British Land Company PLC · LSE:BLND
British Land — H1 2004/05 Earnings Presentation
86 slides from British Land's earnings presentation, November 2004
Slide 1: Interim Presentation
INTERIM PRESENTATION ve ene Six months ended 30 September 2004 sm. British Land 1
Slide 2: John Ritblat, Chairman
JOHN RITBLAT CHAIRMAN ve ene Six months ended 30 September 2004 sm. British Land 2
Slide 3: Stephen Hester, Chief Executive
STEPHEN HESTER CHIEF EXECUTIVE 3
Slide 4: Financial Review
FINANCIAL REVIEW GRAHAM ROBERTS, FINANCE DIRECTOR 4
Slide 5: Highlights
HIGHLIGHTS NAV per share + 8.6% to 1049p (£5.5bn) - Total Return 9.1% Underlying profits before tax + 15.1% to £74.8m - Net rental income + 5.6% to £265.1m Valuation + 3.8% to £11.1bn - Retail + 4.3% Offices + 3.4% 775,700 sq ft of Central London lettings - Adds £34.8m pa to rent £122.1m pa addition
Slide 6: Total Return: 9.1% in 6 Months
TOTAL RETURN: 9.1% IN 6 MONTHS £m Pence per Share NAV1 at March 2004 5,035 966 Valuation uplift (3.8% of portfolio) 400 76 + 7.9% Retained profits and reserve movements 50 7 NAV1 at Sept 2004 5,485 1,049 + 8.6% Total Return1 (including 4.8p dividend) 455 88 + 9.1% 1 Adjusted, diluted 6
Slide 7: Underlying Profit Before Tax: Up 15.1% to £74.8m
UNDERLYING PROFIT BEFORE TAX: UP 15.1% TO £74.8M Sept 2004 Sept 2003 £m £m Net rental income 265.1 251.0 + 5.6% Net interest payable (171.7) (163.9) Underlying profit before tax 74.8 65.0 + 15.1% Gains on property disposals 5.3 21.9 Profit before tax 80.1 86.9 Effective tax rate 17.5% 13.1% Underlyi
Slide 8: Low Costs: 0.8% of Portfolio
LOW COSTS: 0.8% OF PORTFOLIO % of Portfolio Sept 2004 Sept 2003 (annualised) £m £m Total portfolio 11,066 9,649 Direct property costs1 0.39% 21.3 18.3 Administrative expenses2 0.41% 23.0 22.4 Total costs 0.80% 44.3 40.7 1 Includes letting and rent review fees, non-recoverable landlord costs, legal a
Slide 9: Reversion: £99.7m, 56% Already Contracted
REVERSION: £99.7M, 56% ALREADY CONTRACTED £m 110 £102.8m £99.7m2 100 90 £85.0m 80 70 60 £54.0m 55.7 Contracted1 50 £42.4m 52.8 53.8 40 30 20 26.3 27.5 10 0 2005 2006 2007 2008 2009 Year ending 30 Sept 1 Contracted rents from expiry of rent free periods and minimum guaranteed uplifts 2 The fall in re
Slide 10: Balance Sheet Efficient
BALANCE SHEET EFFICIENT Sept 2004 March 2004 Total Group properties & investments £10,683m £10,063m Net debt (Group) £4,936m £4,867m Net assets1 £5,462m £4,877m Mortgage ratio (Group) 46% 48% Mortgage ratio (including share of JVs) 48% 51% Gearing (Group) 90% 100% Interest cover (Group)2 1.5x 1.5x 1
Slide 11: Flexible Finance
FLEXIBLE FINANCE £730m of new unsecured bank facilities at an average cost of LIBOR + 65bp Early conversion of £150m 6% Subordinated Irredeemable Convertible Bonds Group Sept 2004 March 2004 Weighted average debt maturity 13.8 years1 16.9 years Weighted average interest rate 6.5% 6.4% % of net debt
Slide 12: International Accounting Standards
INTERNATIONAL ACCOUNTING STANDARDS Well advanced with preparations for IAS. Full compliance for March 2006 year end Workshop on transition to IAS on 25 Jan 2005. IAS restated March 2005 results to be released Summer 2005 Cash flows will be unaffected Areas of particular focus: IAS 12 Deferre
Slide 13: Long-Term Income Profile
