Final Results - Part 1

RNS Number : 0384H

British Land Co PLC

14 May 2014

THE BRITISH LAND COMPANY PLC FULL YEAR RESULTS

Strong results: well positioned for the future

Chris Grigg, Chief Executive said: "The business is in good shape and we've delivered a strong set of results. We have benefited from strengthening occupational and investment markets but the decisions and actions we have taken both this year and in previous years have been a significant contributor to our performance, driving around half our valuation uplift. These actions leave us well positioned going forward to take advantage of London's continuing success and improving demand for the best retail space."

Strong full year results

· Underlying PBT +8.4% to £297million; IFRS PBT of £1,110 million (2013: £260 million)

· EPRA NAV +15.4% to 688 pence; IFRS Net Assets at £7.1 billion (2013: £5.7 billion)

· Quarterly dividend of 6.75 pence; bringing the full year to 27.0 pence (+2.3%)

· Total accounting returns of 20.0% (2013: 4.6%)

Portfolio returns boosted by our actions along with strengthening markets

· UK portfolio valuation +8.3%: Retail valuation +4.4% and Offices/Residential valuation +14.5%

· Asset management and developments contributed almost half the valuation uplift

· Continued outperformance vs IPD benchmarks: total property returns of 14.2% (+60bps); capital returns of 8.9% (+140bps)

Increased letting activity driven by improving occupier demand

· Investment lettings/renewals 6.3% ahead of ERV; leasing activity adds £24.0 million of new rent

· Demand in Retail broader and higher quality: investment lettings/renewals 4.9% ahead of ERV; like for like occupancy increased by 100bps to 98.6%

· Increased Office letting activity across all locations, like for like occupancy +190 bps to 98.1%; investment lettings/renewals 8.4% ahead of ERV

Significant investment adding to core income and replenishing development pipeline

· Investment of £1.3 billion (acquisitions and development) focused on London and South East

· Successfully deployed March 2013 equity placing proceeds ahead of schedule; accretive to earnings (0.5 pence per share) and NAV (6 pence per share)

· Acquired 1.1 million sq ft development potential including Paddington Central and Blossom St, Shoreditch

· Total recently committed/near-term pipeline now 2.0 million sq ft

Increased development returns as 2010 programme completes with further pre-lets

· 820,000 sq ft of developments successfully completed during the year in West End

· Programme now 76% pre-let securing £57.3 million of rent; 96% of residential units sold/under offer

· £608 million of development profits from 2010 office programme with £45 million to come based on valuers' estimates

Taking advantage of stronger debt markets to raise £1.5 billion of new finance

· £1.5 billion of low cost new borrowings agreed during the last 12 months

· Weighted average interest rate lower at 4.1% (proportionally consolidated) (2013: 4.6%)

· Proportionally consolidated LTV at 40% (31 March 2013: 40%)

YE 31 March Income statement	2013	2014	Change
Underlying profit before tax^1,2	£274m	£297m	+8.4%
IFRS profit before tax	£260m	£1,110m
Diluted Underlying EPS²	30.3p	29.4p	-3.0%
Diluted EPS	31.5p	110.2p
Dividend per share	26.4p	27.0p	+2.3%
Balance sheet
UK Portfolio at valuation	£10,244m	£11,951m	+8.3%³
EPRA Net Asset Value per share	596p	688p	+15.4%
IFRS net assets	£5,687m	£7,117m
Loan to value ratio	40%	40%
Total accounting return	4.6%	20.0%

¹Underlying profit before tax attributable to shareholders of the company (i.e. excludes non-controlling interests related to HUT)

² See Note 2 to the condensed set of financial statements

³ Valuation movement during the period (excluding effect of capital expenditure) of properties held at the balance sheet date, including purchases and sales

Investor Conference Call

A presentation of the results will take place at 9.30am today, 14 May 2014, and will be broadcast live via webcast (www.britishland.com) and conference call. The details for the conference call are as follows:

UK Toll Free Number: 0800 279 4992

UK Number: +44 (0) 203 427 1901

Passcode: 7762770

A dial in replay will be available later in the day and the details are:

Replay number: +44 (0) 203 427 0598

Passcode: 7762770

For Information Contact

Investor Relations

Sally Jones, British Land 020 7467 2942

Media

Pip Wood, British Land 020 7467 2838

Gordon Simpson, Finsbury Group 020 7251 3801

Guy Lamming, Finsbury Group

Forward-Looking Statements

This Report contains certain 'forward-looking' statements. Such statements reflect current views on, among other things, our markets, activities and prospects. Such 'forward-looking' statements can sometimes, but not always, be identified by their reference to a date or point in the future or the use of 'forward looking' terminology, including terms such as 'believes', 'estimates', 'anticipates', 'expects', 'forecasts', 'intends', 'plans', 'projects', 'goal', 'target', 'aim', 'may', 'will', 'would', 'could', 'should' or similar expressions or in each case their negative or variations or comparable terminology.

