British Land Company PLC

Well good morning everyone and welcome back to 100 Liverpool Street. One of the advantages of doing our results here is you get to see first hand how some of our major developments are progressing. Just six months ago we were here, one broad gate was a hole in the ground. Six months on we're now at level 12 on the core and hopefully you'll all agree that broad gate's really buzzing this morning. We'll follow the usual running order. Bhavesh will take you through our financial results. Darren will provide an operational update and I'll wrap up with the strategy and the outlook. But before we do that, I just wanted to go through the headlines. Clearly, the macro environment has been quite challenging and volatile over the last 12 months. Despite this, our operational performance has been strong. Underlying profit is up 7%, driven by like-for-like rental growth of 6%, additional fee income and a tight grip on the cost base. The dramatic rise in interest rates that we saw during the year increased investors' return requirements. This impacted virtually all asset values. The property was not immune and we saw our portfolio value decline 12%, reflecting a 71 basis point outward yield shift. We outperformed the MSCI benchmark by over 300 basis points, reflecting our sector choices and that operational performance. The macro environment remains hard to call, but in the last few months we've seen upward yield pressure ease and there are early signs of compression for retail parks. We're in good financial shape, benefiting from 750 million of well-timed disposals. We have 1.8 billion of liquidity, a low net debt to EBITDA of 8.4 times, a loan to value ratio of 36%, and we continue to actively recycle capital. Today you will hear three key themes in our presentation. We're executing well both strategically and operationally. We're benefiting from our focus on markets with strong fundamentals where we have pricing power. And we can drive significant value by recycling out of mature assets, building out our development pipeline and enhancing our leading position in retail parks. But more of that in a moment. Now I'll hand over to Bhavesh, who will take you through the financial results.

Thank you, Simon. Good morning and thank you for joining us. Over the next few slides, I'll provide an overview of our financial performance for the year to March. We delivered strong underlying profit growth of 7% in the year, driven by like-for-like net rental growth up 6% year-on-year. And we've kept a strong focus on cost management, evidenced by a significant reduction of our upper cost ratio, improving 610 basis points to 19.5%. We generated earnings per share of 28.3 pence, up by 5%. In line with our dividend policy of paying 80% of underlying EPS, we will pay a final dividend in July of 11.04 pence per share, resulting in a full-year dividend of 22.64 pence. This is a 3% increase on the prior year. Net tangible asset value was 588 pence per share, down 19.5%. The key movement was a decrease in our portfolio valuation of 12.3%. This reflects yield expansion across the portfolio as a result of rising market rates. Encouragingly, we are seeing upward yield pressure easing, and Darren will provide further details shortly. The valuation decline in the year had an impact on LTV, increasing 310 basis points to 36%. Our net debt to EBITDA remains low at 6.4 times on a group basis and 8.4 times on a proportionally consolidated basis, down 1.5 and 1.3 times respectively. The reduction in net debt to EBITDA is a result of strong earnings growth, our well-timed disposals, which further strengthen our financial position. Our headline net rental income is up 21 million pounds or 5% in the year. Net divestment reduced net rents by £13 million, mostly due to the disposal of a 75% interest in Paddington Central, offset by the impact of acquisitions. The £13 million increase in net rents from developments reflects the practical completion of One Triton Square last year and a rates rebate from Euston Tower, following its de-rating ahead of future developments. The impact of historic CVAs, admins, and provisions for debtors have normalized with a net nil impact in the year. We've also delivered strong like-for-like net rents in the year, increasing by 21 million pounds. Let me now take you through the drivers of this. On campuses, like-for-like growth was up 6.5% or 11 million pounds. This was driven by strong lighting activity across our newly refurbished space, including braids at Exchange House and rent reviews with Dentsu at 10 Triton and Meta at 10 Brock Street. Strong lighting activity across Story has also added to campus rental growth this year. In retail parks, Like for Like growth was 6.2%, or seven million pounds in the year. Retail parks continue to be the preferred format for a wide range of retailers, and our occupancy has increased further from already high levels, and we are now 99% full. For shopping centers, Like for Like net rents increased by 2.6%, reflecting good operational performance and improving occupancy. Let me now turn to our income statement, starting with the top line. The strong like-for-like growth that I just spoke to fully offset the impact of the Paddington disposal, and as a result, gross rental income is flat. Rent collection rates have returned to pre-pandemic levels, reducing property outgoing expenses. Combined, these resulted in net rental income growing by 4.9%, and our net to gross rent margin has normalized. Fees and other income increased by five million pounds with our new Canada Water and Paddington Joint Ventures generating additional fee income. Administrative expenses were held flat year on year at 89 million pounds. Our tight grip on costs alongside a normalization of property expenses and higher JV fee income mean we have reduced our upper cost ratio by 610 basis points to 19.5%. Net finance costs were up 9 million in the period to 111 million pounds. The increase is mostly due to