LONG-TERM INCOME PROFILE EXCLUDING ANY RENTAL VALUE GROWTH As at 30 Sept 2004 900 800 700 600 500 £m 400 300 200 100 0 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Development programme (committed and prospective) Current interest cost (annualised) Reversionary income (not contract
Slide 14: Revenue and Underlying Profit Growth
REVENUE AND UNDERLYING PROFIT GROWTH NET RENTAL INCOME UNDERLYING PROFIT1 £m £m 550 160 500 140 450 400 120 350 100 300 80 250 200 60 150 40 100 20 50 0 0 2000/1 2001/2 2002/3 2003/4 2004/5 2000/1 2001/2 2002/3 2003/4 2004/5 H1 H2 1 Underlying profit before tax 14
Slide 15: Total Return: 22.4% in Last 12 Months
TOTAL RETURN: 22.4% IN LAST 12 MONTHS NAV1 GROWTH AND DIVIDENDS Pence per Share 1,200 Compound average total return % pa to Sept 2004 over the last: 1,000 195p 4 years 11.5% 800 3 years 11.6% 600 2 years 14.5% 400 200 1 year 22.4% 0 2001 2002 2003 2004 Year ended 30 Sept Total Return 1 Adjusted, dil
Slide 16: Property Review
PROPERTY REVIEW BOB BOWDEN, PROPERTY INVESTMENT DIRECTOR 16
Slide 17: Agenda
AGENDA Portfolio Valuation Portfolio activity Principal assets Developments Market commentary 17
Slide 18: Valuation £11,066m: Up 3.8%
VALUATION £11,066M: UP 3.8% All Retail 4.3 % Shopping Centres 3.3 % Superstores 0.7 % Retail Warehouses 9.0 % High Street 5.7 % Retail Development 1.1 % All Offices 3.4 % City Offices 3.2 % West End Offices 3.6 % Business Parks & Provincial 3.0 % Office Development 7.5 % Other 2.6 % 1 1 Includes dev
Slide 19: Weighted Contribution by Sector: Up 3.8%
WEIGHTED CONTRIBUTION BY SECTOR: UP 3.8% All Retail 2.2 % Shopping Centres 0.6 % Superstores 0.1 % Retail Warehouses 1.2 % High Street 0.3 % Retail Development 0.0 % All Offices 1.5 % City Offices 1.0 % West End Offices 0.2 % Business Parks & Provincial 0.1 % Office Development 0.2 % Other 0.1 % 1 1
Slide 20: The Components of Capital Growth
THE COMPONENTS OF CAPITAL GROWTH Shopping Centres Superstores Retail Warehouses High Street Retail City Offices West End Offices Total Portfolio -4 -2 0 2 4 6 8 10 12 % ERV Impact Yield Impact Income Residual 1 1 Income residual represents the impact on valuation of lease terms such as rent free per
Slide 21: Portfolio Split: £11,066m
PORTFOLIO SPLIT: £11,066M 43% Offices: 52% Retail: 94% Central London 77% Out of Town Central London Shopping Centres 41% 19% Broadgate 25% Meadowhall 13% Regent’s Place 5% Plantation 4% Superstores 13% Provincial Retail Warehouses Other High Street 2% 14% 5% 6% Developments classified by end use 21
Slide 22: Agenda
AGENDA Portfolio valuation Portfolio Activity Principal assets Developments Market commentary 22
Slide 23: Sales: £274m in H1, YTD £321m
SALES: £274M IN H1, YTD £321M Gross Proceeds1 Gain £m1,2 Group 26 residential units 6 - 6 properties (retail, offices and industrial) 23 3 29 3 Joint Ventures 100 New Bridge Street and Watling House (BLW) 151 - 6 office properties (BLD) 59 9 17 pubs (PHIC) 22 1 7 properties (residential, industrial)
Slide 24: Purchases: H1 £153m, YTD £644m
PURCHASES: H1 £153M, YTD £644M £m1 Group Investment in Canary Wharf 97 194 residential units 32 2 – 21 Cornwall Terrace 16 145 Joint Ventures 3 interests at East Kilbride and Aberdeen (SRPLP) 8 Total 153 Post 30 Sept 2004 includes: Queensmere & Observatory Shopping Centres 192 65 freehold pubs 174 4
