British Land Company PLC

We'll make a start. Good morning, everyone, and thank you very much for joining us. Great to have a nice turnout in the room. Probably helpful the tube strikes were called off. I was a bit worried we'd be presenting to ourselves, but no, here we go. So today we'll follow the usual running order. I'll start with a strategic update. Then David will take you through the financial performance and our attractive earnings outlook. Over the next 30 minutes, you'll see how this is driven by two things. First, our market-leading positions in sectors with strong fundamentals. And second, our active approach to asset management. We've long believed that hands-on asset management is a key source of outperformance. Never has that been more evident, and Kelly will give you some great examples later. So let me start with the occupational fundamentals of our markets and our competitive positioning within them. Our campuses and retail parks now represent 90% of our business. and they're market leading, both in scale and in quality. And I'm struggling to remember a time when the occupational fundamentals were as favourable as they are today, with net absorption very strong and supply constrained in both our markets. Together with our active approach to asset management, this is translating into attractive ERV, like-for-like and earnings growth. This underpins our conviction in delivering 8-10% total accounting returns through the cycle. I thought it would be helpful today to touch on two topical themes, inflation and artificial intelligence. As we all know, inflation rose dramatically after the invasion of Ukraine, and conflict in the Middle East is likely to exert further upward pressure on prices. So how much of this inflation are we likely to capture in our rents? To answer this, let's look at the portfolio performance since 2022. Over this period, our ERV growth has tracked inflation and just recently overtaken it. And we've delivered top quartile total shareholder returns. That's down to having well-located, high-quality assets in sectors with strong occupational fundamentals. And this is the important bit. Our markets are tighter today than they were in 2022, with vacancy around 300 basis points lower in both markets. So we expect to outperform inflation going forward and a guiding to ERV growth of 3% to 5%. Now let's delve into the fundamentals in more detail, starting with the London offices. This is where I want to touch on my second theme, AI. There's a very live debate about AI's potential impact on white collar jobs. Will this be like previous waves of technological change, the PC, the internet, the smartphone, where new jobs were created faster than old ones disappeared? Or will it be different this time? The reality is nobody knows for sure. So as ever, we will stay very close to our customers to be the first to understand what is happening. In the meantime, I think we can say with a high degree of confidence that soft skills will be at a premium and a new generation of companies will want the best physical environments for these skills to flourish in. And our campuses should sit right at the heart of this. If we look at the facts as they are today, net absorption of space, which is one of the best measures of the health of demand, is at a record high and for every company downsizing, four are upsizing. This is driven by a strong return to the office and significant growth from a new wave of AI businesses. Despite geopolitical uncertainty, the forward-looking indicators are very positive. Demand is 57% above the 10-year average and under-offers are 50% higher than this time last year. This demand is meeting a severe supply crunch. driven by initial fears about the effect of hybrid working, increased construction costs and higher yields. The crunch is particularly acute in the city, where vacancy for new and refurbished space is forecast to fall below 2% and remain there for the next four years. Historically, when we've seen this, rents have grown at around 10% per annum. Our campuses are ideally positioned to benefit from this environment As you know, they offer exceptional product next to major transport nodes with rich amenity and space that supports companies at every stage of their growth, from story through work-ready to global HQ space. The results speak for themselves. A record £143 million of leasing last year. To put that into perspective, we represent around 5% of the London office market, but were 15% of last year's reported leasing and 33% in the fourth quarter. I said before the campus proposition is particularly attractive to science and tech businesses. In 2024, we set out a strategy to increase our weighting to this sector. We believe it would be a key growth driver of the UK