) (7)
------ ------ ------ ------ ------- ------ ------
Canada Water(5) 3.9 (1.1) 0.0 (1.1) 11 26 37
------ ------ ------ ------ ------- ------ ------
Total 4.8 1.0 0.7 1.8 (0) 1 1
---------------------------- ------ ------ ------ ------ ------- ------ ------
(1) Excluding developments under construction, assets
held for development and residential assets
(2) As calculated by IPD
(3) Including notional
purchaser's costs
(4) Excludes Euston Tower; as we move closer to tenant break
in 2021, valuation now reflects refurbishment assumption which,
if included, would distort these movements
(5) Reflects standing investment only
Retail Portfolio Valuation - Previous Classification Basis
-----------------------------------------------------------------------------------------------------
At 31 March Valuation(1) Change %(2) ERV Growth %(3) NEY Yield
2018 Movement
bps(4)
GBPm H1 H2 FY H1 H2 FY H1 H2 FY
Shopping Parks 3,180 (0.1) 0.3 0.2 0.8 0.2 0.9 11 (0) 10
Shopping Centres 2,359 0.2 (0.5) (0.3) 0.7 1.4 2.1 3 4 7
Superstores 360 0.8 (1.5) (0.3) (1.2) (1.1) (2.3) (7) (3) (9)
Department Stores 269 2.1 (0.8) 0.5 (0.0) 1.4 1.4 (10) 8 (2)
Leisure 428 2.5 3.5 6.2 7.7 (0.0) 7.7 (15) 2 (9)
Retail 6,596 0.3 - 0.3 1.0 0.5 1.6 5 2 6
------------- ------ ------ ------ ------ ------ ------ ----- ----
(1) Group's share of properties in joint ventures and funds including
HUT at ownership share
(2) Valuation movement during the year (after taking account
of capital expenditure) of properties held at the balance sheet
date, including developments (classified by end use), purchases
and sales
(3) As calculated by
IPD
(4) Including notional
purchaser's costs
Portfolio Net Yields(1,2)
At 31 March 2018 EPRA net EPRA topped Overall Net equivalent Net reversionary
initial up net topped yield % yield %
yield % initial up net
yield %(3) initial
yield
%(4)
--------- ------------ --------- ---------------
Regional 4.5 4.7 4.7 5.0 5.0
Local 5.0 5.1 5.2 5.5 5.5
Multi-let 4.7 4.9 4.9 5.2 5.3
Department Stores
& Leisure 5.7 5.7 6.8 5.7 4.5
Superstores 5.7 5.7 5.7 5.4 5.2
Solus & Other 5.1 5.1 5.1 5.2 4.2
Retail 4.9 5.0 5.2 5.3 5.1
------------------- --------- ------------ --------- --------------- -----------------
West End 3.5 4.0 4.0 4.3 4.7
City 4.2 4.2 4.2 4.5 4.9
Offices 3.8 4.1 4.1 4.4 4.8
------------------- --------- ------------ --------- --------------- -----------------
Canada Water(5) 3.1 3.2 3.2 3.9 3.9
------------------- --------- ------------ --------- --------------- -----------------
Total 4.3 4.6 4.6 4.8 5.0
------------------- --------- ------------ --------- --------------- -----------------
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) Reflects standing investment only
Total Property Return (as calculated by IPD)
-------------------------------------------------------------------------------
Full Year to 31 March Retail Offices Total
2018
% British IPD British IPD British IPD
Land Land Land
------------------------- ------- ------- ------- ------- ------- -------
Capital Return 0.4 1.1 5.2 4.2 2.5 5.3
- ERV Growth 1.6 0.9 2.1 1.1 1.8 2.0
- Yield Movement(1) 6 bps -11 bps -7 bps -21 bps 1 bps -26 bps
Income Return 5.3 5.0 3.6 3.9 4.4 4.6
Total Property Return 5.7 6.2 9.0 8.3 7.0 10.1
------- ------- ------- ------- -------
On a proportionally consolidated basis including the Group's share
of joint ventures and funds
(1) Net equivalent yield movement
Occupiers Representing over 0.5% of Total Contracted Rent
----------------------------------------------------------------------------
At 31 March 2018 % of total % of total
rent rent
-------------------------------- ----------- ---------------- -----------
