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Asset Sales drive robust financial performance for British Land

17
2018
May

In what its chief executive, Chris Griggs, describes as “another good year for British Land”, the company says that financial performance has been robust following significant asset sales and that it has made further strategic and operational progress, while leasing activity has been strong across the business. During the year, the completed over £1 billion of sales, made ‘selective acquisitions’, undertook a £300m share buyback and further reduced its net debt (it says its loan to value ratio is now at 28%).

Mindful of uncertainties

The company comments that, looking forward, it is “mindful of uncertainties”. Its says that, in retail, market conditions are likely to remain challenging although, in offices, demand for its space is healthy, with a range of businesses continuing to commit to London and the supply of high quality new space relatively constrained in the short term. Furthermore, it believes that, as the ways in which businesses and people use space evolves, it can use its “strong and flexible balance sheet” to can capitalise on the opportunities this creates, broaden the type of space it offers and further enhance the mix of uses and occupiers.

Key highlights from the results

The company has highlighted the following in its results announcement for the year ended 31 March 2018:

Robust financial performance
  • EPRA NAV 967 pence, up 5.7%; valuation up 2.2% with buyback contributing 15 pence
  • Underlying Profit £380 million, down 2.6% following £1.5 billion net sales of income producing assets, in the last two financial years
  • Full year dividend 30.08 pence, up 3.0% with a payout ratio of 80%; final dividend of 7.52 pence
  • Total accounting return of +8.9% (2016/17: +2.7%)
London Offices: strong leasing activity driven by campus strategy and good market demand
  • Portfolio value up 4.5% reflecting quality of our assets and leasing success
  • 1.2 million sq ft of leasing activity; up four times on last year; 5.6% ahead of estimated recovery value (ERV)
  • Under offer or in negotiations on a further 548,000 sq ft, to a wide range of occupiers
  • Storey successfully launched across all campuses, with 77% of space now let
Retail: quality space driving operational outperformance in polarising markets
  • Portfolio value up 0.3%, with ERV growth offsetting yield expansion
  • 1.2 million sq ft of leasing activity; 10.3% ahead of ERV with incentives unchanged
  • 90% of leases reaching expiry were either retained or replaced; occupancy maintained at 98%
  • Continued operational outperformance vs benchmarks: footfall 340bps ahead; retailer sales 130bps ahead
  • £419 million disposals; £2.3 billion over the last four years as we proactively reshape the portfolio
Strong progress on developments to drive future growth, with risk carefully managed
  • Committed pipeline doubled to 1.6 million sq ft with speculative exposure low at 4.5%
  • Generating estimated future rent of £63 million, of which 55% pre-let or under offer
  • Committed construction costs to come substantially covered by Clarges residential receipts
  • 1.9 million sq ft of planning consents in the year including Meadowhall Leisure extension
Canada Water Master Development Agreement signed and planning application submitted
Strong performance on sustainability indices, including DJSI, FTSE4Good, GRESB and MSCI

Asset Sales drive robust financial performance for British Land : BLND

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