British Land Company PLC

Thanks, Ed. Morning, everyone. Thanks for dialling in today. I'm David Walker, Head of Investor Relations at British Land, and I'm on the line today with Chris Grigg, Chief Executive, Simon Carter, our CFO, and we also have Darren Richards, our Head of Real Estate, on the line. Before I hand you over to Chris, could I just remind those of you joining us by phone that the slides are available to download now at britishland.com. You are able to register questions on the conference call at any time from now during the presentation. For those of you listening through the website, slides will appear automatically and you can submit written questions via the website, which I will read out following our prepared remarks. With that, I will hand you over to Chris.

Thank you, David. Good morning, everyone. First, I hope you're all well. We really appreciate you taking the time to dial in in what are highly unusual circumstances. We plan to be with you in person for today's results. Obviously, that's not possible But it's certainly our plan for the half year, and as usual, we'll be speaking with as many of you as we can in the coming days. Before I start, I'd like to take a moment to thank our team. COVID-19 has presented unprecedented challenges, not just for our business, but for our people. They've had to adapt to new and often challenging working conditions, whether at home, on our campuses, or at our retail centres. One of our core values is being smarter together, And when I look across the business, that's been very much in evidence in recent months, and I'd like to thank everyone for that. Today, Simon and I will update you on our full year 2020 performance. And while it's still early days, we'll also set out some of the ways in which we've been affected by COVID-19, how we're responding, and our initial thoughts on what this could mean for us long term. Simon will also set out our ambitious new sustainability targets, They build on the progress we've made over the last 10 years and will be critical to the long-term performance of our business. We'll finish with questions when Darren Richard, who, as you know, is responsible for the whole real estate portfolio, will be joining. He's got some great insights into what we're seeing on the ground right across the business. Starting with the results, as you know, all of our operations are in the UK, so for the first 11 months of the financial year, we were unaffected by the outbreaks. In offices, we leased nearly 950,000 square feet over the year, on average 9% ahead of ERV, to a diverse, high-quality range of businesses, including SMBC and BMO. This demonstrates the real strength of our campus proposition. Our developments are nearly 90% pre-let, so they're effectively de-risked, with 54 million of future rents locked in. They were up nearly 8% in value contributing to an uplift of 2.3% across our London office portfolio. Strikingly, this included a 5% increase at Broadgate, demonstrating that the transformation we've delivered there is really paying off. As you know, the retail market was very tough, even pre-COVID. So throughout the year, we were pragmatic in our approach to leasing. We leased 1.4 million square feet of space. That's not far off the previous year. but deals over a year were on average 4% below previous passing rents because we accepted lower rents to keep the portfolio full, supporting footfall and sales. As a result, occupancy remains high at 96%. Inevitably, valuations have been affected. Ongoing structural challenges were exacerbated at year end by the early effects of COVID-19. Though retail was down 26% over the year, and our portfolio was down 10% overall. The 6% decline in EPS reflected the impact of a billion pounds net sales of income-producing assets, as well as the tougher retail markets. Turning to COVID-19, how we've been affected so far and our response, clearly the current situation is unprecedented. There is very little certainty over how deep or how prolonged the impact will be on economic activity and how people's lives will be affected, near and medium term. But there are certainly lessons to be learnt from past crises, which I and the team have worked through. We realise that fundamental long-term changes will emerge, and we do expect, based on past experience, that this crisis will accelerate a number of key trends, like more flexible ways we are like the more flexible ways we are all working and the further shift to online retail. Our strategy has been informed by that. It means that the progress we've already made on our campuses to modernise our buildings, to be more customer focused in our offer, provide additional flexibility through story, position as well, for the changes which will inevitably come out of this. Our customers are telling us they need space which is cleaner, healthier and well managed, though at our campuses in particular our ability to control the environment with the support of our property management team is a real differentiator for us. This strategy has underpinned our leasing success. Here we accounted for 7.5% of central London leasing with just 2.5% of the stock and looking forward we think our approach will continue to deliver. But clearly, retail is more challenging, and here again, we'd expect existing trends to accelerate. At the same time, when the full impact of COVID-19 becomes apparent, and we get a fuller picture of what that means for our business and the sector more generally, it may be that we adapt elements to our strategy or evolve our approach. As we move through this, we really benefit from the work we've done over several years to really strengthen our balance