Tesco(1) 4.3 Asda Group 1.0
J Sainsbury 3.8 Microsoft 1.0
Debenhams 3.5 JD Sports 1.0 UBS AG 3.3 Sports Direct 0.9 HM Government 2.8 Virgin Active 0.9 Next 2.5 Deutsche Bank 0.8 Kingfisher 2.5 Reed Smith 0.8 Facebook 1.9 Steinhoff 0.7 Dentsu Aegis(2) 1.8 Mayer Brown 0.7 Marks & Spencer 1.8 H&M 0.7 Spirit Group 1.7 TGI Fridays 0.7 Wesfarmers (Homebase/Bunnings) 1.7 River Island 0.7 Visa Inc 1.6 Mothercare 0.6 Alliance Boots 1.6 NEX Group 0.6 Dixons Carphone 1.5 Primark 0.6 Arcadia Group 1.4 Credit Agricole 0.6 Herbert Smith 1.3 Pets at Home 0.6 TK Maxx 1.2 Henderson 0.5 Gazprom 1.1 Hutchison 0.5 Vodafone 1.0 Aramco 0.5 David Lloyd 1.0 Misys 0.5 New Look(3) 1.0 -------------------------------- ----------- ---------------- -----------
(1) Includes GBP3.1m at Surrey Quays Shopping Centre
(2) Represents current occupation of 10 Triton Street covering 118,000 sq ft of space. Taking into account their pre-let of 310,000 sq ft at 1 Triton Square, % of contracted rent would rise to 5.2%. As part of this new 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.
(3) Taking into account rent adjustments following CVA
Major Holdings
------------------------------------------------------------------------------------------------------------
At 31 March 2018 BL Share Sq ft Rent Occupancy Lease
% '000 GBPm pa(1) rate %(2,4) Length
yrs(3,4)
---------------------------------------------- ----------------- ----- ---------- ----------- ---------
Broadgate 50 4,850 176 97.2 7.9
Regent's Place 100 1,740 75 98.1 7.4
Paddington Central 100 958 44 97.0 6.2
Meadowhall, Sheffield 50 1,500 89 97.9 6.3
Teesside, Stockton 100 569 17 95.4 5.1
Drake's Circus, Plymouth 100 1,082 21 98.5 9.1
Ealing Broadway 100 540 15 95.2 5.2
Glasgow Fort 77 510 21 99.1 6.0
Sainsbury's Superstores(5) 51 1,457 34 100.0 8.8
10 Portman Square 100 134 10 100.0 7.1
---------------------------------------------- ----------------- ----- ---------- ----------- ---------
(1) Annualised EPRA contracted rent including 100% of Joint Ventures &
Funds
(2) Including accommodation under offer or subject to asset management
(3) Weighted average to first break
(4) Excludes committed and near term developments
(5) Comprises stand-alone stores
Lease Length & Occupancy
--------------------------------------------------------------------------------------------------------------
At 31 March 2018 Average lease length yrs Occupancy rate %(1)
To expiry To break EPRA Occupancy Occupancy(2,4)
-------------------- ------------------ ---------- ---------------------------------------- --------------
Regional 7.7 6.6 96.8 97.1
Local 7.4 6.3 97.4 98.1
Multi-let 7.6 6.5 97.1 97.6
Department Stores
and Leisure 16.4 16.4 99.8 99.8
Superstores 9.4 9.4 100.0 100.0
Solus and Other 11.6 11.6 100.0 100.0
Retail 8.8 7.9 97.6 98.0
-------------------- ------------------ ---------- ---------------------------------------- --------------
West End 8.6 7.0 96.2 96.4
City 8.9 7.9 97.1 97.1
Offices 8.7 7.3 96.5 96.7
-------------------- ------------------ ---------- ---------------------------------------- --------------
Canada Water(3) 6.1 6.0 97.4 98.0
-------------------- ------------------ ---------- ---------------------------------------- --------------
Total 8.7 7.7 97.1 97.4
-------------------- ------------------ ---------- ---------------------------------------- --------------
(1) Space allocated to Storey is shown as occupied where there is a Storey tenant in place
otherwise it is shown as vacant. Offices occupancy would rise from 96.7% to 97.1% and total
occupancy would rise from 97.4% to 97.7% if Storey space were assumed to be fully let.
