British Land Company PLC

Well, good morning, everyone. Thank you for joining us for the half-year results. It covers quite a busy period for the company. It started back in April with the pre-let to Citadel. We then had the sale of a stake in Meadowhall, or our stake in Meadowhall, a series of retail park acquisitions, and wrapped up in October with the placing. So a busy period. But before we get into that, I did just want to say a thank you to Bavesh, who's Here today, he steps down as our CFO today. He's made a very significant contribution to the business over the last three and a half years. I think in particular, there's three areas where he's really excelled. Cost control, balance sheet management and capital allocation. I've really enjoyed working with you and I know the rest of the team have and we wish you all the best at Kingfisher. As you know, David Walker becomes our new CFO today. David's here in the front row. He's very well equipped to pick up the reins from Vivesh. Many of you know him from his time as interim CFO and head of investor relations. And more recently, he's been our chief operating officer and has executed brilliantly against the mandate to make the British land boat go faster. I know he's looking forward to seeing many of you on the road over the next couple of weeks. And then next to David is Kelly Cleveland. Kelly has been our head of investment for the last eight years, so central to all of the capital activity, particularly over the last 12, 18 months. Kelly is taking on a broader role from Darren that now encompasses head of investment and head of real estate. We're combining our asset management, our leasing, and our investment, and that's going to enable us to drive further outperformance from the business. So before I hand over to Bhavesh, I just thought I'd share my thoughts on the first half. The operational momentum of the last couple of years really continues. We've leased well across the business, ahead of ERV, which combined with our cost discipline and successful asset management means we've been able to grow underlying earnings. And that's despite significant development activity. And that development activity is going to be a key driver of future earnings growth. And then in retail parks, we're seeing the best occupational markets in over a decade. Retailers are competing for space as they look to expand out of town. With occupancy at 99%, this drove ERV growth of 3.7% in the half. The fundamentals are also very compelling for developing new headquarters space particularly in the city, where we estimate a 5 million square feet shortfall of new space under construction. As a result, super prime rents have grown around another 10% since the Citadel deal back in April. We've continued to deploy capital into these markets, investing over 700 million into retail parks and committing to develop 2 Finsbury Avenue, where you may have seen on the way in the core, on the east core, is already at level 25. We now have 1.8 million square feet of best-in-class workspace delivering over the next three years into a supply-constrained market. Over the last four years, we've radically reshaped our business via 3.7 billion of capital activity. This includes disposals of 2.1 billion of mature offices and shopping centres at an average yield of 5%, the acquisition of 1.1 billion of retail parks at a yield north of 7%, and the assembly of a 1.9 million square feet urban logistics development pipeline. So today, 93% of the portfolio is in our preferred sectors. With that, I'll hand over to Bhavesh to go through the financials for the last time.

Thank you, Simon, and good morning, everyone. I'll take you through our financial results for the first half of the year, much of which you'll be familiar with following our trading update in early October. We delivered £143 million of underlying profit in the half, up by 1%, despite our decision to take several properties into development and the surrender of one Triton Square lease last September. Earnings per share was up by 1% at 15.3 pence. and will pay a dividend of 12.24 pence per share. Net tangible assets were up 1% at 567 pence per share, supported by an increase in property valuation. We've been active in the period with disposals, acquisitions, and developments. As a result, pro forma LTV increased to 50 basis points to 37.8%, and pro forma group net debt to EBITDA stands at 7.4 times. Let me now walk you through our income statement. Starting with gross rental income, which was down 3% due to the disposal of Meadowhall in July 2024, the surrender of one Triton Square last September, offset by surrender premium receipts in the period, which I'll touch on shortly. We were pleased to have acted quickly to redeploy the Meadowhall sale proceeds into retail parks by the end of the half. These parks will be earnings accretive, and on an annualized basis have fully offset the earnings dilution from the sale. Property operating expenses increased by £5 million in the period versus the prior year, which had benefited from a one-off collection from Arcadia. Our net rental income margin remained strong at 91.6%. Fees and other income increased to £13 million. We now recognize the full fee for managing Meadow Hall. Administrative expenses decreased to £41 million, and I'm pleased our upper cost ratio now stands at 15.3%. Net finance costs were down £10 million due to the timing of £456 million of net disposals completed over the last 18 months to September, offset by ongoing spend on our committed development pipeline. And our hedging continues to protect us from higher market rates, and our weighted average interest rate at September was 3.5%. Underlying earnings per share was 15.3 pence, up 1%, and our dividend is 12.24 pence per share, up 1%. Let's now look at earnings per share growth in more detail, starting on the left of this slide. Sales and purchases increased EPS by 0.4 pence, as the disposals of non-core and mature assets were offset by finance cost savings from the joint venture formation at 1 Triton Square. Although developments are a long-term driver of EPS growth, they reduced EPS in the period by 1.2 pence as we moved 1 Triton Square, 1 Apple Street, and floors at Broadgate Tower into our development pipeline. This was offset by good leasing progress at our newest schemes, Norton Fulgate, which is now over 50% let or under offer, and 3 Sheldon Square at Paddington, which is over 90% let or under offer. Surrender premium receipts added 0.9 pence to underlying EPS following our active asset management in the period, where we took back floors at 155 Bishopsgate and 20 Triton Street, enabling us to capture positive reversion we are seeing in the market. Encouragingly, 88% of this space is already let or in negotiations at