Slide 25: Queensmere & Observatory Centres: £192m
QUEENSMERE & OBSERVATORY CENTRES: £192M Two adjoining freehold shopping centres comprising 45% of the entire retail provision within Slough 500,000 sq ft retail space, 65,000 sq ft offices with 1,600 car spaces Considerable scope for management initiatives including linking the two centres – B
Slide 26: 65 Spirit Pubs: £174m
65 SPIRIT PUBS: £174M Indexed annual rental uplifts for 20 years LOCATION BY NUMBER – Initial yield of 6.1%, rising to 9.8% North of London and England South East 37% 40% High quality freehold pubs with a large average lot size of £2.7m Asset management opportunity Landlord option to revert
Slide 27: 1.1m sq ft Developments Completed: 68% Let
1.1M SQ FT DEVELOPMENTS COMPLETED: 68% LET Projects Sq ft Construction Total Of which cost1 Rent2 Let Plantation Place 540,000 £198.7m £27.0m £26.0m Plantation Place South 161,000 £60.2m £6.7m £0.1m 10 Exchange Square 163,400 £53.2m £7.0m £2.0m Thatcham (BLG) 255,800 £4.5m £0.9m - Total4 1,120,200 £
Slide 28: Plantation Place, Fenchurch Street, EC3
PLANTATION PLACE, 30 FENCHURCH STREET, EC3 Completed April 2004 Total net area 540,000 sq ft on time, on budget Flagship development in the Offices 100% let to high quality heart of the City tenants, £26.0m pa rent 28
Slide 29: 775,700 sq ft Let in Central London: Rent £34.8m
775,700 SQ FT LET IN CENTRAL LONDON: RENT £34.8M Building Tenant Min.Term Sq ft Rent Rent yrs £ psf £m 51 Lime Street Willis1 25 465,000 45 – 47.50 21.0 Plantation Place Wachovia1, Aspen Re1 5 - 15 132,000 46 – 48.00 6.2 and Royal & SunAlliance 10 Exchange Square Herbert Smith 16 43,500 45.00 2.0 15
Slide 30: 51 Lime Street, EC3
51 LIME STREET, EC3 24 storey development 475,000 sq ft net area 465,000 sq ft pre-let to Willis Group £21.0m pa of rent 30
Slide 31: Rents £565m: £76.7m of Contracted Growth
RENTS £565M: £76.7M OF CONTRACTED GROWTH Sept 2004 Of which £m contracted £m Annualised net rents 565.0 565.0 Reversions1 99.7 55.7 Committed developments 22.4 21.0 Increase 122.1 76.7 Total 687.1 641.7 Development prospects 157.0 1 Includes rent reviews, expiry of rent free periods, lease break/exp
Slide 32: Reversionary Income: £99.7m
REVERSIONARY INCOME: £99.7M Reversionary yield1 City Offices 6.6% West End Offices 6.2% Business Parks & Provincial 7.4% All Offices 6.6% Shopping Centres 5.9% Superstores 5.7% Retail Warehouses 5.7% High Street 6.1% All Retail 5.8% Other 6.1% Total2 6.2% 1 Includes rent reviews, expiry of rent free
Slide 33: Long Leases and Low Vacancy
LONG LEASES AND LOW VACANCY Average lease term, yrs1 Vacancy rate to expiry to first break Proforma %2 Sept 2004 % Total Portfolio 16.9 15.7 3.9 4.6 City Offices 14.4 12.7 7.7 10.0 West End Offices 13.8 11.5 3.0 3.0 Shopping Centres 15.3 14.8 3.2 3.2 Superstores 22.0 22.0 0.0 0.0 Retail Warehouses 1
Slide 34: Income: Strong Tenant Covenants
INCOME: STRONG TENANT COVENANTS Rating of rental income %1 Negligible; low; and low / medium risk 89.0 Medium / high risk 5.7 High risk 3.0 Unmatched 2.3 Total 100.0 1 IPD Tenant Income Credit rating Covenant Strength (TICCS) using Experian Stress Score See Appendix page 80 for list of top 30 tenant
Slide 35: Agenda
