Full Year Results Presentation Year ended 31 March 2020
Introduction Chris Grig g, CEO 2
Resilient FY20 Performance • London offices leasing well – 946,000 sq ft, 9% ahead of ERV – Developments 88% let, locking in £54m of rent – Offices value +2.3%; developments +7.5% • Pragmatic approach to Retail leasing – 1.4m sq ft leasing activity – Deals over one year 4% below passing rent – Occupancy high at 96% – Values down 26.1% • EPS down 6.3% to 32.7p – Impact of £1bn net sales of income producing assets since April 2018 – Challenging retail market Broadgate 3
Well positioned in uncertain times • Operating environment and outlook highly uncertain • Key market trends likely to accelerate – More flexible ways of working – Further shift to online retail • Strategy, focusing on campuses, informed by many of these trends – Modern buildings – Customer focused offer – Additional flexibility through Storey • Resilient financial position – Debt low and LTV 34% – £1.3bn undrawn facilities & cash – No need to refinance until 2024 – Temporary dividend suspension Broadgate 4
Covid-19 Response • All but two Retail centres open – Essential stores open c. 15% of total • Campuses are open and all buildings accessible – Physical occupancy low – Most F&B, retail and leisure units closed • Work recommenced at developments following initial suspension – All major sites now open, but with reduced workforce – 135 Bishopsgate completed, being fitted out – 100 Liverpool Street expected to complete calendar Q3 2020 – 1 Triton Square expected to complete calendar The Barcode, Plym outh Q2 2021 Glasgow Fort 3 5
Financial Results Sim on Ca rter, CFO
Results Overview 32.7 p 774 p £ 11.2 bn Und erly ing ea rnings EPRA Net Asset Va lue Portfolio v a lua tion p er sha re p er sha re -10 .1% v s Ma rch 19 -6.3% v s Ma rch 19 -14.5% v s Ma rch 19 (Reta il -26.1%, Offices +2.3%) 34.0 % £ 1.3 bn 8 8 % Loa n to v a lue Und ra w n fa cilities a nd ca sh Com m itted a nd com p leted d ev elop m ents Incl: +340 bp s v a l’n d eclines, No requirem ent to refina nce p re-let +210 bp s ca p ita l sp end until 20 24 4.2p EPS a ccretion w hen fully let 7
Underlying earnings per share Financing £6m (2.5p) Admin £7m 1.1p (1.5p) 1.4p (1.3p) 0.6p 34.9p 33.5p 32.7p 2019 Net divestment & Share buyback Excl. impact of Like for like Cost savings Covid-19 related IFRS 16 adoption 2020 development capital activity income incl. CVAs provisions for & fee income & admins tenant incentives & rent debtors 8
Net rental income 1 £m (33) Offices +0.8% 1 Retail –5.1% 1 (14) (7) 532 (6) 3 3 478 2019 Net divestment Like for like incl. Tenant incentive Rental debtors IFRS 16 adoption Developments and 2020 CVAs and admins provisions provisions other 1 Like for like is stated excluding the impact of surrender premia, CV19 provisions for tenant incentives and CV19 provisions for rental debtors 9
Income statement Financial Year to 31 March 2019 2020 Change % Net rental income (£m) 532 478 (10.2%) Fees & other income (£m) 10 13 30.0% Administrative expenses (£m) (81) (74) (8.6%) Net finance costs (£m) (121) (111) (8.3%) Underlying Profit (£m) 340 306 (10.0%) Underlying earnings per share (p) 34.9 32.7 (6.3%) Dividend per share (p) 31.00 15.97 (48.5%) 10
Dividend policy guidance • To protect the long term strength of the business, the dividend has been temporarily suspended in response to Covid-19 • As a REIT, the dividend is an important element of shareholder return • The Board is focussed on resuming dividends at an appropriate level as soon as there is sufficient clarity of outlook • Guiding principles: • A significant improvement in rent collection • More visibility on the post lockdown productivity of our assets, principally how quickly retail customers and office workers return. 11
EPRA net asset value (137p) 33p (31p) 6p (2p) 905p 774p Mar 19 Valuation performance Underlying Dividends Share buyback Financing activity Mar 20 Profit 12
Valuation performance Va lua tion Va lua tion Yield ERV £ m m ov em ent m ov em ent m ov em ent (10.1%) Total 11,157 +38bps -4.7% Offices 6,773 2.3% -4bps +3.2% (26.1%) Retail 3,873 +101bps -11.7% Residential 147 (2.7%) 9.8% Canada Water 364 13
97% +2.3% Office valuation performance Office Offices FY20 occupancy valuation m ovem ent Sta nd ing Portfolio Dev elop m ents £ 5.8 bn (+1.2%) £ 1.0 bn (+7.5%) -4bps yield shift £83m valuation uplift +3.2% ERV growth £243m spend in period Market demand is expected to be softer in the short term, but supply for prime remains constrained, helping support rents 14