sheets. Our debt remains low with leverage at 34%, and we have $1.3 billion of undrawn facilities in cash. In March, we were pleased to agree a new ESG-linked revolving credit facility, so we have no need to refinance until 2024. And as you know, we announced a temporary suspension to the dividend. That's despite our financial strength and profits of some $300 million. It wasn't a decision the Board took lightly, because we recognise the importance of the dividends to so many of our shareholders. But with so little clarity on the outlook, we felt it prudent to retain the cash within the business. So we will look to resume dividends at an appropriate level as soon as we can and Simon will tell you more. Importantly, this decision gave us extra flexibility to support our customers who have been hard hit. Simon will also set out the details of our rent collection and some scenario analysis we've done, the key takeaway is that we have a lot of headroom. We could withstand a further fall in asset values of 45% without taking any mitigating actions to satisfy our debt covenant, though of course we continue to actively manage our liabilities. So our financial strength stands us in very good stead and frankly that's very different to 2009. Turning to the impact we have seen across our portfolio, In retail, all but two of our assets are open, providing access to essential stores such as supermarkets and pharmacies. Overall, that's about 15% of our units. Our campuses are open, every office building is accessible, but virtually all of the F&B, retail and leisure units remain closed. As you'd expect, physical occupancy is very low, though there are few exceptions. With restrictions starting to ease, we're now in active discussions with customers about returning to work. We initially suspended work at our developments to ensure the safety of the people working there, but we've been working closely with our construction partners and today all our major sites are open, albeit with a smaller workforce in line with social distancing guidelines. 135 Bishopsgate has completed and is being fitted out. We'd expect 100 Liverpool Street to complete in the autumn and one Triton to complete in spring 2021. Throughout this period our focus has been on our customers. We have a broad range of occupiers and we recognise their ability to weather this storm will vary so we tailored our response accordingly. In March we released smaller retail food and beverage and leisure customers from their rental obligation for three months and we allowed others experiencing financial challenges due to COVID-19, deferred March quarter day rents, and spread repayments over six quarters. Simon will give you the detail. In offices, we benefit from a high-quality, diverse range of occupiers. The rent collection for the March quarter was 97%. At Storey, we offered all occupiers who needed it three-month rent deferrals. Of course, physically getting back to work, now what's on everyone's mind. I'll come back to how we're doing that, but central to our response now in the months ahead is the British land property management. As I've touched upon, as we transition to a new normal, our ability to manage the whole environment will become more and more important in the months ahead, and that's a key competitive advantage. On that note, I'll now pass it over to Simon for an update on our financial performance.

Thank you, Fred. Morning, everyone. As usual, I'll take you through the results for the year to March, but I'll also outline our financial resilience, recent rent collection experience, and our assessment of the initial impact of COVID-19 on our customer base, wrapping up with the important 2030 sustainability targets we announced today. Let me start with the results. EPS reduced by 6%, primarily due to sales we've made over the last two years. and increased provisioning in light of COVID-19. Eprinab is down 14%, to £7.74. That's due to a decrease in our portfolio valuation of 10%, as a result of a 26% decline in retail. Offices were up 2.3%. Our financial position remains strong. LTB is 34%. We have access to 1.3 billion of undrawn facilities and cash, significant covenant headroom and no requirement to refinance until 2024. Our committed and recently completed developments are now 88% pre-let, reducing risk and locking in 54 million future rental income. Costs to come on these developments are less than 80 million, a good place to be in the current environment. Looking at the movement in EPS, this is primarily due to net sales of one billion of income producing assets over the last two years, which reduced EPS by two and a half pence. We deployed sale proceeds into share buybacks, increasing EPS by 1.1p, as well as our value accretive development programme. We expect the committed development programme alone to add 4.2p to annualised EPS. Setting aside the impact of capital activities, the 0.8 pence reduction in EPS this period is due to increased provisioning in regards to COVID-19, which I'll cover in a moment. Cost savings through our financing activities and reduced admin expenses offset the impact of CBAs and admins. Turning to net rents, let me draw out some of the key points. Like-for-like decline in retail was 5.1%. $14 million reduction in rental income primarily relates to CBAs and admins across our retail portfolio, the largest impacts being from Debenhams, Arcadia and House of Fraser. Like-for-like growth in offices was 0.8%, lower than recent years due to expiries at Broadwalk House and 155 Bishopsgate ahead of refurbishments. Broadwalk House is now left to challenger bank Monzo. As a result of COVID-19, we have provided an additional £7 million against