AGENDA Portfolio valuation Portfolio activity Principal Assets Developments Market commentary 35
Slide 36: Principal Assets: 89% of the Portfolio
PRINCIPAL ASSETS: 89% OF THE PORTFOLIO Broadgate Shopping Centres Superstores Retail Warehouses 25% 19% 13% 14% Plantation Regent’s Place Developments High Street 4% 5% 3% 6% 36
Slide 37: Broadgate £2,796m: Up 2.1%
BROADGATE £2,796M: UP 2.1% Sept 2004 March 2004 Valuation £2,796m1 £2,665m Rent pa £150.9m2 £151.7m Contracted reversionary income pa £175.9m2 £170.7m Average contracted rent psf3 £46.72 £46.79 Average ERV psf £37.50 £37.50 Vacancy rate 3.4% 1.7% Net initial yield 6.0%4 6.0% 1 Including 10 Exchange
Slide 38: Regent's Place £543m: Up 0.9%
REGENT’S PLACE £543M: UP 0.9% Sept 2004 March 2004 Valuation £543m £531m Rent pa £29.0m £28.9m Contracted reversionary income pa £31.0m £28.5m Average contracted rent psf £33.57 £31.87 ERV range psf £22.50 - £37.50 £24.00 - £37.50 Vacancy rate 2.2% 10.0% Net initial yield 5.84% 6.02% 38
Slide 39: Meadowhall £1,425m: Up 1.5%
MEADOWHALL £1,425M: UP 1.5% Sept 2004 March 2004 Valuation £1,425m £1,400m Rent pa £70.7m £70.1m Estimated rental value pa £75.4m £75.4m Average rent psf £55.11 £54.83 Vacancy rate 1.2% 1.6% Net equivalent yield 5.11%1 5.29% 1 True net equivalent yield is 5.28% on actual basis of rent quarterly in a
Slide 40: 70 Superstores £1,445m: Up 0.7%
70 SUPERSTORES £1,445M: UP 0.7% Sept 20041 March 20041 Valuation £1,445m £1,433m Rent pa £79.4m £79.1m Total reversionary income pa £82.6m £82.8m Average rent psf £19.56 £19.51 ERV range psf £8.85 – £27.50 £8.85 - £27.50 Vacancy rate 0% 0% Initial yield 5.5% 5.5% Reversionary yield 5.7% 5.8% 1 Super
Slide 41: 81% of Superstores > 40,000 sq ft
81% OF SUPERSTORES > 40,000 SQ FT Average store size is 70,000 sq ft Analysis of stores by Standalone Included in Shopping Total Gross Internal Area Centres/Retail Parks Number Sq ft m Number Sq ft m Number Sq ft m 25,000 - 40,000 14 0.4 2 0.1 16 0.5 40,000 – 60,000 13 0.7 3 0.2 16 0.9 60,000 – 80,0
Slide 42: 64 Retail Warehouses £1,521m: Up 9.0%
64 RETAIL WAREHOUSES £1,521M: UP 9.0% Sept 2004 March 2004 Valuation £1,521m £1,393m Rent pa £75.3m £74.1m Total reversionary income pa £85.9m £84.2m Average rent psf £16.14 £15.79 Average ERV psf £18.25 £17.71 Vacancy rate 1.1% 1.0% Initial yield 5.0% 5.3% Reversionary yield 5.7% 6.0% 42
Slide 43: High Street Retail £625m: Up 5.7%
HIGH STREET RETAIL £625M: UP 5.7% Sept 20041 March 2004 Valuation £625m £541m -95 Shops £347m £320m -16 Department stores £214m2 £221m -19 Supermarkets £64m N/A Rent pa £33.6m £29.8m Total reversionary income pa £37.9m £33.3m Vacancy rate 1.7% 1.3% Initial yield 5.4% 5.5% Reversionary yield 6.1% 6.2
Slide 44: Agenda
AGENDA Portfolio valuation Portfolio activity Principal assets Developments Market commentary 44
Slide 45: Committed Developments: 94% Pre-let
COMMITTED DEVELOPMENTS: 94% PRE-LET Projects Date1 Sq ft Construction Total Of which cost2 Rent3 pre-let 51 Lime Street Dec 2006 475,000 £166.8m £21.4m £21.0m Blythe Valley Park Oct 2005 53,000 £8.4m £1.0m - Plot A1 Total 528,000 £175.2m £22.4m £21.0m 1 Anticipated practical completion of constructi
Slide 46: 6.3m sq ft of Prospects