rents significantly ahead of previous passing rents. and includes 77,000 square feet let to Aiken Gump in the period at 155 Bishopsgate. Provisions for debtors and tenant incentives reduced EPS by 0.6 pence. This reflects the impact of the Arcadia payment we benefited from in the prior period. Like for Light Growth added 0.5 pence to EPS. These movements together delivered a first half EPS of 15.3 pence per share. For the full year, we're increasing our earnings per share guidance from 27.9 pence to 28.1 pence to reflect the impact of the successful equity placing and retail park portfolio acquisition. And you can find our usual guidance slides in the appendices to the presentation. We are pleased to deliver positive like-for-like growth across the portfolio in the half, and we expect strong performance to continue across our sectors. On our campuses, like-for-like growth was 3.8%. Strong leasing ahead of ERV across all three of our London campuses drove this performance, where occupancy currently stands at 97%. Retail and London urban logistics delivered 2% like-for-like growth in the half. Our parks have performed particularly strongly in this period, with occupiers continuing to expand into the format. Our retail park occupancy remains at 99%. On London Urban Logistics, we continue to maintain full occupancy on the standing investments. Keeping a firm grip on our costs is an important lever underpinning our earnings growth. Our upper cost ratio has reduced from 25.6% in 2022 to 15.3% today. We have remained disciplined on administrative expenses despite the recent inflationary environment, grown fee income through our existing and new joint venture partnerships, whilst an improvement in rent collection post-COVID has resulted in a strong net rental income margin. And going forward, tightly managing our cost ratio is something that I know David will continue to focus on. Moving on to NTA. Property valuations were marginally up in the first half of the year, adding one pence to NTA. Strong retail park performance, where values increased 5%, offset moderate declines in campuses and London urban logistics. Kelly will provide further detail on our valuations later. Underlying profit less the dividend paid increased NTA by 4 pence, which ended the period at 567 pence. Our total accounting return in the period was a positive 2.8%. Turning now to our balance sheet, which I'm pleased to say is in good shape, and has allowed us to seize opportunities that we see in the market. I'll start with our key debt metrics on the right hand of the slide. Post-period end, we completed an equity placing and retail park portfolio acquisition, as well as a further £86 million of disposals. Proforma net debt stands at £3.5 billion, LTV is 37.8%, and net debt to EBITDA on a group and proportionally consolidated basis are 7.4 and 8.6 times respectively. We front-loaded acquisitions given inflecting markets and expect to continue to recycle capital out of non-core or mature assets. We continue to have excellent liquidity with 1.6 billion pounds of undrawn facilities and cash. And based on our current commitments in these facilities, There's no requirement to refinance until early 2027. We've completed close to £1.4 billion of financing activity in the year to date. This included £930 million of new unsecured RCFs and the extension of £450 million of term loans and RCFs. The new finance raised included a £730 million syndicated RCF with a group of 14 banks in October. which replaces a 525 million RCF maturing in May 2025. This is in addition to nearly 1 billion pounds of financing activity completed in the previous six months. In July, following their annual review, Fitch affirmed all our credit ratings, including senior unsecured at A with stable outlook, which we've held since 2018. You're familiar with our capital allocation framework, against which we've executed well in the period. The resilience of our balance sheet is of utmost importance, and it gives us the flexibility to invest in opportunities as they arise. We were pleased to have executed the disposal of non-core and mature assets earlier this year. We acted with pace to redeploy these proceeds into retail parks at an attractive 7% net equivalent yield, protecting earnings, and growing our retail park portfolio, which now stands at 32% of our gross asset value. We also have an attractive development pipeline. In the period, we committed to 2 Finsbury Avenue on signing the pre-let with Citadel, representing one-third of the building, and more recently, we committed to the science and technology development at 1 Triton Square, which is expected to deliver an IRR of over 30%. We remain selective and disciplined in deploying capital into future acquisitions and developments. The retail parks acquired with the proceeds of the 301 million pound equity placing are expected to deliver double-digit ungeared IRRs, given the attractive yield and strong rental growth prospects, and are immediately accretive to earnings. On an annualized basis, this transaction will increase underlying EPS by 0.4 pence or 1.6%. The placing price was at a 3.6% discount to the undisturbed share price and a 26% discount to the September 2024 NTA, reducing NTA per share by 11 pence. Given the strong returns we're seeing in this sector, we expect to mitigate this dilution over time. The transaction will also improve net debt to EBITDA by 0.3 times on both a group and a proportionally consolidated basis. We're very pleased with the overall demand for the placing. We're very focused on growing our business and our earnings. Like-for-like is a key driver of earnings growth and is supported by the strong supply-demand fundamentals in our markets. Leasing our development pipeline is another key lever of earnings progression, and the demand for our best-in-class base continues to remain strong in this area and is expected to deliver around 4.5 pence of EPS to FY29. We'll also continue to recycle capital into opportunities that can integrate into the existing British land platform at minimal incremental cost, as you saw us execute with the earnings accretive retail park portfolio purchase in October. This earnings growth, along with potential capital growth, supports our target of an 8% to 10% total accounting returns through the cycle. In this half, we've delivered positive earnings growth and been disciplined and decisive with capital allocation. We're confident in the future levers of growth in this business. This is the last set of results I'll be delivering for British Land, and I'd like to say how much I've enjoyed working with you all. As I hand over to David, I'd like to wish him and the British Land team all the best for the future. I'll now hand over to Kelly for a leasing and investment update.