rising market rates, but we expect the impact of future rate rises to be limited as we're 97% hedged for the next 12 months. I'll explain details of our financing activity later on. Underlying earnings per share is 28.3 pence, up 4.8%, resulting in a full year dividend of 22.64 pence per share. The growth in the dividend is lower than EPS growth, reflecting the new accounting guidance on rental concessions, which impacted the prior year. We expect earnings to be broadly flat this year with development income to benefit in future years. We've included a new guidance slide in our appendices which outlines the component parts of our guidance. Turning now to our balance sheet. Net tangible assets decreased 19.5% to 588 pence. This was primarily due to property revaluations, which reflect the impact of rising market interest rates and the repricing of all real estate assets, with our portfolio yield expanding 71 basis points. When including dividends paid in the period, total accounting return was minus 16.3%. I wanted to remind you of our capital allocation framework in the context of the current macroeconomic environment. We have an attractive campus and logistics development pipeline. And as we look ahead, we will continue to be thoughtful about committing to new projects. We'll require clear visibility on rent and an attractive yield on cost for the development. We remain selective and disciplined in deploying capital into future acquisitions. We were net sellers during the last 12 months. Our balance sheet remains strong, we have significant liquidity, and we monitor a number of key metrics, which I'll cover in detail shortly. Finally, our growing dividend reflects the strong operating performance of our business across the year. Our development pipeline is a key driver of long-term value creation, and we expect development profits to come of 1.7 billion pounds. This is lower than the £2 billion that we reported last year as a result of yields moving out in the period. The impact of yield expansion on profit to come has been partially absorbed by lower site values, and we've worked hard to enhance our schemes by improving massing and identifying cost efficiencies. In line with our expectations, construction cost inflation peaked in FY23, and we expect it to moderate to around 3-4% in FY24. In our appraisals, the growth in rents fully offset the increase in construction costs. Let me provide some color on our high quality development pipeline. We've made great progress on our London urban logistics pipeline, submitting five planning consents in the last six months, and most recently receiving approval for the box at Paddington, which we believe will be one of the best, most sustainable last mile logistics facilities in central London. Canada water phase one is well underway. We've brought to market the founding our 35 story built to sell residential building And we've just kicked off our first major sales campaign and so far. It's been very successful achieving an attractive 1250 pounds per square foot on reservations and exchanges to date Last month, we also unveiled our future vision for the Printworks building. This will include 158,000 square feet of workspace called the Grand Press, and subject to planning, a unique cultural venue in the heart of the Canada Water Master Plan. On our other campuses, alongside delivering best-in-class offices, we have an exciting pipeline of lab and innovation space, a key driver of growth, and something Simon will cover in detail later on. Turning now to our balance sheet, which I'm pleased to say remains in a strong position, despite the market volatility over the past year. We monitor three key balance sheet metrics, absolute levels of debt, net debt to EBITDA, and loan to value. Through our disposals and strong earnings growth in the year, we reduced our quantum of debt by around 300 million pounds. Net debt to EBITDA on a group and proportionally consolidated basis have improved to 6.4 and 8.4 times respectively. Despite lower debt, LTV over the period has increased as values have decreased, and so consequently LTV has risen to 36%. We actively recycle capital to ensure our debt metrics remain in the right range. You saw us do this with the sale of Paddington, which crystallized total property returns of 9% per annum over its life, and we remain disciplined in terms of acquisitions. Most recently, we've acquired 150 million pounds of retail parks at an attractive blended yield of 8.1%. Over the next 12 months, you can expect us to continue to actively recycle capital. We maintain good long-term relationships with debt providers across different markets. In the year, we've continued to raise finance on good terms with margins in line with our in-place facilities. We've completed 1.4 billion pounds of financing in the year. Notably, 875 million of this was in the second half. In our joint ventures, we raised £665 million. This includes a £150 million green loan facility completed in March 2023 to support the development of Canada Water Phase 1. And earlier in the year, we completed a £515 million loan in our new Paddington joint venture with GIC. And for British land, we completed 475 million of RCFs with new and existing banks, a mix of new facilities and extensions. At March, our weighted average interest rate was 3.5%. Our debt is 97% hedged over the next year. And on average, over the next five years with a gradually declining profile, we have interest rate hedging on 76% of our projected debt. And as of March, we had 1.8 billion pounds of undrawn facilities. And based on our current commitments, the group has no requirement to refinance until early 2026. So in summary, we've delivered another year of solid earnings growth. We have a strong balance sheet and excellent liquidity. And lastly, we have a high-quality development pipeline that we expect will deliver significant future returns. Thank you. I'll now hand to Darren, who will provide an operations and market update.

