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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.80 | 0.21% | 380.20 | 380.20 | 380.80 | 381.80 | 376.60 | 378.00 | 1,157,648 | 16:29:55 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 418M | -1.04B | -1.1194 | -3.39 | 3.52B |
From Apr 2021 to Apr 2024
TIDMBLND
RNS Number : 7998Z
British Land Co PLC
26 May 2021
The British Land Company PLC Full Year Results
26 May 2021
Simon Carter, CEO said: "This has been an extraordinary year so I am enormously proud of the resilient performance the team delivered, and the strong progress we have made across the priority areas I set out in November. Our new strategy exploits our competitive strengths in development, active management and repositioning assets and sees us invest behind two key themes, Campuses and Retail & Fulfilment . Our London campuses are already a successful differentiator for us, benefitting from increasing customer focus on the best space, where supply is most constrained. In Retail, we are expanding our approach to include fulfilment, building on our market leading position in high quality, out of town retail parks which already play a key role in retailers' fulfilment models, and complementing this with development led investment in urban logistics, primarily in London. We see a value opportunity in retail parks, reflecting increased yields and a more stable occupational outlook. We have been further encouraged by how strongly footfall and sales have rebounded in recent weeks. In urban logistics, our experience delivering complex developments in Central London means we are well placed to deliver innovative solutions to meet the accelerating occupational demand.
While Covid-19 has clearly impacted our performance, with the portfolio value down 10.8%, we have a strong balance sheet and have already delivered excellent progress against our four priorities. We've sold GBP1.2bn of assets, overall 6.2% ahead of book value, completed our first net zero development at 100 Liverpool Street and committed to develop Norton Folgate and 1 Broadgate, where we have pre let nearly 30% of the office space to JLL. We have made our first logistics acquisition in north London and acquired GBP197m of high quality retail parks. Operationally, we have driven rent collection and leasing activity, which at 1.7m sq ft in Retail was our highest ever. I would like to thank the whole team for their incredible efforts this year.
Looking forward, we will further align our business to growth and value, benefitting from the pick up in economic activity that is now emerging. On our Campuses, we have an opportunity to introduce innovative growth sectors including life sciences at Regent's Place. At Canada Water our planning permission is deliberately flexible, enabling us to deliver a range of uses aligned to growth and long term trends. In Retail & Fulfilment we will continue to target value opportunities in retail parks and development-led, logistics in London. We will maintain our focus on the everyday management of our spaces: driving rent collection, supporting our customers and making our space more sustainable."
Performance summary
-- Financial performance reflects the impact of Covid-19
-- Underlying profit reduced 34.3% primarily reflecting an increase in provisions for rent receivables
-- 83% of FY21 rent collected. 99% Offices; 71% Retail
-- Portfolio value down 10.8%; Offices down 3.8%, with moderate decline of 0.8% in the second half; Retail down 24.7% with the rate of decline slowing in Retail Parks; Developments broadly flat
-- EPRA Net Tangible Assets (NTA) reduced 16.3% to 648p -- Strong and flexible balance sheet -- GBP556m retail assets sold since April 2020, 7.0% ahead of book value -- GBP643m of standalone offices sold, 5.2% ahead of book value -- GBP1.8bn undrawn facilities and cash with no requirement to refinance until early 2025 -- LTV down 200bps at 32%; 46% headroom to Group debt covenants
-- FY21 dividend of 15.04p per share, representing 80% of underlying EPS, in line with our new policy
-- Fitch Ratings affirmed unsecured credit rating at 'A' -- Encouraging performance on reopening
-- In the period since reopening, footfall and sales on our Retail portfolio were 88% and 104% of pre pandemic levels respectively; 100% and 109% for retail parks (all excluding F&B)
-- Good progress against 2030 sustainability strategy -- Delivered our first net zero carbon development at 100 Liverpool Street -- Supported 364 people into employment at our places -- GRESB 5* and awarded a green star rating for the 11th consecutive year -- AAA MSCI rating, ranking within the top 11% overall
Progress against our priorities
-- Realising the potential of our Campuses:
-- 168,000 sq ft of deals greater than one year in the period; lettings and renewals on the standing portfolio 2.3% ahead of ERV; occupancy at 94%
-- Total lettings and renewals at 395,000 sq ft; further 161,000 sq ft deals agreed post period end, including pre-let of 134,000 sq ft to JLL at 1 Broadgate; total leasing since 1 April 2020 of 556,000 sq ft
-- Recently completed and committed developments 50% pre-let; generating GBP85m of rent when fully let
-- Under offer and in negotiation on a further 474,000 sq ft -- Storey operational across 348,000 sq ft; launched at 100 Liverpool Street
-- Completed headlease drawdown at Canada Water; signed TEDI-London, a higher education provider
-- Progressing value accretive development -- Commitment to develop 882,000 sq ft across 1 Broadgate and Norton Folgate
-- Commenced enabling works for the first phase of our Canada Water masterplan with main build contracts to be placed in the coming months
-- Targeting the opportunities in Retail & Fulfilment
-- 962,000 sq ft of deals greater than one year; 19% below previous passing rent; occupancy at 94%
-- 737,000 sq ft of short and temporary deals, bringing total leasing to 1.7m sq ft, our highest ever
-- 583,000 sq ft under offer, 5.8% below March 2021 ERV and 29% below passing rent
-- First urban logistics acquisition: 216,000 sq ft warehouse in Enfield with development potential, acquired for GBP87m
-- Exploiting value opportunity in retail parks: commitment to acquire the outstanding interest in HUT based on a GAV of GBP148m and GBP49m acquisition of The A1 Retail Park in Biggleswade
-- Active capital recycling -- GBP1.2bn assets sold, including GBP556m retail sales and GBP643m offices sales -- Reinvesting proceeds into value accretive acquisitions and development -- GBP1.6bn financing, including facility extensions and new loans
Summary performance
Hot Features
Premium
Year ended 31 March 2020 2021 Change
------------- -------------
Income statement
Underlying Profit GBP306m GBP201m (34.3)%
Underlying earnings per share(2) 32.7p 18.8p (42.5)%
IFRS (loss) after tax GBP(1,114)m GBP(1,083)m
IFRS basic earnings per share (110.0)p (111.2)p
Dividend per share 15.97p 15.04p
---------------------------------------- ------------- ------------- -----------
Total accounting return(2) (11.0)% (15.1)%
---------------------------------------- ------------- ------------- -----------
Balance sheet
Portfolio at valuation (proportionally
consolidated) GBP11,157m GBP9,132m (10.8)%(1)
EPRA Net Tangible Assets per
share(2) 773p 648p (16.3)%
IFRS net assets GBP7,147m GBP5,983m
Loan to value ratio (proportionally
consolidated) 34.0% 32.0%
---------------------------------------- ------------- ------------- -----------
Operational Statistics
Lettings and renewals over 1.6m sq ft 1.2m sq ft
1 year
Total lettings and renewals 2.3m sq ft 2.2m sq ft
Gross investment activity GBP0.9bn GBP1.7bn
Committed and recently completed 1.6m sq ft 1.8m sq ft
development
---------------------------------------- ------------- ------------- -----------
Sustainability Performance
MSCI ESG AAA rating AAA rating
GRESB 4* 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 financial statements
Results Presentation Conference Call
A presentation of the results will be broadcast via conference call and slides to accompany the call will be displayed along with an audio broadcast via the website (Britishland.com) at 8.30am on 26 May 2021. The details for the conference call and weblink are as follows:
UK Toll Free Number: 0800 640 6441 Access code: 146721 Click for access: Audio weblink
A dial in replay will be available later in the day for 7 days. The details are as follows:
Replay number: 020 3936 3001 Passcode: 218463
The accompanying slides will be made available at britishland.com just prior to the event starting.
For Information Contact
Investors
David Walker, British Land 07753 928382 Joanna Waddingham, British Land 07714 901166
Media
Charlotte Whitley, British Land 07887 802535 Guy Lamming/Gordon Simpson, Finsbury 020 7251 3801
britishland@finsbury.com
CHIEF EXECUTIVE'S REVIEW
Introduction
This has been an extraordinary year so I am enormously proud of the resilient performance the team delivered, and the strong progress we have made across the priority areas I set out in November. Building on this, we are setting out our new strategy, exploiting our strengths in development, active management and repositioning assets and investing behind two strategic themes, Campuses and Retail & Fulfilment. Our performance this year clearly reflects the impact of Covid-19 but we have further strengthened our finances through timely asset sales and are well positioned for the opportunities that lie ahead.
Covid Impact & Response
The pandemic has spanned our entire financial year. Throughout that time, we have worked closely with our customers to adjust through three national lockdowns and subsequent re-openings. In Offices, we have effectively collected all our rents. In Retail, we have made good progress on rent collection as a result of continuous engagement with our customers across the year. For those customers most affected, primarily smaller independent businesses, we have agreed pragmatic and equitable solutions for the periods of closure which include monthly payments and concessions. We have also engaged on a case by case basis with larger customers facing cash flow difficulties, often combining our discussions on the payment of legacy rents with those on lease extensions and new space. As a result, retail rent collection was 71% for the year. Due to ongoing uncertainty, we have made further provisions totalling GBP59m against outstanding rents and service charge, which has contributed to the reduction in underlying profit of 34.3%. The value of the portfolio was down 10.8% contributing to a fall in EPRA NTA of 16.3% to 648p.
This year our Place Based community activities have focused on helping those most impacted by Covid-19. That has included funding expert strategic advice from The Business School helping 25 of our community partners to navigate the crisis, providing educational materials for more than 3,600 disadvantaged families and supporting local foodbanks. We supported a retail recovery plan in Edinburgh and in London our initiatives included four virtual work experience projects for 200 young people. Overall, this year we have supported 364 people into employment which is a significant achievement in the context of the pandemic and reflects how quickly we were able to mobilise support to where it was most needed.
New business model & strategy
Our strategy is to more actively focus our capital on our competitive strengths in development, active management and repositioning assets . We are investing behind two strategic themes:
-- Campuses - Dynamic neighbourhoods focused on growth customers and sectors; and
-- Retail & Fulfilment - Retail Parks and urban logistics aligned to the growth of convenience, online and last mile fulfilment
Starting in FY22, reflecting this approach, we will update our reporting segments to be Campuses (which will include Canada Water) and Retail & Fulfilment (which will include urban logistics).
Campuses
At Broadgate, Regent's Place and Paddington Central, we provide modern, high quality and sustainable space in some of the most exciting parts of London. The buildings and the spaces between them support wellbeing and are aligned to the changing ways people work. They have excellent transport connections, an engaging public realm and offer an authentic sense of community. We are delivering an exciting, 53 acre, fourth campus at Canada Water.
Our campus proposition is a key differentiator and an important advantage post Covid as occupiers focus on the best space for their businesses where supply is most constrained. That means space which supports recruitment, training, collaboration, culture and wellbeing. Our development pipeline includes opportunities on all our campuses, enabling us to increase investment in these unique assets, deliver attractive returns and refresh our offer with high quality, modern and sustainable space so we are well placed as demand polarises. All our developments will be net zero carbon and with sustainability now seen as a differentiator between the best space and the rest, our ability to deliver buildings which help occupiers reduce their own carbon footprint, is a key advantage.
The proximity of our campuses to hubs of growth and innovation is a further advantage which we will more actively pursue. Already, we have successfully repositioned Broadgate to appeal to a wider range of growing businesses, including creative and technology companies, benefitting from its proximity to areas like Shoreditch as well as its links to the City. Building on this, we are evaluating other opportunities to align our campuses to innovation sectors and see a similar opportunity in life sciences at Regent's Place, given its proximity to the academic and scientific institutions in the Knowledge Quarter. Our ability to deliver bespoke space for our customers and our track record of providing environments in which fast growing businesses can expand, for example through Storey, position us well in this market.
At Canada Water, our permission is deliberately flexible. We can deliver between 2,000 and c.4,000 residential units and from 500,000 sq ft to 2.5m sq ft of workspace enabling us to evolve our offer in line with demand. Already we have signed an engineering, higher education provider and are exploring other opportunities in this sector.
Retail & Fulfilment
In Retail, we are expanding our approach to include fulfilment, building on our market leading position in high quality, out of town retail parks which already play a key role in retailers' fulfilment models, and complementing this with development led investment in urban logistics, primarily in London. Retail parks account for 53% of our retail portfolio. These are increasingly preferred by retailers, because they are affordable and support an online offer by facilitating click & collect, returns and ship from store. They are also preferred by business which are more online resilient, including discount food and homeware retailers. We see a clear value opportunity in this space to leverage our asset management expertise to deliver attractive returns as rents and values stabilise. This rationale underpins our acquisition of the A1 Retail Park in Biggleswade and commitment to acquire the remaining 22% interest in HUT, which comprises ten prime retail parks, together totalling GBP197m.
We are complementing our retail parks with development led investment into urban logistics warehouses, primarily in London. These are in town or edge of town warehouses with good infrastructure connections and access to residential areas to support effective last mile delivery. This particular part of the market, where customer requirements are evolving rapidly and demand is strong but supply of the right kind of space is highly constrained, will require innovative solutions, such as multistorey and underground warehouses as well as potentially incorporating into mixed use schemes. This plays very well to our skill set in site assembly, planning and delivering complex development in Central London.
This is the rationale for our acquisition of a 216,000 sq ft logistics warehouse in Enfield. It is an 11-acre site within the M25, with low coverage for an urban scheme of 40% providing the opportunity to build up as well as out. We benefit from a supportive planning environment in Enfield and in the meantime the scheme is fully let and highly reversionary.
The Priorities for our business
To deliver our strategy, we identified four key priorities for our business in November. We have already made strong progress against these and have a clear plan in each area for the coming year.
Priority Progress since November
Realising the potential
of our Campuses * Pre let 134,000 sq ft at 1 Broadgate to JLL
* Completed the drawdown of the headlease at Canada
Water and signed TEDI-London, a higher education
provider
* Launched Storey at 100 Liverpool Street, 37% let or
under offer
--------------------------------------------------------------
Progressing value
accretive development * Delivered 100 Liverpool Street, our first net zero
development
* Commitments to develop 1 Broadgate and Norton Folgate,
together covering 882,000 sq ft
* Commenced enabling works at the first phase of Canada
Water with main build contracts to be placed in the
coming months
--------------------------------------------------------------
Targeting the opportunities
in Retail & Fulfilment * Acquisition of A1 Retail Park, Biggleswade for GBP49m,
NIY 8.5%; opportunity to drive value through asset
management
* Commitment to acquire the remaining 22% interest in
HUT based on a GAV of GBP148m, taking our ownership
to 100%, NIY over 8% (post year end)
* Acquisition of 216,000 sq ft urban logistics
warehouse in Enfield with development potential for
GBP87m (post year end)
--------------------------------------------------------------
Active capital recycling
* GBP1.2bn of asset sales since April 2020, overall
6.2% ahead of book value
* 882,000 sq ft of development commitments
* GBP284m of Retail & Fulfilment acquisitions
* GBP1.6bn of financing activity in the year
--------------------------------------------------------------
Realising the potential of our Campuses
We will realise the potential of our Campuses through development, active asset management and by aligning them to innovation and growth sectors. At Regent's Place, we are actively targeting life sciences occupiers and at Broadgate, we will continue to focus on creative and technology sectors including FinTech as well as traditional finance. The improvements we have made at Broadgate to the leisure and retail element, including the UK's first Eataly are part of that approach. We are enhancing our space through new developments including 1 Broadgate and the delivery of Exchange Park, a 1.5 acre park in the middle of Broadgate and we have further opportunities at each of our campuses. At Canada Water, we are exploring a range of uses leveraging the flexible nature of our planning consent.
Progressing value accretive development
We committed to 882,000 sq ft of development in the year. Development is an important driver of value for British Land, generating GBP2bn of profit in offices in the last ten years. In addition, our campus developments have a positive impact on our places beyond the individual development, supporting rental growth across the campuses.
We have created further opportunities for development across our campuses and achieved planning consent for two new buildings in the year, 2-3 Finsbury Avenue (704,000 sq ft) at Broadgate and 5 Kingdom Street (438,000 sq ft) at Paddington Central. Having completed the drawdown of our 500-year headlease at Canada Water, we are delighted that we are now able to progress development of our fourth London campus. All of these developments will be net zero carbon and we are focused on delivering the most energy efficient space we can, supporting our ability to let space quicker and at higher rents.
Targeting the opportunities in Retail & Fulfilment
While the broader retail market remains challenging, we have adapted our priority to reflect the compelling opportunities we are now seeing in parts of the retail market, notably retail parks. Rather than "addressing the challenges in retail" as we set out in November, our focus now is on "targeting the opportunities in Retail & Fulfilment".
We have made GBP197m of retail park acquisitions (including our commitment to acquire the outstanding interest in HUT) and will look to make further value-led acquisitions in this space but will remain disciplined on returns. Similarly, we will look to acquire assets, primarily in London with urban logistics development potential and in addition have identified opportunities on our own portfolio, including Meadowhall and Teesside as well as on our campuses, which we will progress this year.
Shopping centres account for 34% of our retail portfolio, with open air covered schemes, including Bath and Ealing comprising 12% and traditional covered centres 22%. We are actively managing this space to drive occupancy and deliver more sustainable cash flows and once stabilised, will decide whether to continue to hold or exit these centres based on expected returns.
Active capital recycling
We will more actively crystallise value from mature and off strategy assets to invest into Campuses and Retail & Fulfilment, focusing on areas where we have a distinct competitive advantage, like development or asset management. We have sold GBP1.2bn of assets since April 2020, 6.2% ahead of book value. This included the sale of a 75% interest in three West End buildings to Allianz Real Estate for GBP401m representing a blended NIY of 4.3% and the offices element of Clarges, Mayfair for GBP177m. We expect to make further disposals this year.
We maintain good long term relationships with debt providers across the markets and have completed GBP1.6bn of financing in the year. This included extensions of RCFs of GBP1.1bn and arrangement of new loans in total of GBP460m involving 14 different lenders.
Full Year 2021 Operational performance
Offices leasing activity was understandably subdued with total lettings and renewals of 395,000 sq ft for the year, including 168,000 sq ft of deals over one year. In addition, we let 161,000 sq ft of space post period end, including 134,000 sq ft pre let to JLL at 1 Broadgate, bringing total leasing since 1 April 2020 to 556,000 sq ft. Office values were down 3.8%, but the movement was heavily weighted towards the first half and with a small uplift in developments. Occupancy remains high at 94%. With the roadmap out of lockdown, we are seeing more businesses from a range of sectors looking beyond Covid to secure space which enables them to perform at their best. The pre-let of 1 Broadgate to JLL is an excellent example of that and we are under offer and in negotiations on a further 474,000 sq ft of space.
In Retail, we maintained our focus on maximising occupancy, driving rent collection and delivering more sustainable cash flows. We proactively engaged with our customers across the portfolio, generating strong leasing volumes covering 1.7m sq ft, our highest ever, although pricing was lower at 19% vs previous passing rent. Encouragingly, our pipeline covers 583,000 sq ft of deals under offer. Valuations were down 24.7% but for Retail Parks, which account for more than half of the Retail portfolio, the pace of decline slowed in the second half, reflecting an increasing amount of capital targeting this sector.
Our people
This has been an exceptionally challenging year for our people. They have supported our customers consistently, often with additional caring responsibilities and without the ability to resolve issues through a face to face conversation. They have done a tremendous job with many remaining onsite to keep our assets open throughout the pandemic; I am hugely grateful for their commitment and delighted to see so many are returning to our office. The culture we have developed at British Land, and the depth and breadth of our people's expertise, is a key differentiator for us and positions us to deliver on the strategy we have set out.
I am pleased that Bhavesh Mistry joins us as Chief Financial Officer in July 2021 and to have welcomed Irvinder Goodhew and Loraine Woodhouse who joined the Board as non executive directors in the year. Rebecca Worthington and William Jackson stood down from the Board during the year and we would like to thank them for their valuable contributions. As announced on 25 May 2021, Mark Aedy will be joining the Board as a non executive director from 1 September 2021.
As a Board, we are committed to creating a diverse and inclusive workplace and were pleased that this year we ranked fourth in the Hampton-Alexander Review of FTSE 100 companies for women in leadership positions. We have met the recommendations of the Parker Review on ethnic diversity and will disclose our ethnicity pay gap in our annual report for the first time alongside our gender pay gap which we have disclosed since 2017.
Outlook & dividend
In October, we announced a new dividend policy, setting the dividend at 80% of Underlying EPS. This policy ensures dividends reflect the impact of development completions, acquisitions, disposals and trading conditions as they change over time and maximises future strategic and financial flexibility. We are pleased to announce a full year dividend of 15.04p with the payment of our final dividend in August 2021.
With a roadmap out of lockdown, confidence has strengthened and UK economic forecasts for calendar 2021 are being revised upwards. In offices, we expect demand for modern, high quality and sustainable space which helps businesses to perform at their best, to be firm but across the market, our central case is for rents to fall by up to 5% before recovering. With supply of the best space tight, we would expect our Campuses to outperform and are encouraged by the conversations we are having on our space, particularly on our development pipeline, as well as the pick up in activity we are seeing at Storey. We anticipate downward pressure on prime office yields as confidence improves and investors target the yield differential with other European cities. Retail occupational markets remain tough and we expect rents to decline further. However, we are seeing signs of stabilisation on retail parks and our central case is an additional rental decline of around 5%, with the potential for some yield compression given the increased capital targeting this space. Shopping centres, which have been more impacted by Covid-19, are likely to take a little longer to stabilise. We are encouraged by the strong rebound we are seeing on footfall and sales particularly on our retail parks, which are now in line with pre pandemic levels. Urban logistics in London should continue to see strong rental growth of 4-5% per annum benefitting from compelling underlying fundamentals.
Although it is early days, economic indicators are positive, and we are hopeful that we are starting to emerge from the pandemic. As we do so, British Land is well placed to benefit given our clear strategy, the diversity and expertise of our people across the business and our opportunities to drive growth and value. However, we are very mindful that the trajectory for this pandemic is highly uncertain with risk from future variants, so we take comfort from the strength of the balance sheet and our resilient performance over the last 12 months.
MARKET BACKDROP
Macro-economic context
The Covid-19 pandemic was the backdrop for the entire financial year. Three national lockdowns severely impacted economic activity, leading to the largest annual contraction in GDP on record at 9.9% for calendar year 2020. However, with good progress on the vaccination programme, the Government has set out a roadmap out of lockdown. In England, restrictions started to ease in March 2021 with further significant steps taken in April, including the opening of non-essential retail and outdoor hospitality and in May, indoor hospitality was permitted. As a result, growth is expected to pick up in the coming quarters with households having accumulated savings throughout the lockdown periods. Consumer confidence has strengthened, and the index is at its highest since the pandemic began. Unemployment has increased to 4.9%, only 0.9 percentage points higher than a year ago but reflecting continued support through the furlough scheme. However, the trajectory of the pandemic remains uncertain, with a clear risk to the recovery posed by variants.
London office market
After a subdued first half, investment activity rebounded strongly at the start of the second half, with nearly GBP5bn of transactions in the quarter to December 2020, representing nearly 60% of all deals in the period. Asia-Pacific and European investors have shown a particular readiness to look through the pandemic and invest in prime Central London real estate, reflecting its long term, secure income stream and attractive yields compared to other global cities. The reintroduction of travel restrictions during the third lockdown in January 2021 impacted activity in the final quarter but underlying fundamentals remain sound and interest rates low so we would expect activity to pick up as and when international travel can resume. Prime yields are c.4% and pricing has generally been in line with pre-pandemic levels.
Occupational markets have been severely disrupted by the pandemic, with activity significantly down as businesses focused on near term operational challenges and postponed decisions on new space. As a result, Central London take up in the year was 64% below the long term average although there has been an uptick in activity more recently. Prime, headline rents were broadly flat, albeit on low volumes but incentives have increased. The vacancy rate rose to 8.8% from 4.3% a year ago, but secondhand space accounts for more than 77% of supply with tenant led space an increasingly significant component. At the same time, Covid-19 has clearly accelerated trends in the way that companies use workspace, sharpening their focus on modern, high quality and sustainable space which supports more hybrid ways of working. As a result, there is encouraging interest on new space, particularly from businesses with requirements three to five years out and 34% of development under construction is currently pre-let.
Retail market
Investment activity was mixed in retail. Volumes were very low in shopping centres, where lot sizes are typically larger, and confidence weakened through the pandemic. Covid-19 has underlined the important role that well located, out of town retail can play in online fulfilment, strengthening investor appetite and driving volumes up 14% to GBP1.7bn in the period. Despite the national lockdowns, there is a strong buyer pool demonstrating renewed confidence in the sector. In particular, the market for assets which are small-to-medium in lot size, with secure, sustainable income streams, has seen more activity. Demand for standalone superstores was good throughout the period, again reflecting their security of income, and there remains good investor appetite for assets with alternative use potential.
Covid-19 has compounded existing structural challenges for retailers by accelerating the shift to online shopping, which now accounts for 33% of retail sales. As a result, more operators have entered CVA or administration, but stronger retailers are adapting their business models to be successful in this environment. Several operators, including Next and M&S have identified out of town retail parks as playing an important role. They are more affordable to retailers and can support an online strategy through click and collect, facilitating returns and ship from store. At the same time, shoppers are more confident visiting open-air locations they can access by car and where social distancing can be more easily managed so footfall and sales have generally recovered more quickly.
Logistics market
In logistics, investment volumes were very strong at nearly GBP12bn over the year with strong institutional demand reflecting the very positive fundamentals in this sector. In the occupational market, take up for the year was more than 50m sq ft, significantly ahead of the average of c.40m sq ft driven the growth of e-commerce, with e-commerce and online retailers accounting for over 60% of transactions. Vacancy rates are declining across the UK but in London, where space is most constrained and demand is very strong, vacancy is around 2%. Within the M25, supply is focused on Grade B and C space, which is less suitable for modern requirements and there is a lack of Grade A space.
BUSINESS REVIEW
Key metrics
Year ended 31 March 2020 2021
-----------
Portfolio valuation GBP11,157m GBP9,132m
Occupancy 96.6%(1) 94.1%(1)
Weighted average lease length 5.8 yrs 5.3 yrs
to first break
Total property return (6.4)% (7.0)%
+38 bps +33 bps
* Yield shift
* ERV growth (4.7)% (7.6)%
* Valuation movement (10.1)% (10.8)%
Lettings/renewals (sq ft)
over 1 year 1.6m 1.2m
Lettings/renewals over 1
year vs ERV (3.2)% (8.9)%
Gross investment activity GBP885m GBP1,690m
GBP118m GBP284m
* Acquisitions
GBP(382)m GBP(1,217)m
* Disposals
GBP385m GBP189m
* Capital investment
Net investment/(divestment) GBP121m GBP(744)m
------------------------------- ----------- ------------
On a proportionally consolidated basis including the Group's share of joint ventures and funds
(1) Where occupiers have entered CVA or administration but are still liable for rates, these are treated as occupied. If units in administration are treated as vacant, then the occupancy rate would reduce from 94.1% to 92.4%
Portfolio performance
At 31 March Valuation Valuation ERV movement Yield Total property
2021 GBPm movement % shift return
% bps %
---------- ------------- -------
Offices 6,032 (3.8) 0.7 +9 (0.8)
Retail 2,592 (24.7) (16.8) +81 (19.1)
Retail Parks 1,367 (18.6) (15.2) +45 (12.3)
Shopping Centres 896 (35.7) (20.3) +143 (29.2)
Residential 121 (10.6) na +37 (10.2)
Canada Water 387 (2.5) na na (1.0)
------------------- ---------- ---------- ------------- ------- ---------------
Total 9,132 (10.8) (7.6) +33 (7.0)
------------------- ---------- ---------- ------------- ------- ---------------
The value of the portfolio was down 10.8%. The value of the Offices portfolio was down 3.8%, weighted towards the first half with values down just 0.8% in the second half. Offices yields moved out in the first half but were flat in the second half. Pricing in the investment market was broadly in line with pre pandemic levels and supportive of values, although increased availability put pressure on lease incentives. Office developments again were up 0.9%.
Retail values were down 24.7%. Retail parks were down 18.6%, but the rate of decline slowed significantly in the second half, when values were down 6.5% compared to down 13.1% in the first half. Shopping centres were down 35.7% in the year. Both categories saw the rate of ERV decline slowing over the year, but there was a notable difference in yields, which for shopping centres increased by 143 bps weighted toward the second half, whilst the increase for retail parks was lower at 45 bps with the majority of the increase coming in the first half. Shopping centres have been acutely impacted by Covid-19 and investor sentiment here remains weak with little transactional evidence to underpin value, particularly for larger assets. Sentiment has improved in retail parks, where investment activity has picked up over the year.
The value of Canada Water fell 2.5%, down 6.0% in the first half reflecting our investment into the masterplan including a new marketing suite but up 3.4% in the second half on drawdown of the headlease following the successful clearing of the Judicial Review process.