6.3M SQ FT OF PROSPECTS Sq ft Cost £m1 Planning Ludgate West City Office 126,000 44 Detailed York House West End Office 138,000 49 Detailed 201 Bishopsgate City Office 747,000 184 Detailed/ revised appl. 122 Leadenhall Street City Office 601,000 255 Resolution to grant West End Office/ Regent’s Plac
Slide 47: 122 Leadenhall Street, EC3
122 LEADENHALL STREET, EC3 Resolution to Grant detailed planning 47 storey tower from City Corporation Triple floorspace of existing building Total net area 601,000 sq ft 47
Slide 48: Agenda
AGENDA Portfolio valuation Portfolio activity Principal assets Developments Market Commentary 48
Slide 49: Initial Yields Have Hardened
INITIAL YIELDS HAVE HARDENED % 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- 01 01 01 01 02 02 02 02 03 03 03 03 04 04 04 04 All Property Retail Office Source: IPD 49
Slide 50: Real Income Returns Remain High
REAL INCOME RETURNS REMAIN HIGH % 25 2003 Real Income Return 4.1% 1971 - 2003 Average - 0.4% 1984 - 2003 Average 3.2% 20 15 10 5 Bank of England Inflation Target 2% 0 1971 1976 1981 1986 1991 1996 2001 2006 Property Income Returns Inflation Source: IPD 50
Slide 51: UK Institutional Net Investment 2001-2004
UK INSTITUTIONAL NET INVESTMENT 2001 - 2004 £m 2,000 1,500 1,000 500 0 -500 -1,000 -1,500 Jun-02 Jun-03 Jun-04 Sep-01 Dec-01 Mar-02 Sep-02 Dec-02 Mar-03 Sep-03 Dec-03 Mar-04 Sep-04 Source: Gerald Eve (Property Data) 51
Slide 52: Decade of Attractive Property Returns
DECADE OF ATTRACTIVE PROPERTY RETURNS UK US 1993 – 2003 Property Equities Gilts Corp Bonds Equities Total Returns pa 10.6% 6.1% 7.4% 9.4% 9.1% Standard Deviation 3.7 16.9 10.1 10.1 18.7 % Total Returns from 70% 54% 78% 71% 11% Income Source: Property Market Analysis (PMA), IPD, Barclays Capital 52
Slide 53: City Market
CITY MARKET ve ene Six months ended 30 September 2004 sm. British Land 53
Slide 54: City: Take Up Increasing
CITY: TAKE UP INCREASING 8,000 7,000 Take up (rolling annual) 000s sq ft 6,000 5,000 4,000 3,000 2,000 1,000 0 1991 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: Property Market Analysis (PMA) 54
Slide 55: City: Active Demand Increases
CITY: ACTIVE DEMAND INCREASES m sq ft 10 9.3m 9.2m 9.2m 9 8 7.6m 7.3m 7 6.3m 6 5.5m 5 4 3 2 1 0 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Active Demand Potential Demand Source: Jones Lang LaSalle See Appendix page 83 and 84 for detailed list of lettings under offer at Q3 2004 and major
Slide 56: City: Construction Starts Still Low
CITY: CONSTRUCTION STARTS STILL LOW m sq ft 5 4 3 2 1 0 Jan- May- Sep- Jan- May- Sep- Jan- May- Sep- Jan- May- Sep- 01 01 01 02 02 02 03 03 03 04 04 04 Source: Property Market Analysis (PMA) 56
Slide 57: City: Only 4 Speculative Schemes > 50,000 sq ft
CITY: ONLY 4 SPECULATIVE SCHEMES > 50,000 SQ FT Speculative schemes > 50,000 sq ft 1 Moor House, London Wall 310,000 sq ft (Q4 2004) 2 Condor House, St Paul’s 130,000 sq ft Churchyard (Q1 2005) 3 78 Hatton Garden 160,000 sq ft (Q1 2006) 4 Palestra (Q2 2006) 290,000 sq ft 1–6 < 50,000 sq ft Source: D
Slide 58: City: Forecast
CITY: FORECAST Total Supply Take Up End of Year Forecast Sq ft Sq ft Vacancy Rate Year 2004 Start 13.3m 15.7% New completions 1.6m Estimated 2nd hand releases 1.4m Total vacancy 2004 16.3m 4.3m 13.9% Year 2005 Start 12.0m New completions 0.13m Estimated 2nd hand releases 0.25m Total vacancy 2005 12.
