Good operational performance in a challenging macroeconomic environment

Simon Carter, CEO said: “Our good operational performance in the half reflects the high quality of our portfolio and reinforces our conviction in our value-add strategy which is focused on sectors with pricing power. We delivered 5% like for like net rental growth and leased 1.5m sq ft of space well ahead of ERV. As a result, underlying profit increased 13% and the dividend is up by 12%.

Higher interest rates have increased property yields, but the impact on valuations was partially cushioned by rental growth. In Campuses, demand remains robust for best-in-class workspace. Retail Parks continue to benefit from retailers’ focus on omni-channel and affordability, while the fundamentals in urban logistics remain compelling given the acute lack of supply and the transport savings operators can realise from the best London locations.

We go into the second half with a strong leasing pipeline, but mindful of the weaker macro environment in which we are operating. Well-timed disposals strengthened our balance sheet and combined with the quality of our platform and our continued commitment to capital recycling, mean we are well placed to exploit our attractive development pipeline and the opportunities now emerging in the market.”

Performance summary

• Good underlying performance and a strong balance sheet
  • Underlying Profit growth of 13.3% driven by strong rental growth and cost control; EPRA cost ratio improved 650 bps to 19.7%
  • HY23 EPS of 14.5p and dividend of 11.6p per share, both up 12.4%
  • Portfolio value down 3.0% with Campuses down 2.7% and Retail & Fulfilment down 3.6%
  • +17 bps yield expansion overall; +18 bps in Campuses; +17 bps in Retail & Fulfilment
  • ERV growth up 1.2%, Campuses +1.6%, Retail Parks +0.8%, Urban Logistics +16.7%
  • EPRA Net Tangible Assets (NTA) down 4.4% to 695p, with Total Accounting Return at -2.8%
  • Raised £765m of new finance on good terms including £515m loan in Paddington Central Joint Venture
  • LTV at 30.7% (32.9%: March 2022); £2bn of undrawn facilities and cash
  • No requirement to refinance until late 2025
  • Interest costs fully hedged for the next year and 77% of projected debt is hedged on average over the next 5 years
  • Fitch affirmed our senior unsecured credit rating at “A”

• Strong operational delivery: 1.5m sq ft leased, 14.7% ahead of ERV and 1.1m sq ft under offer, 11.4% ahead of ERV
  • 494,000 sq ft of Campus leasing in the period, 18.4% ahead of ERV; further 310,000 sq ft under offer
  • 1m sq ft Retail & Fulfilment leasing, 10.3% ahead of ERV; further 772,000 sq ft under offer
  • Delivering 140,000 sq ft of lab space across our Campuses, with over 80,000 sq ft let or in negotiations
  • Storey occupancy up 10ppt to 96% since March 2022
  • Delivering net zero carbon initiatives; EPC A-B rated properties increased to 52% by ERV for our Campus portfolio

• £0.9bn of gross capital activity
  • £694m from sale of 75% of majority of Paddington Central completed in July 2022, crystallising 9% p.a. total property returns
  • £25m acquisition of Peterhouse Western Expansion, 90,000 sq ft consented scheme in Cambridge
  • £22m investment in an urban logistics development site on Mandela Way in Southwark, London

• Progressing attractive development pipeline
  • On site with 1.7m sq ft of net zero carbon developments across our Campuses; 92% of costs fixed for committed developments
  • 10m sq ft development pipeline, targeting IRRs of 10-12%

• Expect good underlying performance underpinned by rental growth, set against upward pressure on property yields
  • Upward pressure on property yields dependent on where medium term interest rates settle
  • ERV guidance, next 12 months: 2-4% growth in Campuses, 1-3% growth in Retail Parks and 4-5% in Urban Logistics

Summary performance

¹ Valuation movement during the period (after taking account of capex) of properties held at the balance sheet date, including developments (classified by end use), purchases and sales.
² See Note 2 to the condensed interim financial statements.
³ EPRA Loan to value is disclosed in Table E of the condensed interim financial statements.

Results Presentation and Investor Conference Call

A presentation of the results will take place at 9.00am on 16 November 2022 at Peel Hunt, 100 Liverpool Street, Broadgate and will be broadcast live via webcast (Britishland.com) and conference call. The details for the conference call and weblink are as follows:

For Information Contact