Offices outperformed Central London Offices in the MSCI benchmark by 120 bps and were in line with the All Offices benchmark on a total returns basis. Retail underperformed the MSCI All Retail benchmark due to our exposure to shopping centres which significantly underperformed and where our weighting is higher than the index. As a result, and reflecting the continued strength of industrials, the portfolio underperformed the MSCI All Property total return index by 820 bps over the period.
Rent collection
Year to March 2021(1)
As at 18 May, we have collected 83% of rent due between 25 March 2020 and 24 March 2021. Of the remainder, 3% has been deferred, 5% has been forgiven, 2% relates to tenants that have subsequently moved into administration and the residual 7% is outstanding.
Rent due between 25 Offices Retail(2) Total
March 2020 and 24 March
2021
-------- ----------
Received 99% 71% 83%
Rent deferrals 1% 5% 3%
Rent forgiven - 9% 5%
Moved into administration - 3% 2%
Outstanding - 12% 7%
--------------------------- -------- ---------- --------
Total 100% 100% 100%
---------------------------
GBP225m GBP305m GBP530m
--------------------------- -------- ---------- --------
Collection of adjusted
billing(3) 100% 83% 90%
--------------------------- -------- ---------- --------
March 2021 Quarter(1)
As at 18 May, we have collected 84% of rent due between 25 March and 18 May. Of the remainder, 1% has been forgiven, 3% is being paid monthly and 12% is outstanding.
Rent due between 25 Offices Retail(2) Total
March and 18 May
-------- ----------
Received 98% 72% 84%
Rent deferrals - - -
Rent forgiven - 1% 1%
Customer paid monthly 1% 5% 3%
Outstanding 1% 22% 12%
------------------------ -------- ---------- -------
Total(4) 100% 100% 100%
------------------------
GBP45m GBP50m GBP95m
------------------------ -------- ---------- -------
Collection of adjusted
billing(3) 99% 76% 87%
------------------------ -------- ---------- -------
(1) As at 18 May
(2) Includes non-office customers located within our London campuses
(3) Total billed rents exclusive of rent deferrals, rent forgiven and tenants moved to monthly payments
Capital activity
From 1 April Offices Retail Residential Canada Water Total
2020
GBPm GBPm GBPm GBPm GBPm
------------------ -------- ------- ------------ ------------- --------
Purchases(1) - 284 - - 284
Sales(2) (643) (556) (18) - (1,217)
Development
Spend 98 3 2 26 129
Capital Spend 35 25 - - 60
------------------ -------- ------- ------------ ------------- --------
Net Investment (510) (244) (16) 26 (744)
------------------ -------- ------- ------------ ------------- --------
Gross Investment 776 868 20 26 1,690
------------------ -------- ------- ------------ ------------- --------
On a proportionally consolidated basis including the Group's share of joint ventures and funds
(1) Includes the purchase of Heritage House, Enfield which exchanged and completed post period end, as well as the commitment to acquire the remaining 22% interest of HUT at a GAV of GBP148m.
(2) Includes Beaumont Leys sale for GBP9m which exchanged in the year and completed post period end and St Anne's sales for GBP6m which exchanged in the year.
The total gross value of our investment activity since 1 April 2020 was GBP1,690m. We made GBP1.2bn of asset disposals, overall 6.2% ahead of book value on a blended NIY of 4.6%. In Offices, we sold GBP643m of assets 5.2% ahead of book value; the most significant was the sale of a 75% interest in three West End buildings to Allianz Real Estate for GBP401m representing a blended NIY of 4.3%. This included York House where our head office is based. We also sold the offices and retail element of our Clarges scheme in Mayfair for GBP177m at a NIY of 3.5%, and Yalding House for GBP42m at a NIY of 4.4%.
In Retail, we sold GBP556m of assets overall 7.0% ahead of book value. The most significant transactions were the sale of two Tesco superstores at our centres in Milton Keynes and Peterborough together totalling GBP149m and four standalone B&Q stores totalling GBP100m. We sold our Beaumont Leys shopping centre for GBP72m in two separate transactions and two small retail parks in Lincoln and Newmarket for a combined total of GBP21m. We sold our share of a portfolio of reversionary interests in Sainsbury's superstores for GBP102m and made further sales of standalone assets, including a Tesco in Brislington for GBP42m and a David Lloyd gym in Northwood for GBP51m.
In residential, we sold St Anne's, our affordable housing development at Regent's Place for GBP6m and are under offer on the final residential unit at Clarges.
We made several notable acquisitions in Retail. In March 2021 we acquired The A1 Retail Park in Biggleswade, Bedfordshire for GBP49m on a NIY of 8.5%. This is a strong trading, modern, well located scheme, easily accessible from the A1 and within the Oxford-Cambridge arc. We expect to deliver attractive financial returns off stabilised rents and reflecting our asset management expertise. We saw a similar opportunity in HUT (Hercules Unit Trust, which comprises ten prime retail parks) and in February we voted to extend its terms, effectively committing to the acquisition of the 22% interest we do not own at March 2021 valuation. HUT had a look-through blended NIY of over 8%, and acquisition of the remaining interest is anticipated for June 2021 at a gross asset value of GBP148m.
In May 2021, post period end, we completed on the acquisition of Heritage House a 216,000 sq ft urban logistics warehouse in Enfield for GBP87m. This asset is currently fully let to high quality occupiers Waitrose (for their North London customer fulfilment centre) and Crown Records Management and offers significant redevelopment potential given the opportunity to increase density.
Sustainability
We launched our 2030 Sustainability Strategy in June, and building on our progress over recent years, we achieved some important milestones as we work towards our 2030 ambitions. Recognising our strong performance, we achieved a GRESB 5* rating and our climate commitments have been validated by the Science Based Target initiative as being in line with a 1.5(O) C global warming trajectory.
Net Zero
We are committed to achieving a net zero carbon portfolio by 2030 and this year completed our first net zero carbon development at 100 Liverpool Street. We were able to retain half of the existing structure at this building and made low carbon choices throughout its construction so embodied carbon was low at 389 kg CO(2) e per sqm, below our 2030 target of 500 kg CO(2) e per sqm. We offset residual embodied carbon through accredited schemes from the Verified Carbon Standard, split equally between restoring 30,000 hectares of forest on the Tibetan plateau and a teak afforestation project in Mexico. We mirrored that with an additional commitment in the UK, supporting the planting of 150,000 trees in Cumbria and Scotland. As these forests mature, they are expected to offset an additional c.26,000 tonnes of CO(2) e, which may contribute to the offsetting of future development projects. We were also pleased to achieve BREEAM Outstanding certification and are on track for a WELL Gold Standard certification for this building.
We committed to two new developments in the year; in line with our strategy both developments will be net zero carbon. At 1 Broadgate, we will deliver our most energy efficient building yet with energy intensity in line with our stretching 2030 target and the UKGBC's 2030-35 efficiency target. It is a pioneer project for adopting the NABERS UK Design for Performance approach, which provides a methodology against which we can design and test our plans to ensure we stay on track to achieve our target energy efficiency. The building will have solar panels on the roof and use energy efficient lighting and lifts. It includes more than 47,000 sq ft of roof terraces and space for over 1,000 bikes. We are targeting a BREEAM Outstanding certification, WELL Platinum rating for wellbeing and WIRED Platinum rating for digital connectivity. Its embodied carbon is above our 2030 target at 901 kg CO(2) e per sqm mainly due to the design which includes terraces and a retail walkway, improving the experience for occupiers and visitors but resulting in a higher carbon footprint. However, we have a good track record of reducing embodied carbon against concept design. In addition, we are actively salvaging materials from the current building for re-use, including the existing granite façade which will be repurposed as flooring. At Norton Folgate, which comprises three buildings, embodied carbon is in line with our 2030 targets at 540kg CO(2) e per sqm. The office buildings will be all electric and include solar panels on the roof and we are on track for a BREEAM Excellent rating in offices and Very Good in retail. Its operational energy performance will also support progress towards our 2030 commitments with a base build efficiency in line with the UKGBC's 2020-2025 interim efficiency target. Overall, average embodied carbon in our development pipeline is 640 kg CO(2) e per sqm comparing well to our 2030 target of 500 kg CO(2) e per sqm.
On the standing portfolio, building on the strong progress we have made to improve the energy efficiency of our buildings, we are piloting net zero asset audits to identify further energy saving interventions, which if actioned, would enable us to achieve our target of a 25% energy intensity reduction by 2030. Six audits have completed to date. This will be supported by our Transition Vehicle, which was set up to finance the retrofitting of our standing portfolio and pay for certified offsets and is funded by an internal carbon levy of GBP60 per tonne of embodied carbon on new developments as well as a GBP5m annual float. One of the first projects to benefit has been an LED lighting upgrade at Regent's Place, saving c.100 tonnes of carbon pa.
Place Based approach
This year, our community activities focused on supporting the people in and around our places who have been most impacted by Covid-19. The strong local partnerships we built up over more than ten years of community engagement were instrumental in ensuring that we provided the appropriate support to those who needed it most. We funded a bespoke coaching programme through The Business School (formerly Cass) helping 25 local partners navigate the crisis. We supported local foodbanks including Lifeafterhummus at Regent's Place, where our site teams and some of our occupiers volunteered, the Euston Foodbank and the Nourish Community Foodbank, through Royal Victoria Place. Recognising the severe impact that prolonged school closures had on many disadvantaged children, we worked with the National Literacy Trust to provide them with books and activity packs, benefitting an estimated 3,600 families.
With retail and hospitality industries most acutely impacted by this year's lockdown, our efforts have focused on supporting people who became unemployed in those sectors as a result. In Edinburgh, we worked with long term partner Capital City Partnership on a rapid retail recovery plan that assisted over 80 businesses with recruitment and workforce needs including advice on funding and furlough, delivered training and information sessions to over 60 people and supported 30 jobseekers into employment. In London initiatives included four virtual work experience projects for over 200 young people, involving our customers and local partners. Overall, nearly 1,000 people received meaningful employment support, of which 364 moved into employment (compared to 508 last year), which is a fantastic achievement in the context of the pandemic and reflects how quickly we were able to mobilise support.
To inform our longer term programme, this year we commissioned independent research into the social and economic issues facing the diverse communities around 25 of our places. This work demonstrated that while there were shared themes, such as education and employment, there were also specific local challenges. In the coming year we will work with local partners to target the issues where we can make the greatest impact.
REAL ESTATE PERFORMANCE REVIEW
Campus focused London offices
Key metrics
As at 31 March 2020 2021
----------
Portfolio Valuation (BL share) GBP6,773m GBP6,032m
GBP5,518m GBP5,405m
* Of which campuses
Occupancy 97.3% 94.1%
Weighted average lease length 5.7 yrs 5.5 yrs
to first break
Total property return +5.7% (0.8)%
(4) bps +9 bps
* Yield shift
* ERV growth +3.2% +0.7%
* Valuation movement +2.3% (3.8)%
Total lettings/renewals (sq
ft) 946,000 395,000
Lettings/renewals (sq ft) over
1 year 733,000 168,000
Lettings/renewals over 1 year
vs ERV +11.3% +2.3%
-------------------------------- ---------- ----------
On a proportionally consolidated basis including the Group's share of joint ventures and funds
Campus operational and financial highlights
-- Office values down 3.8%, with the City down 4.6% and the West End down 3.2% -- 9 bps yield expansion, more pronounced in the West End (+13 bps); City (+2 bps)
-- ERVs marginally up overall; down 1.6% in the City; up 2.0% in the West End. The increase reflects valuation assumptions regarding future building refurbishments, excluding these, ERVs are down c.1% overall
-- Like-for-like income down 1.0%, driven by expiries ahead of refurbishment -- Leasing activity subdued at 168,000 sq ft (deals greater than one year) in the year
-- Total lettings and renewals at 395,000 sq ft; further 161,000 sq ft deals agreed post period end, including pre-let of 134,000 sq ft to JLL at 1 Broadgate, bringing total leasing since 1 April to 556,000 sq ft
-- Under offer and in negotiations on a further 474,000 sq ft -- Investment lettings and renewals over one year, 2.3% ahead of ERV -- 469,000 sq ft rent reviews agreed 9.7% ahead of passing rent adding GBP1.7m to rents -- Occupancy of 94.1% -- Rent collection high at 99% for FY21
Campus operational review
Campuses now account for nearly 90% of our offices portfolio. Located in some of London's most exciting neighbourhoods, they are well-connected, high quality environments which foster innovation and creativity. As the nature of demand changes, we are well placed to target successful businesses in innovative growth sectors as we have done successfully at Broadgate. One clear opportunity is in life sciences at Regent's Place, benefiting from its location in the Knowledge Quarter.
Occupancy remains high at 94.1%. We benefit from a diverse portfolio of high quality occupiers focused on financial, corporate and media & technology sectors. As a result, we have collected virtually all our rent for the full year (99%).
Leasing activity was inevitably impacted by Covid-19 as occupiers postponed decisions on new space to manage their Covid response. As a result, total leasing activity was 395,000 sq ft, including 168,000 sq ft of deals over one year (2.3% ahead of ERV). However, interest returned towards the end of the year, particularly on our development space, where occupiers with sizeable requirements, two to three years in the future are looking to secure space which enables them to perform at their best. Encouragingly, we let a further 161,000 sq ft post period end bringing total leasing since 1 April 2020 to 556,000 sq ft, we are under offer or in negotiations on a further 474,000 sq ft.
Broadgate
Total leasing activity in the year covered 229,000 sq ft, including 124,000 sq ft of long term deals. Post period end, we let a further 134,000 sq ft to JLL for their UK flagship office at 1 Broadgate. This deal represented nearly 30% of the offices space in the building and demonstrates JLL's continuing conviction in the importance of modern, high quality and sustainable space. Similarly, TP ICAP increased the size of their office at 135 Bishopsgate, signing for a further 20,000 sq ft and taking them to 143,000 sq ft. We signed deals with William Blair at Broadgate Tower (25,000) sq ft and Western Asset Management at 10 Exchange Square (12,000) sq ft, all ahead of ERV. We also let 17,000 sq ft of fitted space to Vorboss at Broadwalk House, completing in just four weeks despite the lockdown restrictions. Rent reviews were agreed on 257,000 sq ft, 4.2% ahead of passing rent including 146,000 sq ft to Mayer Brown at 201 Bishopsgate.
We continue to modernise our existing space with asset management initiatives across the campus, the largest of which is at 155 Bishopsgate (GBP35m our share). Other projects include the part refurbishment of Broadwalk House, which completed in the year, and we are on site with partial refurbishments of Exchange House and 10 Exchange Square. This investment ensures that existing as well as new space is well positioned to benefit as occupiers increasingly focus on the best space for their business. We are also on site at Exchange Park, which will deliver 1.5 acres of green space, including amphitheatre style seating and outside events space which will be open to all and a range of tree and plant life to support biodiversity. Works are due to complete at the end of the year.
A number of exciting new brands have opened at Broadgate, including the first UK Eataly, an Italian market concept including restaurants and bars over two floors and a terrace which opened at 135 Bishopsgate in April 2021. The new retail line up at 100 Liverpool Street is now open, including Gant, Watches of Switzerland, Tommy Hilfiger and Kiehls and the UK's first John Reed Gym, with live DJs is due to open in the summer. Storey is now open at 100 Liverpool Street, offering 48,000 sq ft of flexible workspace, including Storey Club following its success at Paddington Central.
The campus saw a valuation fall of 3.6% reflecting mild yield expansion of 2bps (all in the first half) and an overall ERV decline of 1.3%, comprising a fall of 1.5% in the first half, offset by growth in the second half. Occupancy is 92.0%, which is lower than September 2020, with the inclusion of 100 Liverpool Street which reached practical completion in the year.
Regent's Place
At Regent's Place, technology business Anaplan signed for 13,000 sq ft at 338 Euston Road. We agreed 59,000 sq ft of deals and a further 40,000 sq ft of rent reviews, 21% ahead of previous passing rent.
Aligning our campuses towards innovative growth sectors and businesses is a key area of focus. At Regent's Place we see a clear opportunity in life sciences, reflecting its location within London's Knowledge Quarter a unique part of London between Kings Cross, Euston Road and Bloomsbury which is home to over 100 academic, cultural, research, scientific and media organisations. We are starting to see early signs of interest and are under offer on 20,000 sq ft to two occupiers in this sector.
The campus was down 3.9% in value, but benefited from an uplift at 1 Triton Square, due to profit release given the proximity to practical completion. Yield expansion was 17 bps overall, but weighted towards the first half, partially offset by ERV growth of 4.2% with a number of buildings now being valued on a refurbishment basis. Occupancy is 96.1%.
Paddington Central
At Paddington, cyber security software company Trend Micro extended their 7,000 sq ft lease at 2 Kingdom Street by a further two years. We have agreed rent reviews covering 109,000 sq ft, 17% ahead of passing rent.
Pergola, the outdoor dining pop up on the site of 5 Kingdom Street has performed exceptionally well on re-opening and The Cheese Barge, the latest addition to our food & beverage offer opened in May.
This year, we were pleased to secure planning permission for an extensive upgrade to the public realm which will transform the landscaping and revitalise the amphitheatre with work due to commence in the Autumn. Working with our occupiers and local partners, we launched a community garden in April 2021 for local schools and community groups and we are supporting The Paddington Partnership to deliver a wayfinding narrative trail around the area, inspired by community stories and art.
The campus saw a valuation fall of 2.4%, reflecting yield expansion of 7 bps (all in the first half) and ERV decline of 0.3%. Values benefited from progress made on planning at 5 Kingdom Street. Occupancy is 98.4%.
Storey: our flexible workspace brand
Storey our flexible workspace offer, is now operational across 348,000 sq ft. This year, we launched a further 48,000 sq ft of Storey space at 100 Liverpool Street which was 37% let or under offer at launch to customers including ITAU BBA International and Aperion Investment Group. 13,000 sq ft has been allocated to Storey Club, which opened on 17 May 2021, providing ad hoc meeting and events space, as well as lounge and café areas.
We have been encouraged by the increase in activity in recent months, with viewings and enquiries returning to pre pandemic levels. Leasing activity covered 61,000 sq ft for the year with 14,000 sq ft let since 1 April 2021. We have seen good demand from larger overseas corporates looking for a main UK office, generally taking larger spaces on longer terms. We have also seen several of our existing customers scale up, including recruitment company Storm 2, BAI Communications and Levin Group. We are under offer on a further 48,000 sq ft and occupancy at stabilised buildings (let and under offer) is now 79%.
We are still achieving rents at a premium of more than 30% to a traditional lease and average lease length is 26 months.
Storey has proved resilient, with rent collection for the year at 100% reflecting the strength of its customer base. The majority of occupiers are UK / European headquarters, scale up businesses or large multinationals. Only five customers deferred rents in the first half and no further deferrals were required in the second half.
Retail
Key metrics
As at 31 March 2020 2021
----------
Portfolio valuation (BL share) GBP3,873m GBP2,592m
GBP1,839m GBP1,367m
* Of which Retail Parks
GBP1,510m GBP896m
* Of which Shopping Centres
Occupancy(1) 95.7% 94.1%
Weighted average lease length 5.9 yrs 5.1 yrs
to first break
Total property return (22.6)% (19.1)%
+101 bps +81 bps
* Yield shift
* ERV growth (11.7)% (16.8)%
* Valuation movement (26.1)% (24.7)%
Total lettings/renewals (sq ft) 1,361,000 1,699,000
Lettings/renewals (sq ft) over
1 year 865,000 962,000
Lettings/renewals over 1 year
vs ERV (20.9)% (11.5)%
--------------------------------------- ---------- ----------
On a proportionally consolidated basis including the Group's share of joint ventures and funds
(1) Where occupiers have entered CVA or administration but are still liable for rates, these are treated as occupied. If units in administration are treated as vacant, then the occupancy rate for Retail would reduce from 94.1% to 90.6%
Retail operational and financial highlights
-- Total Retail portfolio value down 24.7% reflecting the ongoing impact of Covid-19 and higher vacancies due to CVA and administrations
-- Yield expansion of 81bps overall; +143bps for shopping centres, weighted to the second half and +45bps for retail parks, weighted to the first half
-- ERVs down 16.8%; down 20.3% for shopping centres and down 15.2% for retail parks, weighted to the first half
-- Like-for-like income down 17.4% including the impact of CVAs and administrations
-- Leasing activity ahead of last year with 962,000 sq ft deals greater than one year; 19% below passing rent
-- Total lettings and renewals at 1.7m sq ft
-- Strong pipeline with 583,000 sq ft under offer, 5.8% below March 2021 ERV and 29% below passing rent
-- Further 524,000 sq ft of rent reviews agreed 2.3% ahead of passing rent -- Good occupancy levels at 94.1%
-- Footfall since re-opening 88% of same period in 2019; like-for-like sales 104% of the same period in 2019 (both excluding F&B)
-- 71% of FY21 rent collected; 72% of March 2021 quarter rent now collected
Performance review
Operational performance
Our priority has been helping our occupiers to trade safely when permitted, keeping our centres full with the right mix of retailers who are additive to our places and maximising rent collection. We are pragmatic and proactive in our approach, working with successful, financially strong retailers to ensure leasing structures are appropriate and deliver sustainable cash flows. Often this has meant accepting rents which are below previous passing rents, but are more appropriate in the current environment and sustainable longer term.
Despite a challenging occupational market, overall leasing volumes were ahead of last year, with deals over one year accounting for 79% of activity (by rent) but were 11.5% below ERV and 19% below previous passing rent. We have a strong pipeline of deals, with 583,000 sq ft under offer, of which 348,000 sq ft is at our retail parks.
Retail parks, which account for 53% of our Retail assets, have proved more resilient throughout the pandemic. They are well connected and affordable to retailers meaning they play an important role in a successful online retail strategy facilitating click and collect, returns and ship from store. We have seen this trend accelerate as rates of online shopping have increased with shoppers more confident visiting open-air locations they can access easily by car and where social distancing can be more effectively managed. Shopping centres account for 34% of our retail portfolio, with open air covered schemes comprising 12% and traditional covered centres 22%. Many of our open air schemes were deliberately acquired for their development potential, including Ealing Broadway where we have the potential to deliver a fifth London Campus.
More retailers are assessing their physical footprint to ensure they have the right space for their business model. Examples include Home Bargains, who have taken space at two of our retail parks, the Kingston Centre, Milton Keynes (20,000 sq ft) and Mayflower, Basildon (15,000 sq ft) and Aldi, who have also taken space at the Kingston Centre (23,300) sq ft and Crown Point retail park in Denton (20,000 sq ft). We negotiated five renewals and one new letting with Sports Direct at our retail parks together totalling 87,800 sq ft and four renewals with Next totalling 56,600 sq ft. We were delighted that Amazon Fresh chose our Ealing Broadway centre for their first physical store outside North America. We also agreed 53 rent reviews, delivering a 2.3% increase in rent on average.
Footfall and sales have recovered strongly since reopening, as set out below:
FY21 performance Performance
since reopening
(1,2)
% of FY20 Benchmark outperformance(3,4,5) % same period
in 2019
---------- -----------------
Footfall
* Portfolio 60.3% +21.3ppt 88.3%
* Retail parks 69.3% +30.3ppt 99.8%
Retailer sales
* Portfolio 56.8% +14.6ppt 104.1%
* Retail parks 63.9% +21.7ppt 109.2%
---------- -------------------------------- -----------------
1 Excludes F&B and excludes assets for periods when non-essential retail was required to close
2 The period 11 April 2021 - 16 May 2021
3 Footfall benchmark: ShopperTrak UK National Footfall Index
4 Retailer sales benchmark: BDO High Street Index
5 Footfall benchmark average includes year on two-year for the month of March 2021, retailer sales benchmark average excludes the last week of March 2021 due lockdown annualising
Inevitably, Covid-19 related restrictions affected the cash flow of many of our occupiers and hence their ability to pay rent. We have collected 71% of rent for FY21 and 72% of rent for the March 2021 quarter (see Supplementary Tables for full disclosure).
We have made good progress on rent collection as a result of continuous engagement with our customers across the year. For those customers most affected, primarily smaller independent businesses, we have agreed pragmatic and equitable solutions for the periods of closure which include monthly payments and concessions. We have also engaged on a case by case basis with larger customers facing cash flow difficulties, often combining our discussions on the payment of legacy rents with those on lease extensions and leasing new space.
CVAs and administrations
Over the year, there has been an increase in CVAs and administrations. We have seen 49 occupiers enter into CVAs or Administration accounting for 205 units. Of these units, 66 have closed, 110 have seen reduced rents and 29 were unaffected. Overall, this has resulted in a GBP25.3m reduction in annualised rents. DEVELOPMENT
At 31 March 2021 Sq ft Current Cost to ERV ERV
Value complete Let
'000 GBPm GBPm GBPm GBPm
-------------------- ------ -------- ---------- ----- ------
Recently completed 520 403 - 19.4 15.5
-------------------- ------ -------- ---------- ----- ------
Committed 1,247 657 488 65.1 26.9
-------------------- ------ -------- ---------- ----- ------
Near term 1,156 191 806 53.7 -
-------------------- ------ -------- ---------- ----- ------
Medium term 6,847
-------------------- ------ -------- ---------- ----- ------
On a proportionally consolidated basis including the Group's share of joint ventures and funds (except area which is shown at 100%)
Portfolio
Progressing value accretive development is one of our four priorities and we have made excellent progress in the year. Recently completed and committed developments now total 1.8m sq ft and are 50% pre let, securing GBP42m of future rent. Total development exposure is now 5.3% of portfolio gross asset value with speculative exposure at 6.6% (which is based on ERV), within our internal risk parameters of 12.5%.
The majority of space in our development pipeline is either income producing or held at low cost, enhancing our flexibility, so we have attractive options we can progress as and when appropriate. If we were to commit to our near term pipeline, our speculative exposure would increase to 10.7% of portfolio ERV. We continue to create options for development across our portfolio with 1.7m sq ft of detailed planning permissions achieved in the year and a further 1.2m sq ft under consideration; we also delivered over 8m sq ft of outline planning permissions (based on gross external area, primarily at Canada Water).
The construction market has been impacted by lockdown so cost inflation remains low at c.0.5%. The FY20/21 pipeline has shifted outwards, with reduced competition driving down prices, but with some upward pressure likely given reduced labour availability, constrained logistics and fluctuating material costs as a result of Covid-19 and Brexit. Our Brexit risks were tightly controlled with limited effects felt from the transition. Overall, inflation is expected to be flat in the current year, increasing steadily through 2022 and 2023 to recent norms of 3%.
Campus developments: further enhancing the mix of uses
Development is one of the key ways in which we realise the potential of our Campuses. Through development and comprehensive refurbishments, we are providing modern, sustainable space, built around the evolving needs of our customers. More than ever, the ability to deliver this into environments which are safe and engaging will be an advantage, generating a lasting positive impact beyond the individual buildings.
Completed developments
We reached practical completion at 100 Liverpool Street (520,000 sq ft) in October 2020 and in March 2021, 100 Liverpool Street became our first net zero carbon development, when we offset the residual carbon associated with this building. The building is 81% let, rising to 89% including 48,000 sq ft allocated to Storey which launched in February 2021. Occupiers at the building include Peel Hunt, SMBC Europe and Milbank Tweed. 68% of the retail space is let or under offer and with let space now open in line with Government regulations.
Committed developments
Our committed pipeline now stands at 1.2m sq ft, comprising 1 Triton Square at Regent's Place, Norton Folgate and 1 Broadgate. 1 Broadgate (546,000 sq ft) will be one of the most energy efficient buildings we have delivered and aligns with JLL's net zero carbon ambitions. Demolition of the existing buildings commenced in May 2021. Norton Folgate is a 336,000 sq ft scheme, comprising 302,000 sq ft of office space, alongside retail and leisure space creating a mixed use development which is in keeping with the historic fabric of the area. Benefitting from its location in Shoreditch, close to Shoreditch High Street and Spitalfields market, this building is ideally suited to technology and creative firms and we expect to generate higher rents closer to completion when the buildings can be viewed.
At 1 Triton Square, Regent's Place, we are fully pre-let on the office space to Dentsu Aegis Network on a 20-year lease. Progress at this development has been slower as a result of social distancing requirements but we reached practical completion after the year end in May 2021.
Near Term pipeline
Our near term pipeline now covers 1.2m sq ft with the first phase of Canada Water, comprising three buildings, accounting for half of that. Building A1 at Canada Water provides a mix of office, retail and residential space over 272,000 sq ft. A2 is an office-led building, including a new leisure centre built for the London Borough of Southwark, altogether covering 248,000 sq ft. K1 is a solely residential building, providing 79 affordable homes. We are targeting BREEAM Outstanding on all the office space and Home Quality Mark Beta 3* on the residential. Enabling works have commenced and we expect to place the main build contracts in the coming months.
At 5 Kingdom Street, Paddington Central, our planning application to increase our consented scheme from 206,000 sq ft to 438,000 sq ft was approved by the Mayor in October 2020. Phase 2 of our mixed use development at Aldgate accounts for the remaining 136,000 sq ft. This phase will deliver 159 build to rent homes with 19,000 sq ft of office space as well as retail accommodation. We have planning consent for the building and will be in a position to start on site in calendar Q4 2021.