Slide 59: City: Forecast Rents
CITY: FORECAST RENTS Agents’ Consensus BL City Rent Reviews Range £psf Average Increase % of rent roll 2005 42.50 – 49.20 + 2.3% 16% 2006 45.00 – 52.90 + 7.4% 19% 2007 48.00 – 59.50 + 9.4% 15% 2008 55.00 - 60.60 + 9.0% 22% 2009 61.25 – 64.76 + 8.2% 28% BL’s average City Office passing rent £46.07 ps
Slide 60: City & West End: Strong Investment Market
CITY & WEST END: STRONG INVESTMENT MARKET £6.7bn Q1 – Q3 2004 £bn £1.3bn Under Offer Q4 2004 9 8 7.9 7.8 7 6.8 6.9 6.7 6 5.4 5.3 5 Average £4.6bn 4.6 4 2.9 3.1 3 2.7 2.4 1.9 2.0 2 1.7 1 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Q1 - Q3 2004 Source: Jones Lang LaSalle Se
Slide 61: Retail
RETAIL ve ene Six months ended 30 September 2004 sm. British Land 61
Slide 62: Retail Sales Continue to Grow
RETAIL SALES CONTINUE TO GROW Comparison Sales (non food) 14% 12% 10% 8% growth %pa 6% 4% 2% 0% -2% Aug- Nov- Feb- May- Aug- Nov- Feb- May- Aug- Nov- Feb- May- Aug- 01 01 02 02 02 02 03 03 03 03 04 04 04 Values Volumes Source: Property Market Analysis 62
Slide 63: Retail Sales Growth Forecast
RETAIL SALES GROWTH FORECAST Comparison Sales (non food) 14 12 10 8 growth %pa 6 4 2 0 -2 -4 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Values Volumes Source: Property Market Analysis 63
Slide 64: 52% Retail: 77% Out of Town
52% RETAIL: 77% OUT OF TOWN Total Retail Portfolio £5.8bn Out of Town as % of Total Retail Spend1 Superstores 2008E 32.5% 25% Retail Meadowhall Warehouses 2006E 32.0% 25% 27% 2003 31.1% 2000 29.0% 1997 27.4% High Street In town Shopping 1994 24.8% 11% Centres 12% Out of Town In Town 1 Verdict Develo
Slide 65: Portfolio Split: £11,066m
PORTFOLIO SPLIT: £11,066M 43% Offices: 52% Retail: 94% Central London 77% Out of Town Central London Shopping Centres 41% 19% Broadgate 25% Meadowhall 13% Regent’s Place 5% Plantation 4% Superstores 13% Provincial Retail Warehouses Other High Street 2% 14% 5% 6% Developments classified by end use 65
Slide 66: Highlights
HIGHLIGHTS NAV per share + 8.6% to 1049p (£5.5bn) - Total Return 9.1% Underlying profits before tax + 15.1% to £74.8m - Net rental income + 5.6% to £265.1m Valuation + 3.8% to £11.1bn - Retail + 4.3% Offices + 3.4% 775,700 sq ft of Central London lettings - Adds £34.8m pa to rent £122.1m pa addition
Slide 67: Appendix
APPENDIX ve ene Six months ended 30 September 2004 sm. British Land 67
Slide 68: Analysis of Net Rental Income Movement
ANALYSIS OF NET RENTAL INCOME MOVEMENT Rent reviews and new lettings 7.2 Purchases 13.1 Sales -2.5 Asset management and other -3.7 14.1 Total £m 68
Slide 69: Operating Cash Flow: 13.0p per Share
OPERATING CASH FLOW: 13.0P PER SHARE Sept 2004 Sept 2003 £m £m Net cash inflow from operating activities 222.4 206.4 Dividends received 6.8 1.6 Net interest (157.0) (141.1) Tax paid (7.0) (1.0) Net cash inflow from operating activities 65.2 65.9 after interest and tax Operating cash flow per share 1
