British Land Company delivers another strong period of leasing and good cost control

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British Land Company plc (LON:BLND) has announced its half year report.

Simon Carter, British Land Company CEO said:

“We are pleased with the performance in the first half with underlying profits increasing 3% on the back of another strong period of leasing and good cost control. We have seen yields continue to move out, but as we predicted in May, at a slower pace. Rental growth has accelerated, with lettings 12% ahead of ERV, and occupancy remains strong at 96% well above levels in the wider market.

We are benefitting from our decision to pursue a value-add strategy across campuses, retail parks and London urban logistics. These submarkets have the strongest occupational fundamentals and highest rental growth within the office, retail and logistics sectors. We now expect ERV growth at the top end of our previous guidance for FY24.

Whilst in the past 18 months we have delivered good earnings growth, asset values have been impacted by the increase in interest rates. The geopolitical and economic landscape remains uncertain; however, with our portfolio yield now over 6% and an increased likelihood we are approaching the peak in UK base rates we expect the strong occupational fundamentals of our submarkets, together with the differentiated quality of our assets, to reassert themselves as the primary drivers of performance.”

FINANCIAL

• Underlying Profit growth of 3.4%

• EPRA cost ratio 14.8% vs 19.5% at FY23

• Underlying earnings per share of 15.2p up 3.4%

• Dividend per share of 12.16p up 4.8%

BALANCE SHEET

• EPRA Net Tangible Assets per share of 565p down 3.9%

• Loan To Value at 36.9% (FY23 36.0%), Group Net Debt to EBITDA 6.0x (FY23 6.4x)

• Fitch affirmed our Senior Unsecured credit rating at ‘A’ with stable outlook

• £1.7bn undrawn facilities and cash

• £600m of financing activity, including £350m new loans post period end which further increase our capacity

• Debt 99% hedged for the six months to March 2024 and 84% hedged on average over the next five years

CAPITAL ACTIVITY

• Sale of office and data centre portfolio for £125m¹, 13% above book value at a NIY of 4.6%

• Surrender of 1 Triton Square lease on 25 September 2023 for £149m

• Acquisition of Thanet Retail Park in April 2023 for £55m at a NIY of 8.1%

OPERATIONAL METRICS

• Portfolio occupancy 96%: Campuses 94%, Retail Parks 99% and London Urban Logistics 100%

• Leased 1.6m sq ft, 12.2% ahead of ERV and a further 1.1m sq ft under offer, 16.6% above ERV

• Campus leasing 368,000 sq ft, 7.5% ahead of ERV, 281,000 sq ft under offer, 9.7% above ERV and 1.8m sq ft in negotiations on 1.0m sq ft of space (including near term pipeline)

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• Retail & London Urban Logistics leasing 1.2m sq ft, 14.2% ahead of ERV, and 844,000 sq ft under offer, 20.5% ahead of ERV

PORTFOLIO VALUATION

• ERV growth of +3.2%: Campuses +3.2%, Retail Parks +4.0%, London Urban Logistics +3.1%

• Yields +23bps to 6.1% NEY: Campuses +32bps to 5.3%, Retail Parks +13bps to 6.7%, London Urban Logistics +9bps to 4.7%

• Values down 2.5%: Campuses -4.0%, Retail Parks up +0.2% and London Urban Logistics up +0.6%

SUSTAINABILITY

• GRESB rating of 5* for both standing investments and developments

• 50% of portfolio rated EPC A or B (up from 45% at FY23)

OUTLOOK

• Expecting ERV growth at the top end of our previously guided ranges for FY24: Campuses 2-4%, Retail Parks 3-5%, London Urban Logistics 4-5%

• Comfortable with current market expectations for FY24 earnings

SUMMARY PERFORMANCE

Period ended	30 September 2023	30 September 2022²	% Change
INCOME STATEMENT
Underlying Profit³	£142m	£138m	3.4%
Underlying earnings per share³	15.2p	14.7p	3.4%
IFRS loss after tax	£(61)m	£(32)m
IFRS basic earnings per share	(6.6)p	(3.5)p
Dividend per share⁴	12.16p	11.60p	4.8%
Total accounting return³	(2.0)%	(2.8)%

As at	30 September 2023	31 March 2023
BALANCE SHEET
Portfolio at valuation (proportionally consolidated)⁵	£8,704m	£8,898m	(2.5)%
EPRA Net Tangible Assets per share³	565p	588p	(3.9)%
IFRS net assets	£5,367m	£5,525m
Net Debt to EBITDA (Group)^{6, 7}	6.0x	6.4x
Loan to value (proportionally consolidated)^{7, 8}	36.9%	36.0%
Senior Unsecured credit rating	A	A

Period ended	30 September 2023	30 September 2022
OPERATIONAL STATISTICS
Lettings and renewals over 1 year	1.3m sq ft	1.1m sq ft
Total lettings and renewals	1.6m sq ft	1.5m sq ft
Committed and recently completed development	1.9m sq ft	1.7m sq ft
SUSTAINABILITY PERFORMANCE
MSCI ESG	AAA rating	AAA rating
GRESB (Standing Investments / Developments)	5* / 5*	4* / 5*

1. Of which £29m completed post period end.

2. Prior period comparatives have been restated for a change in accounting policies in respect of rental concessions (as disclosed in Note 1 of the condensed interim financial statements).

3. See Note 2 to the condensed interim financial statements for definition and calculation.

4. The growth in the dividend is higher than the Underlying EPS growth due to the impact of the rental concession restatement in the prior period.

5. Valuation movement during the period (after taking account of capex) of properties held at the balance sheet date, including developments (classified by end use), purchases, sales and surrender premium received at 1 Triton Square.

6. Net Debt to EBITDA on a Group basis excludes non-recourse and joint venture borrowings and includes distributions from non-recourse companies and joint ventures.

7. See Note 9 to the condensed interim financial statements for definition, calculation and reference to IFRS metrics.

8. EPRA Loan to value is disclosed in Table E of the condensed interim financial statements.

RESULTS PRESENTATION AND INVESTOR CONFERENCE CALL

A presentation of the results will take place at 9.00am on Monday 13 November 2023 at Peel Hunt, 100 Liverpool Street, Broadgate and will be broadcast live via webcast (www.britishland.com) and conference call. The details for the conference call and weblink are as follows:

UK Toll Free Number: 0800 260 6466

International: +44 20 3481 4247

Access code: 9857826

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 3433 3849

Passcode: 9857826

Accompanying slides will be made available at Britishland.com just prior to the event starting.