Medium Term Pipeline
The most significant campus scheme in our medium term pipeline, outside Canada Water, is 2-3 Finsbury Avenue at Broadgate where we received consent for our revised scheme covering 704,000 sq ft in the year. Our new plans add more than 130,000 sq ft to the previous consent. This building will target the BREEAM 'Outstanding' certification in construction. The building is currently generating an income through short term, more flexible lettings, including 40,000 sq ft allocated to Storey. The further phases at Canada Water cover 4.5m sq ft of mixed use space.
Retail & Fulfilment development: enhancing and repositioning our portfolio for the future
We are unlikely to undertake standalone retail development in the near term but we are actively identifying opportunities for the development of urban logistics space on our portfolio and potential acquisitions. In addition, we have a number of mixed use opportunities at our retail centres which align well to our strategy.
Opportunities to add uses
At Ealing Broadway, we completed the successful refurbishment of 54 The Broadway, our first office scheme in Ealing in December 2020 which is fully let to the Department of Work and Pensions. We are working up plans for a comprehensive refurbishment of International House, which is returned to us in mid 2022, as well as an exciting redevelopment of 10-40 The Broadway, an office led mixed use scheme covering 303,000 sq ft that will sit adjacent to our Ealing Broadway shopping centre outside the new Crossrail entrance. At Eden Walk, Kingston (jointly owned with USS) our consented mixed use development plans include 380 new homes, alongside shops, restaurants and 35,000 sq ft of flexible office space.
We are scoping the broader retail portfolio for alternative and additional use opportunities. Following an initial assessment, we have identified 2.4m sq ft of opportunities with the most significant being logistics on the surrounding land at Meadowhall and Teesside (together c. 1m sq ft). At Meadowhall, we have existing outline planning permission on a development plot separate from the shopping centre and would expect to submit a reserved matters application this year. At Teesside, we have a similar opportunity on land outside the retail park and are working up our plans for a logistics use. We made our first logistics acquisition of a warehouse in Enfield covering 216,000 sq ft in April 2021. Located inside the M25, this site is a prime urban logistics site and the coverage is low at c.40% presenting a clear opportunity to increase densification by expanding the footprint as well as through multi-level development. The planning environment in Enfield is supportive for intensification of uses, particularly logistics. In the meantime, the site is fully let and is highly reversionary.
Canada Water: 53 acre masterplan for a new urban centre in Central London
Highlights
-- Planning secured on Canada Water Masterplan, a 5m sq ft mixed use scheme in May 2020 -- Drawdown of 500 year headlease with Southwark Council completed in December 2020 -- Signed first pre let with higher education enterprise, TEDI-London for their new campus -- Targeting annual development returns in the low teens -- Advancing plans to bring in partners to support the delivering of the wider scheme
-- Net valuation movement down 2.5% but with an uplift of 3.4% in the second half, reflecting headlease drawdown
At Canada Water, we are working with the London Borough of Southwark to deliver a 5m sq ft mixed use scheme, including around 3,000 new homes alongside a mix of commercial, retail and community space. The site is located on the Jubilee line and the London Overground, making it easily accessible from London Bridge, the West End, Canary Wharf, Shoreditch and South West London. It will also be an indirect beneficiary of Crossrail, which will free up capacity on the Jubilee Line between Canary Wharf and Bond Street. It covers 53 acres including the dock area, providing 48 acres of developable land.
In May 2020 we secured outline planning permission on the entire 5m sq ft masterplan, including detailed consent on the first three buildings, covering 582,000 sq ft. In December, having successfully overcome a Judicial Review challenge, we completed the drawdown of the 500-year headlease with Southwark Council, effectively combining the ownership of all our assets at Canada Water into a single 500-year headlease with Southwark Council as the Lessor. The headlease allows for the comprehensive redevelopment and investment in the site, with Southwark Council owning an initial 20% interest and with the ability to participate in the development, up to a maximum of 20% with returns pro-rated accordingly.
This is a ten to twelve year programme for which we will target annual development returns in the low teens. In parallel, we are advancing plans to bring in partners to support the delivery of the wider scheme and have had some encouraging conversations. We have commenced enabling works for the first phase and expect to place the main build contract in the coming months.
The first three buildings will deliver 265 homes, of which over 35% will be affordable (split 70% social rent and 30% intermediate housing), as well as commercial space, public spaces and improved pedestrian connections. As part of our commitment to the early delivery of affordable housing, we will deliver building K1 which is solely residential, comprising 79 homes (all affordable) in Phase 1. The other buildings in that phase are A1, which provides 186 homes (including eight affordable) alongside offices and a small amount of retail space, together covering 272,000 sq ft and A2, which is offices-led but includes a 56,000 sq ft leisure centre within the 248,000 sq ft building.
We are exploring a range of alternative uses, including healthcare, life sciences, senior living and higher education, and we are pleased that, higher education provider, TEDI-London a global partnership with King's College London, Arizona State University and UNSW Sydney has chosen Canada Water as the location for its new campus. TEDI-London has taken an initial 13,000 sq ft for their modular campus with the option to expand to 40,000 sq ft which we will deliver in phases as the organisation grows. Longer term, we plan to work with TEDI to deliver a permanent home for around 1,000 students within the Canada Water masterplan. These plans align with our wider strategy to focus the business on growing sectors and demonstrates strong progress against our priority to realise the potential of our campuses. Our planning permission at Canada Water is deliberately flexible so as we move forward, we can take account of changes in demand by amending our offices, residential and retail allocations as appropriate.
Sustainability
The Canada Water Masterplan will be one of the most genuinely sustainable regeneration projects in the UK. Sustainability is engrained in all aspects of the masterplan, with a key focus on delivering net-zero carbon, promoting wellbeing and significantly increasing biodiversity.
We are reducing embodied carbon in construction and minimising carbon emissions during operation through efficient design, the use of low carbon materials (such as high recycled content in steel and 'earth-friendly' concrete) and new building technologies. We are also adopting NABERS UK Design for Performance modelling to design to the highest efficiency and performance, whilst also allowing for future adaptation to suit emerging green technologies. K1 will be one of our first all-electric buildings.
All buildings will target BREEAM Certification (Commercial Outstanding, Retail Excellent, Residential Home Quality Mark) and as part of our holistic approach to sustainability, the Canada Water Masterplan will also achieve BREEAM Communities Certification.
Wellbeing principles are at the heart of the Canada Water Masterplan and we aim to create an environment, accessible to all, that links people and places. We will enhance the individual experience through the use of smart technologies, by improving local air quality and providing access to nature. We will increase biodiversity through the enhancement of existing green spaces and creation of 12 acres of open space, including a 3.5 acre park, connected to 130 acres of parks, woodlands and water.
Working with local communities
We are excited to be making progress at Canada Water and we recognise that developing such a large part of London carries real responsibilities to the community that lives, works and studies in and around the area. We worked with Southwark Council to develop a Social Regeneration Charter to capture local residents' priorities for the development, which commits us to working in partnership to deliver on these. This approach is now a model for development across the Borough.
This year we have worked closely with our community partners to support those most impacted by Covid-19. We provided increased funding to grassroots organisations and local charities such as Time & Talents, who ran a foodbank close to Canada Water and five of our local partners now receive professional coaching support via The Business School to support them and their organisations to emerge from this crisis. Our partnership with Construction Youth Trust continues to grow; despite the restrictions, they delivered meaningful employer engagement to over 800 students at schools local to Canada Water. We are continuing to work with Tree Shepherd to provide low-cost workspace with business support and advice to help local entrepreneurs get their businesses off the ground. The project aims to become self-sustaining and create a network of local entrepreneurs to inform the ongoing programme and maximise outreach within the local community. We have also signed up to the Southwark Stands Together pledge which sets out five commitments to tackle racism and inequality in the borough of Southwark.
Valuation
The net valuation movement for Canada Water over the year showed a fall of 2.5% to GBP387m with values down 6.0% in the first half, reflecting continued investment to support the delivery of the Masterplan, such as a new marketing suite. We saw an uplift of 3.4% in the second half reflecting the drawdown of the headlease.
FINANCE REVIEW
Year ended 31 March 2020 2021 Underlying Profit(1,2) GBP306m GBP201m Underling earning per share(1,2) 32.7p 18.8p IFRS (loss) after tax GBP(1,114)m GBP(1,083)m Dividend per share 15.97p 15.04p Total accounting return(1,3) (11.0%) (15.1%) ------------------------------ ------------ ------------ EPRA Net Tangible Assets per share(1,2) 773p 648p IFRS net assets GBP7,147m GBP5,983m ------------------------------ ------------ ------------ LTV (1,4,5) 34.0% 32.0% Weighted average interest rate (5) 2.5% 2.9% ------------------------------ ------------ ------------
(1) See Glossary on website for definitions. (2) See Table B within supplementary disclosure for reconciliations to IFRS metrics. (3) See Note 2 within condensed 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 has been significantly impacted by Covid-19 and an already challenged retail environment. Underlying Profit is down 34.3% at GBP201m, while underlying earnings per share (EPS) is down 42.5% at 18.8p.
Underlying Profit
GBPm
Underlying Profit for the year ended 31 March 2020 306
Like-for-like rent (incl. CVA and administrations) (43)
Provisions for outstanding rents, service charge and deferred rents(1) (59)
Provisions for tenant incentives 2
Finance cost reductions 8
Net divestment (21)
Developments 10
Fees & other income (2)
Underlying Profit for the year ended 31 March 2021 201
(1) The year on year impact of provisions for outstanding rents, service charge and deferred rents was GBP59m. This reflects the difference between the GBP65m charge to the income statement in the year to 31 March 2021 (as disclosed in Note 10 of condensed financial statements) and the GBP6m charge in the year to 31 March 2020.
Underlying Profit decreased by GBP105m, primarily due to provisions for outstanding rent, service charge and rent deferrals made in light of Covid-19, as well as a reduction in like-for-like rents and the impact of disposals made during the period. Lower market interest rates alongside our hedging approach and financing activity increased Underlying Profit by GBP8m.
Net divestment decreased earnings by GBP21m in the year. Proceeds from sales have and will be deployed into our value accretive development programme. The recently completed and committed schemes are expected to generate earnings accretion of GBP50m, of which 50% is already pre-let.
Since April 2020, we have completed GBP1.2bn of asset disposals, overall 6.2% ahead of book value. This included GBP556m of retail disposals, primarily the sale of three Tesco superstores totalling GBP191m and four standalone B&Q stores totalling GBP100m. We sold our Beaumont Leys shopping centre for GBP72m in two separate transactions and two retail parks in Lincoln and Newmarket for a combined total of GBP21m. We sold our share of a portfolio of reversionary interests in Sainsbury's superstores for GBP102m and made further sales of standalone retail assets, including a Tesco in Brislington for GBP42m and a David Lloyd gym in Northwood for GBP51m.
We completed GBP643m of office disposals since November; the most significant transaction was the sale of a 75% interest in a portfolio of three buildings in the West End to Allianz Real Estate for GBP401m representing a blended NIY of 4.3%. We also sold the offices and retail element of our Clarges scheme in Mayfair for GBP177m at a NIY of 3.5% and Yalding House for GBP42m at a NIY of 4.4%.
Overall valuations have reduced by 10.8% on a proportionally consolidated basis resulting in an overall EPRA NTA per share decline of 16.3%.
Financing activity of GBP1.6bn included the extension by a further year of GBP1.1bn unsecured bank facilities: GBP650m RCFs were extended to 2025 and in March 2021 our GBP450m ESG-linked RCF was extended to 2026. New loans of GBP460m were arranged, for British Land, HUT and our new Joint Venture with Allianz.
LTV has decreased by 200bps during the year to 32.0%. The primary driver of the movement was asset disposals which reduced LTV by 780bps. This was partially offset by valuation declines adding 420bps and development spend adding 140bps.
As a result, our financial position remains strong with GBP1.8bn of undrawn facilities and cash and no requirement to refinance until early 2025. We retain significant headroom to our debt covenants, meaning the Group could withstand a further fall in asset values across the portfolio of 46% prior to taking any mitigating actions.
Fitch Ratings as part of the annual review in August 2020 affirmed all our credit ratings, including the senior unsecured rating at 'A', with a Stable Outlook.
Presentation of financial information
The Group financial statements are prepared under IFRS where the Group's interests in joint ventures and funds are shown as a single line item on the income statement and balance sheet and all subsidiaries are consolidated at 100%.
Management considers the business principally on a proportionally consolidated basis when setting the strategy, determining annual priorities, making investment and financing decisions and reviewing performance. This includes the Group's share of joint ventures and funds on a line-by-line basis and excludes non-controlling interests in the Group's subsidiaries. The financial key performance indicators are also presented on this basis.
A summary income statement and summary balance sheet which reconcile the Group income statement and balance sheet to British Land's interests on a proportionally consolidated basis are included in Table A within the supplementary disclosures.
Management monitors Underlying Profit as this more accurately reflects the underlying recurring performance of our core property rental activity, as opposed to IFRS metrics which include the non-cash valuation movement on the property portfolio. It is based on the Best Practices Recommendations of the European Public Real Estate Association (EPRA) which are widely used alternate metrics to their IFRS equivalents.
This year, the Group has adopted the new EPRA NAV metrics; Net Reinvestment Value (NRV), Net Tangible Assets (NTA) and Net Disposal Value (NDV). We are reporting NTA in place of the previous EPRA net asset value (NAV). Similarly, NDV replaces the previous EPRA triple net asset value measure (NNNAV). The total accounting return is now calculated based on EPRA NTA. Definitions of these metrics are shown in Table B of the supplementary disclosures.
Management monitors EPRA NTA as this provides a transparent and consistent basis to enable comparison between European property companies. Linked to this, the use of Total Accounting Return allows management to monitor return to shareholders based on movements in a consistently applied metric, being EPRA NTA, and dividends paid.
Loan to value (proportionally consolidated) is also monitored by management as a key measure of the level of debt employed by the Group to meet its strategic objectives, along with a measurement of risk. It also allows comparison to other property companies who similarly monitor and report this measure.
Income statement
1. Underlying Profit
Underlying Profit is the measure that we use to assess income performance. This is presented below on a proportionally consolidated basis. No company adjustments have been made in the current or prior year and therefore this is the same as the pre-tax EPRA earnings measure which includes a number of adjustments to the IFRS reported loss after tax.
Section 2020 2021
GBPm GBPm
----------------------------------------- -------- --------- ---------
Gross rental income 560 508
Property operating expenses (82) (141)
----------------------------------------- -------- --------- ---------
Net rental income 1.2 478 367
Net fees and other income 13 11
Administrative expenses 1.3 (74) (74)
Net financing costs 1.4 (111) (103)
----------------------------------------- -------- --------- ---------
Underlying Profit 306 201
----------------------------------------- -------- --------- ---------
Underlying tax charge - (26)
Non-controlling interests in Underlying
Profit 12 3
EPRA adjustments(1) (1,432) (1,261)
----------------------------------------- -------- --------- ---------
IFRS (loss) after tax 2 (1,114) (1,083)
----------------------------------------- -------- --------- ---------
Underlying EPS 1.1 32.7p 18.8p
IFRS basic EPS 2 (110.0)p (111.2)p
Dividend per share 3 15.97p 15.04p
----------------------------------------- -------- --------- ---------
(1) EPRA adjustments consist of investment and development property revaluations, gains/losses on investment and trading property disposals, changes in the fair value of financial instruments and associated close out costs. These items are presented in the 'capital and other' column of the consolidated income statement.
1.1 Underlying EPS
Underlying EPS is 18.8p, down 42.5%. This reflects the Underlying Profit decline of 34.3% and an underlying tax charge of GBP26m, partially offset by the impact of prior year share buybacks. The tax charge follows the temporary suspension of the dividend which resulted in a shortfall in our REIT property income distributions, creating a corporation tax liability. With the reinstatement of the dividend, we do not expect this to repeat in future years.
1.2 Net rental income
GBPm
Net rental income for the year ended 31 March 2020 478
Net divestment (25)
Developments 14
Like-for-like rent (incl. CVA and administrations) (43)
Provisions for outstanding rents and service charge(1) (53)
Provisions for deferred rents (6)
Provisions for tenant incentives 2
---------------------------------------------------------- -----
Net rental income for the year ended 31 March 2021 367
---------------------------------------------------------- -----
(1) The year on year impact of provisions for outstanding rents and service charge was GBP53m. This reflects the difference between the GBP59m charge to the income statement in the year to 31 March 2021 (as disclosed in Note 10 of condensed financial statements) and the GBP6m charge in the year to 31 March 2020.
Net sales of income producing assets over the last 24 months reduced net rents by GBP25m in the year. Proceeds from sales are being reinvested in the committed development pipeline which is expected to deliver GBP85m in rents in future years and including the recent commitment of Norton Folgate and 1 Broadgate, is already 50% pre-let.
Retail like-for-like net rental decline is 17.4% in the year. This reflects the impact of CVAs and administrations, declining ERVs, longer void periods and reduced car park income over the closure period. The offices portfolio saw a like-for-like decline of 1.0%, which was primarily driven by expiries at Exchange House and 155 Bishopsgate ahead of refurbishment. Office developments contributed GBP14m of new rental income, with 135 Bishopsgate and 100 Liverpool Street completing earlier in the year.
In light of Covid-19, provisions made against trade debtors increased by GBP53m compared to the prior year. In the March 2020 quarter we deferred rent of GBP10m which is held as accrued income, and an impairment of GBP6m was made against this to account for risk to recoverability over the next three quarters
We take a systematic approach to provisioning for rent receivables, based on both aging profile and credit quality. We are provided at 66% on rent receivables and service charge based on balances outstanding at year end. When taking into account post year end rent receipts of GBP24m this increases to 85% for trade debtors. Further detail on balances, provisions and the charge in FY21 made against them are set out in the table below:
Receivables Debtor balance Provision balance % provided FY 21
for impact
------------------- --------------- ------------------ ---------- -------
Less than 90 days GBP45m GBP14m 31% GBP14m
90 - 182 days GBP20m GBP14m 70% GBP14m
182 - 365 days GBP31m GBP31m 100% GBP31m
More than 365 days GBP13m GBP13m 100% -
------------------- --------------- ------------------ ---------- -------
Trade debtors GBP109m GBP72m 66% GBP59m
------------------- --------------- ------------------ ---------- -------
Deferred rents GBP10m GBP6m 60% GBP6m
------------------- --------------- ------------------ ---------- -------
Total GBP119m GBP78m 66% GBP65m
------------------- --------------- ------------------ ---------- -------
The above balances are presented on a proportionally consolidated basis, net of VAT.
The table below presents trade debtors and the associated provision balance by both aging profile and level of credit risk:
Trade debtors Provision balance
Low Medium High CVAs Total Low Medium High CVAs Total
& admins & admins
------- ------- ------- ---------- -------- ------ ------- ------- ---------- -------
Less than GBP22m GBP5m GBP10m GBP8m GBP45m GBP1m GBP1m GBP4m GBP8m GBP14m
90 days
90 - 182 days GBP6m GBP2m GBP4m GBP8m GBP20m GBP1m GBP1m GBP4m GBP8m GBP14m
182 - 365 GBP5m GBP3m GBP6m GBP17m GBP31m GBP5m GBP3m GBP6m GBP17m GBP31m
days
More than GBP2m - GBP3m GBP8m GBP13m GBP2m - GBP3m GBP8m GBP13m
365 days
------- ------- ------- ---------- -------- ------ ------- ------- ---------- -------
Total GBP35m GBP10m GBP23m GBP41m GBP109m GBP9m GBP5m GBP17m GBP41m GBP72m
------- ------- ------- ---------- -------- ------ ------- ------- ---------- -------
The above balances are presented on a proportionally consolidated basis, net of VAT.
The impact of provisions made against tenant incentives decreased by GBP2m compared to the previous year, with a GBP18m provision charge recognised in the year.
1.3 Administrative expenses
Administrative expenses have been of particular focus across the business this year, and despite the cost resulting from our Covid response, they have remained flat on the prior year, at GBP74m. The Group's EPRA operating cost ratio increased to 37.9% (2019/20: 23.5%) as a result of a significant increase in property outgoing expenses due to provisions made in respect of rental debtors, accrued income and tenant incentive, as well as lower rental income following sales activity. Excluding provisions made in respect of tenant debtors, accrued income and tenant incentives, the Group's operating cost ratio is 20.7% (2019/20: 18.7%).
1.4 Net financing costs
GBPm
Net financing costs for the year ended 31
March 2020 (111)
Financing activity 5
Lower market rates 7
Net divestment 4
Developments (4)
Convertible bond maturity (2)
Other (2)
--------------------------------------------- ------
Net financing costs for the year ended 31
March 2021 (103)
--------------------------------------------- ------
Financing activity undertaken over the last 24 months has reduced costs by GBP5m in the year, predominantly as a result of prior year debt liability management, partially offset by the repayment of the GBP350m zero coupon convertible bond at its maturity in June as planned using existing facilities.
We have a balanced approach to interest rate risk management. At 31 March 2021, we were fully hedged on a spot basis, and we had interest rate hedging on 78% of our projected debt on average over the next five years. Our use of interest rate caps as part of our hedging means that the cost of around half of our debt benefits while market rates remain low and, compared to the prior year, we've seen a GBP7m reduction in finance costs from the impact of lower market rates year on year. Our weighted average interest rate remained low at 2.9%.
The reduction in finance costs from net divestment is due to the proceeds from GBP1.2bn of asset disposals, being used to repay our revolving credit facilities, as well as being reinvested into development pipeline.
2. IFRS loss after tax
The main difference between IFRS loss after tax and Underlying Profit is that IFRS includes the valuation movement on investment and trading properties, fair value movements on financial instruments and capital financing costs. In addition, the Group's investments in joint ventures and funds are equity accounted in the IFRS income statement but are included on a proportionally consolidated basis within Underlying Profit.
The IFRS loss after tax for the year was GBP1,083m, compared with a loss after tax for the prior year of GBP1,114m. IFRS basic EPS was (111.2)p per share, compared to (110.0)p per share in the prior year. The IFRS loss after tax for the year primarily reflects the downward valuation movement on the Group's properties of GBP888m, the capital and other income loss from joint ventures and funds to GBP409m and the Underlying profit of GBP201m. The Group valuation movement and capital and other income loss from joint ventures and funds was driven principally by outward yield shift of 33bps and ERV decline of 7.6% in the portfolio resulting in a valuation a decline of 10.8%.
The basic weighted average number of shares in issue during the year was 927m (2019/20: 934m).
3. Dividends
In October we announced the intention to resume paying dividends semi-annually, calculated at 80% of Underlying EPS based on the most recently completed six-month period. Applying this policy, the Board are proposing a final dividend for the year ended 31 March 2021 of 6.64p per share. Payment will be made on Friday 6 August 2021 to shareholders on the register at close of business on Friday 25 June 2021. The dividend will be a Property Income Distribution and no SCRIP alternative will be offered.
Balance sheet
As at March Section 2020 2021
GBPm GBPm
------------------------------- -------- -------- --------
Property assets 11,177 9,140
Other non-current assets 131 51
------------------------------- -------- -------- --------
11,308 9,191
Other net current liabilities (252) (203)
Adjusted net debt 6 (3,854) (2,938)
Other non-current liabilities - -
------------------------------- -------- -------- --------
EPRA Net Tangible Assets 7,202 6,050
------------------------------- -------- -------- --------
EPRA NTA per share 4 773p 648p
------------------------------- -------- -------- --------
Non-controlling interests 112 59
Other EPRA adjustments(1) (167) (126)
------------------------------- -------- -------- --------
IFRS net assets 5 7,147 5,983
------------------------------- -------- -------- --------
Proportionally consolidated basis
(1) EPRA Net Tangible Assets NTA is a proportionally consolidated measure that is based on IFRS net assets excluding the mark-to-market on derivatives and related debt adjustments, the carrying value of intangibles, the mark-to-market on the convertible bonds, as well as deferred taxation on property and derivative valuations. The metric includes the valuation surplus on trading properties and is adjusted for the dilutive impact of share options. Details of the EPRA adjustments are included in Table B within the supplementary disclosures.
4. EPRA Net Tangible Assets per share
pence
EPRA NTA per share at 31 March 2020 773
Valuation performance (137)
Underlying Profit 19
Property disposals 3
Dividend (8)
Finance liability management (1)
Other (1)
--------------------------------------- ------
EPRA NTA per share at 31 March 2021 648
--------------------------------------- ------
The 16.3% decrease in EPRA NTA per share reflects a valuation decrease of 10.8% combined with the Group's gearing.
Office valuations were down 3.8%, primarily due to the uncertainty of economic outlook and potential changes as a result of Covid-19. As a result, and coupled with lower investment market activity, yields moved out 9bps although ERV was marginally up. Developments again outperformed the standing portfolio and saw a valuation gain of 0.9%.
Valuations in Retail were down 24.7%, with outward yield shift of 81bps and ERV decline of 16.8%. These values reflect ongoing structural challenges faced by occupiers, compounded by Covid-19 and limited investment market activity. Across our largest assets, yields have moved between 60-170bps. For retail parks, improving liquidity in the market provided some valuation evidence, particularly for smaller parks.
Our external valuers have included an explanatory note in relation to Covid-19 in their valuation reports, recognising that it continues to affect real estate markets globally. However, their opinions are not subject to "material valuation uncertainty" (as defined by VPS 3 and VPGA 10 of the RICS Valuation - Global Standards), concluding that there was an adequate quantum of market evidence upon which to base their opinions of value. The current market uncertainty has been reflected in the valuations in a number of ways, depending on the relevant property sub-market. For retail, as well as adjusting yields and reflecting agreed concessions, our valuers have reduced assumed turnover rent. Where concessions have not been agreed, and rent collection has been inconsistent, they have deducted 3-6 months rent as a capital sum. For offices, the uncertainty has principally been reflected through assumed void periods and incentive packages.
5. IFRS net assets
IFRS net assets at 31 March 2021 were GBP5,983m, a decrease of GBP1,164m from 31 March 2020. This was primarily due to IFRS loss after tax of GBP1,083m and the interim dividend paid in the year of GBP78m.
Cash flow, net debt and financing
6. Adjusted net debt(1)
GBPm
Adjusted net debt at 31 March 2020 (3,854)
Disposals 1,186
Acquisitions (52)
Development and capex (230)
Net cash from operations 149
Dividend (76)
Corporation tax (33)
Other (28)
-------------------------------------- --------
Adjusted net debt at 31 March 2021 (2,938)
-------------------------------------- --------
(1) Adjusted net debt is a proportionally consolidated measure. It represents the Group net debt as disclosed in Note 14 to the condensed 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 GBP1,134m whilst development spend totalled GBP185m with a further GBP45m on capital expenditure related to asset management on the standing portfolio. The value of recently completed and committed developments is GBP1,060m, with GBP488m costs to come. Speculative development exposure is 6.6% of ERV. There are 1.2m sq ft of developments in our near term pipeline with anticipated cost of GBP806m.
7. Financing
Group Proportionally consolidated
2020 2021 2020 2021
Net debt / adjusted net GBP3,247m GBP2,249m GBP3,854m GBP2,938m
debt (1)
Principal amount of gross GBP3,294m GBP2,291m GBP4,158m GBP3,183m
debt
Loan to value 28.9% 25.1% 34.0% 32.0%
Weighted average interest
rate 1.9% 2.2% 2.5% 2.9%
Interest cover 5.8 4.3 3.8 3.0
Weighted average maturity 6.8 years 7.0 years 7.5 years 7.6 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.
At 31 March 2021, our proportionally consolidated LTV was 32.0%, down from 34.0% at 31 March 2020. The impact of asset disposals reduced LTV by 780 bps. This was partially offset by valuation declines which added 420 bps, as well as development spend which added 140 bps. Note 14 of the condensed financial statements sets out the calculation of the Group and proportionally consolidated LTV.
We are committed to maintaining good long-term relationships with debt providers in the different markets, with around 30 lenders in bank facilities and private placements alone. This year we have carried out financing of GBP1.6bn involving 14 different lenders.
In March 2021, we extended our GBP450m ESG-linked RCF by a further year to 2026 with all eight banks in agreement. Earlier in the year, we extended an additional GBP650m of RCFs, by a further year to 2025. Our GBP350m convertible bond was repaid at its scheduled maturity in June 2020 as planned using RCFs.
In December 2020 we signed a GBP100m unsecured loan facility with Homes England to fund specified infrastructure works which will accelerate the delivery of up to 3,000 homes at Canada Water. The loan facility has a seven-year term which may be extended at our request, subject to Homes England's approval.
For HUT, one of the bank facilities which was due to mature in September 2020 was refinanced in May 2020 with a GBP200m facility to December 2023, secured on a portfolio of HUT's retail parks.
In March 2021, we also raised a GBP160.5m seven-year loan from SMBC for our new Joint Venture with Allianz in which we have a 25% stake, secured on the assets of the JV.
This is a SONIA based loan and we are considering the processes for transition of our existing range of LIBOR based debt and derivatives to reference SONIA, alongside emerging market practice.