economy. What we didn't fully anticipate was quite how powerful a tailwind AI would prove to be. Growth across AI and data sciences has accelerated, particularly over the last 12 months, and the lead indicators are very compelling. If you take a look at the US, leasing activity in the San Francisco Bay Area reached 11 million square feet last year, the highest since 2017. and there's another 3.8 million square feet in the first quarter of this year. These businesses are now expanding internationally, and London is very clearly the leading destination. That's due to the fantastic talent on offer. We're currently tracking 2.5 million square feet of active demand. The knowledge quarter sits right at the centre of this activity, as you can see on this slide. That's benefiting Regents Place. We've rapidly grown the number of innovation occupiers across our portfolio. Our acquisition of Life Science REIT adds further high-quality assets in the Golden Triangle, serving a wide range of occupiers, such as Wave in autonomous vehicles, Oxford Ionics in quantum computing, or Thought Machine in banking payments. On a pro forma basis, science and tech now represents 35% of our campus footprint. The name Life Science REIT understates the opportunity, which spans the entire science and tech ecosystem. Labs represent just 6% of the acquired portfolio. And interestingly, there are no life science companies among the top five occupiers, which together account for 50% of the rent roll. The acquisition delivers attractive economics unlocked through our scalable platform. We expect meaningful cost synergies through the elimination of corporate costs and efficient onboarding of assets. The acquisition is immediately earnings accretive, and we expect further earnings growth through capturing reversion and leasing vacant space, particularly at Oxford Technology Park, where much of the space is newly delivered. We've already made excellent progress in our first month of ownership, as you'll hear from David. And crucially, Earnings accretion was achieved with no impact on MTA. I'm sometimes asked how we manage the higher covenant risk associated with smaller science and tech companies. In practice, we've seen very few failures, as you can see. But risk management remains critical. Smaller, higher growth occupiers typically take story or work-ready space on shorter leases with limited rent-free periods supported by rent deposits. Because the fit-out is generic, if a tenant does fail, we can relet quickly with downtime generally covered by the deposit. By contrast, we require strong credit profiles for our HQ space, given the longer leases, higher incentives and more bespoke customer fit-outs. Though ultimately, owning in-demand real estate is the best miskin of credit risk. I'd like to now turn to development. It's a more challenging environment for this, given higher build and funding costs. So it won't work everywhere, but in very core locations like here at Broadgate, where future supply is close to zero, the economics remain compelling. We're achieving premium rents, yields on costs over 7%, and we're mitigating risk through pre-lets, fixed price design and build contracts and partnerships. This is exactly the approach we're taking at 1 Appold Street, as you'll hear later from Kelly. And now to retail parks, a growing part of our business where the fundamentals remain very healthy. By now, you'll be very familiar with our three A's, affordability, accessibility and adaptability. These make parks the formatted choice for the UK's best performing retailers, the grocers, essentials and omni-channel operators. Expansion by these retailers has driven strong absorption, with vacancy down 340 basis points since 2021, unlike high streets and shopping centres where vacancy remains high. New supply is very unlikely, values remain below replacement costs and planning is extremely restrictive. Our portfolio is unmatched in terms of quality and scale. We have 10 million square foot of space within 30 minutes of half the UK's population. And our deep, long-standing retailer relationships are a key competitive advantage. This is translated into footfall that's grown more than 13% above the UK retail benchmark since 2019. Strong rental growth on our retail parks looks set to continue, given the high correlation with occupancy. Our occupancy is 99%, and we delivered 4.4% rental growth last year. The over-rent that emerged post-COVID has largely burned off through ERV growth, and today we're leasing space around 6% above previous passing rent, Kelly will cover this and how we're also leveraging our retail relationships to source attractive acquisitions and drive performance. But before that, I'll hand over to David to take you through the finances. David, over to you.