Thank you, Bhavesh, and good morning, everyone. I'll start today with valuations, which are marginally up for the portfolio overall. On our campuses, ERV was, within guidance, up 1.7% for the first half. Values are down 1.7% due to outward yield shift of 12 basis points, but the investment market recognises the strength of the occupational market and liquidity is returning in larger lot sizes. The value of our retail park portfolio is up 5%. That's due to inward yield shift of 22 basis points and strong ERV growth of 3.7% exceeding our full year guidance on an annualised basis. In London urban logistics, values were slightly down and ERV growth was 0.3% in the half. This is lower than you've seen recently due to a lack of lease events across the small standing investment portfolio. We're pleased that we've delivered ERV growth of 15% per annum over the last three years. Leasing performance on our campuses is a reflection of strong demand across the market for best-in-class office space in core locations. While overall take-up in the quarter was down 8% on the 10-year average, it was 8% ahead for space in core central London. Forward-looking indicators are also positive. Space under offer in the city is 25% ahead of the 10-year average. And active demand across central London is 34% above average. 13 million square feet, as you can see on the right. So a really strong picture on the demand side. On the supply side, vacancy is... continues to diverge between the best and the rest. For new or refurbished space in core central London, it's just 1.7%, compared to 11% overall for the rest of central London. And you can see on the right-hand chart, the actual amount of vacant new space in the city in West End is very low. This is reflected in our excellent leasing performance, with deals on nearly 960,000 square feet, 8.3% ahead of ERV. This includes the Citadel pre-let at 2 Finsbury Avenue, A&O Sherman taking up their option space at 1 Broadgate, and Aiton Gump at 155 Bishopsgate on floors we had taken back earlier in the year. High demand continued into the second half with a further 296,000 square feet under offer at 1.4% ahead of ERV. This lower premium reflects a long-term lease to a strong covenant with annual CPI uplifts. We also have 1.7 million square feet of active negotiations at very strong rents on just 0.9 million square feet of space. Story is a key component of our campus offer and in the first half we've done 20 deals on 77,000 square feet with occupancy above our 90% target. Sustainability is a focus for the entire portfolio and it gives us real competitive advantage on our campuses. The proportion of our total portfolio with A or B rated EPCs has increased from 36% in 2022 to 64% today. We've spent a total of $19 million to achieve this, of which 60% is recovered, so we're well within our original target of $100 million. We also retained our five-star Grisby sustainability rating, outperforming last year's scores by for both standing investments and developments. Moving on to retail, retail parks continue to go from strength to strength. We completed over 300,000 square feet of leasing in the half, 7.4% ahead of ERB. And we have a further 430,000 square feet under offer, 7.3% ahead of ERB. We have significant demand from retailers expanding their footprint, including discounters such as Aldi and Lidl, fashion retailers such as Primark and JD Sports, and leading omnichannel retailers such as M&S and Next. We remain virtually full. We have 99% occupancy and had just 24 vacant units out of over 1,000 at the end of September. Three quarters of these are now under offer or in negotiations. Retail is not without its covenant risks, but when retailers do go out of favour, we're able to get the space reoccupied in short order. Carpet right, which went into administration in July, is a great example. All the units are already assigned, under offer, or in negotiation. Since we launched our strategy to buy retail parks, we've deployed 1.1 billion at a yield of 7.1%, These acquisitions reflect our real competitive edge when it comes to underwriting and executing deals in this space. This comes down to our scale. We are the largest owner and operator of retail parks. They now account for 32% of our portfolio, up from 15% in 2021. Provided we continue to see these returns, this weighting will increase. Turning now to logistics, we've built a pipeline of seven schemes covering 1.9 million square feet with a gross development value of 1.3 billion. Logistics vacancy in London remains low, especially for zone one and two ultra urban logistics where it's just 0.2%. The sequencing of our schemes means that the first opportunities we'll deliver are located in these zones. starting with Mandela Way and Verney Road in Southwark, which Simon will talk about shortly. We're also working up planning submission at Finsbury Square Car Park and considering a range of uses and occupiers at The Box in Paddington. Our other schemes at Thurrock and Wembley have longer-term development potential. So to conclude... Yields are stabilising and we're driving strong ERV growth across the portfolio. We benefit from tight supply and high demand sectors. And we continue to deploy capital into higher returning retail parks and world-class developments. With that, I'll hand back to Simon.