As a result of this activity, at 31 March 2021 British Land had GBP1.8bn of undrawn facilities and cash and no requirement to refinance until early 2025.
Our debt and interest rate management approach has enabled us to maintain a low weighted average interest rate of 2.9%. This is a 40bps increase from 31 March 2020, and is due to the repayment of our RCFs with proceeds from disposals, which will be redrawn as we deploy proceeds into developments or acquisitions. Our use of interest rate caps as part of our hedging means that the cost on around half of our debt benefits while market rates remain low.
Fitch Ratings, as part of their annual review in August 2020 affirmed our senior unsecured credit rating 'A', our long term IDR credit rating 'A-' and short term IDR credit rating 'F1' , with Stable Outlook.
The current environment reinforces the importance of a strong balance sheet.
David Walker
Interim Chief Financial Officer
About British Land
Our portfolio of high quality UK commercial property is focused on London Campuses and Retail & Fulfilment assets throughout the UK. We own or manage a portfolio valued at GBP12.7bn (British Land share: GBP9.1bn) as at 31 March 2021 making us one of Europe's largest listed real estate investment companies.
We create Places People Prefer, delivering the best, most sustainable places for our customers and communities. Our strategy is to leverage our best in class platform and proven expertise in development, repositioning and active management, investing behind two key themes: Campuses and Retail & Fulfilment.
Our three Campuses at Broadgate, Paddington Central and Regent's Place are dynamic neighbourhoods, attracting growth customers and sectors, and offering some of the best connected, highest quality and most sustainable space in London. We are delivering our fourth campus at Canada Water, where we have planning consent to deliver 5 million sq ft of residential, commercial, retail and community space over 53 acres. Our campuses account for 70% of our portfolio.
Retail & Fulfilment accounts for 25% of the portfolio and is focused on retail parks which are aligned to the growth of convenience, online and last mile fulfilment. We are complementing this with urban logistics primarily in London, focused on development-led opportunities.
Sustainability is embedded throughout our business. In 2020, we set out our sustainability strategy which focuses on two time-critical areas where British Land can create the most benefit: making our whole portfolio net zero carbon by 2030, and partnering to grow social value and wellbeing in the communities where we operate.
Further details can be found on the British Land website at www.britishland.com
RISK MANAGEMENT AND PRINCIPAL RISKS
We maintain a comprehensive risk management process which serves to identify, assess and respond to the range of financial and non-financial risks facing our business, including those risks that could threaten solvency and liquidity, as well as identifying emerging risks. Our approach is not intended to eliminate risk entirely, but instead to manage our risk exposures across the business, whilst at the same time making the most of our opportunities. Our approach to risk management is centred on being risk-aware, clearly defining our risk appetite, responding to changes to our risk profile quickly and having a strong risk management culture among employees with clear roles and accountability. Our organisational structure ensures close involvement of senior management in all significant decisions as well as in-house management of our property management activities and development.
The continually evolving circumstances caused by the Covid-19 pandemic, coupled with the backdrop of geopolitical and macroeconomic uncertainty, has, and continues to present a rapidly changing near term operating environment for our business to navigate and affect our entire risk landscape. Whilst our performance has been impacted, our financial position remains strong and demonstrates the importance of our risk management to protect our business through this period of uncertainty and adapt to a rapidly-changing environment. We have robust crisis management and business continuity plans in place and acted swiftly in dealing with the exceptional challenges posed by Covid-19; our focus has been to ensure the safety of our people; our assets are securely maintained and to support our customers, suppliers and local communities. Looking forward, whilst the successful rollout of the Government's vaccination programme provides optimism, we are mindful that the trajectory for this pandemic is highly uncertain given the risk of future variants. Therefore, risk management and the Group's continued ability to be flexible in responding to the risks as they evolve will be fundamental to our business.
The Board confirms that a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity, was carried out during the year taking into account the evolving Covid-19 risk and the economic and political environment. In accordance with our risk management process, Covid-19 is viewed as an overarching risk rather than a single principal risk. It has had a material negative impact on our business, in particular resulting in reduced rent collection in our Retail business, an increase in failures amongst our retailer customer base and reduced physical occupancy at our office-led assets. Changes in Government regulation and intervention in leasing contracts have occurred which also present a risk to our business, such as the rent moratorium.
Our current assessment is that the majority of our principal risks we flagged as elevated last year remain heightened. While the good progress on the vaccination programme and a roadmap out of lockdown provides optimism, the trajectory of the pandemic remains a key area of uncertainty and thus it is too early to conclude that the risks to our business have reduced. Albeit, the risks to the Economic Outlook and Investment Markets have reduced from the elevated levels immediately after the outset of the pandemic, whilst the risks to our Development Strategy and People, have increased slightly (as detailed overleaf). We have also added one principal risk as a standalone risk being Environmental Sustainability in light of the significance to the business and our customers.
Our principal external and internal risks are summarised below, including an assessment of how the risks have changed in the year. A more comprehensive explanation of the Group's approach to risk management will be included in the 2021 Annual Report.
External risks
Risks and impacts How we monitor Change in risk assessment
and manage the in year
risk
1 Economic outlook
The UK economic -- The Risk Committee -- The Covid-19 pandemic
climate present reviews quarterly has brought substantial economic
risks the contraction, with the UK's
and opportunities economic environment GDP falling 9.9% for the
in property and in which we operate calendar year 2020, severely
financing markets to impacting both our markets
and to the businesses assess whether and the businesses of our
of our customers changes to the customers.
which can impact economic outlook -- The combination of strong
both the delivery justify a reassessment Government spending (in particular
of our strategy of the risk appetite the Job Retention Scheme),
and our financial of the business. low inflation and low interest
performance. -- Key indicators rates helped mitigate some
including forecast of the impact of Covid-19.
GDP growth, employment -- Economic growth is expected
rates, business to bounce back relatively
and consumer quickly as restrictions ease
confidence, interest and the Government has set
rates and inflation/deflation out a four-stage roadmap
are considered, with a view to lifting all
as well as central restrictions by 21 June 2021.
bank guidance -- Overall, the risk to the
and government economic outlook has slightly
policy updates. reduced from the elevated
-- We stress level last year, in view
test our business of the good progress with
plan against the vaccination programme
a and the economy is on track
downturn in economic for full reopening in June.
outlook to ensure Albeit, the trajectory of
our financial the pandemic remains a key
position is sufficiently area of uncertainty and any
flexible and significant re-emergence
resilient. of Covid-19 or new variants
-- Our business could result in the imposition
model focuses of restrictions and further
on a high quality economic damage and there
portfolio underpinned are also concerns that inflation
by our balance may rise.
sheet and financial -- The Board and executive
strength. team have taken appropriate
action to help us navigate
the near term challenges
and determine the longer
term strategic direction
of the business focused on
four priorities.
------------------------------- ------------------------------------------
2 Political and regulatory outlook
Significant political -- Whilst we -- The political risk outlook
events and regulatory cannot influence remains high dictated by
changes, including the outcome of the national and global response
the UK's decision significant political to Covid-19. Furthermore,
to leave the events, we do the global geopolitical and
EU, and Government take the trade environments remain
policy response uncertainty related uncertain.
to the to such events -- While the UK managed to
pandemic, bring and the range secure a deal with the EU,
risks principally of possible outcomes avoiding major disruption
in four areas: into account to trade, the realities of
-- reluctance when making strategic the new trading relationship
of investors investment and are expected to dampen economic
and businesses financing decisions. growth in the short term.
to make investment -- Internally Also, further uncertainty
and we review and remains until the agreement
occupational monitor proposals in respect of financial services
decisions whilst and emerging is finalised.
the outcome remains policy and legislation -- Changes in Government
uncertain to ensure that regulation and
-- the impact we take the necessary intervention in leasing contracts
on the case for steps to ensure have occurred, which have
investment compliance, if presented a risk to our business,
in the UK, and applicable. Additionally, such as the rent moratorium.
on specific policies we engage public Also, the very recent court
and affairs consultants decisions on CVAs and Restructuring
regulation introduced, to ensure that Plans have clarified the
particularly we are properly methods occupiers can use
those which directly briefed on the to adversely alter their
impact real potential policy rental and other obligations
estate or our and regulatory to property owners. There
customers implications is also increased potential
-- the potential of political for tax rises on businesses.
for a change events. We also -- We continue to regularly
of leadership monitor public monitor proposed and actual
or political trust in business. changes in legislation and
direction -- Where appropriate, regulations and with the
-- the impact we act with other help of professional bodies,
on the businesses industry participants if possible, mitigate the
of our occupiers and representative risks to our business. During
as well as our bodies to contribute the year, we have engaged
own business. to policy and with the British Property
regulatory debate. Federation in their response
We monitor and to the Government's call
respond to social for evidence on how to address
and political the impact of Covid-19 on
reputational commercial rents.
challenges relevant
to the industry
and apply our
own evidence-based
research to engage
in thought leadership
discussions,
such as with
Design for Life.
------------------------------- ------------------------------------------
3 Commercial property investor demand
Reduction in -- The Risk Committee London Offices
investor reviews the property -- Whilst the London investment
demand for UK market quarterly market was understandably
real to assess whether subdued in the period following
estate may result any the initial outbreak of Covid-19,
in falls in asset changes to the in the second half of the
valuations and market outlook year, overseas investors
could arise from present risks have shown an increased readiness
variations in: and opportunities to look through the pandemic
-- the health which should and invest in prime London
of the UK be reflected offices, and thus this risk
economy in the execution has reduced. The final quarter
-- the attractiveness of our strategy of calendar year 2020 saw
of and our capital c.GBP5bn of transactions.
investment in allocation plan. -- Whilst the reintroduction
the UK The of travel restrictions during
-- availability Committee considers the third lockdown in January
of finance indicators such 2021 impacted activity in
-- relative attractiveness as the last quarter, transaction
of other asset the margin between volumes are expected to pick
classes property yields up as restrictions are lifted,
and particularly in the context
borrowing costs of low interest rates. The
and property London Office investment
capital growth market is expected to remain
forecasts, which attractive globally given
are considered its transparency, liquidity
alongside the and its yield differential.
Committee members' -- This year, benefitting
knowledge and from the resilient office
experience of investment market, we made
market activity timely sales of GBP643m of
and trends. standalone office buildings.
-- We focus on Retail
prime assets -- The retail investment
and sectors market was significantly
which we believe weaker, reflecting challenges
will be less in the occupational market,
susceptible over resulting in yield expansion
the medium term particularly in the first
to a reduction half of the year.
in occupier and -- There has been limited
investor demand. liquidity and lack of transactional
-- We maintain evidence, particularly for
strong relationships shopping centres, where lot
with agents and sizes are typically larger,
direct investors and confidence weakened through
active in the the pandemic. However, sentiment
market. has improved in retail parks,
-- We stress which have weathered the
test our business pandemic better and where
plan for the investment activity has picked
effect of a change up with GBP1.7bn of transactions
in property yields. in the year, slightly lowering
this risk to our business.
In particular, the market
for assets which are small
to medium in lot size, with
secure, sustainable income
streams, has seen more activity.
-- This year, benefitting
from pockets of demand in
the retail investment market,
we have sold GBP556m of retail
assets focused on standalone
units and superstores where
we have limited potential
to drive value through asset
management.
------------------------------- ------------------------------------------
4 Occupier demand and tenant default
Underlying income, -- The Risk Committee London Offices
rental growth reviews indicators -- The Covid-19 pandemic
and capital performance of affected leasing activity
could be adversely occupier demand which is significantly down
affected by weakening quarterly including as businesses focused on
occupier demand consumer confidence near term operational challenges
and occupier surveys and employment and postponed decisions on
failures resulting and ERV growth new space, and will undoubtedly
from variations forecasts, cause many businesses to
in the health alongside the consider how to use their
of the UK economy Committee members' offices most productively
and corresponding knowledge and and safely going forward.
weakening of experience of As a result, the type of
consumer occupier space businesses need will
confidence, business plans, trading evolve, and this risk remains
activity and performance and elevated.
investment. leasing activity -- Across the market, prime
Changing consumer in guiding execution headline rents have generally
and business of our strategy. been flat, albeit on low
practices -- We have a volumes and incentives have
including the high quality, increased. The vacancy rate
growth of diversified occupier rose to 8.8% from 4.3% a
internet retailing, base and monitor year ago, but secondhand
flexible working concentration space accounts for most of
practices (including of exposure to supply with tenant-led space
more working individual occupiers an increasingly significant
from home) and or sectors. We component.
demand for energy perform rigorous -- Covid-19 has accelerated
efficient buildings, occupier covenant a focus on quality space,
new checks ahead with occupiers increasingly
technologies, of approving focused on the best space
new deals and on for their business, their
legislation and an ongoing basis people and the environment.
alternative locations so that we can We are seeing encouraging
may result in be proactive interest in new space, particularly
earlier than in managing exposure from businesses with requirements
anticipated to weaker occupiers. two to three years in the
obsolescence -- Through our future for modern, high quality
of our buildings Key Occupier and sustainable space which
if evolving Account supports more hybrid ways
occupier and programme, we of working.
regulatory work together Retail
requirements with our customers -- Covid-19 has had a significant
are not met. to find ways impact on retail, which was
Some or all of to best meet already facing structural
these trends their evolving challenges as a result of
could be requirements. the growth of online. The
accelerated by -- Our Sustainability risks to the retail occupational
the Strategy links market have remained high
pandemic. action on in the near term; and have
customer wellbeing, played out in several ways,
energy efficiency, including rent reductions,
community and rent deferments and non-payment,
sustainable design but also an increase in retailers
to our business entering CVAs or administrations.
strategy. Our We had elevated this risk
social and environmental last year in response to
targets enhance Covid-19 and this risk remains
our customer heightened.
offer; for example, -- Stronger retailers are
all our new developments increasingly focused on how
are net zero best to align their models
carbon and we to the growth of online;
facilitate customer this has included a growing
networks and interest in retail parks
local which are more affordable
partnerships and can support an online
on all our campuses. strategy through click &
collect.
-- Our priority has been
on keeping our centres full
of the right mix of retailers
who are additive to our places.
We are pragmatic and proactive
in our approach, working
with successful, financially
strong retailers to ensure
leasing structures are appropriate
and deliver sustainable cash
flows. At times, this has
meant accepting rents which
are below previous passing
rents, but are more appropriate
in the current environment
and sustainable longer term.
------------------------------- ------------------------------------------
5 Availability and cost of finance
Reduced availability -- Market borrowing -- Markets were adversely
of finance may rates and real affected globally by the
adversely impact estate debt availability Covid-19 outbreak. Governments
ability to refinance are monitored and central banks responded
debt and/or drive by the Risk Committee with significant interest
up cost. These quarterly and rate cuts (to all-time lows)
market factors reviewed regularly and economic stimulus packages
may also result in order to guide to offset the effects and
in weaker investor our financing support economies.
demand for real actions in executing -- In the UK, lenders' appetite
estate. our strategy. and support varies in different
Regulation and -- We monitor debt markets. Strength of
capital costs our projected sponsor and quality of property
of lenders may LTV and our debt remain key factors.
increase cost requirements -- Availability of finance
of finance, as using several for retail assets significantly
could increased internally generated reduced, but there is more
risk in terms reports focused support for logistics, offices
of economic outlook. on borrowing and build to rent residential.
levels, debt Initial LTVs reduced and
maturity, available margins increased throughout
facilities and 2020; however, overall costs
interest rate of finance remain low reflecting
exposure. low market interest rates.
-- Should inflationary -- British Land maintains
pressure result good access to its primary
in increased sources of funds in the unsecured
interest rates, markets, given our 'A' credit
funding costs rating, as well as to secured
may increase. markets for joint ventures
We have interest and funds, and the risk to
rate hedging our business in this respect
on 78% of our has remained broadly stable.
projected debt
on average over
the next five
years
-- We maintain
good long term
relationships
with our key
financing partners.
-- The scale
and quality of
our business
enable us to
access a diverse
range of sources
of finance with
a spread of repayment
dates. We aim
always to have
a significant
level of undrawn,
committed, unsecured
revolving facilities
to ensure we
have adequate
financing available
to support business
requirements
and opportunities.
-- We work with
industry bodies
and other relevant
organisations
to participate
in debate on
emerging finance
regulations where
our interests
and those of
our industry
are affected.
------------------------------- ------------------------------------------
6 Catastrophic business event
An external event -- We maintain -- This risk was increased
such as a civil a comprehensive last year (and remains elevated)
emergency, including crisis response as the Group's operations
a large-scale plan across all have been severely impacted
terrorist attack, business units in the year by the Covid-19
cybercrime, pandemic as well as a pandemic. Our core crisis
disease, extreme head office business management team overseen
weather occurrence, continuity plan. by the Executive Committee
environmental -- The Risk Committee coordinated the Group's operational
disaster or power monitors the response to the pandemic,
shortage, could Home Office terrorism including managing communications
severely disrupt threat level, with stakeholders and implementing
global markets and we have access health and safety procedures.
(including property to security threat Also, this involved managing
and information services. the various lockdown restrictions
finance) and -- Asset emergency which closed non-essential
cause significant procedures are retail across our portfolio
damage and disruption regularly reviewed, and required measures to
to British Land's and scenario be implemented to allow occupiers
portfolio, operations, tested. Physical to continue to use their
customers and security offices.
people. measures are -- Terrorism and social unrest
in place at properties remain a threat and our crisis
and management team have regular
development sites. training and carry out mock
-- Our Sustainability incidents to test processes
Committee continues and procedures.
to -- The wider use and enhancement
monitor environmental of digital
risks and we technology across the Group
have increases the risks associated
established a with information and cyber
TCFD Steering security, with an increasing
Committee to risk from legacy system vulnerabilities,
review our management social engineering and phishing.
processes for In the wider market, there
climate-related has been an increase in cyber
risks and opportunities. attacks being perpetrated
-- Asset risk and in response we have further
assessments are enhanced our security position
carried out to and controls. In addition,
assess a range all staff continue to undertake
of risks including mandatory cyber security
security, flood, awareness training. During
environmental the year, we have established
and health and an InfoSec Committee reporting
safety. to the Risk Committee which
-- We have implemented will oversee further enhancing
corporate cyber our cyber security and IT
security systems, infrastructure and review
governance and and improve our key IT controls.
processes 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
for physical
damage.
------------------------------- ------------------------------------------
Internal risks
Risks and impacts How we monitor Change in risk assessment
and manage the in year
risk
7 Investment strategy
In order to meet -- Our investment -- We have reviewed the
our strategic strategy is determined capital plan in light of
objectives, we to be consistent Covid-19 and are focused
aim to invest with our target on recycling capital out
in and exit risk appetite of mature retail and office
from the right and is based assets into value accretive
properties at on the evaluation development and new growth
the right time. of the external sectors.
Underperformance environment. -- We have made good progress,
could result -- Progress against executing GBP1.7bn of capital
from changes the strategy activity since April 2020.
in market sentiment and continuing This includes GBP1.2bn of
as well as inappropriate alignment with sales, overall, at 6.2%
determination our risk appetite ahead of valuation.
and execution is discussed -- Recycling capital out
of our property at of assets which do not offer
investment strategy, each Risk Committee opportunities for us to
including: with reference add value through asset
-- sector selection to the management or development
and weighting property markets and into assets that do
-- timing of and the external is central to our business
investment and economic model going forward. Overall,
divestment environment. the risk remains broadly
decisions -- The Board the same as last year.
-- exposure to carries out an
developments annual review
-- asset, occupier, of the overall
region concentration corporate strategy
-- co-investment including the
arrangements current and prospective
asset portfolio
allocation.
-- Individual
investment decisions
are subject to
robust risk evaluation
overseen by our
Investment Committee
including consideration
of returns relative
to risk adjusted
hurdle rates.
-- Review of
prospective performance
of individual
assets and their
business plans.
-- We foster
collaborative
relationships
with our
co-investors
and enter into
ownership
agreements which
balance the interests
of
the parties.
----------------------------- -----------------------------------
8 Development strategy
Development provides -- We manage -- Progressing value accretive
an opportunity our levels of development is one of our
for outperformance total and speculative key priorities and is a
but usually involves development exposure fundamental driver of value,
elevated risk. within targeted but is inherently higher
This is reflected ranges risk, particularly when
in our decision considering associated pursued on a speculative
making process risks and the basis. We actively manage
around impact on our development risk and
which schemes key financial pre-letting our space is
to develop, the metrics. This an important part of that
timing is monitored approach. We limit our total
of the development, quarterly by development exposure to
as well as the the Risk Committee 12.5% of the total portfolio
execution of along with progress by value as well as limiting
these projects. of developments our speculative development
Development strategy against plan. exposure to 12.5% of the
addresses several -- Prior to committing total portfolio ERV.
development risks to a development, -- During the year, our
that could adversely a detailed appraisal development sites initially
impact underlying is undertaken. experienced delays following
income This includes shutdowns due to the pandemic.
and capital performance consideration All our sites are now operational
including: of returns relative and strict Covid-19 protocols
-- development to risk adjusted have been introduced, in
letting exposure hurdle rates accordance with the current
-- construction and is overseen Construction Leadership
timing and costs by our Investment Council Site Operating
(including construction Committee. Procedures. Since April
cost inflation) -- Pre-lets are 2020, we have successfully
-- major contractor used to reduce completed both 100 Liverpool
failure development letting Street and 1 Triton Square.
-- adverse planning risk were considered -- We have flexibility to
judgements appropriate. commit to our near term
-- Competitive development programme as
tendering of and when
construction appropriate. During the
contracts year, we have committed
and, where appropriate, to Norton Folgate and 1
fixed price contracts Broadgate, increasing total
entered into. development exposure to
We measure inflationary 5.3% of the portfolio value
pressure on construction and our speculative exposure
materials and to 6.6% of portfolio ERV
labour costs (and thereby slightly
and make appropriate increasing the risk). Also,
allowances in we have commenced enabling
our cost estimates works for the first phase
and include within of our Canada Water masterplan.
our fixed price We will continue to exploit
contracts. our development pipeline
-- Detailed selection but ensure we mitigate risk
and close monitoring through a combination of
of timing, pre-lets and joint
contractors and ventures.
key subcontractors
including covenant
reviews.
-- Experienced
development management
team
closely monitors
design, construction
and overall
delivery process.
-- Early engagement
and strong relationships
with planning
authorities.
The Board considers
the s.172 factors
to ensure the
impact on the
environment and
communities is
adequately addressed.
-- Through our
Place Based approach,
we engage with
communities where
we operate to
incorporate stakeholder
views in our
development activities,
as detailed in
our Sustainability
Brief.
-- We engage
with our development
suppliers to
manage environmental
and social risks,
including through
our Supplier
Code of Conduct,
Sustainability
Brief and Health
and Safety Policy.
----------------------------- -----------------------------------
9 Capital structure - leverage
Our capital structure -- We manage -- The current uncertain
recognises the our use of debt environment reinforces the
balance between and equity finance importance of a strong balance
performance, to balance the sheet. Over the last few
risk and flexibility: benefits of leverage years, we have actively
-- leverage magnifies against the risks, lowered our leverage, and
property returns, including magnification continued to benefit from
both positive of property valuation a strong
and negative movements. financial position. This
-- an increase -- We aim to risk remains unchanged,
in leverage increases manage our loan with our proportionally
the to value (LTV) consolidated LTV of 32%,
risk of a breach through the property despite valuation falls.
of covenants cycle such that We have retained significant
on borrowing our headroom to our Group debt
facilities and financial position covenants which could withstand
may increase would remain a further fall in values
finance costs robust in the of c.46%, before any mitigating
event of a significant actions.
fall in property
values. This
means we do not
adjust our approach
to leverage based
only on changes
in property
market yields.
-- We manage
our investment
activity, the
size and timing
of which can
be uneven, as
well as our development
commitments to
ensure that our
LTV level remains
appropriate.
-- We leverage
our equity and
achieve benefits
of scale while
spreading risk
through joint
ventures and
funds which are
typically partly
financed by debt
without recourse
to British Land.
----------------------------- -----------------------------------
10 Finance strategy
Finance strategy -- Five key principles -- Despite the challenging
addresses risks guide our financing, market conditions, the scale
both employed together of our business and quality
to continuing to manage the of our assets have enabled
solvency and risks in this us to access a broad range
profits generated. area: diversify of debt finance on attractive
Failure to manage our sources of terms in different markets
refinancing requirements finance, phase and this risk remains stable.
may result in maturity of debt -- Our strong senior unsecured
a shortage of portfolio, maintain rating 'A', long term IDR
funds to sustain liquidity, maintain credit rating 'A-' and short
the operations flexibility, term IDR credit rating 'F1'
of the business and maintain were all affirmed by Fitch
or repay facilities strong metrics. during the year, with a
as they fall -- We monitor stable outlook.
due. the period until -- During the year we have
financing is extended GBP650m of revolving
required, which credit facilities to 2025,
is a key determinant and GBP450m to 2026, and
of financing have GBP1.8bn of undrawn
activity. Debt facilities and cash and
and capital market no requirement to refinance
conditions are until early 2025.
reviewed regularly
to identify financing
opportunities
that meet our
business requirements.
-- Financial
covenant headroom
is evaluated
regularly and
in conjunction
with transactions.
-- We are committed
to maintaining
and enhancing
relationships
with our key
financing partners.
-- We are mindful
of relevant emerging
regulation which
has the potential
to impact the
way that we finance
the business.
----------------------------- -----------------------------------
11 Environmental sustainability
A failure to -- We are currently -- The Board recognises
anticipate and undertaking TCFD-aligned the scale of the climate
prepare for scenario analyses emergency, its potential
(i) environmental to assess our impact on real estate and
risks and (ii) exposure to climate-related therefore the urgent need
preventative physical and to take mitigating action;
steps taken by transition risks. and we have added this as
government and This workstream a standalone risk this year.
society represent is overseen by During the year we launched
a principal and the Risk and our 2030 Sustainability
emerging risk. Sustainability Strategy, which sets out
This risk category Committees, with ambitious targets to be
includes the: Board-level oversight net zero carbon by 2030
-- increased from the Audit and includes a focus on
exposure of assets and CSR Board environmental leadership.
to environmental Committees. -- In this first year, we
hazards, driven -- Underpinned have achieved some
by climate change by our SBTi-approved important milestones including
-- policy risk climate our first net zero carbon
from the cost targets, our development at 100 Liverpool
of complying guiding corporate Street, our Pathway to Net
with new climate policies (the Zero Carbon and the launch
regulations with Pathway to Net of our Transition Vehicle,
specific performance Zero and the to finance energy efficient
and/or Sustainability improvements across the
technology requirements Brief) establish portfolio. The Science Based
-- overall compliance a series of climate Targets initiative also
requirements and energy targets validated our climate
from existing to ensure our targets as being aligned
and emerging alignment with with a 1.5degC global
environmental a societal transition warming trajectory.
regulation to net zero that -- We continue to work towards
-- leasing risk limits global full TCFD alignment in climate
as a result of warming to 1.5degC. risk disclosure by 2022,
less sustainable -- Our property and undertook a portfolio-wide
/ non-compliant management department physical risk scenario analysis
buildings operates in the year. As occupying
an environmental sustainable buildings becomes
management system increasingly important to
(EMS) aligned occupiers, our guiding policies
with ISO 14001. - the Sustainability Brief
In 2020, our and Pathway to Net Zero
commercial offices - play an important role
achieved formal in setting standards aligned
third party ISO to external expectations.
14001 For example, our new developments
certification. target ambitious sustainability
-- We actively ratings (`Outstanding' targeted
engage with the for new office
communities in developments) and operational
which we operate, efficiency through NABERS
as detailed in Design for Performance.
our Local
Charter, to ensure
we provide places
that meet the
needs of all
relevant stakeholders.
----------------------------- -----------------------------------
12 People
A number of critical Our HR strategy -- We have a broad range
business processes is designed to of expertise across our
and decisions minimise risk business which is critical
lie in the hands through: to the successful delivery
of a few people. -- informed and of our strategy.
Failure to recruit, skilled recruitment -- The Covid-19 crisis presented
develop and retain processes a health & safety risk to
staff and Directors -- talent performance our people and made day-to-day
with the right management and operations more difficult
skills and experience succession planning and complex, however this
may result in for key roles risk has lessened as a result
significant underperformance -- highly competitive of the successful vaccination
or impact the compensation roll-out. The
effectiveness and benefits health and wellbeing of
of operations -- people development our people remains our priority
and decision and training and we were quick to encourage
making, in turn The risk is measured all our office-based staff
impacting business through employee to work from home and followed
performance. engagement surveys, Government guidelines.
wellbeing surveys, -- As we entered the next
employee turnover phase of Covid-19 and third
and retention lockdown we saw a more tangible
metrics. We impact on our employees
monitor this both in terms of their physical
through voluntary and mental health and wellbeing,
staff turnover clearly indicated by the
in addition to results of our pulse wellbeing
conducting exit surveys. We have taken a
interviews. number of steps to promote
We engage with wellbeing, but it is clear
our employees that Covid-19 has negatively
and suppliers impacted the wellbeing of
to make clear our employees, notwithstanding
our requirements all the measures we have
in managing key put in place.
risks including -- Despite this backdrop
health and safety, our people have delivered
fraud and bribery great progress this year.
and other social Our voluntary staff turnover
and environmental was low at 6% in the year,
risks, as detailed albeit we anticipate this
in our policies to increase slightly as
and codes of the recruitment market opens
conduct. up post lockdown. During
the year, there have been
a number of changes to our
senior leadership team and
we have set out our new
strategy to more actively
focus on development, active
management and repositioning
assets.