Thanks, Simon. Morning, everyone. Three things from me today. First, I'll cover our financial performance for FY26. Then I'll update on the balance sheet and our approach to capital allocation. And finally, how our five earnings levers drive performance into the current year, FY27. Starting then with the financials. I'm pleased we delivered earnings growth ahead of the guidance I gave at the start of the year, underpinned by strong like-for-like growth, good progress on development leasing, especially through the second half, and continued cost discipline. Like-for-like net rents grew 6%, adding 2.1 pence to EPS, and within this, campus growth was 12%, as EPRA occupancy improved following leasing progress at buildings like Norton Follgate and 155 Bishopsgate. Retail also performed well, delivering 2% growth despite already high occupancy levels, and the fact we're now doing deals ahead of previous passing rent is a key driver of future like-for-like growth. Development leasing added 1.4 pence to EPS as recently completed schemes began to contribute to income. And we saw the benefit of our focus on admin costs, which are down 9%. And this, combined with a £1 million increase in fee income, added 0.8 pence to EPS. These positive items were partially offset by two factors, the negative year-on-year movement in one-off items and higher finance costs. Within the one-off items, There was a provision released last year, mainly related to the receipt of legacy arrears, that did not repeat in FY26, and this movement more than offset the upside from surrender premiums. Surrenders were higher than normal in the year, but in each case they represent the kind of hands-on asset management Simon described, allowing us to secure cash receipts and relap the space to new occupiers at higher rents. Higher finance costs reduced EPS by 3.4 pence. Of this, one pence was due to a 30 basis point increase in our weighted average interest rate to 3.9%. But the bulk of the increase is because interest that was previously capitalized on developments now hits the P&L as these schemes complete. This in itself reduced EPS by 2.4 pence. Although looking forward, the impact is now more than offset by the leasing we've delivered on these schemes. And that's one of the key reasons why we see earnings growth into FY27 as being de-risked, something I'll touch on later. Overall then, underlying profit was up 5% with underlying EPS up 1%. And so, in line with our dividend policy of paying out 80% of underlying EPS, the board has proposed a final dividend of 10.8 pence, taking the total payout to 23.12p, up 1%. In terms of the more detailed P&L accounts, the two metrics I'd focus on here are the net rent margin and cost ratio, both of which have been impacted this year by specific factors. Firstly, the provision movements I just described, and secondly, increased void costs as development is completed. Going forward, the void cost impact will reduce as we benefit from the development leasing we've already delivered and fill the remaining space. At the same time, we of course remain focused on controlling costs. In this context, it's pleasing that admin costs are down 16% since 2022, despite inflationary pressures, and down 9% this year alone. This will benefit the cost ratio, which I expect to be around 17.5% in FY27, before reducing further to mid-teens in future years, whilst margins return to around 90% over time. Moving on to the balance sheet and NTA. Portfolio values increased 2.3% over the year, which along with profit growth delivered a 4% increase in NTA per share to 590 pence. Combined with the dividend paid, this delivered an 8.1% total accounting return within our target range of eight to 10% for the first time since 2022. It's clear that our focus on making smart asset management decisions in the right sectors driving rents higher while controlling costs, has underpinned this performance. We remained active in the debt markets in the year, completing over £3 billion of financing activity. More recently, the backdrop has, of course, been more volatile, but we've continued to access markets successfully, including a new loan secured on 100 Liverpool Street in April and our new commercial paper programme, which is shorter dated by nature, but benefits the PML. Looking ahead, with our diverse mix of debt types and duration, we remain well financed with flexibility on when and how we raise new debt. Leverage remains within our target ranges for this stage of the cycle. LTV is 39.2%. Net debt to EBITDA on a group basis is 7.7 times and our pitch rating remains A with a stable outlook. So with 1.6 billion pounds of liquidity and no requirement to refinance until 2029, the balance sheet continues to provide the stable platform we need to grow. In this context, our approach to capital allocation remains disciplined and consistent. In fact, this slide is unchanged from half year. Our focus is on recycling capital out of more mature, lower returning assets into higher returning opportunities. Today, that means continuing to invest in retail parks at attractive pricing and progressing best-in-class campus developments, but on a suitably de-risked basis. Kelly will talk you through the framework of how we think about de-risking development shortly. As ever, we take all capital allocation decisions in the context of shareholder