tenant incentives. These are non-cash charges against balances related to the spreading of historic rent freeze and fixed up list. A further £6 million has been provided against trade debtors. It is worth noting that where we offered to defer March rent, these are not debtors at year end and therefore not provided against. Slide 10 sets out the income statement. We've covered net rents. There was an improvement in fees and other income. Our focus on cost control combined with lower variable pay resulted in a 9% reduction in admin expenses. We'll remain very focused on the cost base going forward. As you heard from Chris, Despite making over $300 million of profits, the dividend has been temporarily suspended. We took this difficult decision to protect the long-term value of the business, enabling us to support those customers hardest hit and further strengthen our financial position. As a REIT, the dividend is an important element of shareholder return, so we are focused on resuming dividends at an appropriate level as soon as we can more reliably forecast our cash receipts. For this, we will need to see a significant improvement in rent collection and have more visibility on the post-lockdown productivity of our assets, principally how quickly retail customers and office workers return. Turning to the balance sheet, the reduction in NAV was driven by the decline in retail valuations, partially offset by the buybacks. Financing activity had a negative impact but delivers future interest cost savings. Last year, EPRA published three replacement measures of net asset value. Net tangible assets, net reinvestment value, and net disposable value. Going forwards, we will publish all three metrics, but we'll use EPRA net tangible assets as our primary measure, which is closest to the current EPRA NAV. The impact of the change is expected to be de minimis. Proforma calculations are set out in the appendix. Turning to valuation performance. As you know, the valuers have incorporated a material uncertainty clause across all property sectors as at the 31st of March. They have confirmed this doesn't mean the valuation cannot be relied upon, but in these current extraordinary circumstances, less certainty can be attached than would normally be the case. Overall, values are down 10%, but offices have increased around 2%, driven by ERB growth of 3.2% in the period. However, retail is down 26%, reflecting 101 basis points outward yield shift and an ERV decline of 11.7%. The value of Canada water is up nearly 10% this year, reflecting progress on planning. This has decreased from 12% at half-year due to a lower existing use value for the retail, but we expect this to unwind on the move to a full development appraisal following formal receipt of planning. Looking at offices in a bit more detail, investment volumes were low in the first half of the year, but following the election result, there was a noticeable increase in activity. More recently, while some transactions did complete after the COVID outbreak, a number paused or fell away. Looking forward, before committing additional capital, potential investors are keen to see collection stats for the June quarter date and for the forfeiture moratorium to end. On the occupier side, there is still a lack of high-quality supply, though we've seen ERV growth on the standing portfolio. Our developments once again delivered a strong performance. They're up 7.5%. And despite the current context, whilst we expect the market to be softer in the short term, supply prime is constrained, and customers are continuing to look for space early if they have large space requirements. We're under offer on 220,000 square foot, and we've responded to nearly 400,000 square foot of RFPs since March. On slide 15, I've set out our retail valuations. Our valuations are as at the 31st of March, so our value was adjusted for the early effects of COVID-19, which increased valuation decline by around 6%. Specifically, they assumed a three-month rent deduction on all non-essential retail, increased voids, additional structural vacancy and moved yields. Consequently, retail parks and shopping centres both declined by 29% on average, with solace assets holding up better. Generally, investment transaction volumes were very low for multi-let assets. Albeit, at the beginning of the year, there was a pick-up in retail park activity, reflecting generally lower occupancy costs and capex requirements. supported in some cases by potential for change of use. However, the market for multi-let assets crowned to a halt in the wake of COVID-19. Turning to CVAs and admins, over the last 12 months, a more robust stance by us and others has reduced the aggressive use of CVAs. We have seen outcomes improving from the perspective of property owners, but clearly COVID-19 has seen more retailers enter distress and we expect further insolvencies. Already over the last few months, you've seen the likes of Debenhams and Oasis enter administration. Against this tough backdrop, our focus has been on driving operational performance, keeping our fences full with the right type of occupiers. As a result, we have maintained occupancy at 96%, and leasing volumes for the year were 1.4 million square foot. Lettings longer than one year were on average 4% below previous passing rent, with an average lease term of 6.7 years and average incentive of 10 months. Prior to COVID-19, footfall was only marginally down, and we outperformed the national benchmark by some margins. However, the impact of COVID-19 began to be felt in the Q4 footfall numbers. You can see on the right-hand side, footfall figures become less meaningful after lockdown, with a