----------------------------- -----------------------------------
13 Income sustainability
We are mindful -- We undertake -- Our income has been negatively
of maintaining comprehensive impacted by the challenges
sustainable income profit and cash facing the retail market,
streams which flow forecasting compounded by the pandemic,
underpin shareholder incorporating as Covid-19 and related
returns and provide scenario restrictions have affected
the platform analysis to model the cash flow of many of
from which to the impact of our occupiers, primarily
grow the business. proposed in our retail business,
This could be transactions. and hence their ability
adversely affected -- We take a to pay rent.
by non-payment proactive asset -- Our income risk was heightened
of rent; occupier management at last year end and remains
failures; inability approach to maintain so; encompassing higher
to re-let space a strong occupier levels of non payment of
on equivalent line-up. We monitor rent; an increase in occupiers
terms; as our market letting entering CVAs or administrations;
well as potential exposure including and the inability to re-let
structural changes vacancies, upcoming space on equivalent terms;
to lease obligations. expiries and as well as potential structural
We consider sustainability breaks and speculative changes to lease obligations
of our development as (which may result in increased
income streams well as our weighted income volatility). Also,
in: average the very recent court decisions
-- execution unexpired lease on CVAs and Restructuring
of investment term. Plans have clarified the
strategy -- We have a methods occupiers can use
and capital recycling, high quality to adversely alter their
notably timing and diversified rental and other obligations
of reinvestment occupier base to property owners.
of sale and monitor concentration -- We have been actively
proceeds of exposure to monitoring our rental collection
-- nature and individual occupiers together with our exposure
structure of or sectors. to occupiers at risk of
leasing activity -- We are proactive default and administration.
-- nature and in addressing Our approach has been both
timing of asset key lease pragmatic and proactive
management and breaks and expiries to maximise occupancy and
development activity to minimise periods rent collection. For those
of customers most affected,
vacancy. primarily smaller independent
retailers, we have agreed
pragmatic and equitable
solutions for the
periods of closure which
include monthly payments
and partial concessions.
We have also engaged on
a case by case basis with
larger customers facing
cash flow difficulties,
often combining our discussions
on the payment of legacy
rents with those on lease
extensions and new space.
As a result, we have now
collected 83% of rent for
FY21 (Office 99%; Retail
71%).
----------------------------- -----------------------------------
Key:
Change in risk assessment from last year
Increase
No change
Decrease
New risk
Directors' Responsibilities Statement
The Directors' Responsibilities Statement below has been prepared in connection with the full Annual Report and financial statements for the year ended 31 March 2021. Certain parts of the Annual Report and financial statements have not been included in this announcement as set out in Note 1 to the condensed financial information.
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 and Company financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Additionally, the Financial Conduct Authority's Disclosure Guidance and Transparency Rules require the Directors to prepare the Group financial statements in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
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, for the Group and Company, international accounting standards in conformity with the requirements of the Companies Act 2006 and, for the Group, international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union have been followed, subject to any material departures disclosed and explained in the financial statements
-- make judgements and accounting estimates that are reasonable and prudent
-- 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 position and performance, business model and strategy.
Each of the Directors, whose names and functions are set out on the British Land website, 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 or loss of the Company
-- the Group financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the group
-- the Strategic Report and the Directors' Report include a fair review of the development and performance of the business and the position of the Group and Company, together with a
-- description of the principal risks and uncertainties they face.
By order of the Board.
Simon Carter
Chief Executive
25 May 2021
Consolidated income sheet
For the year ended 31 March 2021
2021 2020
===================================== ==== -------------------------------- --------------------------------
Capital Capital
and and
Underlying(1) other Total Underlying(1) other Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
===================================== ==== ============= ======= ======== ============= ======= ========
Revenue 3 468 - 468 526 87 613
Costs(2) 3 (180) - (180) (148) (70) (218)
------------------------------------- ---- ------------- ------- -------- ------------- ------- --------
3 288 - 288 378 17 395
Joint ventures and funds (see
also below) (3) 8 52 (409) (357) 79 (306) (227)
Administrative expenses (74) - (74) (73) - (73)
Valuation movement 4 - (888) (888) - (1,105) (1,105)
Profit on disposal of investment
properties and investments - 28 28 - 1 1
Net financing costs
financing income 5 - 15 15 1 - 1
financing charges 5 (62) (3) (65) (67) (41) (108)
------------- ------- -------- ------------- ------- --------
(62) 12 (50) (66) (41) (107)
------------------------------------- ---- ------------- ------- -------- ------------- ------- --------
Profit (loss) on ordinary activities
before taxation 204 (1,257) (1,053) 318 (1,434) (1,116)
Taxation 6 (26) (4) (30) - 2 2
------------------------------------- ---- ------------- ------- -------- ------------- ------- --------
Profit (loss) for the year after
taxation 178 (1,261) (1,083) 318 (1,432) (1,114)
------------------------------------- ---- ------------- ------- -------- ------------- ------- --------
Attributable to non-controlling
interests 3 (55) (52) 12 (99) (87)
Attributable to shareholders
of the Company 175 (1,206) (1,031) 306 (1,333) (1,027)
------------------------------------- ---- ------------- ------- -------- ------------- ------- --------
Earnings per share:
basic 2 (111.2)p (110.0)p
diluted 2 (111.2)p (110.0)p
-------- --------
All results derive from continuing operations.
2021 2020
==================================== ==== ============================= =============================
Capital Capital
and and
Underlying(1) other Total Underlying(1) other Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
==================================== ==== ============= ======= ===== ============= ======= =====
Results of joint ventures and
funds accounted
for using the equity method
Underlying Profit 52 - 52 79 - 79
Valuation movement 4 - (409) (409) - (284) (284)
Capital financing costs - - - - (22) (22)
Loss on disposal of investment
properties,
trading properties and investments - (1) (1) - - -
Taxation 6 - 1 1 - - -
==================================== ==== ============= ======= ===== ============= ======= =====
8 52 (409) (357) 79 (306) (227)
==================================== ==== ============= ======= ===== ============= ======= =====
1. See definition in Note 2 and a reconciliation between Underlying Profit and IFRS profit in Note 17.
2. Included within 'Costs' is a charge relating to provision for impairment of tenant debtors, accrued income and tenant incentives of GBP60m (2019/2020: GBP24m), disclosed in further detail in Note 7 and Note 10.
3. Included within 'Joint ventures and funds' is a charge relating to provision for impairment of loans to joint ventures of GBP144m (2019/20: GBPnil), disclosed in further detail in Note 8.
Consolidated statement of comprehensive income
For the year ended 31 March 2021
2021 2020
GBPm GBPm
=========================================================== ======= =======
Loss for the year after taxation (1,083) (1,114)
Other comprehensive income:
Items that will not be reclassified subsequently to profit
or loss:
Net actuarial loss on pension scheme (13) -
Valuation movement on owner-occupied properties (1) 1
======= =======
(14) 1
======= =======
Items that may be reclassified subsequently to profit or
loss:
Gains (losses) on cash flow hedges
Group 2 2
Joint ventures and funds 1 (1)
======= =======
3 1
======= =======
Deferred tax on items of other comprehensive income 6 -
Other comprehensive (loss) income for the year (5) 2
=========================================================== ======= =======
Total comprehensive loss for the year (1,088) (1,112)
=========================================================== ======= =======
Attributable to non-controlling interests (52) (86)
Attributable to shareholders of the Company (1,036) (1,026)
=========================================================== ======= =======
Consolidated balance sheet
As at 31 March 2021
2021 2020
Note GBPm GBPm
=================================================== ==== ======= =======
ASSETS
Non-current assets
Investment and development properties 7 6,326 8,188
Owner-occupied properties 7 2 68
======= =======
6,328 8,256
======= =======
Other non-current assets
Investments in joint ventures and funds 8 2,120 2,358
Other investments 9 20 125
Property, plant and equipment 30 6
Interest rate and currency derivative assets 14 135 231
Debtors 6 -
8,639 10,976
======= =======
Current assets
Trading properties 7 26 20
Debtors 10 56 56
Cash and short term deposits 14 154 193
======= =======
236 269
=================================================== ==== ======= =======
Total assets 8,875 11,245
=================================================== ==== ======= =======
LIABILITIES
Current liabilities
Short term borrowings and overdrafts 14 (161) (637)
Creditors 11 (219) (253)
Corporation tax (7) (17)
======= =======
(387) (907)
======= =======
Non-current liabilities
Debentures and loans 14 (2,249) (2,865)
Other non-current liabilities 12 (128) (156)
Deferred tax liabilities 13 - (1)
Interest rate and currency derivative liabilities 14 (128) (169)
------- -------
(2,505) (3,191)
=================================================== ==== ======= =======
Total liabilities (2,892) (4,098)
=================================================== ==== ======= =======
Net assets 5,983 7,147
=================================================== ==== ======= =======
EQUITY
Share capital 234 234
Share premium 1,307 1,307
Merger reserve 213 213
Other reserves 16 38
Retained earnings 4,154 5,243
=================================================== ==== ======= =======
Equity attributable to shareholders of the Company 5,924 7,035
Non-controlling interests 59 112
=================================================== ==== ======= =======
Total equity 5,983 7,147
=================================================== ==== ======= =======
EPRA NTA per share(1) 2 648p 773p
=================================================== ==== ======= =======
1. As defined in Note 2.
Consolidated statement of cash flows
For the year ended 31 March 2021
2021 2020
Note GBPm GBPm
========================================================= ==== ======= =====
Rental income received from tenants 320 415
Fees and other income received 38 42
Operating expenses paid to suppliers and employees (125) (146)
Indirect taxes (paid) received in respect of operating
activities (15) 11
Sale of trading properties - 82
======= =====
Cash generated from operations 218 404
======= =====
Interest paid (70) (79)
Interest received - 5
Corporation taxation payments (33) (4)
Distributions and other receivables from joint ventures
and funds 8 34 49
======= =====
Net cash inflow from operating activities 149 375
======= =====
Cash flows from investing activities
Development and other capital expenditure (172) (259)
Purchase of investment properties (52) (52)
Sale of investment properties 1,073 77
Acquisition of remaining share of Aldgate JV - (21)
Acquisition of investment in WOSC joint venture - (57)
Purchase of investments (5) (9)
Sale of investments 108 19
Indirect taxes (paid) received in respect of investing
activities (2) 1
Loan repayments from joint ventures and funds 40 -
Investment in and loans to joint ventures and funds (84) (191)
Capital distributions from joint ventures and funds 4 131
======= =====
Net cash inflow (outflow) from investing activities 910 (361)
======= =====
Cash flows from financing activities
Issue of ordinary shares - 5
Purchase of own shares - (125)
Dividends paid 15 (76) (295)
Dividends paid to non-controlling interests (1) (13)
Capital payments in respect of interest rate derivatives (10) (14)
Decrease in lease liabilities (7) (8)
Decrease in bank and other borrowings (1,218) (189)
Drawdowns on bank and other borrowings 214 576
======= =====
Net cash outflow from financing activities (1,098) (63)
======= =====
Net decrease in cash and cash equivalents (39) (49)
Cash and cash equivalents at 1 April 193 242
========================================================= ==== ======= =====
Cash and cash equivalents at 31 March 154 193
========================================================= ==== ======= =====
Cash and cash equivalents consists of:
Cash and short term deposits 14 154 193
========================================================= ==== ======= =====
Consolidated statement of changes in equity
For the year ended 31 March 2021
Hedging
and Re- Non-
Share Share translation valuation Merger Retained 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
2020 234 1,307 12 26 213 5,243 7,035 112 7,147
=================== ======== ======== ============ ========== ======== ========= ======= ============ =======
Loss for the year
after taxation - - - - - (1,031) (1,031) (52) (1,083)
Revaluation of
owner-occupied
property - - - (1) - - (1) - (1)
Gains on cash flow
hedges -
Group - - 2 - - - 2 - 2
Gains on cash flow
hedges -
joint ventures - - - 1 - - 1 - 1
Reserves transfer
on disposal
of owner-occupied
property - - - (30) - 30 - - -
Net actuarial loss
on pension
scheme - - - - - (13) (13) - (13)
Deferred tax on
items of other
comprehensive
income - - - 6 - - 6 - 6
======== ======== ============ ========== ======== ========= ======= ============ =======
Other comprehensive
income - - 2 (24) - 17 (5) - (5)
=================== ======== ======== ============ ========== ======== ========= ======= ============ =======
Total comprehensive
income for
the year - - 2 (24) - (1,014) (1,036) (52) (1,088)
------------------- -------- -------- ------------ ---------- -------- --------- ------- ------------ -------
Fair value of share
and share
option awards - - - - - 3 3 - 3
Dividends payable
in year (8.40p
per share) - - - - - (78) (78) - (78)
Dividends payable
by subsidiaries - - - - - - - (1) (1)
=================== ======== ======== ============ ========== ======== ========= ======= ============ =======
Balance at 31 March
2021 234 1,307 14 2 213 4,154 5,924 59 5,983
=================== ======== ======== ============ ========== ======== ========= ======= ============ =======
Balance at 1 April
2019 240 1,302 11 26 213 6,686 8,478 211 8,689
=================== ======== ======== ============ ========== ======== ========= ======= ============ =======
Loss for the year
after taxation - - - - - (1,027) (1,027) (87) (1,114)
Revaluation of
owner-occupied
property - - - 1 - - 1 - 1
Gains on cash flow
hedges -
Group - - 1 - - - 1 1 2
Losses on cash flow
hedges -
joint ventures - - - (1) - - (1) - (1)
Deferred tax on - - - - - - - - -
items of other
comprehensive
income
======== ======== ============ ========== ======== ========= ======= ============ =======
Other comprehensive
income - - 1 - - - 1 1 2
=================== ======== ======== ============ ========== ======== ========= ======= ============ =======
Total comprehensive
income for
the year - - 1 - - (1,027) (1,026) (86) (1,112)
=================== ======== ======== ============ ========== ======== ========= ======= ============ =======
Share issues - 5 - - - - 5 - 5
Fair value of share
and share
option awards - - - - - (2) (2) - (2)
Purchase of own
shares (6) - - - - (119) (125) - (125)
Dividends payable
in year (31.47p
per share) - - - - - (295) (295) - (295)
Dividends payable
by subsidiaries - - - - - - - (13) (13)
=================== ======== ======== ============ ========== ======== ========= ======= ============ =======
Balance at 31 March
2020 234 1,307 12 26 213 5,243 7,035 112 7,147
=================== ======== ======== ============ ========== ======== ========= ======= ============ =======
1. The balance at the beginning of the current year includes GBP15m in relation to translation and (GBP3m) in relation to hedging (2019/20: GBP15m and (GBP4m)). Opening and closing balances in relation to hedging relate to continuing hedges only.
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 2021 or 2020, but is derived from those accounts. Statutory accounts for 2020 have been delivered to the Registrar of Companies and those for 2021 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts; their reports on those accounts were unqualified, but for the year ended 31 March 2020 included a reference to matters to which the auditor drew attention by way of emphasis without qualifying the report, in relation to the material uncertainty clause attached to the valuation of investment and development properties, either held directly or through joint ventures. The auditors' report did not contain statements under section 498(2) or (3) of the Companies Act 2006.
The financial statements for the year ended 31 March 2021 have been prepared on the historical cost basis, except for the revaluation of properties, investments classified as fair value through profit or loss and derivatives. The financial statements are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 ('IFRS') and the applicable legal requirements of the Companies Act 2006. In addition to complying with international accounting standards in conformity with requirements of the Companies Act 2006, the consolidated financial statements also comply with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
On 31 December 2020 EU-adopted IFRS was brought into UK law and became UK-adopted international accounting standards, with future changes to IFRS being subject to endorsement by the UK Endorsement Board. The consolidated financial statements will transition to UK-adopted international accounting standards for financial periods beginning 1 April 2021.
While the 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 July 2021.
In the current financial year the Group has adopted a number of minor amendments to standards effective in the year issued by the IASB, none of which have had a material impact on the Group.
These amendments include IAS 1 and IAS 8 (amended) - Definition of Material, IFRS 3 (amended) - Definition of a Business, IFRS 9 (amended) - criteria for hedge accounting on transition from LIBOR to IBOR and IFRS 16 (amended).
A number of new standards and amendments to standards and interpretations have been issued but are not yet effective for the current accounting period. These amendments include amendments to IFRS 16, 'Leases' - Covid-19 related rent concessions, amendments to IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2, amendments to IAS 1, Presentation of financial statements' on classification of liabilities, a number of narrow-scope amendments to IFRS 3, IAS 16, IAS 17 and some annual improvements on IFRS 1, IFRS 9, IAS 41 and IFRS 16 and narrow scope amendments to IAS 1, Practice statement 2 and IAS 8. The above amendments are not expected to have a significant impact on the Group's results.
Going concern
The financial information is prepared on a going concern basis. Whilst the balance sheet shows that the Group is in a net current liability position, predominantly as a result of the $220m of Senior US Dollar Loan Notes that are reaching maturity within the next 12 months, the Group has access to GBP1.8bn of undrawn facilities and cash, which provides the Directors with a reasonable expectation that the Group will be able to meet these current liabilities as they fall due. In making this assessment the Directors took into account forecast cash flows and covenant compliance, including stress testing through the impact of sensitivities as part of a 'severe downside scenario'. Before factoring in any income receivable, the undrawn facilities and cash would also be sufficient to cover forecast capital expenditure, property operating costs, administrative expenses, maturing debt and interest over the next 12 months.
Having assessed the Principal risks, the Directors believe that the Group is well placed to manage its financing and other business risks satisfactorily despite the uncertain economic climate, and have a reasonable expectation that the Company and the Group have adequate resources to continue in operation for at least 12 months. Accordingly, they believe the going concern basis is an appropriate one.
Accounting judgements and estimates
In applying the Group's accounting policies, the Directors are required to make judgements and estimates that affect the financial information.
The general risk environment in which the Group operates remained heightened during the period, which is largely due to the continued level of uncertainty associated with the impact of Covid-19, the significant deterioration in the UK retail market and relatively weak investment markets.
Significant areas of estimation are:
Valuation of investment, trading and owner-occupied properties and investments classified as fair value through profit or loss. 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 classified as fair value through profit or loss are inherently subjective, as they are based upon valuer assumptions which may prove to be inaccurate.
Impairment provisioning of lease debtors (including accrued income) and lease incentives, which are presented within investment properties, are now considered to be an area of significant estimation. The impact of Covid-19 has given rise to an increase in lease debtors due from tenants along with higher loss rates. Consequently the impairment provisions, calculated using the expected credit loss model under IFRS 9 against these balances, are higher than in previous periods.
The key assumptions within the expected credit loss model include the tenants' credit risk rating and the related loss rates assumed for each risk rating depending on the ageing profile. In the current environment as a result of Covid-19, more weighting is given to risk rating when determining expected credit losses. Tenant risk ratings are determined by management, taking into consideration information available surrounding a tenant's credit rating, financial position and historical loss rates. Consideration is also given for the current impact of Covid-19 and its potential impact over the next 12 months on their business along with industry trends. Tenants are classified as being in Administration or CVA, high, medium or low risk based on this information. The assigned loss rates for these risk categories are reviewed at each balance sheet date. The same key assumptions are applied in the expected credit loss model for tenant incentives, without the consideration of the ageing profile which is not relevant for these balances. The loss rates attributed to each credit risk rating for tenant incentives is lower than that attributed to lease debtors on the basis that the associated credit risk on these balances, which relate to the tenant's future lease liabilities, is lower than that associated to current tenant debtors outstanding as a result of Covid-19.
Other less significant areas of estimation include the valuation of 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 following items are ongoing areas of accounting judgement, however, significant judgment has not been required for any of these items in the current financial year.
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 consideration of the structure, legal form, contractual terms and other facts and circumstances relating to the relevant entity. 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 information.
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; accounting for transaction costs and contingent consideration; and application of the concept of linked accounting. 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 loss after taxation attributable to shareholders of the Company excluding investment and development property revaluations, gains/losses on investing and trading property disposals, changes in the fair value of financial instruments and associated close-out costs and their related taxation.
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.
2021 2020
=================== =============================== ===============================
Relevant Earnings Relevant Earnings
Relevant number per Relevant number per
earnings of shares share earnings of shares share
Earnings per share GBPm million pence GBPm million pence
=================== ========= ========== ======== ========= ========== ========
Underlying
Underlying basic 175 927 18.9 306 934 32.8
Underlying diluted 175 930 18.8 306 937 32.7
=================== ========= ========== ======== ========= ========== ========
EPRA
EPRA basic 175 927 18.9 306 934 32.8
EPRA diluted 175 930 18.8 306 937 32.7
=================== ========= ========== ======== ========= ========== ========
IFRS
Basic (1,031) 927 (111.2) (1,027) 934 (110.0)
Diluted (1,031) 927 (111.2) (1,027) 934 (110.0)
=================== ========= ========== ======== ========= ========== ========
Net asset value
The Group adopted the EPRA issued new best practice guidelines in the year ending 31 March 2021, incorporating three new measures of net asset value: EPRA Net Tangible Assets (NTA), Net Reinvestment Value (NRV) and Net Disposal Value (NDV). EPRA NTA is considered to be the most relevant measure for the Group and is now the primary measure of net assets, replacing the previously reported EPRA Net Asset Value metric. The total accounting return is now calculated based on EPRA NTA. Further detail on the adopted metrics is included within the supplementary disclosures (Table B).
The net assets and number of shares for each performance measure are shown below. A reconciliation between IFRS net assets and the three EPRA net asset valuation metrics, and the relevant number of shares for each performance measure, are shown within the supplementary disclosures (Table B). EPRA NTA is a measure that is based on IFRS net assets excluding the mark-to-market on derivatives and related debt adjustments, the carrying value of intangibles and deferred taxation on property and derivative valuations. The metric includes the valuation surplus on trading properties and is adjusted for the dilutive impact of share options.
2021 2020
========================== =============================== =============================
Net asset Relevant Net asset
Relevant Relevant value Relevant number value
net number per net of per
assets of shares share assets shares share
Net asset value per share GBPm million pence GBPm million pence
========================== ======== ========== ========= ======== ======== =========
EPRA
EPRA NTA 6,050 933 648 7,202 932 773
EPRA NRV 6,599 933 707 7,872 932 845
EPRA NDV 5,678 933 609 6,762 932 726
IFRS
Basic 5,983 927 645 7,147 927 771
Diluted 5,983 933 641 7,147 932 767
========================== ======== ========== ========= ======== ======== =========
Total accounting return
The Group also measures financial performance with reference to total accounting return. This is calculated as the movement in EPRA Net Tangible Assets per share and dividend paid in the year as a percentage of the EPRA Net Tangible Assets per share at the start of the year.
2021 2020
======================== =============================== =================================
Decrease Dividend Decrease Dividend
in per in per
NTA per share Total NTA share Total
share paid accounting per share paid accounting
pence pence return pence pence return
======================== ======== ======== =========== ========== ======== ===========
Total accounting return (125) 8.40 (15.1%) (131) 31.47 (11.0%)
======================== ======== ======== =========== ========== ======== ===========
3 Revenue and costs
2021 2020
========================== ==========================
Capital Capital
and and
Underlying other Total Underlying other Total
GBPm GBPm GBPm GBPm GBPm GBPm
========================================== ========== ======= ===== ========== ======= =====
Rent receivable 370 - 370 431 - 431
Spreading of tenant incentives and
guaranteed rent increases 7 - 7 (3) - (3)
Surrender premia - - - 5 - 5
========================================== ========== ======= ===== ========== ======= =====
Gross rental income 377 - 377 433 - 433
========================================== ========== ======= ===== ========== ======= =====
Trading property sales proceeds - - - - 87 87
Service charge income 64 - 64 64 - 64
Management and performance fees (from
joint ventures and funds) 7 - 7 8 - 8
Other fees and commissions 20 - 20 21 - 21
========================================== ========== ======= ===== ========== ======= =====
Revenue 468 - 468 526 87 613
========================================== ========== ======= ===== ========== ======= =====
Trading property cost of sales - - - - (70) (70)
Service charge expenses (59) - (59) (61) - (61)
Property operating expenses (45) - (45) (46) - (46)
Provision for impairment of trade
debtors and accrued income (52) - (52) (4) - (4)
Provision for impairment of tenant
incentives and guaranteed rent increases (8) - (8) (20) - (20)
Other fees and commissions expenses (16) - (16) (17) - (17)
========================================== ========== ======= ===== ========== ======= =====
Costs (180) - (180) (148) (70) (218)
========================================== ========== ======= ===== ========== ======= =====
288 - 288 378 17 395
========================================== ========== ======= ===== ========== ======= =====
The cash element of net rental income (gross rental income less property operating expenses) recognised during the year ended 31 March 2021 from properties which were not subject to a security interest was GBP202m (2019/20: GBP316m). Property operating expenses relating to investment properties that did not generate any rental income were GBPnil (2019/20: GBPnil). Contingent rents of GBP5m (2019/20: GBP3m) were recognised in the year.
Further detail on the provision for impairment of trade debtors, accrued income, tenant incentives and guaranteed rent increases is disclosed in Note 7 and Note 10.
4 Valuation movements on property
2021 2020
GBPm GBPm
=========================================================== ======= =======
Consolidated income statement
Revaluation of properties (886) (1,105)
Revaluation of owner-occupied properties (2) -
Revaluation of properties held by joint ventures and funds
accounted for using the equity method (409) (284)
=========================================================== ======= =======
(1,297) (1,389)
=========================================================== ======= =======
Consolidated statement of comprehensive income
Revaluation of owner-occupied properties (1) 1
=========================================================== ======= =======
(1,298) (1,388)
=========================================================== ======= =======
5 Net financing costs
2021 2020
GBPm GBPm
================================================================ ===== =====
Underlying
Financing charges
Facilities and overdrafts (22) (25)
Derivatives 31 30
Other loans (74) (76)
Obligations under head leases (4) (4)
===== =====
(69) (75)
Development interest capitalised 7 8
===== =====
(62) (67)
----- -----
Financing income
Deposits, securities and liquid investments - 1
===== =====
- 1
================================================================ ===== =====
Net financing charges - underlying (62) (66)
================================================================ ===== =====
Capital and other
Financing charges
Valuation movement on fair value hedge accounted derivatives(1) (83) 62
Valuation movement on fair value hedge accounted debt(1) 83 (62)
Capital financing costs - 3
Fair value movement on convertible bonds (3) (4)
Valuation movement on non-hedge accounted derivatives - (40)
===== =====
(3) (41)
===== =====
Financing income
Valuation movement on non-hedge accounted derivatives 15 -
===== =====
15 -
===== =====
Net financing charges - capital 12 (41)
================================================================ ===== =====
Net financing costs
Total financing income 15 1
Total financing charges (65) (108)
================================================================ ===== =====
Net financing costs (50) (107)
================================================================ ===== =====
1. The difference between valuation movement on designated fair value hedge accounted derivatives (hedging instruments) and the valuation movement on fair value hedge accounted debt (hedged item) represents hedge ineffectiveness for the period of GBPnil (2019/20: GBPnil).
Interest payable on unsecured bank loans and related interest rate derivatives was GBP11m (2019/20: GBP9m). Interest on development expenditure is capitalised at the Group's weighted average interest rate of 2.2% (2019/20: 1.9%). The weighted average interest rate on a proportionately consolidated basis at 31 March 2021 was 2.9% (2019/20: 2.5%).
6 Taxation
2021 2020
GBPm GBPm
================================================================ ======= =======
Taxation (expense) income
Current taxation
Underlying profit
Current period UK corporation taxation (2020/21: 19%; 2019/20:
19%) (2) -
Underlying profit adjustments in respect of prior periods(1) (24) -
------- -------
Total current underlying profit taxation expense (26) -
------- -------
Capital profit
Current period UK corporation taxation (2020/21: 19%; 2019/20:
19%) - (1)
Capital profit adjustments in respect of prior periods 1 5
------- -------
Total current capital profit taxation income 1 4
------- -------
Total current taxation (expense) income (25) 4
Deferred taxation on revaluations and derivatives (5) (2)
================================================================ ======= =======
Group total taxation (expense) income (30) 2
Attributable to joint ventures and funds 1 -
================================================================ ======= =======
Total taxation (expense) income (29) 2
================================================================ ======= =======
Taxation reconciliation
Loss on ordinary activities before taxation (1,053) (1,116)
Less: loss attributable to joint ventures and funds(2) 358 227
======= =======
Group loss on ordinary activities before taxation (695) (889)
======= =======
Taxation on loss on ordinary activities at UK corporation
taxation rate of 19% (2019/20: 19%) 132 169
Effects of:
REIT exempt income and gains (134) (165)
Taxation losses - (5)
Deferred taxation on revaluations and derivatives (5) (2)
Adjustments in respect of prior years (23) 5
================================================================ ======= =======
Group total taxation (expense) income (30) 2
================================================================ ======= =======
1. Includes the GBP28m corporation tax charge in relation to the year ended 31 March 2020, discussed below, offset by other credits in respect of prior periods of GBP4m relating to tax provisions in respect of historic taxation matters and points of uncertainty.