Thank you, Bhavesh. Good morning, everyone. I'm going to give you an update on activity in our key markets. But first, let me take you through our valuations. Overall, we've seen a valuation decline of 12.3%. This was due to yield expansion of 71 basis points across the portfolio, reflecting challenges in the macro environment and rising interest rates. This has been partially offset by rental growth driven by our asset management activity, resulting in an uplift in ELVs of 2.8%. The valuation of our campuses was down 13.1%, following outward yield movement of 70 basis points. However, rents grew by 2.6%, following our positive leasing activity, which I'll come back to in a moment. Of course, the movement in exit yields is magnified on development site values, which were down 15% in the year. But as you heard from Bhavesh, there is still significant profit to come on these schemes. In retail and London urban logistics, we've seen a decline of 10.9%. In retail parks, we previously said that our activity would start to drive rental growth. And that's coming through now at the upper end of our guidance range at 2.8%. London Urban Logistics are down 24.2%. The increase in yields on our logistics assets was 187 basis points. However, because we were conservative in our development appraisals on acquisition, the exit yields used for our GDVs have only moved around 75 basis points. This, combined with the fact that we've seen very strong rental growth in London of 29.4% over the year, means we're still expecting attractive returns from our development pipeline. So despite the tough macroeconomic backdrop, we've seen rental growth across all of our key target markets. Now the capital markets have obviously been through a period of significant uncertainty with yields needing to reflect the movement in interest rates. There was speculation last year on how long this would take to feed through to our valuations, but we've seen a relatively rapid expansion across all sectors of between 75 and 100 basis points. This can be seen in the overview of agents' prime yields shown in the table on the slide, which corresponds to what's come through in the MSCI data and also what we're seeing in the market at the moment. For retail parks, there's been a very noticeable uptick in activity, with competition in the market continuing since the year end, meaning that we're currently witnessing a compression in yields. In London offices, there's been less transactional activity. However, following the significant repricing, there are recent signs of increasing investor interest. But it's important to note that the structural evolution we've seen in offices since COVID is very much at the forefront of investors' minds, with their focus on high-quality buildings with strong sustainability credentials. Now, obviously, we need to see this interest turn to activity over the next few months for there to be more clarity on pricing levels. But what I can say is that the occupational picture, as always, will be an important factor in terms of market confidence. And here we're seeing some very good levels of activity. We've seen strong leasing volumes across our portfolio with deals on over a million square feet on rents totalling £68.4 million at an average of 11% ahead of ERV and 18% above passing rent. We also have a further 106,000 square feet under offer at 8.6% ahead of ERV, demonstrating the continued demand for best-in-class office space and our campus proposition. Storey occupancy is at 93%, following 146,000 square feet of leasing activity, combined with a very strong 76% retention rate. And we've had continued leasing success at our developments. We've already let 65% of 3 Sheldon Square at Paddington to Virgin Media O2, building on our successful leasing of over a third of the office space at Norton Folgate to Reed Smith. This supports what we've seen across the London market with continued evidence of the bifurcation of best-in-class and secondary office space. The latest analysis shows that BREEAM certified buildings command a 12% rental premium and a 24 basis point yield premium, showing that quality and sustainability are important characteristics for occupiers and investors alike. And if we look at net absorption rates, as shown by the CoStar analysis on the slide, five star buildings defined as best in class and highly sustainable have strong positive net absorption in contrast to the rest, which has seen negative net absorption since the pandemic. When we drill into this analysis further, we see this trend applies to both the city and the West End, with positive net absorption for five star buildings, showing that the trend here is quality, not geography. This is exactly what we're delivering on our campuses and across our committed development programme of 1.8 million square feet, where we're now 46% pre-let, including the space let at Norton Fulgate, 3 Sheldon Square and here at 1 Broadgate. And we're having very positive discussions on the remaining space, with over a million square feet in negotiations on the committed and near-term pipeline. We're delivering into an increasingly supply-constrained market, where, quite simply, occupiers are prepared to pay for the best. And this underpins our confidence in our development returns going forwards. Now, an exciting part of our strategy is the leveraging of our campus proposition to expand into innovation and life sciences, where we're focusing on delivering best-in-class space within the Golden Triangle of Cambridge, Oxford and London. We think that this is most clearly demonstrated in our plans for Regent's Place. Here we have a 13-acre campus sitting in the heart of London's Knowledge Courser, close to a range of academic and research institutions including UCL, the Wellcome Trust and the Francis Crick Institute. We have an opportunity to deliver 700,000 square feet of lab and innovation space, including exciting plans for Euston Tower and 120,000 square feet of labs within existing buildings. of which half is either completed or on site at 20 Trident Street and 338 Euston Road, where relation therapeutics who work in drug development are already in occupation. This drives good economics for us. Relative to traditional office rents, lab-enabled and fully fitted space commands rental premiums of around 20% and 50% respectively. This is net of the amortisation of additional fit-out costs, which are around £75 per square foot for enabled and £150 per square foot for fully fitted. In addition, there's potential upside with improved yields, enhancing our capital return. Simon will talk more about this part of our strategy in a moment. On sustainability, we continue to make good progress towards our net zero targets. 