Slide 70: Tax Charge Reconciliation
TAX CHARGE RECONCILIATION Gross Tax £m £m Tax on profit for the period at 30% 80.1 24.0 Losses (revenue and capital) (5.6) Capital allowances (4.9) Other (3.7) Corporation tax charge 9.8 12.2% Deferred tax charge 4.2 Tax charge for Sept 2004 14.0 17.5% 70
Slide 71: Contracted Reversions from Lettings
CONTRACTED REVERSIONS FROM LETTINGS Year ending 31 March 2005 2006 2007 2008 2009 Contracted Further Gross Rental Income1 £m £m £m £m £m EBRD Cash flow - - 6.5 19.0 19.0 IAS basis* 14.2 14.2 14.2 14.2 14.2 Other City offices Cash flow 0.7 16.4 22.1 24.6 25.2 IAS basis* 14.4 23.9 23.9 23.8 24.0 West
Slide 72: Accessing a Flexible Pool of Finance
ACCESSING A FLEXIBLE POOL OF FINANCE Group Group and JVs Mortgage ratio 46% 48% NAV Gearing 90% 98% £6.6bn Gross Finance Availability £1.0bn Undrawn Securitisations (Fixed Rate Bonds) - Group Securitisations (Floating Rate Bonds)1- Group 1 Debentures - Group Debentures - JVs US Private Placements -
Slide 73: IAS: Impact on Net Assets
IAS: IMPACT ON NET ASSETS UK GAAP IAS Impact on Net Assets Deferred tax Not recognised where Full provision. Recognise Reduce not obliged to pay more contingent tax on property tax at a future date and other valuations Derivatives Not valued on balance Carried at fair value Reduce or sheet when hedg
Slide 74: IAS: Impact on Profits
IAS: IMPACT ON PROFITS UK GAAP IAS Impact on Profits Investment Movements in fair value Recognised in income Increase or reduce properties recognised in revaluation statement Introduces volatility reserve Deferred tax Not recognised where not Full provision. Tax recognised on obliged to pay more tax
Slide 75: Long-Term Income Profile Assumptions
LONG-TERM INCOME PROFILE ASSUMPTIONS • Annualised net rents of £565.0 million at 30 Sept 2004 are shown to decrease on the first to occur of lease expiry or tenant’s break. Annualised net rents are increased for the contracted reversions of £55.7m receivable over the next 5 years • Renewal of leases
Slide 76: Portfolio Valuation
PORTFOLIO VALUATION £m % Change %1 Offices: City 3,569 32.3 3.2 West End 722 6.5 3.6 Business Parks & Provincial 249 2.2 3.0 Development 229 2.1 7.5 All Offices 4,769 43.1 3.4 Retail: Shopping Centres 2,145 19.4 3.3 Superstores 1,445 13.1 0.7 Retail Warehouses 1,521 13.7 9.0 High Street 625 5.6 5.7
Slide 77: BL Davidson Acquisition
BL DAVIDSON ACQUISITION In October 2004, BL Davidson acquired the other 50% interest in The Retail and Warehouse Company Ltd from Harris Ventures for £61m (total gross assets £122m) comprising: Size sq ft Average passing rent psf Kingswood Retail Park, Kingston Upon Hull 129,000 £14.12 Cwmbran Ret
Slide 78: Analysis of 5 Year Reversion
ANALYSIS OF 5 YEAR REVERSION Sept 2004 Of which contracted £m £m Net reversion (rents reviews less lease expires) 13 - Expiry of rent-free periods 51 51 Guaranteed rental uplifts 5 5 Letting of vacant space 311 - Total 100 56 1 £4.6m of income has been contracted on lettings since Sept 2004 78