2. A current taxation income of GBP1m (2019/20: GBPnil) and a deferred taxation credit of GBPnil (2019/20: GBPnil) 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 2021 was GBP26m (2019/20: GBPnil). Taxation income attributable to Capital and other profit was GBP1m (2019/20: income of GBP4m). Corporation taxation payable at 31 March 2021 was GBP7m (2019/20: GBP17m) as shown on the balance sheet.
A REIT is required to pay Property Income Distributions (PIDs) of at least 90% of the taxable profits from its UK property rental business within 12 months of the end of each accounting period.
Following the temporary suspension of the dividend to best ensure we could effectively support our customers who were hardest hit and protect the long term value of the business as a result of Covid-19, there was a shortfall in the required distributions for the year ended 31 March 2020. We agreed with HMRC that we would remain compliant with the REIT regime requirements through payment of corporation tax at 19% on the underpayment of the PID requirement for the year to 31 March 2020 arising as a consequence of Covid-19. The taxable PID underpayment is expected to be GBP149m and the resulting corporation tax thereon of GBP28m has been paid in the year ended 31 March 2021.
Following the resumption of the dividend, it is expected that the PID requirement for the year to 31 March 2021 and subsequent years will be satisfied in full on a timely basis through dividend payments.
7 Property
Property reconciliation for the year ended 31 March 2021
Investment
Offices and
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
2020 3,188 3,941 400 659 8,188 20 68 8,276
Additions
property purchases 52 - - - 52 - - 52
development expenditure 3 (3) 25 76 101 - 3 104
capitalised interest and
staff costs - - 4 7 11 - - 11
capital expenditure on
asset management
initiatives 20 8 - 6 34 - - 34
right-of-use assets - 2 - - 2 - - 2
====== ============ ====== ============ ============ =========== ========= =======
75 7 29 89 200 - 3 203
====== ============ ====== ============ ============ =========== ========= =======
Disposals (421) (699) - (10) (1,130) - (66) (1,196)
Right-of-use assets
disposals - - (36) - (36) - - (36)
Reclassifications 16 - - (22) (6) 6 - -
Revaluations included in
income statement (683) (202) (7) 6 (886) - (2) (888)
Revaluations included in
OCI - - - - - - (1) (1)
Movement in tenant
incentives
and contracted rent uplift
balances 1 (5) - - (4) - - (4)
====== ============ ====== ============ ============ =========== ========= =======
Carrying value at 31 March
2021 2,176 3,042 386 722 6,326 26 2 6,354
====== ============ ====== ============ ============ =========== ========= =======
Lease liabilities (Notes
11 and 12) (1) (108)
Less valuation surplus
on right-of-use assets(2) (8)
Valuation surplus on trading
properties 9
=================================== ============ ====== ============ ============ =========== ========= =======
Group property portfolio valuation
at 31 March 2021 6,247
Non-controlling interests (137)
=========================== ====== ============ ====== ============ ============ =========== ========= =======
Group property portfolio valuation at 31 March 2021
attributable to shareholders 6,110
===================================================================================== =========== ========= =======
1. The GBP25m difference between lease liabilities of GBP108m and GBP133m per Notes 11 and 12 relates to a GBP25m lease liability where the right-of-use asset is classified as property, plant and equipment.
2. Relates to properties held under leasing agreements. The fair value of right-of-use assets is determined by calculating the present value of net rental cash flows over the term of the lease agreements. IFRS 16 right-of-use assets are not externally valued, their fair value is determined by management, and are therefore not included in the Group property portfolio valuation of GBP6,247m above.
Property valuation
The different valuation method levels are defined below:
Level Quoted prices (unadjusted) in active markets for identical assets
1: or liabilities.
Level Inputs other than quoted prices included within Level 1 that are
2: observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level Inputs for the asset or liability that are not based on observable
3: 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 below. There were no transfers between levels in the year.
The general risk environment in which the Group operates remained heightened during the period, which is largely due to the impact of Covid-19, uncertainty regarding the impact of the UK's exit from the EU, the significant deterioration in the UK retail market and weak investment markets. This environment has had, and may continue to have, a significant impact upon property valuations.
The Group's total property portfolio was valued by external valuers on the basis of fair value, in accordance with the RICS Valuation - Global Standards 2019, published by The Royal Institution of Chartered Surveyors.
The Covid-19 pandemic has continued to impact global financial markets and market activity in many sectors, with some real estate markets having experienced lower levels of transactional activity and liquidity. In some cases, 'lockdowns' have been applied - in varying degrees - to reflect further 'waves' of Covid-19. While these may imply a new stage of the crisis, they are not unprecedented in the same way as the initial impact. As at the valuation date property markets are mostly functioning again, with transaction volumes and other relevant evidence returning to levels which our valuers consider to be an adequate quantum of market evidence upon which to base their opinions of value. Accordingly, and for the avoidance of doubt, our valuers have not reported their valuations as being subject to 'material valuation uncertainty' as defined by VPS 3 and VPGA 10 of the RICS Valuation- Global Standards. Our valuers have, however, highlighted the market context under which their opinions have been prepared and, in recognition of the potential for market conditions to move rapidly in response to changes in the control or future spread of Covid-19, the importance of the valuation date.
In preparing their valuations, our valuers have considered the impact of concessions agreed with tenants at the balance sheet date, which mainly relate to rent deferrals and rent free periods, on valuations, primarily of retail assets. They have also given consideration to occupiers in higher risk sectors, and those assumed to be at risk of default, in determining the appropriate yields to apply.
At 31 March 2020 all of our external valuation reports included a "material valuation uncertainty" declaration, which emphasised that less certainty - and a higher degree of caution - should be attached to the valuations than would normally be the case. In light of this, we reviewed the ranges used for our sensitivity analysis, and adopted expanded ranges to reflect this increased uncertainty. No such declaration was included in our valuation reports at 31 March 2021, with our external valuers concluding that there was an adequate quantum of market evidence upon which to base opinions of value.
There has been no change in the valuation methodology used for investment property as a result of Covid-19.
The information provided to the valuers, and the assumptions and valuation models used by the valuers, are reviewed by the property portfolio team, the Head of Real Estate and the Interim Chief Financial Officer. 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 britishland.com/reports.
A breakdown of valuations split between the Group and its share of joint ventures and funds is shown below:
2021 2020
=================================== ======================= ========================
Joint Joint
ventures ventures
and and
Group funds Total Group funds Total
GBPm GBPm GBPm GBPm GBPm GBPm
=================================== ===== ========= ===== ===== ========= ======
Knight Frank LLP 1,375 40 1,415 1,420 54 1,474
CBRE 1,642 124 1,766 2,097 183 2,280
Jones Lang LaSalle 849 506 1,355 1,348 765 2,113
Cushman & Wakefield 2,381 2,378 4,759 3,241 2,270 5,511
=================================== ===== ========= ===== ===== ========= ======
Total property portfolio valuation 6,247 3,048 9,295 8,106 3,272 11,378
Non-controlling interests (137) (26) (163) (185) (36) (221)
=================================== ===== ========= ===== ===== ========= ======
Total property portfolio valuation
attributable to shareholders 6,110 3,022 9,132 7,921 3,236 11,157
=================================== ===== ========= ===== ===== ========= ======
Information about fair value measurements using unobservable inputs (Level 3) for the year ended 31 March 2021
Costs to complete
ERV per sq ft Equivalent yield per sq ft
===================== ========== ============ =================== ==================== =====================
Fair value
at
31 March
2021 Valuation Min Max Average Min Max Average Min Max Average
Investment GBPm technique GBP GBP GBP % % % GBP GBP GBP
===================== ========== ============ ==== ==== ======= ==== ==== ======== ===== ===== =======
Investment
Retail 2,118 methodology 2 32 18 5 14 8 - 46 13
Investment
Offices 2,918 methodology 9 176 58 4 6 5 - 475 85
Residual
Canada Water(1) 387 methodology 22 53 50 5 6 5 162 343 260
Investment
Residential 66 methodology 2 2 2 5 5 5 - - -
Residual
Developments 723 methodology 65 90 77 4 14 6 2 89 48
===================== ========== ============ ==== ==== ======= ==== ==== ======== ===== ===== =======
Total 6,212
Trading properties
at fair value 35
===================== ========== ============ ==== ==== ======= ==== ==== ======== ===== ===== =======
Group property
portfolio valuation 6,247
===================== ========== ============ ==== ==== ======= ==== ==== ======== ===== ===== =======
1. Includes owner-occupied.
Provision for impairment of tenant incentives and guaranteed rent increases
A provision of GBP23m (31 March 2020: GBP17m) has been made for impairment of tenant incentives and contracted rent uplift balances (guaranteed rents). The charge to the income statement in relation to write-offs and provisions for impairment for tenant incentives and guaranteed rents was GBP8m (2019/20: GBP20m) (see Note 3). The Directors consider that the carrying amount of tenant incentives is approximate to their fair value.
The table below shows the movement in provisions for impairment of tenant incentives during the year ending 31 March 2021 on a Group and on a proportionally consolidated basis.
Proportionally
Group consolidated
Movement in provisions for impairment of tenant incentives GBPm GBPm
=========================================================== ===== ==============
Provisions for impairment of tenant incentives as at 1
April 2020 17 17
Write-offs of tenant incentives (2) (6)
Increase in provision for impairment of tenant incentives 8 18
----- --------------
Total provision charge recognised in income statement 8 18
----- --------------
Provisions for impairment of tenant incentives as at 31
March 2021 23 29
=========================================================== ===== ==============
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 2020 2,188 170 2,358 1,659 699 2,358
Additions 209 - 209 63 146 209
Disposals (41) (12) (53) (13) (40) (53)
Share of loss on ordinary activities
after taxation(1) (330) (27) (357) (213) (144) (357)
Distributions and dividends:
Capital (4) - (4) (4) - (4)
Revenue (26) (8) (34) (34) - (34)
Hedging and exchange movements 1 - 1 1 - 1
===================================== ========= ===== ===== ====== ===== =====
At 31 March 2021 1,997 123 2,120 1,459 661 2,120
===================================== ========= ===== ===== ====== ===== =====
1. The share of loss on ordinary activities after taxation comprises equity accounted losses of GBP213m and IFRS 9 impairment charges against loans of GBP144m, relating to loans owed by MSC Property Intermediate Holdings Limited (GBP131m) and WOSC Partners Limited Partnership (GBP13m). In accordance with IFRS 9, management has assessed the recoverability of loans to joint ventures. Amounts due are expected to be recovered by a joint venture selling its properties and investments and settling financial assets, net of financial liabilities. The net asset value of a joint venture is considered to be a reasonable approximation of the available assets that could be realised to recover the amounts due and the requirement to recognise expected credit losses.
The summarised income statements and balance sheets below 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 2021
MSC Property
Broadgate Intermediate
REIT Holdings WOSC Partners
Ltd Ltd(5) Limited Partnership(5)
=============================================== ============= ============= =======================
Partners Euro Bluebell Norges Bank Norges Bank
LLP Investment Investment
(GIC) Management Management
=============================================== ============= ============= =======================
Property sector City Offices Shopping West End
Broadgate Centres Offices
Meadowhall
=============================================== ============= ============= =======================
Group share 50% 50% 25%
=============================================== ============= ============= =======================
Summarised income statements GBPm GBPm GBPm
=============================================== ============= ============= =======================
Revenue(4) 216 85 12
Costs (79) (49) (6)
============= ============= =======================
137 36 6
Administrative expenses - - -
Net interest payable (61) (29) -
============= ============= =======================
Underlying Profit (loss) 76 7 6
Net valuation movement (172) (421) (57)
Capital financing costs - - -
Profit (loss) on disposal of investment
properties and investments - - -
============= ============= =======================
Loss on ordinary activities before taxation (96) (414) (51)
Taxation - - -
=============================================== ============= ============= =======================
Loss on ordinary activities after taxation (96) (414) (51)
=============================================== ============= ============= =======================
Other comprehensive income - 3 -
=============================================== ============= ============= =======================
Total comprehensive expense (96) (411) (51)
=============================================== ============= ============= =======================
British Land share of total comprehensive
expense (48) (205) (13)
=============================================== ============= ============= =======================
British Land share of distributions payable 22 1 -
=============================================== ============= ============= =======================
Summarised balance sheets
=============================================== ============= ============= =======================
Investment and trading properties 4,501 779 163
Current assets 13 17 4
Cash and deposits 160 20 5
============= ============= =======================
Gross assets 4,674 816 172
============= ============= =======================
Current liabilities (94) (37) (3)
Bank and securitised debt (1,306) (552) -
Loans from joint venture partners (988) (472) (218)
Other non-current liabilities - (17) (4)
============= ============= =======================
Gross liabilities (2,388) (1,078) (225)
=============================================== ============= ============= =======================
Net assets (liabilities) 2,286 (262) (53)
=============================================== ============= ============= ======================= British Land share of net assets (liabilities) less shareholder loans 1,143 - - =============================================== ============= ============= =======================
1. USS joint ventures include the Eden Walk Shopping Centre Unit Trust and the Fareham Property Partnership.
4. Hercules Unit Trust joint ventures and sub-funds includes 50% of the results of Deepdale Co-Ownership Trust, Fort Kinnaird 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.
5. Included in the column headed 'Other joint ventures and funds' are contributions from the following: BL Goodman Limited Partnership, Bluebutton Property Management UK Limited, City of London Office Unit Trust and BL Sainsbury's Superstores Limited.
6. Revenue includes gross rental income at 100% share of GBP262m (2019/20: GBP284m).
7. In accordance with the Group's accounting policies, the Group recognises a nil equity investment in joint ventures in a net liability position at period end.
8. During the year ended 31 March 2021 the Group entered into a joint arrangement with Allianz SE, the new joint venture holds properties which were previously wholly owned by the Group.
Hercules Unit
BL West End The SouthGate USS Trust Other Total
Offices Limited joint joint ventures joint ventures Total Group share
Limited(6) Partnership ventures(1) and sub-funds(2) and funds(3) 2021 2021
=========== ============= =============== ================= =============== ======= ============
Allianz SE Aviva Universities
Investors Superannuation
Scheme Group
PLC
=========== ============= =============== ================= =============== ======= ============
West End Shopping Shopping Retail
Offices Centres Centres Parks
=========== ============= =============== ================= =============== ======= ============
25% 50% 50% Various
=========== ============= =============== ================= =============== ======= ============
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=========== ============= =============== ================= =============== ======= ============
6 10 12 30 - 371 182
(1) (10) (10) (14) - (169) (85)
=========== ============= =============== ================= =============== ======= ============
5 - 2 16 - 202 97
- - - - - - -
(1) (1) - (1) (1) (94) (45)
=========== ============= =============== ================= =============== ======= ============
4 (1) 2 15 (1) 108 52
(26) (62) (57) (65) - (860) (409)
- - - - - - -
8 - - (7) - 1 (1)
=========== ============= =============== ================= =============== ======= ============
(14) (63) (55) (57) (1) (751) (358)
- - - - 3 3 1
=========== ============= =============== ================= =============== ======= ============
(14) (63) (55) (57) 2 (748) (357)
=========== ============= =============== ================= =============== ======= ============
- - - - - 3 1
=========== ============= =============== ================= =============== ======= ============
(14) (63) (55) (57) 2 (745) (356)
=========== ============= =============== ================= =============== ======= ============
(3) (32) (27) (29) 1 (356)
=========== ============= =============== ================= =============== ======= ============
- - 3 8 4 38
=========== ============= =============== ================= =============== ======= ============
520 144 131 236 - 6,474 3,067
4 3 1 1 1 44 22
6 5 5 12 1 214 104
=========== ============= =============== ================= =============== ======= ============
530 152 137 249 2 6,732 3,193
=========== ============= =============== ================= =============== ======= ============
(9) (4) (5) (9) - (161) (78)
(158) - - - - (2,016) (968)
(15) - (31) - (3) (1,727) (805)
(11) (28) - - - (60) (27)
=========== ============= =============== ================= =============== ======= ============
(193) (32) (36) (9) (3) (3,964) (1,878)
=========== ============= =============== ================= =============== ======= ============
337 120 101 240 (1) 2,768 1,315
=========== ============= =============== ================= =============== ======= ============
84 60 50 122 - 1,459
=========== ============= =============== ================= =============== ======= ============
-- 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.
Operating cash flows of joint ventures and funds (Group share)
2021 2020
GBPm GBPm
==================================================================== ===== =====
Rental income received from tenants 119 131
Operating expenses paid to suppliers and employees (26) (27)
===== =====
Cash generated from operations 93 104
===== =====
Interest paid (47) (56)
Interest received - 1
UK corporation tax paid (2) (2)
==================================================================== ===== =====
Cash inflow from operating activities 44 47
==================================================================== ===== =====
Cash inflow from operating activities deployed as:
Surplus (deficit) cash retained within joint ventures and
funds 10 (2)
Revenue distributions per consolidated statement of cash
flows 34 49
Revenue distributions split between controlling and non-controlling
interests
==================================================================== ===== =====
Attributable to non-controlling interests 2 2
Attributable to shareholders of the Company 32 47
==================================================================== ===== =====
9 Other investments
2021 2020
====================================== ======================================
Fair Fair
value value
through through
profit Amortised Intangible profit Amortised Intangible
or loss cost assets Total or loss cost assets Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
====================== ======== ========= ========== ===== ======== ========= ========== =====
At 1 April 111 3 11 125 114 5 10 129
Additions 3 - 5 8 4 2 4 10
Transfers / disposals (109) (1) - (110) - (4) - (4)
Revaluation 1 - - 1 (7) - - (7)
Amortisation - - (4) (4) - - (3) (3)
====================== ======== ========= ========== ===== ======== ========= ========== =====
At 31 March 6 2 12 20 111 3 11 125
====================== ======== ========= ========== ===== ======== ========= ========== =====
The amount included in the fair value through profit or loss relates to private equity / venture capital investments of GBP6m (2019/20: GBP2m) which are categorised as Level 3 in the fair value hierarchy and government bonds of GBPnil (2019/20: GBP16m) which are classified as Level 1. The fair values of private equity / venture capital investments are determined by the Directors.
As at 31 March 2020, fair value through profit or loss included GBP93m comprising interests as a trust beneficiary. The trust's assets comprise freehold reversions in a pool of commercial properties, comprising Sainsbury's superstores. This interest was sold for GBP102m in the year ending 31 March 2021.
10 Debtors
2021 2020
GBPm GBPm
=============================== ===== =====
Trade and other debtors 38 29
Prepayments and accrued income 14 10
Rental deposits 4 17
=============================== ===== =====
56 56
=============================== ===== =====
Trade and other debtors are shown after deducting a provision for impairment against tenant debtors of GBP57m (2019/20: GBP14m). Accrued income is shown after deducting a provision for impairment of GBP5m (2019/20: GBPnil). The provision for impairment is calculated as an expected credit loss on trade and other debtors in accordance with IFRS 9.
The charge to the income statement for the year in relation to provisions for impairment of trade receivables and accrued income was GBP52m (2019/20: GBP4m), as disclosed in Note 3. Within this charge, GBP9m (2019/20: GBPnil) represents provisions for impairment made against receivable balances related to billed rental income due on 25 March rent quarter day. Rental income is recognised on a straight-line basis over the lease term in accordance with IFRS 16. The majority of rental income relating to 25 March rent quarter day has, therefore, not yet been recognised in the income statement in the current year and is instead recognised as deferred income, within current liabilities as at 31 March 2021. As the rent due on 25 March has been billed to the tenant, however, the Group is required to provide for expected credit losses at the balance sheet date in accordance with IFRS 9. This creates a mismatch in the period between the recognition of rental income and the impairment of the associated rent receivable.
The increase in provisions for impairment of trade debtors and accrued income of GBP48m (2019/20: GBP3m) is equal to the charge to the income statement of GBP52m (2019/20: GBP4m), less write-offs of trade debtors of GBP4m (2019/20: GBP1m).
The Directors consider that the carrying amount of trade and other debtors is approximate to their fair value.
The table below summarises the movement in provisioning for impairment of tenant debtors and accrued income during the year ending 31 March 2021.
Proportionally
Movement in provisions for impairment of tenant debtors Group consolidated
and accrued income GBPm GBPm
======================================================== ===== ==============
Provisions for impairment of tenant debtors and accrued
income as at 1 April 2020 14 17
Write-offs of tenant debtors (4) (4)
Increase in provision for impairment of tenant debtors 47 59
Increase in provision for impairment of accrued income 5 6
----- --------------
Total increase in provision charge recognised in income
statement 52 65
===== ==============
Provision for impairment of tenant debtors and accrued
income as at 31 March 2021 62 78
======================================================== ===== ==============
11 Creditors
2021 2020
GBPm GBPm
=================================== ===== =====
Trade creditors 55 55
Other taxation and social security 25 27
Accruals 68 89
Deferred income 62 58
Lease liabilities 5 7
Rental deposits due to tenants 4 17
=================================== ===== =====
219 253
=================================== ===== =====
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
2021 2020
GBPm GBPm
================== ===== =====
Lease liabilities 128 156
================== ===== =====
128 156
================== ===== =====
13 Deferred tax
The movement on deferred tax is as shown below:
Deferred tax assets year ended 31 March 2021
Debited
1 April to Credited 31 March
2020 income to equity 2021
GBPm GBPm GBPm GBPm
====================== ======= ======= ========== ========
Temporary differences 5 (5) - -
====================== ======= ======= ========== ========
5 (5) - -
====================== ======= ======= ========== ========
Deferred tax liabilities year ended 31 March 2021
GBPm GBPm GBPm GBPm
===================================== ==== ==== ==== ====
Property and investment revaluations (6) - 6 -
===================================== ==== ==== ==== ====
(6) - 6 -
===================================== ==== ==== ==== ====
Net deferred tax liabilities (1) (5) 6 -
===================================== ==== ==== ==== ====
Deferred tax assets year ended 31 March 2020
Debited
1 April to Credited 31 March
2019 income(1) to equity(2) 2020
GBPm GBPm GBPm GBPm
=================================================== ======= ========== ============= ========
Interest rate and currency derivative revaluations 1 (1) - -
Temporary differences 6 (1) - 5
=================================================== ======= ========== ============= ========
7 (2) - 5
=================================================== ======= ========== ============= ========
Deferred tax liabilities year ended 31 March 2020
GBPm GBPm GBPm GBPm
====================================== ==== ==== ==== ====
Property and investment revaluations (6) - - (6)
====================================== ==== ==== ==== ====
(6) - - (6)
====================================== ==== ==== ==== ====
Net deferred tax assets (liabilities) 1 (2) - (1)
====================================== ==== ==== ==== ====
1. A GBP1m credit in respect of the deferred tax asset, credited to income, results from the change in the tax rate used to calculate the deferred tax to 19% (2018/19: 17%).
2. A GBP1m debit in respect of the deferred tax liability, debited to equity, results from the change in the tax rate used to calculate deferred tax to 19% (2018/19: 17%).
The following corporation tax rate has been substantively enacted: 19% effective from 1 April 2017. 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 19% (2019/20: 19%) of GBPnil (2019/20: GBP4m) 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 GBP137m (2019/20: GBP135m) exist at 31 March 2021.
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 2021, the Group had an unrecognised deferred tax asset calculated at 19% (2019/20: 19%) of GBP45m (2019/20: GBP52m) 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 2021, the value of such properties is GBP801m (2019/20: GBP254m) and if these properties were to be sold and no tax exemption was available, the tax arising would be GBP0.3m (2019/20: GBP21m).
14 Net debt
2021 2020
Footnote GBPm GBPm
============================================================== ======== ===== =====
Secured on the assets of the Group
5.264% First Mortgage Debenture Bonds 2035 361 375
5.0055% First Mortgage Amortising Debentures 2035 89 91
5.357% First Mortgage Debenture Bonds 2028 241 249
Bank loans 1 358 515
1,049 1,230
Unsecured
4.635% Senior US Dollar Notes 2021 2 157 180
4.766% Senior US Dollar Notes 2023 2 102 117
5.003% Senior US Dollar Notes 2026 2 67 80
3.81% Senior Notes 2026 111 113
3.97% Senior Notes 2026 112 115
0% Convertible Bond 2020 - 347
2.375% Sterling Unsecured Bond 2029 298 298
4.16% Senior US Dollar Notes 2025 2 77 89
2.67% Senior Notes 2025 37 37
2.75% Senior Notes 2026 37 37
Floating Rate Senior Notes 2028 80 80
Floating Rate Senior Notes 2034 102 102
Facilities and overdrafts 181 677
===== =====
1,361 2,272
============================================================== ======== ===== =====
Gross debt 3 2,410 3,502
============================================================== ======== ===== =====
Interest rate and currency derivative liabilities 128 169
Interest rate and currency derivative assets (135) (231)
Cash and short term deposits 4,5 (154) (193)
============================================================== ======== ===== =====
Total net debt 2,249 3,247
============================================================== ======== ===== =====
Net debt attributable to non-controlling interests (70) (107)
============================================================== ======== ===== =====
Net debt attributable to shareholders of the Company 2,179 3,140
============================================================== ======== ===== =====
Total net debt 2,249 3,247
============================================================== ======== ===== =====
Amounts payable under leases (Notes 11 and 12) 133 163
============================================================== ======== ===== =====
Total net debt (including lease liabilities) 2,382 3,410
============================================================== ======== ===== =====
Net debt attributable to non-controlling interests (including
lease liabilities) (75) (112)
============================================================== ======== ===== =====
Net debt attributable to shareholders of the Company
(including lease liabilities) 2,307 3,298
============================================================== ======== ===== =====
1. These are non-recourse borrowings with no recourse for repayment to other companies or assets in the Group.
2021 2020
GBPm GBPm
==================== ===== =====
Hercules Unit Trust 358 515
==================== ===== =====
358 515
==================== ===== =====
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 2021 was GBP2,291m (2019/20: GBP3,294m). Included in this is the principal amount of secured borrowings and other borrowings of non-recourse companies of GBP998m of which the borrowings of the partly-owned subsidiary, Hercules Unit Trust, not beneficially owned by the Group are GBP79m.
4. Included within cash and short term deposits is the cash and short term deposits of Hercules Unit Trust, of which GBP8m is the proportion not beneficially owned by the Group.
5. Cash and deposits not subject to a security interest amount to GBP145m (2019/20: GBP173m).
Maturity analysis of net debt
2021 2020
GBPm GBPm
============================================ ===== =====
Repayable: within one year and on demand 161 637
===== =====
Between: one and two years 169 188
two and five years 846 829
five and ten years 738 1,141
ten and fifteen years 496 107
fifteen and twenty years - 600
===== =====
2,249 2,865
===== =====
Gross debt 2,410 3,502
Interest rate and currency derivatives (7) (62)
Cash and short term deposits (154) (193)
============================================ ===== =====
Net debt 2,249 3,247
============================================ ===== =====
0% Convertible bond 2015 (maturity 2020)
On 9 June 2020, the GBP350 million convertible bonds were redeemed at par in cash.
Fair value and book value of net debt
2021 2020
========================================= ========================== ==========================
Fair Book Fair Book
value value Difference value value Difference
GBPm GBPm GBPm GBPm GBPm GBPm
========================================= ====== ====== ========== ====== ====== ==========
Debentures and unsecured bonds 1,978 1,871 107 2,022 1,964 58
Convertible bonds - - - 347 347 -
Bank debt and other floating rate
debt 546 539 7 1,197 1,191 6
========================================= ====== ====== ========== ====== ====== ==========
Gross debt 2,524 2,410 114 3,566 3,502 64
========================================= ====== ====== ========== ====== ====== ==========
Interest rate and currency derivative
liabilities 128 128 - 169 169 -
Interest rate and currency derivative
assets (135) (135) - (231) (231) -
Cash and short term deposits (154) (154) - (193) (193) -
========================================= ====== ====== ========== ====== ====== ==========
Net debt 2,363 2,249 114 3,311 3,247 64
========================================= ====== ====== ========== ====== ====== ==========
Net debt attributable to non-controlling
interests (70) (70) - (107) (107) -
========================================= ====== ====== ========== ====== ====== ========== Net debt attributable to shareholders of the Company 2,293 2,179 114 3,204 3,140 64 ========================================= ====== ====== ========== ====== ====== ==========
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 adviser.