reduction of 78%. Picture is very similar for retailer sales, as you can see on the chart on page 19. Turning to rent collection and deferrals. Here our focus was on helping customers most in need. We did this in two key ways. First, we waived rents for the March quarter date for smaller independent businesses, particularly in the F&B retail and leisure sector, who were hardest hit by the lockdown. In total, these waivers amounted to 2 million of rents. Secondly, we offer to defer the March quarter rent for larger businesses, primarily retailers, who are experiencing significant challenges because of COVID-19. Air repayment will be spread across six quarters from September 20. We will keep a close eye on the recoverability of these. The table shows our collection stats for rents due between 2 March and end of April. As of 15 May, we have collected 68% That's 43% across our retail assets and 97% in offices. Of the remaining 32%, 25% has been proactively deferred or waived by us, meaning 7% remains outstanding, primarily from stronger retailers. I thought you'd be interested in our bottom-up initial assessment of the impact of COVID-19 on our customers. We have segmented our rent roll into customers whose revenues have been materially impacted by COVID-19 and those whose businesses are more insulated. For sectors like leisure, F&B and fashion, the impact has been significant. By contrast, big technology companies, banking, insurance and legal customers have typically fared much better. As you can see, we estimate around half of our rental income is derived from customers in sectors where COVID-19's impact is likely to be higher. The other half is from businesses likely to be more resilient. This picture is supported by our rent collection figures for March, with lower impacted customers paying 93% of rents due. But for those more materially impacted, payment rates are much lower at around 40%. Put these figures in context. Income from our lower impacted customers fully covered our operating outgoings last year. We take additional comfort from the fact that over a third of high-impact businesses are listed companies, with market capitalisations currently in excess of $1 billion. The strength of our debt metrics is a continuing focus, and here we're really benefiting from the work we've done over many years. We have undrawn facilities in cash of $1.3 billion. During the year, we signed a new $450 million ESG facility, and extended £925 million of facilities. Taking into account committed capex and future debt maturities, we don't have to raise finance until 2024. Our LTV is 34%. Financing activity and our use of caps has reduced our weighted average interest rate to a new low of 2.5%. Importantly, there are no income or interest cover covenants on British land unsecured debt. Given our covenant structure across the group, we could withstand a fall in asset values across the portfolio of 45% before taking any mitigating action. Clearly, this financial resilience is a key advantage in the current environment, and it's something we will remain very focused on in the coming months. We'll work to maximise rent collection and keep our capex and admin expenses under constant review and make sure that we continue to benefit from the robust financial position we have today. Looking further forward, I'd like to spend a couple of minutes on the new 2030 sustainability targets we announced today. As we think about the future of our business, we're increasingly focused on how we can deliver space which is both more sustainable and more inclusive. We've made a lot of progress in this area already and achieved many of the goals we set ourselves five years ago. We've already reduced our carbon intensity by a massive 73%. our energy intensity by 55% and supported more than 1,700 people into jobs. Building on this momentum, I'm pleased to announce our 2030 target. Taking the environmental side first, our key commitment is to be net zero carbon by 2030. The main elements of this are for all future developments to be net zero carbon and by 2030, all developments will have 50% less embodied carbon. We'll also reduce our operational carbon by a further 75%. We're taking a whole-life approach, so the overriding principles are to reuse, recycle and resource sustainably. We'll only offset as a last resource. Our innovative transition fund incentivises us to reduce embodied carbon while funnelling resources to improve the efficiency of the standing portfolios. We're seeing more and more evidence that sustainable buildings generate higher rents and lease quicker than other prime space. And with more of our customers explicitly committed to reducing their emissions, we think this approach really enhances our offer. Already we're seeing the benefits of that in the conversations we're having. On the social side, we're rolling out our place-based approach to community engagement. We'll work with our communities, local authorities, customers and suppliers tackle local issues, such as education and employment, as we've done so well at Regent Place and Fort Kinnaird. This approach builds important relationships, making our places more successful. And when I think about how quickly and effectively our community team responded to the current crisis, it's clear that we've made some very deep connections. To conclude, sustainability is a key part of our offer and our strategy. It's what our customers want. And that means it goes hand in hand with delivering value for our shareholders. We've set ourselves further stretching targets. We have a clear plan to achieve them, which I'll set out at our event in a few months' time. On that note, I'll hand over to Chris.