(2) Includes accommodation under offer or subject to asset management
(3) Reflects standing investment only
(4) If units let to occupiers who have entered liquidation post 31 March 18 are treated as
vacant, then the occupancy rate for Retail would reduce from 98.0% to 97.5%, and total occupancy
would reduce from 97.4% to 97.2%
Portfolio Weighting
----------------------------------------------------------------------------------------------
At 31 March 2017 2018 2018 2018
(current) (current) (pro-forma(1)
)
% % GBPm %
Regional 21.3 22.1 3,030 21.3
Local 15.4 16.7 2,298 15.9
Multi-let 36.7 38.8 5,328 37.2
Department Stores
& Leisure 4.1 4.3 594 4.1
Superstores 4.5 2.6 360 2.5
Solus & Other 2.5 2.3 314 2.2
Retail 47.8 48.0 6,596 46.0
-------------------- ------------------ ---------- ------------------- -------------------
West End 28.4 31.0 4,255 31.6
City 20.7 17.9 2,450 19.5
Offices 49.1 48.9 6,705 51.1
-------------------- ------------------ ---------- ------------------- -------------------
Residential(2) 1.2 1.0 132 0.9
-------------------- ------------------ ---------- ------------------- -------------------
Canada Water 1.9 2.1 283 2.0
-------------------- ------------------ ---------- ------------------- -------------------
Total 100.0 100.0 13,716 100.0
-------------------- ------------------ ---------- ------------------- -------------------
London Weighting 58% 59% 8,037 60%
-------------------- ------------------ ---------- ------------------- -------------------
On a proportionally consolidated basis including the Group's
share of joint ventures and funds
(1) Pro forma for developments under construction at estimated
end value (as determined by the Group's external valuers)
(2) Stand-alone residential
Annualised Rent & Estimated Rental Value (ERV)
---------------------------------------------------------------------------------------
At 31 March 2018 Annualised rent ERV Average rent
(valuation basis) GBPm GBPpsf
GBPm(1)
-----------------------------
Group JVs Total Total Contracted(2) ERV
& Funds
----------------------------- ------ --------- ------ ------ -------------- -----
Regional 63 88 151 168 32.2 34.2
Local 98 26 124 137 24.1 25.9
Multi-let 161 114 275 305 28.0 29.9
Department Stores & Leisure 36 - 36 29 16.4 13.0
Superstores 5 16 21 19 22.7 20.6
Solus & Other 17 - 17 14 20.9 17.1
Retail 219 130 349 367 25.4 25.9
----------------------------- ------ --------- ------ ------
West End(3) 133 - 133 179 58.2 67.1
City(3) 5 88 93 108 51.1 57.1
Offices(3) 138 88 226 287 55.2 62.9
Residential(4) 5 - 5 4 - -
Canada Water(5) 8 - 8 10 17.2 21.7
Total 370 218 588 668 31.4 33.9
On a proportionally consolidated basis including the
Group's share of joint ventures and funds
(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 2019 2020 2021 2022 2023 2019-21 2019-23
March
At 31 March 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Regional 19 11 18 14 11 48 73
Local 18 11 12 6 18 41 65
Multi-let 37 22 30 20 29 89 138
Department Stores
and Leisure 7 - - - - 7 7
Superstores 3 8 6 1 1 17 19
Solus and Other - - - - - - -
Retail 47 30 36 21 30 113 164
West End 27 15 10 9 13 52 74
City 15 4 9 - - 28 28
Offices 42 19 19 9 13 80 102
Canada Water(1) 1 - - - - 1 1
Total 90 49 55 30 43 194 267
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 For period to 31 2019 2020 2021 2022 2023 2019-21 2019-23 March At 31 March 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm Regional 14 14 9 14 20 37 71 Local 12 10 10 12 13 32 57 Multi-let 26 24 19 26 33 69 128 Department Stores and Leisure - - - - - - - Superstores - - - - 2 - 2 Solus and Other - - 1 - - 1 1 Retail 26 24 20 26 35 70 131 West End 5 4 18 21 25 27 73 City 10 10 8 2 3 28 33 Offices 15 14 26 23 28 55 106 Canada Water(1) 1 0 1 0 1 2 3 Total 42 38 47 49 64 127 240 % of contracted rent 6.9% 6.2% 7.8% 8.0% 10.3% 20.9% 39.2%
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
At 31 March Sector BL Share 100% PC Calendar Current Cost to come ERV Let & Under
2018 sq ft Year Value Offer
% '000 GBPm GBPm(1) GBPm(2) GBPm
Clarges Mayfair
- Retail &
Residential(3) Mixed Use 100 104 Q4 2017 473 14 0.7 -
Speke (Leisure) Retail 67 66 Q1 2018 15 3 1.1 0.9
Total Completed in Year 170 488 17 1.8 0.9
100 Liverpool
Street Office 50 522 Q1 2020 166 117 18.7 5.0
1 Triton
Square(4) Office 100 366 Q4 2020 210 185 23.1 21.8
1 Finsbury
Avenue Office 50 291 Q1 2019 105 26 8.1 2.4
135 Bishopsgate Office 50 328 Q2 2019 87 61 9.5 4.2
Plymouth
(Leisure) Retail 100 107 Q4 2019 4 38 3.1 1.2
Total Committed 1,614 572 427 62.5 34.6
Retail Capex(5) 69
(1) From 1 April 2018. 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) Current value includes GBP319m (of total GBP344m) units exchanged and not completed as
at 31 March 2018. Sales of GBP168m completed post period end.