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)
2021 2020
GBPm GBPm
============================================================== ===== ======
Group loan to value (LTV) 25.1% 28.9%
============================================================== ===== ======
Principal amount of gross debt 2,291 3,294
Less debt attributable to non-controlling interests (79) (113)
Less cash and short term deposits (balance sheet) (154) (193)
Plus cash attributable to non-controlling interests 8 6
============================================================== ===== ======
Total net debt for LTV calculation 2,066 2,994
============================================================== ===== ======
Group property portfolio valuation (Note 7) 6,247 8,106
Investments in joint ventures and funds (Note 8) 2,120 2,358
Other investments and property, plant and equipment (balance
sheet) (1) 26 131
Less property and investments attributable to non-controlling
interests (163) (221)
============================================================== ===== ======
Total assets for LTV calculation 8,230 10,374
============================================================== ===== ======
1. The GBP24m difference between other investments and plant, property and equipment per the balance sheet totalling GBP50m, relates to a right-of-use asset recognised under a lease which is classified as property, plant and equipment which is not included within Total assets for the purposes of the LTV calculation.
Proportionally consolidated loan to value (LTV)
2021 2020
GBPm GBPm
============================================================= ===== ======
Proportionally consolidated loan to value (LTV) 32.0% 34.0%
============================================================= ===== ======
Principal amount of gross debt 3,262 4,271
Less debt attributable to non-controlling interests (79) (113)
Less cash and short term deposits (258) (322)
Plus cash attributable to non-controlling interests 10 6
============================================================= ===== ======
Total net debt for proportional LTV calculation 2,935 3,842
============================================================= ===== ======
Group property portfolio valuation (Note 7) 6,247 8,106
Share of property of joint ventures and funds (Note 7) 3,048 3,272
Other investments and property, plant and equipment (balance
sheet) (1) 26 131
Less property attributable to non-controlling interests (163) (221)
============================================================= ===== ======
Total assets for proportional LTV calculation 9,158 11,288
============================================================= ===== ======
1. The GBP24m difference between other investments and plant, property and equipment per the balance sheet totalling GBP50m, relates to a right-of-use asset recognised under a lease which is classified as property, plant and equipment which is not included within Total assets for the purposes of the LTV calculation.
British Land Unsecured Financial Covenants
The two financial covenants applicable to the Group unsecured debt including convertible bonds are shown below:
2021 2020
GBPm GBPm
================================================================= ===== =====
Net Borrowings not to exceed 175% of Adjusted Capital and
Reserves 33% 40%
================================================================= ===== =====
Principal amount of gross debt 2,291 3,294
Less the relevant proportion of borrowings of the partly-owned
subsidiary/non-controlling interests (79) (113)
Less cash and deposits (balance sheet) (154) (193)
Plus the relevant proportion of cash and deposits of the
partly-owned subsidiary/non-controlling interests 8 6
================================================================= ===== =====
Net Borrowings 2,066 2,994
================================================================= ===== =====
Share capital and reserves (balance sheet) 5,983 7,147
EPRA deferred tax adjustment (EPRA Table A) - 6
Trading property surpluses (EPRA Table A) 9 13
Exceptional refinancing charges (see below) 188 199
Fair value adjustments of financial instruments (EPRA Table
A) 115 141
Less reserves attributable to non-controlling interests (balance
sheet) (59) (112)
================================================================= ===== =====
Adjusted Capital and Reserves 6,236 7,394
================================================================= ===== =====
In calculating Adjusted Capital and Reserves for the purpose of the unsecured debt financial covenants, there is an adjustment of GBP188m (2019/20: GBP199m) to reflect the cumulative net amortised exceptional items relating to the refinancings in the years ended 31 March 2005, 2006 and 2007.
2021 2020
GBPm GBPm
================================================================== ======= =======
Net Unsecured Borrowings not to exceed 70% of Unencumbered
Assets 25% 30%
================================================================== ======= =======
Principal amount of gross debt 2,291 3,294
Less cash and deposits not subject to a security interest
(being GBP145m less the relevant proportion of cash and deposits
of the partly-owned subsidiary/non-controlling interests
of GBP6m) (139) (169)
Less principal amount of secured and non-recourse borrowings (998) (1,156)
================================================================== ======= =======
Net Unsecured Borrowings 1,154 1,969
================================================================== ======= =======
Group property portfolio valuation (Note 7) 6,247 8,106
Investments in joint ventures and funds (Note 8) 2,120 2,358
Other investments and property, plant and equipment (balance
sheet) (1) 26 131
Less investments in joint ventures (2,120) (2,358)
Less encumbered assets (1,592) (1,733)
================================================================== ======= =======
Unencumbered Assets 4,681 6,504
================================================================== ======= =======
1. The GBP24m difference between other investments and plant, property and equipment per the balance sheet totalling GBP50m, relates to a right-of-use asset recognised under a lease which is classified as property, plant and equipment which is not included within Unencumbered Assets for the purposes of the covenant calculation.
Reconciliation of movement in Group net debt for the year ended 31 March 2021
Arrangement
Foreign costs
2020 Cash flows Transfers(3) exchange Fair value amortisation 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================= ===== ========== ============ ========= ========== ============= =====
Short term borrowings 637 (637) 161 - (2) 2 161
Long term borrowings 2,865 (367) (161) (44) (46) 2 2,249
Derivatives(1) (62) 14 - 44 (3) - (7)
================================= ===== ========== ============ ========= ========== ============= =====
Total liabilities from financing
activities(4) 3,440 (990) - - (51) 4 2,403
Cash and cash equivalents (193) 39 - - - - (154)
================================= ===== ========== ============ ========= ========== ============= =====
Net debt 3,247 (951) - - (51) 4 2,249
================================= ===== ========== ============ ========= ========== ============= =====
Reconciliation of movement in Group net debt for the year ended 31 March 2020
Arrangement
Foreign costs
2019 Cash flows Transfers(3) exchange Fair value amortisation 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================= ===== ========== ============ ========= ========== ============= =====
Short term borrowings 99 (121) 637 - 22 - 637
Long term borrowings 2,932 507 (637) 21 37 5 2,865
Derivatives(2) (24) 4 - (21) (21) - (62)
================================= ===== ========== ============ ========= ========== ============= =====
Total liabilities from financing
activities(5) 3,007 390 - - 38 5 3,440
Cash and cash equivalents (242) 49 - - - - (193)
================================= ===== ========== ============ ========= ========== ============= =====
Net debt 2,765 439 - - 38 5 3,247
================================= ===== ========== ============ ========= ========== ============= =====
1. Cash flows on derivatives include GBP24m of net receipts on derivative interest.
2. Cash flows on derivatives include GBP17m of net receipts on derivative interest.
3. Transfers comprises debt maturing from long term to short term borrowings.
4. Cash flows of GBP990m shown above represents net cash flows on capital payments in respect of interest rate derivatives of GBP10m, decrease in bank and other borrowings of GBP1,218m and drawdowns on bank and other borrowings of GBP214m shown in the consolidated statement of cash flows, along with GBP24m of net receipts on derivative interest.
5. Cash flows of GBP390m shown above represents net cash flows on capital payments in respect of interest rate derivatives of GBP14m, decrease in bank and other borrowings of GBP189m and drawdowns on bank and other borrowings of GBP576m shown in the consolidated statement of cash flows, along with GBP17m 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.
2021 2020
=========================== ========================== ==========================
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 - (135) - (135) - (231) - (231)
Other investments - fair
value through profit or
loss (Note 9) - - (6) (6) (16) - (95) (111)
=========================== ===== ===== ===== ===== ===== ===== ===== =====
Assets - (135) (6) (141) (16) (231) (95) (342)
=========================== ===== ===== ===== ===== ===== ===== ===== =====
Interest rate and currency
derivative liabilities - 128 - 128 - 169 - 169
Convertible bonds - - - - 347 - - 347
=========================== ===== ===== ===== ===== ===== ===== ===== =====
Liabilities - 128 - 128 347 169 - 516
=========================== ===== ===== ===== ===== ===== ===== ===== =====
Total - (7) (6) (13) 331 (62) (95) 174
=========================== ===== ===== ===== ===== ===== ===== ===== =====
Categories of financial instruments
2021 2020
GBPm GBPm
========================================================================= ======= =======
Financial assets
Amortised cost
Cash and short term deposits 154 193
Trade and other debtors (Note 10) 42 46
Other investments (Note 9) 2 3
Fair value through profit or loss
Derivatives in designated fair value hedge accounting relationships(1,2) 126 209
Derivatives not in designated hedge accounting relationships 9 22
Other investments (Note 9) 6 111
========================================================================= ======= =======
339 584
========================================================================= ======= =======
Financial liabilities
Amortised cost
Creditors (Note 11) (141) (180)
Gross debt (2,410) (3,155)
Lease liabilities (Notes 11 and 12) (133) (163)
Fair value through profit or loss
Derivatives not in designated accounting relationships (128) (167)
Convertible bond - (347)
Fair value through other comprehensive income
Derivatives in designated cash flow hedge accounting relationships(1,2) - (2)
========================================================================= ======= =======
(2,812) (4,014)
========================================================================= ======= =======
Total (2,473) (3,430)
========================================================================= ======= =======
1. Derivative assets and liabilities in designated hedge accounting relationships sit within the derivative assets and derivative liabilities balances of the consolidated balance sheet.
2. The fair value of derivative assets in designated hedge accounting relationships represents the accumulated amount of fair value hedge adjustments on hedged items.
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 are approximate to their fair value, and that the carrying amounts are recoverable.
Maturity of committed undrawn borrowing facilities
2021 2020
GBPm GBPm
======================================================== ===== =====
Maturity
date: over five years 347 50
between four and five years 1,049 1,046
between three and four years 294 -
------------------------------------------------------- ----- -----
Total facilities available for more than three years 1,690 1,096
-------------------------------------------------------- ----- -----
Between two and three years - 20
Between one and two years - -
Within one year - -
======================================================== ===== =====
Total 1,690 1,116
======================================================== ===== =====
The undrawn facilities are comprised of British Land undrawn facilities of GBP1,690m plus undrawn facilities of Hercules Unit Trust totalling GBPnil.
15 Dividends
As announced on 9 October 2020, dividend payments were resumed in the year ended 31 March 2021 following the temporary suspension in March 2020. Under the Group's revised dividend policy, going forward the dividend will be paid semi-annually, fixed at 80% of Underlying earnings per share based on the most recently completed six-month period.
The Final dividend payment for the six-month period ending 31 March 2021 will be 6.64p. Payment will be made on 6 August 2021 to shareholders on the register at close of business on 25 June 2021. The Final dividend will be a Property Income Distribution and no SCRIP alternative will be offered.
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.
Pence
per 2021 2020
Payment date Dividend share GBPm GBPm
================================= ========================= ======= ===== =====
Current year dividends
06.08.2021 2021 Final 6.64
19.02.2021 2021 Interim 8.40 78
15.04
-------
Prior year dividends
07.02.2020 2020 2nd interim 7.9825 74
08.11.2019 2020 1st interim 7.9825 74
-------
15.97
-------
02.08.2019 2019 4th interim 7.75(1) 73
03.05.2019 2019 3rd interim 7.75 74
--------------------------------- ------------------------- ------- ----- -----
Dividends in consolidated statement of changes in equity 78 295
Dividends settled in shares - -
------------------------------------------------------------ ------- ----- -----
Dividends settled in cash 78 295
Timing difference relating to payment of withholding
tax (2) -
------------------------------------------------------------ ------- ----- -----
Dividends in cash flow statement 76 295
------------------------------------------------------------ ------- ----- -----
1. Dividend split half PID, half non-PID.
16 Share capital and reserves
2021 2020
============================================== =========== ============
Number of ordinary shares in issue at 1 April 937,938,097 960,589,072
Share issues 43,895 1,144,135
Repurchased and cancelled - (23,795,110)
============================================== =========== ============
At 31 March 937,981,992 937,938,097
============================================== =========== ============
Of the issued 25p ordinary shares, 7,376 shares were held in the ESOP trust (2019/20: 7,376), 11,266,245 shares were held as treasury shares (2019/20: 11,266,245) and 926,708,371 shares were in free issue (2019/20: 926,664,476). No treasury shares were acquired by the ESOP trust during the year. All issued shares are fully paid.
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. The Other/unallocated sector includes residential properties.
The relevant gross rental income, net rental income, operating result and property assets, being the measures of segment revenue, segment result and segment assets used by the management of the business, are set out below. Management reviews the performance of the business principally on a proportionally consolidated basis, which includes the Group's share of joint ventures and funds on a line-by-line basis and excludes non-controlling interests in the Group's subsidiaries. The chief operating decision maker for the purpose of segment information is the Executive Committee.
Gross rental income is derived from the rental of buildings. Operating result is the net of net rental income, fee income and administrative expenses. No customer exceeded 10% of the Group's revenues in either year.
From 1 April 2021, the Group intends to change to reporting under two principal sectors, Campuses and Retail & Fulfilment, in line with changes to how management intends to review the performance of the business.
Segment result
Offices Retail Canada Water Other/unallocated Total
======================== ============ ============ ============== =================== ============
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================== ===== ===== ===== ===== ====== ====== ========= ======== ===== =====
Gross rental income
British Land Group 156 166 195 236 7 9 3 4 361 415
Share of joint ventures
and funds 86 71 56 71 - - - - 142 142
======================== ===== ===== ===== ===== ====== ====== ========= ======== ===== =====
Total 242 237 251 307 7 9 3 4 503 557
======================== ===== ===== ===== ===== ====== ====== ========= ======== ===== =====
Net rental income
British Land Group 134 145 126 189 5 8 - 4 265 346
Share of joint ventures
and funds 69 63 28 66 - - - - 97 129
======================== ===== ===== ===== ===== ====== ====== ========= ======== ===== =====
Total 203 208 154 255 5 8 - 4 362 475
======================== ===== ===== ===== ===== ====== ====== ========= ======== ===== =====
Operating result
British Land Group 133 146 121 193 1 3 (48) (42) 207 300
Share of joint ventures
and funds 69 57 28 60 - - - - 97 117
======================== ===== ===== ===== ===== ====== ====== ========= ======== ===== =====
Total 202 203 149 253 1 3 (48) (42) 304 417
======================== ===== ===== ===== ===== ====== ====== ========= ======== ===== =====
2021 2020
Reconciliation to Underlying Profit GBPm GBPm
================================================================== ======= =======
Operating result 304 417
Net financing costs (103) (111)
================================================================== ======= =======
Underlying Profit 201 306
================================================================== ======= =======
Reconciliation to loss on ordinary activities before taxation
================================================================== ======= =======
Underlying Profit 201 306
Capital and other (1,257) (1,434)
Underlying Profit attributable to non-controlling interests 3 12
================================================================== ======= =======
Loss on ordinary activities before taxation (1,053) (1,116) ================================================================== ======= ======= Reconciliation to Group revenue ================================================================== ======= ======= Gross rental income per operating segment result 503 557 Less share of gross rental income of joint ventures and funds (142) (142) Plus share of gross rental income attributable to non-controlling interests 16 18 ================================================================== ======= ======= Gross rental income (Note 3) 377 433 ================================================================== ======= ======= Trading property sales proceeds - 87 Service charge income 64 64 Management and performance fees (from joint ventures and funds) 7 8 Other fees and commissions 20 21 ================================================================== ======= ======= Revenue (consolidated income statement) 468 613 ================================================================== ======= =======
A reconciliation between net financing costs in the consolidated income statement and net financing costs of GBP103m (2019/20: GBP111m) in the segmental disclosures above can be found within Table A in the supplementary disclosures. Of the total revenues above, GBPnil (2019/20: GBPnil) was derived from outside the UK.
Segment assets
Offices Retail Canada Water Other/unallocated Total
======================== ============ ============ ============== =================== =============
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================== ===== ===== ===== ===== ====== ====== ========= ======== ===== ======
Property assets
British Land Group 3,622 4,470 1,988 2,960 387 364 121 147 6,118 7,941
Share of joint ventures
and funds 2,418 2,323 604 913 - - - - 3,022 3,236
======================== ===== ===== ===== ===== ====== ====== ========= ======== ===== ======
Total 6,040 6,793 2,592 3,873 387 364 121 147 9,140 11,177
======================== ===== ===== ===== ===== ====== ====== ========= ======== ===== ======
Reconciliation to net assets
2021 2020
British Land Group GBPm GBPm
=================================== ======= =======
Property assets 9,140 11,177
Other non-current assets 51 131
=================================== ======= =======
Non-current assets 9,191 11,308
=================================== ======= =======
Other net current liabilities (203) (252)
Adjusted net debt (2,938) (3,854)
Other non-current liabilities - -
=================================== ======= =======
EPRA net tangible assets (diluted) 6,050 7,202
Non-controlling interests 59 112
EPRA adjustments (126) (167)
=================================== ======= =======
Net assets 5,983 7,147
=================================== ======= =======
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 2021
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 2021 Year ended 31 March 2020
=============================================== ===============================================
Joint Less non- Joint Less non-
ventures controlling Proportionally ventures controlling Proportionally
Group and funds interests consolidated Group and funds interests consolidated
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================== ===== ========== ============ ============== ===== ========== ============ ==============
Gross rental
income(1) 382 142 (16) 508 436 142 (18) 560
Property operating
expenses (105) (45) 9 (141) (70) (13) 1 (82)
===== ========== ============ ============== ===== ========== ============ ==============
Net rental income 277 97 (7) 367 366 129 (17) 478
Administrative
expenses (74) - - (74) (73) (1) - (74)
Net fees and other
income 11 - - 11 12 - 1 13
===== ========== ============ ============== ===== ========== ============ ==============
Ungeared income
return 214 97 (7) 304 305 128 (16) 417
Net financing
costs (62) (45) 4 (103) (66) (49) 4 (111)
================== ===== ========== ============ ============== ===== ========== ============ ==============
Underlying Profit 152 52 (3) 201 239 79 (12) 306
================== ===== ========== ============ ============== ===== ========== ============ ==============
Underlying
taxation (26) - - (26) - - - -
================== ===== ========== ============ ============== ===== ========== ============ ==============
Underlying Profit
after
taxation 126 52 (3) 175 239 79 (12) 306
================== ===== ========== ============ ============== ===== ========== ============ ==============
Valuation movement (1,298) (1,389)
Other capital and
taxation
(net)(2) 87 57
================== ===== ========== ============ ============== ===== ========== ============ ==============
Result
attributable
to shareholders
of
the Company (1,036) (1,026)
================== ===== ========== ============ ============== ===== ========== ============ ==============
1. Group gross rental income includes GBP5m (2019/20: GBP3m) of all-inclusive rents relating to service charge income.
2. Includes other comprehensive income, movement in dilution of share options and the movement in items excluded for EPRA NTA.
Summary balance sheet based on proportional consolidation as at 31 March 2021
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 Tangible 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
Share on Valuation EPRA EPRA
of joint Less derivatives surplus NTA NTA
ventures non- and related on 31 31
and controlling Share debt Lease trading March March
Group funds interests options adjustments liabilities properties Intangibles 2021 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============== ======= ======== =========== ======= =========== =========== ========== =========== ======= =======
Retail
properties 2,183 646 (163) - - (74) - - 2,592 3,873
Office
properties 3,663 2,421 - - - (53) 9 - 6,040 6,793
Canada Water
properties 387 - - - - - - - 387 364
Other
properties 121 - - - - - - - 121 147 ============== ======= ======== =========== ======= =========== =========== ========== =========== ======= ======= Total properties(1) 6,354 3,067 (163) - - (127) 9 - 9,140 11,177 Investments in joint ventures and funds 2,120 (2,120) - - - - - - - - Other investments 20 30 - - - - - (12) 38 125 Other net (liabilities) assets (262) (74) 5 14 - 127 - - (190) (246) Net debt (2,249) (903) 99 - 115 - - - (2,938) (3,854) ============== ======= ======== =========== ======= =========== =========== ========== =========== ======= ======= Net assets 5,983 - (59) 14 115 - 9 (12) 6,050 7,202 ============== ======= ======== =========== ======= =========== =========== ========== =========== ======= ======= EPRA NTA per share (Note 2) 648p 773p ============== ======= ======== =========== ======= =========== =========== ========== =========== ======= =======
1. Included within the total property value of GBP9,140m (2019/20: GBP11,177m) are right-of-use assets net of lease liabilities of GBP8m (2019/20: GBP20m), which in substance, relate to properties held under leasing agreements. The fair value of right-of-use assets are determined by calculating the present value of net rental cash flows over the term of the lease agreements.
EPRA Net Tangible Assets movement
Year ended Year ended
31 March 2021 31 March 2020
======================= ================ ================
Pence Pence
per per
GBPm share GBPm share
======================= ======== ====== ======== ======
Opening EPRA NTA 7,202 773 8,639 904
Income return 175 19 306 33
Capital return (1,249) (136) (1,323) (139)
Dividend paid (78) (8) (295) (31)
Purchase of own shares - - (125) 6
======================= ======== ====== ======== ======
Closing EPRA NTA 6,050 648 7,202 773
======================= ======== ====== ======== ======
Table B: EPRA Performance measures
EPRA Performance measures summary table
2021 2020
============= ===============
Pence Pence
per per
GBPm share GBPm share
===================================================== ===== ====== ===== ========
EPRA Earnings - basic 175 18.9 306 32.8
- diluted 175 18.8 306 32.7
==================================================== ===== ====== ===== ======
EPRA Net Initial Yield 4.6% 4.6%
EPRA 'topped-up' Net Initial Yield 5.2% 5.1%
EPRA Vacancy Rate 8.3% 6.3%
===================================================== ===== ====== ===== ========
2021 2020
========= ===================== =====================
Net asset Net asset
value value
per per
Net assets share Net assets share
GBPm (pence) GBPm (pence)
========= ========== ========= ========== =========
EPRA NTA 6,050 648 7,202 773
EPRA NRV 6,599 707 7,872 845
EPRA NDV 5,678 609 6,762 726
========= ========== ========= ========== =========
Calculation and reconciliation of EPRA/IFRS earnings and EPRA/IFRS earnings per share
2021 2020
(Audited) GBPm GBPm
==================================================================== ======= =======
Loss attributable to the shareholders of the Company (1,031) (1,027)
Exclude:
Group - current taxation 25 (4)
Group - deferred taxation 5 2
Joint ventures and funds - taxation (1) -
Group - valuation movement 888 1,105
Group - profit on disposal of investment properties and investments (28) (1)
Group - profit on disposal of trading properties - (17)
Joint ventures and funds - net valuation movement (including
result on disposals) 410 284
Joint ventures and funds - capital financing costs - 22
Changes in fair value of financial instruments and associated
close-out costs (12) 41
Non-controlling interests in respect of the above (55) (99)
==================================================================== ======= =======
Underlying Profit 201 306
==================================================================== ======= =======
Group - underlying current taxation (26) -
==================================================================== ======= =======
EPRA earnings - basic and diluted 175 306
==================================================================== ======= =======
Loss attributable to the shareholders of the Company (1,031) (1,027)
Dilutive effect of 2015 convertible bond - -
==================================================================== ======= =======
IFRS earnings - diluted (1,031) (1,027)
==================================================================== ======= =======
2021 2020
Number Number
million million
==================================================== ======== ========
Weighted average number of shares 938 945
Adjustment for treasury shares (11) (11)
==================================================== ======== ========
IFRS/EPRA Weighted average number of shares (basic) 927 934
==================================================== ======== ========
Dilutive effect of share options - -
Dilutive effect of ESOP shares 3 3
==================================================== ======== ========
EPRA Weighted average number of shares (diluted) 930 937
==================================================== ======== ========
Remove anti-dilutive effect (3) (3)
==================================================== ======== ========
IFRS Weighted average number of shares (diluted) 927 934
==================================================== ======== ========
Net assets per share (Audited)
EPRA published its latest Best Practices Recommendations in October 2019 which included three new Net Asset Valuation metrics, EPRA Net Tangible Assets (NTA), EPRA Net Reinstatement Value (NRV) and EPRA Net Disposal Value (NDV). These metrics are effective from 1 January 2020 and have been adopted in the current year. A reconciliation between the new EPRA net asset valuation metrics and the previous measures is shown below.
2021 2020
=============================================== ============= =============
Pence Pence
per per
GBPm share GBPm share
=============================================== ===== ====== ===== ======
Balance sheet net assets 5,983 7,147
=============================================== ===== ====== ===== ======
Deferred tax arising on revaluation movements - 6
Mark-to-market on derivatives and related debt
adjustments 115 141
Dilution effect of share options 14 18
Surplus on trading properties 9 13
Intangible assets (12) (11)
Less non-controlling interests (59) (112) =============================================== ===== ====== ===== ====== EPRA Net Tangible Assets (NTA) 6,050 648 7,202 773 =============================================== ===== ====== ===== ====== Intangible assets 12 11 Purchasers' costs 537 659 ----------------------------------------------- ----- ------ ----- ------ EPRA Net Reinstatement Value (NRV) 6,599 707 7,872 845 ----------------------------------------------- ----- ------ ----- ------ Deferred tax arising on revaluation movements (1) (9) Purchasers' costs (537) (659) Mark-to-market on derivatives and related debt adjustments (115) (141) Mark-to-market on debt (268) (301) =============================================== ===== ====== ===== ====== EPRA Disposal Value (NDV) 5,678 609 6,762 726 =============================================== ===== ====== ===== ======
EPRA NTA is considered to be the most relevant measure for the Group and is now the primary measure of net assets, replacing the previously reported EPRA NAV metric. EPRA NTA assumes that entities buy and sell assets, thereby crystallising certain levels of unavoidable deferred tax. Due to the Group's REIT status, deferred tax is only provided at each balance sheet date on properties outside the REIT regime. As a result deferred taxes are excluded from EPRA NTA for properties within the REIT regime. For properties outside of the REIT regime, deferred tax is included to the extent that it is expected to crystallise, based on the Group's track record and tax structuring. EPRA NRV reflects what would be needed to recreate the Group through the investment markets based on its current capital and financing structure. EPRA NDV reflects shareholders' value which would be recoverable under a disposal scenario, with deferred tax and financial instruments recognised at the full extent of their liability.
2021 2020
Number Number
million million
===================================== ======== ========
Number of shares at year end 938 938
Adjustment for treasury shares (11) (11)
===================================== ======== ========
IFRS/EPRA number of shares (basic) 927 927
===================================== ======== ========
Dilutive effect of share options 3 3
Dilutive effect of ESOP shares 3 2
===================================== ======== ========
IFRS/EPRA number of shares (diluted) 933 932
===================================== ======== ========
Reconciliation of new EPRA net asset valuation metrics to previous metrics
31 March 31 March
2021 2020
GBPm GBPm
========================= ======== ========
EPRA Net Tangible Assets 6,050 7,202
Adjustment for:
Intangibles 12 11
EPRA Net Asset Value 6,062 7,213
------------------------- -------- --------
Per share measure 650p 774p
------------------------- -------- --------
31 March 31 March
2021 2020
GBPm GBPm
============================= ======== ========
EPRA Net Reinstatement Value 6,599 7,872
Adjustment for:
Purchasers' costs (537) (659)
EPRA Net Asset Value 6,062 7,213
----------------------------- -------- --------
Per share measure 650p 774p
----------------------------- -------- --------
As the Group's EPRA NDV is the same as the EPRA NNNAV, there are no reconciling items.