returns, including the relative returns and EPS accretion available from share buybacks, for example, when we have proceeds to invest following significant disposals. Our acquisition of LifeScience REIT demonstrates how we are alert to opportunities to drive growth in an earnings accretive, NTA neutral manner. It allows us to scale into a sector with strong tailwinds using our existing platform and is immediately earnings accretive, adding 0.3 pence to EPS in FY27, with further upside moving forward, primarily from the lease-up of the newly delivered space at Oxford Technology Park. We've already repaid the legacy company debt using cheaper British land facilities, integrated the five assets into our portfolio at minimal incremental cost, and we're making good progress on initial leasing with 56,000 square foot of newly delivered space under offer at Oxford Technology Park. Turning now to our five earnings levers. This is the framework we use to deliver consistent cash-generative growth. And I'm pleased at how, in FY26, we've delivered well against these, including good like-for-like growth, continued cost rigour, and strong progress on development lease-up. Fee growth has been slightly below what we target medium-term. That's largely because capital activity was also lower in FY26 than we would normally expect. And again, Kelly will expand how we see the outlook for investment markets in a minute. Principally though, these levers were about the building blocks of earnings growth for FY27 onwards. And here I've set out how we expect them to trend over the medium term, which again is consistent with half year. The first three levers demonstrate how we expect to generate around 4% core organic EPS growth per year, with capital activity adding a potential further 2% EPS growth, meaning overall we expect to deliver sustainable earnings growth of between 3 and 6% per annum going forward. Specifically for FY27, there are a few things I would highlight. First, given the occupational strength of our core markets, we are confident in delivering like-for-like growth at the top end of our target range of 3 to 5%. Second, we will benefit from the development leasing completed over the last 18 months, which will deliver around £40 million of rents in FY27. Third, we remain focused on leasing our remaining development space while retaining a firm grip on admin costs, which will both drive an improvement in our cost ratio to around 17.5% this year based on the expected shape of our P&L. Partially offsetting this, we do expect a continued further gradual increase in finance costs likely at the top end of this range of 10 to 20 basis points, given our hedging profile. And finally, within the capital recycling lever, as I described, the lifetime street acquisition is immediately earnings accretive, all of which underpins our confidence in delivering at least 30.5p of EPS for FY27. That's 6% EPS growth of FY26 levels, which is a good place to hand over to Kelly.

Thanks, David, and morning, everyone. Simon's covered the market backdrop in our strategy, so what I want to do now is bring it to life. I'll talk you through the activity and value creation we're seeing on the ground and share some examples of where our hands-on approach to asset management really delivers. Starting with valuations, this is fundamentally an occupational story. Portfolio values were up 2.3%, driven by ERV growth of 4.9% and stable yields. ERV growth is at the top end of our 3-5% guidance range, reflecting the strength of leasing we've delivered. You can see the same pattern across both campuses and retail. Campuses are up 2%, with ERVs up 6.5%. and retail and urban logistics are up 2.7%, with ERVs up 3.6%. Due political and macro volatility remains very evident, but the operational performance has shown no signs of pausing, with leasing volumes accelerating in recent months. At our campuses, we completed a record 1.7 million square foot of leasing, 6% ahead of ERV and 20% ahead of previous passing rents. This reflects tight supply for well-located, high-quality space. Around half of this annual activity was delivered in the final quarter, despite the more volatile macro backdrop. This continues into FY27, with a further 295,000 square feet under offer as at year-end, 17% ahead of ERV, and in the six weeks post-year-end, a further 228,000 square feet has gone under offer. Over half our deals have been on previously vacant or newly delivered space. This strong leasing drove occupancy to 95% at year end from 92% in September. That includes Norton Solgate, now 94% left and under offer. Over at Regent's Place, in October, we launched One Triton Square. This building is a perfect example of our hands-on approach. We proactively took the building back from META in late 2023, received a £149 million surrender premium, brought in Royal London as a JV partner early 2024, and repositioned it as a world-class science and tech building. Leasing velocity has exceeded expectations, with the building 94% set, including all of the lab space, just seven months after practical completion. and achieving rents 40% ahead of what Netta were paying. Occupiers include Gilead, announced earlier this year, and more recently, Anthropic, one of the world's leading AI companies, who've signed for 158,000 square feet. This is our sixth deal with Anthropic at Reason