(4) 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
(5) Capex committed and underway within our investment portfolio relating to leasing and asset
management
Near Term Development Pipeline
At 31 March Sector BL Share 100% Expected Current Cost to ERV Let & Planning
2018 sq ft Start On Value Come Under Status
Site Offer
% '000 GBPm GBPm(1) GBPm(2) GBPm
Gateway
Building Leisure 100 105 Q3 2018 7 123 6.0 - Consented
Blossom
Street,
Shoreditch Office 100 340 Q2 2019 17 250 18.6 - Consented
Bradford
(Leisure) Retail 100 49 Q1 2019 1 16 0.9 - Pre-submission
Teesside
(Leisure) Retail 100 84 Q1 2019 30 47 4.7 - Res to Grant
Total Near-Term 578 55 436 30.2 -
Retail Capex (3) 101
(1) From 1 April 2018. 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
At 31 March 2018 Sector BL Share 100% Planning Status
% Sq ft
'000
2-3 Finsbury Avenue Office 50 563 Consented
1-2 Broadgate Office 50 507 Pre-submission
5 Kingdom Street(1) Office 100 332 Consented
Meadowhall (Leisure) Retail 50 330 Resolution to Grant
Peterborough (Leisure) Retail 100 208 Submitted
Ealing - 10-40 The Broadway Retail 100 298 Pre-submission
Aldgate Place Phase 2 Residential 50 145 Consented
Eden Walk Retail & Residential Mixed Use 50 533 Consented
Chester Masterplan Retail 77 45 Pre-submission
Plymouth, George Street Retail 100 31 Pre-submission
Total Medium Term excl. Canada Water 2,992
Canada Water - Phase 1(2) Mixed Use 100 1,848 Submitted outline
(1) Planning consent for previous 240,000 sq ft scheme
(2) Canada Water site covers 5m sq ft in total based on net area (gross area of 7m sq ft)
Forward-looking statements
This Press Release contains certain 'forward-looking' statements. Such statements reflect current views on, among other things, our markets, activities, projections, objectives and prospects. Such 'forward-looking' statements can sometimes, but not always, be identified by their reference to a date or point in the future or the use of 'forward-looking' terminology, including terms such as 'believes', 'estimates', 'anticipates', 'expects', 'forecasts', 'intends', 'due', 'plans', 'projects', 'goal', '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 risks, assumptions and uncertainties because they relate to future events and depend on circumstances which may or may not occur and may be beyond our ability to control or predict. Forward-looking statements should be regarded with caution as actual results may differ materially from those expressed in or implied by such statements.
Important factors that could cause actual results, 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 and (q) the availability and cost of finance. The Company's principal risks are described in greater detail in 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. 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 or the basis on which they were prepared.
Other than in accordance with our legal and regulatory obligations (including under the UK Financial Conduct Authority's Listing Rules and Disclosure Rules, Transparency Rules, and the Market Abuse Regulation), British Land does not intend or undertake to update or revise forward-looking statements to reflect any changes in British Land's expectations with regard thereto or any changes in information, events, conditions or circumstances on which any such statement is based. This document shall not, under any circumstances, create any implication that there has been no change in the business or affairs of British Land since the date of this document or that the information contained herein is correct as at any time subsequent to this date.
This information is provided by RNS
The company news service from the London Stock Exchange
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May 17, 2018 02:00 ET (06:00 GMT)
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