31 March 31 March
2021 2020
GBPm GBPm
======================== ======== ========
EPRA Net Disposal Value 5,678 6,762
------------------------ -------- --------
EPRA NNNAV 5,678 6,762
------------------------ -------- --------
Per share measure 609p 726p
------------------------ -------- --------
EPRA Net Initial Yield and 'topped-up' Net Initial Yield (Unaudited)
2021 2020
GBPm GBPm
=========================================================== ======= =======
Investment property - wholly-owned 6,118 7,941
Investment property - share of joint ventures and funds 3,022 3,236
Less developments, residential and land (1,224) (1,140)
======= =======
Completed property portfolio 7,916 10,037
Allowance for estimated purchasers' costs 648 724
=========================================================== ======= =======
Gross up completed property portfolio valuation (A) 8,564 10,761
=========================================================== ======= =======
Annualised cash passing rental income 425 517
Property outgoings (29) (21)
=========================================================== ======= =======
Annualised net rents (B) 396 496
=========================================================== ======= =======
Rent expiration of rent-free periods and fixed uplifts(1) 51 49
=========================================================== ======= =======
'Topped-up' net annualised rent (C) 447 545
EPRA Net Initial Yield (B/A) 4.6% 4.6%
EPRA 'topped-up' Net Initial Yield (C/A) 5.2% 5.1%
=========================================================== ======= =======
Including fixed/minimum uplifts received in lieu of rental
growth 5 10
=========================================================== ======= =======
Total 'topped-up' net rents (D) 452 555
Overall 'topped-up' Net Initial Yield (D/A) 5.3% 5.2%
=========================================================== ======= =======
'Topped-up' net annualised rent 447 545
ERV vacant space 42 38
Reversions 12 13
=========================================================== ======= =======
Total ERV (E) 501 596
Net Reversionary Yield (E/A) 5.9% 5.5%
=========================================================== ======= =======
1. The weighted average period over which rent-free periods expire is one year (2019/20: one 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 2021, plus an allowance for estimated purchasers costs. Estimated purchasers 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
2021 2020
GBPm GBPm
============================================================= ===== =====
Annualised potential rental value of vacant premises 42 38
Annualised potential rental value for the completed property
portfolio 507 603
EPRA Vacancy Rate 8.3% 6.3%
============================================================= ===== =====
EPRA Cost Ratios (Unaudited)
2021 2020
GBPm GBPm
=================================================================== ===== =====
Property operating expenses 96 69
Administrative expenses 74 73
Share of joint ventures and funds expenses 45 14
Performance and management fees (from joint ventures
Less: and funds) (7) (8)
Net other fees and commissions (4) (5)
Ground rent costs and operating expenses de facto included
in rents (21) (16)
================================================================== ===== =====
EPRA Costs (including direct vacancy costs) (A) 183 127
Direct vacancy costs (31) (30)
=================================================================== ===== =====
EPRA Costs (excluding direct vacancy costs) (B) 152 97
Gross Rental Income less ground rent costs and operating
expenses de facto included in rents 341 398
Share of joint ventures and funds (GRI less ground rent costs) 142 142
=================================================================== ===== =====
Total Gross Rental Income less ground rent costs (C) 483 540
EPRA Cost Ratio (including direct vacancy costs) (A/C) 37.9% 23.5%
EPRA Cost Ratio (excluding direct vacancy costs) (B/C) 31.5% 18.0%
=================================================================== ===== =====
Impairment of tenant debtors, tenant incentives and accrued
income (D) 83 26
Adjusted EPRA Cost ratio (including direct vacancy costs
and excluding impairment of tenant debtors, accrued income,
tenant incentives and guaranteed rent increases) (A-D)/C 20.7% 18.7%
Adjusted EPRA Cost ratio (excluding direct vacancy costs
and excluding impairment of tenant debtors, accrued income,
tenant incentives and guaranteed rent increases) (B-D)/C 14.3% 13.1%
=================================================================== ===== =====
Overhead and operating expenses capitalised (including share
of joint ventures and funds) 6 6
=================================================================== ===== =====
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. In addition to the standard EPRA Cost ratios (both including and excluding direct vacancy costs), adjusted versions of these ratios have also been presented which remove the impact of the impairment of tenant debtors, tenant incentives and accrued income which are exceptional items in the current year, to show the impact of these items on the ratios.
Table C: Gross rental income
2021 2020
GBPm GBPm
============================================================= ===== =====
Rent receivable(1) 493 558
Spreading of tenant incentives and guaranteed rent increases 11 (3)
Surrender premia 4 5
============================================================= ===== =====
Gross rental income 508 560
============================================================= ===== =====
1. Group gross rental income includes GBP5m (2019/20: GBP3m) of all-inclusive rents relating to service charge income.
The current and prior year information is presented on a proportionally consolidated basis, excluding non-controlling interests.
Table D: Property related capital expenditure
Year ended 31 March Year ended 31 March
2021 2020
======================= =======================
Joint Joint
ventures ventures
and and
Group funds Total Group funds Total
GBPm GBPm GBPm GBPm GBPm GBPm
=========================================== ===== ========= ===== ===== ========= =====
Acquisitions 52 - 52 94 54 148
Development 104 25 129 156 126 282
Investment properties
Incremental lettable space 1 - 1 1 - 1
No incremental lettable space 31 28 59 82 20 102
Tenant incentives 2 5 7 9 6 15
Other material non-allocated types
of expenditure 5 1 6 5 1 6
Capitalised interest 6 2 8 4 4 8
------------------------------------------- ----- --------- ----- ----- --------- -----
Total property related capital expenditure 201 61 262 351 211 562
------------------------------------------- ----- --------- ----- ----- --------- -----
Conversion from accrual to cash basis 34 14 48 9 11 20
------------------------------------------- ----- --------- ----- ----- --------- -----
Total property related capital expenditure
on cash basis 235 75 310 360 222 582
=========================================== ===== ========= ===== ===== ========= =====
The above is presented on a proportionally consolidated basis, excluding non-controlling interests and business combinations. The 'Other material non-allocated types of expenditure' category contains capitalised staff costs of GBP6m (2019/20: GBP6m).
SUPPLEMENTARY TABLES
Data includes Group's share of Joint Ventures and Funds (includes Hercules Unit Trust)
FY21 rent collection(1)
Rent due between 25 Offices Retail(2) Total
March 2020 and 24 March
2021
-------- ----------
Received 99% 71% 83%
Rent deferrals 1% 5% 3%
Rent forgiven - 9% 5%
Moved to administration - 3% 2%
Outstanding - 12% 7%
-------------------------- -------- ---------- --------
Total 100% 100% 100%
--------------------------
GBP225m GBP305m GBP530m
-------------------------- -------- ---------- --------
Collection of adjusted
billing(3) 100% 83% 90%
-------------------------- -------- ---------- --------
March 2021 rent collection(1)
Rent due between 25 Offices Retail(2) Total
March and 18 May
-------- ----------
Received 98% 72% 84%
Rent deferrals - - -
Rent forgiven - 1% 1%
Customer paid monthly 1% 5% 3%
Outstanding 1% 22% 12%
------------------------ -------- ---------- -------
Total 100% 100% 100%
------------------------
GBP45m GBP50m GBP95m
------------------------ -------- ---------- -------
Collection of adjusted
billing(3) 99% 76% 87%
------------------------ -------- ---------- -------
(1) As at 18 May
(2) Includes non-office customers located within our London campuses
(3) Total billed rents exclusive of rent deferrals, rent forgiven and tenants moved to monthly payments
Since 1 April 2020 Price Price Annual Passing
(100%) (BL Share) Rent
Purchases Sector GBPm GBPm GBPm (1)
---------------------------- ---------- ------- ----------- --------------
Completed
A1 Retail Park, Biggleswade Retail 49 49 5
Heritage House, Enfield(2) Logistics 87 87 2
Exchanged
Hercules Unit Trust units 148 148 12
Total 284 284 19
------- -----------
(1) BL share of annualised rent topped up for rent frees
(2) Exchanged and completed post period end.
Since 1 April 2020 Price Price Annual Passing
(100%) (BL Share) Rent
Sales Sector GBPm GBPm GBPm (1)
------------------------------------- ------------ ------- ----------- --------------
Completed
Tescos, Milton Keynes & Peterborough Retail 149 149 9
Portfolio of Sainsbury's stores(2) Retail 102 102 -
B&Qs, Various Retail 100 100 8
Beaumont Leys (Bradgate Mall) Retail 63 63 5
Beaumont Leys (Fletcher Mall)(3) Retail 9 9 1
David Lloyd, Northwood Retail 51 51 2
Tesco, Brislington Retail 42 42 3
Valentine Retail Park, Lincoln Retail 24 9 1
Picton Place / James Street,
London Retail 14 14 1
Studlands Retail Park, New
Market Retail 11 11 1
Debenhams, Chelmsford Retail 4 4 -
Deepdale Retail Park (unit
A), Preston Retail 4 2 -
Marble Arch House, York House
& 10 Portman Sq Offices 535 401 12
Clarges, Mayfair Offices 177 177 5
Yalding House, London Offices 42 42 2
Orwell House, London Offices 23 23 1
Clearwater Development, Theale Residential 12 12 -
Exchanged
St Anne's, Regents Place Residential 6 6 -
Total 1,368 1,217 51
--------------------------------------------------- ------- ----------- --------------
(1) BL share of annualised rent topped up for rent frees
(2) The portfolio was the indirect ownership (25.5%) of the reversionary
interest of 26 Sainsbury's stores.
(3) Exchanged and completed post period end.
Portfolio Valuation by Sector
---------------------------------------------------------------------------------
At 31 March 2021 Group JVs & Total Change%(1)
Funds
GBPm GBPm GBPm H1 H2 FY
--------------------------- ------- -------- ------ ------- ------- -------
West End 3,297 167 3,464 (2.5) (0.8) (3.2)
City 317 2,251 2,568 (4.0) (0.7) (4.6)
Offices 3,614 2,418 6,032 (3.1) (0.8) (3.8)
--------------------------- ------- -------- ------ ------- ------- -------
Retail Parks 831 536 1,367 (13.1) (6.5) (18.6)
Shopping Centre 409 487 896 (18.1) (19.9) (35.7)
Superstores 47 - 47 (0.2) 1.7 0.7
Department Stores 10 - 10 (34.3) (32.3) (55.3)
High Street 91 1 92 (14.0) (9.8) (22.4)
Leisure 162 18 180 (11.3) (3.3) (14.2)
Retail 1,550 1,042 2,592 (14.9) (11.4) (24.7)
--------------------------- ------- -------- ------ ------- ------- -------
Residential(2) 121 - 121 (9.1) (1.9) (10.6)
--------------------------- ------- -------- ------ ------- ------- -------
Canada Water 387 - 387 (6.0) 3.4 (2.5)
--------------------------- ------- -------- ------ ------- ------- -------
Total 5,672 3,460 9,132 (7.3) (3.8) (10.8)
--------------------------- ------- -------- ------ ------- ------- -------
Standing Investments 4,559 3,357 7,916 (8.1) (4.5) (12.4)
Developments 1,113 103 1,216 (0.9) 1.9 (0.6)
--------------------------- ------- -------- ------ ------- ------- -------
(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 GBPm 12 months to 31 March 2021 Annualised as at 31 March 2021
Group JVs & Total Group JVs & Total
Funds Funds
----------------------------------------- ---------- ----------- --------- ---------- ----------- ---------
West End 131 18 149 116 7 123
City 16 80 96 6 77 83
Offices 147 98 245 122 84 206
----------------------------------------- ---------- ----------- --------- ---------- ----------- ---------
Retail Parks 84 51 135 71 46 117
Shopping Centre 50 43 93 40 40 80
Superstores 5 - 5 3 - 3
Department Stores 1 - 1 1 - 1
High Street 5 - 5 5 - 5
Leisure 12 1 13 12 1 13
Retail 157 95 252 132 87 219
----------------------------------------- ---------- ----------- --------- ---------- ----------- ---------
Residential(2) 3 - 3 1 - 1
----------------------------------------- ---------- ----------- --------- ---------- ----------- ---------
Canada Water 7 - 7 - - -
----------------------------------------- ---------- ----------- --------- ---------- ----------- ---------
Total 314 193 507 255 171 426
----------------------------------------- ---------- ----------- --------- ---------- ----------- ---------
Canada Water is now excluded from the standing investment analysis as it is valued as a development
asset on a residualised basis
(1) Gross rental income will differ from annualised valuation rents due to accounting adjustments
for fixed & minimum contracted rental uplifts and lease incentives
(2) Stand-alone residential
Portfolio Net
Yields(1,2)
--------------------------------------------------------------
As at 31 March 2021 EPRA net EPRA topped up Overall Net Net Net ERV
initial yield net initial topped equivalent equivalent reversionary Growth
% yield up net yield yield yield %(5)
%(3) initial % movement %
yield bps
%(4)
-------------- --------------- ------- ---------- ---------- ------------ ------
West End 3.7 4.4 4.4 4.5 13 5.3 2.0
City 3.0 3.8 3.8 4.4 2 5.0 (1.6)
Offices 3.4 4.1 4.1 4.5 9 5.1 0.7
---------------------------- -------------- --------------- ------- ---------- ---------- ------------ ------
Retail Parks 7.8 8.1 8.2 7.5 45 7.4 (15.2)
Shopping Centre 6.8 7.1 7.3 7.6 143 7.1 (20.3)
Superstores 5.9 7.3 7.3 5.7 (31) 5.9 0.2
Department Stores (0.4) (0.4) (0.4) 9.4 (23) 15.1 (23.5)
High Street 4.8 5.0 5.0 6.0 42 6.5 (17.1)
Leisure 6.3 6.4 7.0 6.9 90 5.5 (10.3)
Retail 7.1 7.5 7.6 7.4 81 7.2 (16.8)
---------------------------- -------------- --------------- ------- ---------- ---------- ------------ ------
Total 4.6 5.2 5.3 5.4 33 5.9 (7.6)
---------------------------- -------------- --------------- ------- ---------- ---------- ------------ ------
On a proportionally consolidated basis including the Group's share of joint ventures and funds
Canada Water is now excluded from the standing investment analysis as it is valued as a development
asset on a residualised basis
(1) Including notional purchaser's costs
(2) Excluding committed developments, assets held for development and residential assets
(3) Including rent contracted from expiry of rent-free periods and fixed uplifts not in lieu
of rental growth
(4) Including fixed/minimum uplifts (excluded from EPRA definition)
(5) As calculated by MSCI
Total Property Return (as calculated by MSCI)
-------------------------------------------------------------------------------
12 months to 31 March Offices Retail Total
2021
% British MSCI British MSCI British MSCI
Land Land Land
-------------------------- -------- ------- -------- ------ ------- -----
Capital Return (3.6) (4.5) (24.7) (12.9) (10.8) (3.2)
- ERV Growth 0.7 (1.0) (16.8) (9.0) (7.6) (2.8)
- Yield Movement(1) 9 bps 20 bps 81 bps 30 bps 33 bps 1 bps
Income Return 3.0 3.8 7.3 5.5 4.2 4.5
-------------------------- -------- ------- -------- ------ ------- -----
Total Property Return (0.8) (0.8) (19.1) (8.1) (7.0) 1.2
-------------------------- -------- ------- -------- ------ ------- -----
On a proportionally consolidated basis including the Group's share
of joint ventures and funds
(1) Net equivalent yield movement
Top 20 Tenants by Sector
---------------------------------------------------------------------------
As at 31 March 2021 % of retail % of office
rent rent
--------------------- ------------ ------------------------ ------------
Retail Offices
--------------------- ------------ ------------------------ ------------
Next 5.4 Facebook 8.6
Walgreens (Boots) 4.7 UK Government 6.9
M&S Plc 4.2 Dentsu Aegis(1) 4.8
Tesco 3.1 Visa 4.3
J Sainsbury 3.1 Herbert Smith Freehills 3.5
JD Sports 2.9 Gazprom 2.9
Dixons Carphone 2.9 Microsoft Corp 2.7
Frasers Group 2.6 TP ICAP Plc 2.5
TJX (Tk Maxx) 2.5 SMBC 2.4
Virgin 2.0 Vodafone 2.2
Asda Group 2.0 Deutsche Bank 2.1
Hutchison Whampoa
Ltd 1.9 Henderson 1.9
DFS Furniture 1.9 Reed Smith 1.8
The Interpublic Group
TGI Fridays 1.8 (McCann) 1.7
River Island 1.6 Mayer Brown 1.6
H&M 1.5 Ctrip.com (Skyscanner) 1.5
Primark 1.5 Mimecast Ltd 1.4
Wilkinson 1.5 Credit Agricole 1.3
Homebase 1.5 Kingfisher 1.3
Pets at Home 1.2 Milbank LLP 1.2
--------------------- ------------ ------------------------ ------------
(1) Taking into account their pre-let of 310,000 sq ft at 1 Triton Square, and the break of existing space at 10 & 20 Triton St, % contracted rent would rise to 8.9%
Major Holdings
--------------------------------------------------------------------------------------------------------------------
As at 31 March 2021 BL Share Sq ft Rent (100%) Occupancy Lease
% '000 GBPm pa(1,4) rate %(2,4) length yrs(3,4)
--------------------------- ---------------- -------------- ----------------- -------------- ------------------
Broadgate 50 4,468 184 92.0 7.3
Regent's Place 100 1,740 78 96.1 3.8
Paddington Central 100 958 46 98.4 5.3
Meadowhall, Sheffield 50 1,500 72 94.9 4.1
Drake's Circus, Plymouth 100 1,190 14 87.0 5.4
Glasgow Fort 78 510 16 91.7 5.4
Ealing Broadway 100 540 13 90.7 3.4
Teesside, Stockton 100 569 14 90.9 3.2
New Mersey, Speke 68 502 13 95.8 4.6
Giltbrook, Nottingham 100 198 7 100.0 5.6
--------------------------- ---------------- -------------- ----------------- -------------- ------------------
(1) Annualised EPRA contracted rent including 100% of Joint Ventures & Funds
(2) Includes accommodation under offer or subject to asset management
(3) Weighted average to
first break
(4) Excludes committed and near term developments
Lease Length & Occupancy
--------------------------------------------------------------------------------------------------------------------
As at 31 March 2021 Average lease length yrs Occupancy rate %
To expiry To break EPRA Occupancy Occupancy(1,2,3)
------------------------------------- ---------------- ------------------- ------------------ ------------------
West End 5.5 4.3 96.3 96.6
City 8.4 7.2 84.6 90.7
Offices 6.7 5.5 91.3 94.1
------------------------------------- ---------------- ------------------- ------------------ ------------------
Retail Parks 6.4 4.7 93.3 94.7
Shopping Centre 5.7 4.4 91.0 93.3
Superstores 6.3 6.3 96.6 96.6
Department Stores 23.1 22.9 97.0 97.0
High Street 3.7 3.1 91.0 93.7
Leisure 13.0 12.8 94.0 94.0
Retail 6.5 5.1 92.5 94.1
------------------------------------- ---------------- ------------------- ------------------ ------------------
Total 6.6 5.3 91.8 94.1
------------------------------------- ---------------- ------------------- ------------------ ------------------
Canada Water is now excluded from the standing investment analysis as it is valued as a development
asset on a residualised basis
(1) Space allocated to Storey is shown as occupied where there is a Storey tenant in place
otherwise it is shown as vacant. Total occupancy would rise from 94.1% to 95.4% if Storey
space were assumed to be fully let.
(2) Includes accommodation under offer or subject to asset management
(3) Where occupiers have entered administration or CVA but are still liable for rates, these
are treated as occupied. If units in administration are treated as vacant, then the occupancy
rate for Retail would reduce from 94.1% to 90.6%, and total occupancy would reduce from 94.1%
to 92.4%
Portfolio Weighting
As at 31 March 2020 2021 2021
-------------------------- ----------------- ---------- -----------
% % GBPm
-------------------------- ----------------- ---------- -----------
West End 37.7 37.9 3,464
City 23.0 28.1 2,568
Offices 60.7 66.0 6,032
-------------------------- ----------------- ---------- -----------
Retail Parks 16.5 15.0 1,367
Shopping Centre 13.5 9.8 896
Superstores 0.8 0.5 47
Department Stores 0.3 0.1 10
High Street 1.2 1.0 92
Leisure 2.4 2.0 180
Retail 34.7 28.4 2,592
-------------------------- ----------------- ---------- -----------
Residential(1) 1.3 1.3 121
-------------------------- ----------------- ---------- -----------
Canada Water 3.3 4.3 387
-------------------------- ----------------- ---------- -----------
Total 100.0 100.0 9,132
-------------------------- ----------------- ---------- -----------
London Weighting 71% 77% 6,984
-------------------------- ----------------- ---------- -----------
(1) Stand-alone residential
Annualised Rent & Estimated Rental Value (ERV)
--------------------------------------------------------------------------------------------------------------------
As at 31 March 2021 Annualised rent ERV GBPm Average rent GBPpsf
(valuation basis) GBPm(1)
---------------------------------------------------
Group JVs & Funds Total Total Contracted(2) ERV
--------------------------------------------------- ------- ------------- ------ -------- --------------- ----
West End (3) 108 7 115 165 59.9 69.0
City (3) 7 71 78 124 54.5 55.2
Offices (3) 115 78 193 289 57.6 62.5
Retail Parks 74 50 124 114 22.2 19.6
Shopping Centre 42 43 85 88 24.1 24.1
Superstores 3 - 3 3 17.8 14.4
Department Stores 1 - 1 2 0.7 3.1
High Street 5 - 5 7 11.5 14.5
Leisure 12 1 13 11 17.3 14.6
Retail 137 94 231 225 20.6 19.3
Residential(4) 1 - 1 1 12.7 11.4
Total 253 172 425 515 28.1 30.6
Canada Water is now excluded from the standing investment analysis as it is valued as a development
asset on a residualised basis
(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
Rent Subject to Open Market Rent Review
For period to 31 March 2022 2023 2024 2025 2026 2022-24 2022-26
As at 31 March 2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
West End 7 22 4 15 1 33 49
City - 1 16 8 27 17 52
Offices 7 23 20 23 28 50 101
Retail Parks 11 9 6 7 6 26 39
Shopping Centre 6 8 3 3 2 17 22
Superstores - 1 1 - - 2 2
Department Stores - - - - - - -
High Street - - - - - - -
Leisure - - - 1 - - 1
Retail 17 18 10 11 8 45 64
Residential 1 - - - - 1 1
Total 25 41 30 34 36 96 166
On a proportionally consolidated basis including the Group's share of joint ventures and funds
Canada Water is now excluded from the standing investment analysis as it is valued as a development asset on a residualised basis
(1) Reflects standing investment only
Rent Subject to Lease Break or Expiry (1)
-------------------------------------------------------------------------------------------------------------------
For period to 31 March 2022 2023 2024 2025 2026 2022-24 2022-26
As at 31 March 2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
West End 29 24 12 9 12 65 86
City 7 4 13 4 16 24 44
Offices 36 28 25 13 28 89 130
Retail Parks 17 15 24 12 14 56 82
Shopping Centre 16 15 10 8 13 41 62
Superstores - 2 - - - 2 2
Department Stores - - - - - - -
High Street 2 1 1 1 - 4 5
Leisure - - - - 1 - 1
Retail 35 33 35 21 28 103 152
Residential - - - - - - -
Total 71 61 60 34 56 192 282
% of contracted rent 14.8 12.8 12.8 7.2 11.8 40.4 59.4
On a proportionally consolidated basis including the Group's share of joint ventures and funds
Canada Water is now excluded from the standing investment analysis as it is valued as a development
asset on a residualised basis
(1) Reflects standing investment only
Recently Completed and Committed Developments
As at Sector BL Share 100% PC Calendar Year Current Value Cost to come ERV Pre-let
31 March 2021 sq ft
% '000 GBPm GBPm(1) GBPm(2) GBPm
100 Liverpool Street Office 50 520 Q3 2020 403 - 19.4 15.5
Total Recently Completed 520 403 - 19.4 15.5
1 Triton Square(4) Office 100 365 Q2 2021 443 32 22.8 21.9
Norton Folgate Office 100 336 Q3 2023 120 229 22.2 -
1 Broadgate Office 50 546 Q2 2025 94 227 20.1 5.0
Total Committed 1,247 657 488 65.1 26.9
Other Capital Expenditure(3) 34
(1) From 1 April 2021. 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) Capex committed and underway within our investment portfolio relating to leasing and
asset management
(4) Completed post year end in May
Near Term Development Pipeline
As at Sector BL Share 100% Earliest Current Cost to ERV Let & Planning
31 March sq ft Start on Value Come Under Status
2021 Site Offer
% '000 GBPm GBPm(1) GBPm(2) GBPm
5 Kingdom
Street Office 100 438 Q2 2022 117 344 30.1 - Consented
Aldgate
Place,
Phase 2 Residential 100 136 Q3 2021 28 99 6.5 - Consented
Canada
Water,
Plot A1(3) Mixed Use 100 272 Q3 2021 30 218 6.7 - Consented
Canada
Water,
Plot A2(3) Mixed use 100 248 Q3 2021 16 120 10.4 - Consented
Canada
Water,
Plot K1(3) Residential 100 62 Q3 2021 - 25 - - Consented
Total Near Term 1,156 191 806 53.7 -
Other Capital Expenditure
(4) 97
(1) From 1 April 2021. Cost to come excludes notional interest as interest is capitalised
individually on each development at our capitalisation rate
(2) Estimated headline rental value net of rent payable under head leases (excluding tenant
incentives)
(3) The London Borough of Southwark has confirmed they will not be investing in Phase 1.
The BL ownership share will change over time as costs are incurred and is expected to be c.98-99%
by PC
(4) Forecast capital commitments within our investment portfolio over the next 12 months
relating to leasing and asset enhancement
Medium Term Development Pipeline
As at Sector BL Share 100% Planning Status
31 March 2021 % Sq ft
'000
2-3 Finsbury Avenue Office 50 704 Consented
Eden Walk Retail & Residential Mixed Use 50 452 Consented
Ealing - 10-40 The Broadway Mixed Use 100 303 Pre-submission
Ealing - International House Office 100 165 Pre-submission
Gateway Building Leisure 100 105 Consented
Euston Tower Other 100 620 Pre-submission
Canada Water - Future phases(1) Mixed Use 100 4,498 Consented
Total Medium Term 6,847
(1) The London Borough of Southwark has the right to invest in up to 20% of the completed
development. The BL ownership share will change over time depending on the level of contributions
made, but will be no less than 80%
Forward-looking statements
This Press Release contains certain (and we may make other verbal or written) 'forward-looking' statements. These forward-looking statements include all matters that are not historical fact. Such statements reflect current views, intentions, expectations, forecasts and beliefs of British Land concerning, among other things, our markets, activities, projections, strategy, plans, initiatives, objectives, performance, financial condition, liquidity, growth and prospects, as well as assumptions about future events. Such 'forward-looking' statements can sometimes, but not always, be identified by their reference to a date or point in the future, the future tense, or the use of 'forward-looking' terminology, including terms such as 'believes', 'considers', 'estimates', 'anticipates', 'expects', 'forecasts', 'intends', 'continues', 'due', 'potential', 'possible', 'plans', 'seeks', 'projects', 'budget', 'goal', 'guidance', 'trends', 'future', 'outlook', 'schedule', 'target', 'aim', 'may', 'likely to', 'will', 'would', 'could', 'should' or similar expressions or in each case their negative or other variations or comparable terminology. By their nature, forward-looking statements involve inherent known and unknown risks, assumptions and uncertainties because they relate to future events and circumstances and depend on circumstances which may or may not occur and may be beyond our ability to control, predict or estimate. Forward-looking statements should be regarded with caution as actual outcomes or results, or plans or objectives, may differ materially from those expressed in or implied by such statements. Recipients should not place reliance on, and are cautioned about relying on, any forward-looking statements.
Important factors that could cause actual results (including the payment of dividends), performance or achievements of British Land to differ materially from any outcomes or results expressed or implied by such forward-looking statements include, among other things: (a) general business and political, social and economic conditions globally, (b) the consequences of the United Kingdom's withdrawal from the European Union, (c) industry and market trends (including demand in the property investment market and property price volatility), (d) competition, (e) the behaviour of other market participants, (f) changes in government and other regulation including in relation to the environment, health and safety and taxation (in particular, in respect of British Land's status as a Real Estate Investment Trust), (g) inflation and consumer confidence, (h) labour relations and work stoppages, (i) natural disasters and adverse weather conditions, (j) terrorism and acts of war, (k) British Land's overall business strategy, risk appetite and investment choices in its portfolio management, (l) legal or other proceedings against or affecting British Land, (m) reliable and secure IT infrastructure, (n) changes in occupier demand and tenant default, (o) changes in financial and equity markets including interest and exchange rate fluctuations, (p) changes in accounting practices and the interpretation of accounting standards (q) the availability and cost of finance and (r) the consequences of the covid-19 pandemic . The Company's principal risks are described in greater detail in the section of this Press Release headed "Risk Management and Principal Risks" and in the Company's latest annual report and accounts (which can be found at www.britishland.com ). Forward-looking statements in this Press Release, or the British Land website or made subsequently, which are attributable to British Land or persons acting on its behalf, should therefore be construed in light of all such factors.
Information contained in this Press Release relating to British Land or its share price or the yield on its shares are not guarantees of, and should not be relied upon as an indicator of, future performance, and nothing in this Press Release should be construed as a profit forecast or profit estimate, or be taken as implying that the earnings of British Land for the current year or future years will necessarily match or exceed the historical or published earnings of British Land. Any forward-looking statements made by or on behalf of British Land speak only as of the date they are made. Such forward-looking statements are expressly qualified in their entirety by the factors referred to above and no representation, assurance, guarantee or warranty is given in relation to them (whether by British Land or any of its associates, Directors, officers, employees or advisers), including as to their completeness, accuracy, fairness, reliability, the basis on which they were prepared, or their achievement or reasonableness.
Other than in accordance with our legal and regulatory obligations (including under the UK Financial Conduct Authority's Listing Rules, Disclosure Guidance and Transparency Rules, the UK Market Abuse Regulation, and the requirements of the Financial Conduct Authority and the London Stock Exchange), British Land does not intend or undertake any obligation to update or revise publicly forward-looking statements to reflect any changes in British Land's expectations with regard thereto or any changes in information, events, conditions, circumstances or other information on which any such statement is based (regardless of whether those forward-looking statements are affected as a result). This document shall not, under any circumstances, create any implication that there has been no change in the business or affairs of British Land since the date of this document or that the information contained herein is correct as at any time subsequent to this date.
Nothing in this document shall constitute, in any jurisdiction, an offer or solicitation to sell or purchase any securities or other financial instruments, nor shall it constitute a recommendation, invitation or inducement, or advice, in respect of any securities or other financial instruments or any other matter.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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END
FR DKPBQFBKDQPB
(END) Dow Jones Newswires
May 26, 2021 02:00 ET (06:00 GMT)
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