Market Reaction – British Land

22 May 2024

Time Period: Year ended 31 March 2024

- CEO Simon Carter highlighted strong rental growth, stable values in H2, and a strategic focus on campuses, retail parks, and London urban logistics.

- ERV growth reached 5.9%, outperforming MSCI benchmark by 300 basis points.

- Underlying Profit grew 2% to £268m.

- EPRA cost ratio improved to 16.4% from 19.5% in FY23.

- Underlying earnings per share increased 1% to 28.5p.

- Dividend per share up 1% to 22.8p.

Financial Metrics:

- EPRA Net Tangible Assets per share decreased 4.4% to 562p.

- Pro forma Loan To Value at 34.6%; FY24 Loan To Value at 37.3% (FY23: 36.0%).

- Group Net Debt to EBITDA pro forma at 6.4x; FY24 at 6.8x (FY23: 6.4x).

- Fitch Senior Unsecured credit rating affirmed at 'A' with stable outlook.

- £1.9bn undrawn facilities and cash, with £1bn financing activity in the year.

- Interest rate on debt fully hedged for FY25, 86% hedged over the next five years.

Capital Activity:

- Disposal proceeds of £410m, 11% above book value.

- Sale of 50% stake in Meadowhall Shopping Centre to Norges for £360m, completing in July 2024.

- Acquisition of Westwood Retail Park, Thanet for £55m at a net initial yield of 8.1%.

Operational Metrics:

- Portfolio occupancy at 97%.

- Leased 3.3m sq ft, 15.1% ahead of ERV.

- Significant leasing activity in campuses and retail & urban logistics sectors, with strong performance exceeding ERV.

Portfolio Valuation:

- ERV growth of 5.9% across sectors.

- NEY increased by 33bps to 6.2%.

- Overall values decreased by 2.6%, with sector variations.

- Outperformed MSCI All Property total return benchmark by 300 bps.

Sustainability:

- GRESB rating of 5* for both Standing Investments and Developments.

- 58% of the portfolio rated EPC A or B, targeting 64% by FY25.

- New 2030 Social Value Target to generate £200m in direct value.

Outlook:

- FY25 ERV guidance of 3-5% growth.

- Market expectations for FY25 Underlying EPS at 27.9p.

- Committed and recently completed developments expected to deliver 4.5p of EPS, with 2.6p in FY26.

Summary Performance:

- Underlying Profit increased 2% to £268m.

- Underlying earnings per share increased 1% to 28.5p.

- IFRS profit after tax at £1m, improving from a loss of £1,039m.

- Dividend per share up 1% to 22.8p.

- Total accounting return at -0.5%.

Balance Sheet:

- Portfolio valuation decreased 2.6% to £8,684m.

- EPRA Net Tangible Assets per share down 4.4% to 562p.

- Net Debt to EBITDA increased to 6.8x.

- Loan to value ratio increased to 37.3%.

Operational Statistics:

- Lettings and renewals over 1 year at 2.8m sq ft.

- Total lettings and renewals at 3.3m sq ft.

- Committed and recently completed developments at 2.8m sq ft.

Board Changes:

- William Rucker appointed as Chair Designate.

- Amanda Mackenzie, Mary Ricks, and Amanda James appointed as independent Non-Executive Directors.

- Laura Wade-Gery to step down as Non-Executive Director in July 2024.

Dividends:

- Proposed final dividend for the year ended 31 March 2024 is 10.64p per share, payable on 26 July 2024.

The results were roughly as expected, although I was a bit disappointed to see the continuation of the portfolio value declining a further 2% I also am not too impressed with the guidance for 2025 expecting underlying EPS at 27.9p which is 2.1% below their 2024 figures. The company currently still sits at a 30% discount to NAV.

Given the slight disappointment on the results, positive NAV discount and the recent negative movements in the share price during May – I don’t anticipate much share price movement today.