45% of our standing portfolio is now APC A or B rated, up from 36% last year. In our campus portfolio, we're 50% A or B rated, and our pathway is very much built into our asset management activity as standard. For example, we've already installed heat pumps into five of our buildings, with a further plan for four buildings next year. A great example of our progress is our all-electric refurbishment at 3 Sheldon Square, which includes the installation of air-source heat pumps, reducing operational energy demand by over 40%, a key reason behind Virgin Media's decision. Moving on to retail, we've had another record-breaking year on volumes, with 2.4 million square feet of activity at nearly 19% ahead of ERV. Momentum which is continuing with a further 800,000 square feet under offer at similar premiums to ERV. Much of this is driven by the performance of the retail parks, where we're seeing our activity now start to feed through to rental growth, as I mentioned earlier. And we have a very strong position on the ground, having driven occupancy up to 99%. As you know, we believe retail parks are clearly the winning retail format in the UK. They're affordable for our customers, with very low occupational costs of 9%. They attract a diverse occupier base, appealing to omnichannel and value retailers alike. And they aren't oversupplied, accounting for just 10% of total UK retail footprint. Our experience and market leading position here means that we're very well placed to price new products. We've made another £150 million worth of acquisitions this year at a combined yield of 8%. And also that we've got the ability to do a huge amount of repeat business with retailers, which has been a key factor in driving our occupancy. Let me quickly show you what this actually looks like on the ground. I'll start with the big one, Glasgow Fort. 32 deals this year on 167,000 square feet of space, including deals with Zara, who doubled their footprint. 100% let once we complete our under-offer deals. Speak, Liverpool, 16 deals on 97,000 square feet, 100% let. Chester, eight deals on 24,000 square feet, 100% let. Biggles Wade, which we bought last year, we've done three deals in total. One 10,000 square foot deal this year, meaning we're now 100% let. Walsall, three deals on 20,000 square feet, 100% let. And Giltbrook, Nottingham, seven deals on 89,000 square feet, 100% let. Now with occupancy of 99% overall, obviously I could go on. But hopefully you can see this puts us in a really strong position as we head into FY24. Let me turn to look at London Urban Logistics, where we continue to focus on two key types of product, Zone 1 in the very centre of London and multi-storey within the M25. The fundamentals remain very compelling, with a wider range of occupiers competing to find last-mile solutions. And with a chronic undersupply of modern space across Greater London, vacancy is 2.3%, and in Zone 1 it is only 0.4%. This type of space in these locations drives greater efficiencies for operators, which means rents are affordable, and combined with the low levels of supply, why we continue to see strong rental growth performance. We've made excellent progress in our development pipeline. We have a total of 2.9 million square feet with a GDV of 1.3 billion, and already have 2.1 million square feet of this in planning. including the very recent consent achieved at the Box of Paddington, which Simon will speak more about. We've also submitted planning applications for Verney Road and Mandela Way in Southwark, as well as Thurrock and Enfield, with a further 750,000 square feet of projects where planning submissions are being progressed. And as I said earlier, the fact that we were conservative on exit yields and we continue to see strong rental growth means project returns remain attractive. Before I hand over to Simon, I want to briefly touch on our shopping centres. We've made good progress on our leasing with 990,000 square feet of leasing deals on 18.5% ahead of ERV. Occupancy is 94.1% and we have a further 274,000 square feet under offer at an average of 9.1% ahead of ERV. As you've just heard, we prefer the fundamentals of retail parks and view this element of the portfolio as subscale and non-core. Therefore, we will opportunistically look to sell over time, as and when liquidity returns to the market. In the meantime, we'll continue to drive healthy cash flows and occupancy levels. So to wrap up, all sectors of our business are performing well occupationally, and we're driving ERV growth across all of our key markets. Our campus proposition is continuing to deliver, as businesses focus on best-in-class space. And we leverage the model into life sciences and innovation. Retail parks are the preferred format for retailers, demonstrated by 99% occupancy and rental growth returning. And we're making good progress on the London urban logistics pipeline, where the fundamentals remain very compelling. Now I'll hand you back over to Simon for an update on strategy.