-26.1% Retail Valuation Movements Retail FY20 valuation m ovem ent March ’20 Valuations (£’m ) 1,600 Valuers’ Covid-19 adjustments 1,400 included: • 3 months rent on all non- 1,200 essential retail deducted as a capital sum 1,000 • Non-contractual income deducted as a capital sum for 6 month 800 period 600 • Increasing yields by c.25-100 bps • Increased void period 400 • Increased structural vacancy 200 On average accounted for a - decline of c.6% 0% to -5% -5% to -15% -15% to -25% -25% to -30% -30% to -35% More than -35% Shopping Centres Retail Parks Superstores Leisure High Street Dept Stores % Va lua tion Mov em ent in FY20 15
CVAs & Admins Annualised contracted rent impact by Quarter (£’m) 12 m onths: £ 13m 12 m onths: £ 11m Admins - stores closing Admins - reduced rents CVAs - stores closing 7.0 CVAs - reduced rents 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Total FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 16
96% Retail Leasing Overview Retail occupancy Grocery & Conv enience - 62k sq ft - £0.9m headline rent Other Business - +5% vs passing - 28k sq ft - 14.0 years average lease term - £0.2m headline rent - 12 months average incentive - (13%) vs passing - 2.7 years average lease term - 1 month average incentive Food & Leisure -4% - 58k sq ft Fa shion & Bea uty - 251k sq ft - £1.2m headline rent - £5.5m headline rent - +7% vs passing vs previous passing - (1%) vs passing - 8.4 years average lease term rent 1 - 4.6 years average lease term - 4 months average incentive - 7 months average incentive Hom e & DIY Genera l Reta il - 148k sq ft - 212k sq ft - £2.5m headline rent - £4.0m headline rent - (6%) vs passing - (11%) vs passing - 7.6 years average lease term - 6.9 years average lease term - 9 months average incentive - 17 months average incentive 1. Excludes temporary deals with terms of less than one year 17
Footfall British Land Footfall movement vs Benchmark 1 BL Footfall Benchmark Outperformance (bps) % YoY +700 +420 +440 +460 +460 Grocery anchored assets: -70% -0.2 -0.2 -1.2 -4.4 -4.6 -5.8 -8.0 -12.6 -78 -85 Post lockdown FY20 Q1 FY20 Q2 FY20 Q3 FY20 Q4 23 Mar - 10 May 1 ShopperTrak UK National Index 18
Retailer sales British Land LfL sales movement vs Benchmark 1 BL LfL Sales Benchmark Outperformance (bps) % YoY Grocery anchored +520 +310 +270 +460 assets: -42% -0.1 1.1 -1.1 -3.2 -3.8 -4.1 -8.4 -13.0 -82 Post lockdown FY20 Q1 FY20 Q2 FY20 Q3 FY20 Q4 23 Mar - 10 May 1 BRC KPMG In-Store LFL Non-Food Index 19
Covid-19: Rent collection and deferrals Rent due since 2 March to 30 April As at 15 th May Retail 1 Offices Total Received 97% 43% 68% Rent deferrals 1% 40% 22% Rent forgiven 1% 4% 3% Moved to monthly - 1% - Outstanding 1% 12% 7% Total 100% 100% 100% Collection of adjusted billing 2 99% 78% 91% 1 Includes non-office customers located within our London campuses. 2 Total billed rents exclusive of rent deferrals, rent forgiven and tenants moved to monthly payments. 20
Our assessment of Covid-19 on our customers Low er Im p a ct Hig her Im p a ct Typical sectors: Typical sectors: • Food & Leisure • Global Technology • Fashion & Beauty • Financial Institutions • General Retail • Professional & Corporate • Travel & Media • Grocery & Convenience • Home & DIY • Government 4 9% 51% 39% Rent collected for period 93% Rent collected for period 2 nd March – 30 th April 2 nd March – 30 th April In FY20 , incom e from low er im p a ct custom ers fully cov ered tota l Group p rop erty , a d m in a nd Ov er a third of higher fina nce costs im p a ct businesses a re listed w ith a m a rket ca p of ov er £ 1bn 1 Based on contracted rents on proportionally consolidated basis 21 1 Market capitalisation as at 18th May
Strength of debt metrics 31 March 2019 31 March 2020 Undrawn Facilities and Cash £1.7bn £1.3bn No requirement to refinance until: 2022 2024 Loan to value (LTV) 1 28.1% 34.0% Weighted Average Interest Rate 1 2.9% 2.5% Interest Cover 1 3.8x 3.8x Weighted Average Drawn Debt Maturity 1 8.1yrs 7.5yrs Senior unsecured credit rating (Fitch) A A Unsecured debt covenants: 29% 40% Net Borrowings not to exceed 175% of Adjusted Capital and Reserves 21% 30% Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets Valuation headroom 45% 1 Proportionally consolidated basis 22
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