Slide 79: Reversionary Income: £99.7m
REVERSIONARY INCOME: £99.7M Annualised Reversion Reversionary net rents £m £m1 net yield 177.4 59.2 Offices: City 6.6% 39.4 5.2 West End 6.2% 18.7 (0.3) Business parks & Provincial 7.4% 235.5 64.1 All Offices 6.6% 112.0 15.1 Retail: Shopping Centres 5.9% 79.4 3.2 Superstores 5.7% 75.3 10.6 Retail Wa
Slide 80: Strong Tenant Base
STRONG TENANT BASE Top 30 tenants represent c. 61% of total rental income Top 30 tenants by rental income1 1. J Sainsbury 11. Herbert Smith 21. ABN Amro 2. Tesco 12. Henderson Holding Group 22. Denton Wilde Sapte 3. UBS 13. Bhs/Arcadia Group 23. Allders 4. House of Fraser 14. Somerfield 24. Bank One
Slide 81: Broadgate: Rent Reviews
BROADGATE: RENT REVIEWS 8 office rent reviews settled on 157,000 sq ft with a combined rent of £6.8m at no uplift Principal review settled: Building Tenant Sq ft New Rent psf Old Rent psf 6 Broadgate Tokyo Mitsubishi 112,000 £42.50 £42.50 12 office reviews outstanding on 1,110,000 sq ft: average
Slide 82: Development Programme
DEVELOPMENT PROGRAMME Sept 2004 March 2004 Committed Prospects Committed Prospects Net Area (sq ft) 0.5m 6.3m 1.1m 6.6m Construction Cost £m1 175 1,250 320 1,361 - Of which costs to complete 166 1,219 64 1,326 Rent £m2 22 157 42 175 Pre-let Rent £m 21 - 21 - 1 Costs of construction excluding land an
Slide 83: City: Lettings Under Offer Q3 2004
CITY: LETTINGS UNDER OFFER Q3 2004 Tenant Business Sector Max Sq ft Willis Insurance 465,000 Norton Rose Legal 343,000 Legal & General UK Financial Services 170,000 Lawrence Graham Legal 125,000 The Economist Printing, Publishing & Recording 66,930 Ince & Co Legal 60,000 Wachovia Bank Foreign Banks
Slide 84: City: Active Demand Q3 2004
CITY: ACTIVE DEMAND Q3 2004 Tenant Business Sector Max Sq ft Dresdner Kleinwort Wasserstein (Under Offer) Foreign Banks & Securities Houses 396,000 AON Ltd Insurance 300,000 Berwin Leighton Paisner Legal 275,000 Deloitte & Touche (Under Offer) Accountants & Management Consultants 250,000 Standard Ch
Slide 85: City & West End: Acquisition Yields Q2 2004 to Date
CITY & WEST END: ACQUISITION YIELDS Q2 2004 TO DATE Property Purchaser Lease expiry Price Yield 7 Clifford Street Hermes 4 yrs £39m 5.13% 33 Old Broad Street Consortium 35 yrs £140m 5.13% 1 King William Street Chinese Private Investor 13 yrs £60m 5.70% 10/12 Great Marlborough Street Merrill Lynch 4
Slide 86: Basis of Preparation and Forward-Looking Statements
The information has been extracted largely from the Preliminary Announcement for the six months ended 30 Sept 2004. General property market data has been extracted from Jones Lang LaSalle and other agents’ reports. Figures include our share of joint ventures, unless otherwise stated. Adjusted dilute
British Land Company — H1 2004/05 Earnings Presentation on 6ix