Space, and a great illustration of how our campus model supports growing businesses as they scale. Stepping back, Regent's Place as a whole has had a strong year as it continues to transform. The 1.4 million square foot Knowledge Quarter campus benefits from proximity to leading academic and research institutions. Leasing this year has been 12% ahead of ERV, and ERVs across the campus are now almost 7% higher year on year. This has been driven by a broadening of the occupier base, with a science and technology focus. Science and tech occupiers now represent over half the campus rent, up from a third five years ago. Euston Tower is the next chapter. As we move forward with our search for a development partner, it's a great opportunity to build on the campus' position as London's fastest growing destination for innovation and high growth businesses. and British Land will be moving head office to the campus in just a couple of months, so we're excited to have a front row seat to everything that follows. While AI and tech's an important source of incremental demand, professional and financial service activity remains incredibly robust. Our meeting to lawyers HSFK at Broadgate's One Apple Street development, signed in February and completing in 2029, is a good example. Their 21-year lease for the office space sets new benchmark prints for Broadgate, and the project meets all our development criteria. Prime campus location, meaningful pre-let of between 60 and 100% of the office space, construction cost certainty, and flexibility to bring in an additional capital partner alongside GIC to manage risk and drive fee income. Turning to the office's investment market, The occupational backdrop is well recognised as very strong, and that strength will feed through to investment appetite in time. At the start of the year, we were seeing encouraging signs with renewed appetite for larger lot sizes. Since then, the Middle East conflict and UK political situation has weighed on the rates environment, but it's a question of when the recovery continues, not if. The occupational fundamentals are too strong for investors to ignore. Post year end, we've exchanged or gone under offer on 176 million pounds of asset sales and have a number of other side processes underway. We'll update you on these in due course. Turning now to our retail parks, which remain virtually full. Leasing volumes are strong, with 1.5 million square foot completed at 9% above ERV. Importantly, deals are now being agreed above previous passing rents, reflecting very limited new supply and strong occupied demand. And it marks a key inflection point. For several years, rental growth absorbed historic over-rent. We're now through that phase, so rental growth is flowing through into like-for-like growth. Demand on retail parks also continues to broaden. Compared with a decade ago, more occupier types have moved from marginal to mainstream, including gyms and leisure, drive-thrus, discount grocers like Elsie and Little, EV charging, and health service uses. This matters because it supports higher footfall, longer dwell times and greater cross spend, which will support the next wave of sustainable rental growth. To finish, I'll touch on some examples of recent active management in retail parks. This is one of the things we do better than anyone else. In November 2024, we acquired Orbital Retail Park. At underwriting, the plan was upsize M&S food into the former home-based unit, and remit the smaller vacated M&S space to another leading national operator. We agreed both deals, in principle, before we purchased, acquiring with Homebase in situ, recognising the pressures they were under, and with direct visibility from our discussions with M&S that they wanted a larger store. M&S opened pre-Christmas, just over a year after acquisition, and they tell us this is their fastest new store from signing to opening. and has been trading extremely strongly. The asset has delivered us a 21% IRR since acquisition. Telford's another good example of hands-on asset management. We bought Telford Forge Shopping Park in October 2024, followed by the neighbouring park last month, acquired at an attractive price, reflecting some vacancy. To create value across both parks, we've agreed a deal to bring a major national retailer to Telford Forge. To make room, we'll relocate some existing tenants into the vacant units next door. We've also added everyday services and EV charging to drive football and dwell time, and we expect combined returns of around 11%. This is exactly the kind of opportunity our expertise allows us to find and execute. less competitive, more attractively priced, and difficult for others to replicate. We have more in the pipeline. It's also important that we recycle capital when we've delivered our business plan and we see more attractive returns elsewhere. That was the case at Harlech, where on completion of a re-gear and enhancing the scheme's income profile, we sold the park in March this year at 10% ahead of book. So to summarize, we've had a year of record leasing in campuses, driven by strong occupational fundamentals. Retail park rents are now growing above previous passing, a meaningful infection point, driven by broadening demand. And we're adding value through active asset management and capital recycling. And I'll now hand back to Simon.