By their nature, forward-looking statements involve inherent risks and uncertainties because they relate to future events and circumstances which may or may not occur and may be beyond our ability to control or predict. Therefore they should be regarded with caution. Important factors that could cause actual results, performance or achievements of British Land to differ materially from any outcomes or results expressed or implied by such forward-looking statements include, among other things, general business and economic conditions globally, industry trends, competition, changes in government and other regulation, including in relation to the environment, health and safety and taxation (in particular, in respect of British Land's status as a Real Estate Investment Trust), labour relations and work stoppages, changes in political and economic stability, changes in occupier demand and tenant default and the availability and cost of finance. These and other risks are described in greater detail in the section of this Report headed "Our Principal Risks and Uncertainties". Such forward-looking statements should therefore be construed in light of such factors. Information contained in this Report relating to British Land or its share price, or the yield on its shares are not guarantees of, and should not be relied upon as an indicator of, future performance.

Any forward-looking statements made by or on behalf of British Land speak only as of the date they are made and no representation, assurance, guarantee or warranty is given in relation to them (whether by British Land or any of its associates, directors, officers, employees or advisers), including as to their completeness, accuracy or the basis on which they were prepared. Other than in accordance with our legal and regulatory obligations (including under the UK Financial Conduct Authority's Listing Rules and Disclosure Rules and Transparency Rules), British Land does not intend or undertake to update or revise forward-looking statements to reflect any changes in British Land's expectations with regard thereto or any changes in information, events, conditions or circumstances on which any such statement is based.

Notes to Editors:

About British Land

We are one of Europe's largest publicly listed real estate companies. We own, manage, develop and finance a portfolio of high quality commercial property, focused on retail locations around the UK and London Offices & Residential. We have total assets in the UK, owned or managed of £17.8 billion (British Land share of which is £12.0 billion), as valued at 31 March 2014. Our properties are home to over 1,000 different organisations and receive over 300 million visits each year. Our objective is to deliver long-term and sustainable total returns to our shareholders and we do this by focusing on Places People Prefer. People have a choice where they work, shop and live and we aim to create outstanding places which make a positive difference to people's everyday lives. Our customer orientation enables us to develop a deep understanding of the people who use our places. We employ a lean team of experts, who have the skills to translate this understanding into creating the right places, and we have an efficient capital structure which is able to effectively finance these places.

UK Retail assets account for 53% of our portfolio. As the UK's largest listed owner and manager of retail space, our portfolio is well matched to the different ways people shop today, from major regional shopping centres to single occupier locations. We are focused on being the destination of choice for retailers and their customers by being the best provider of spaces and services. Comprising around 25 million sq ft of retail space across 66 retail parks, 85 superstores, 15 shopping centres, 12 department stores and 77 leisure assets, the retail portfolio is modern, flexible and adaptable to a wide range of formats.

Our Office and Residential portfolio, which accounts for 47% of our portfolio is focused on London, We have an attractive mix of high‑quality buildings in well‑managed environments and a pipeline of development projects which will add significantly to our portfolio. Increasingly, our offices are in mixed-use environments which include retail and residential elements. Our 7.3 million sq ft of high quality office space includes Regent's Place and Paddington Central in the West End and Broadgate, the premier City office campus (50% share).

Our size and substance demands a responsible approach to business. We believe leadership on issues such as sustainability helps drive our performance and is core to the delivery of our overall objective of driving shareholder value and creating Places People Prefer.

Further details can be found on the British Land website at www.britishland.com

CHIEF EXECUTIVE'S REVIEW

It has been a good year for British Land and our business is performing well. The decisions and actions we have taken continue to be a key driver of our performance along with the strengthening of our markets.

We have actively invested more capital into improving occupational and investment markets while at the same time re-shaping our portfolio. By doing this, our portfolio is well positioned to benefit from the long-term trends in the UK property market. We have committed more capital to London and the South East, reflecting our belief that the region will continue to benefit from London's position as a leading global city. We raised fresh capital through an equity placing in March 2013 because we saw a number of highly attractive investment opportunities. Within London, we have significantly increased our exposure to the West End and up and coming locations, particularly those which have strong transport infrastructure, including those that will be close to new Crossrail stations when the line opens in 2018. Capital recycling within our Retail portfolio ensures we remain focused on the best locations which meet the changing demands of our retail occupiers and their consumers in a more digitally enabled world. As retailers continue to focus their physical presence on the best space, it is our view that these locations will generate better sustainable long-term returns than other locations.

During our 2014 financial year, we successfully invested the proceeds of our equity placing ahead of schedule, acquiring attractive assets at good prices. Assets such as Paddington Central, where we can create attractive environments; places people prefer to work, shop and live in and which are integrated into their local communities. We made major strides replenishing our London development potential giving us a significant pipeline of near and medium-term opportunities. In Retail, we took advantage of stronger investment markets to sell mature assets, redeploying the capital into properties with more attractive prospective returns, such as SouthGate, Bath. We took advantage of improving debt markets to raise new competitively priced finance, providing us with additional flexible capital to support the future growth of the business.

As economic confidence has improved in the UK, and debt finance more broadly available, the market environment has become significantly more favourable, particularly in the second half of our financial year. Domestic and international investors were more active, driving a higher volume of transactions with a consequent tightening of yields. Capital returns outside London strengthened, although London continued to outperform all other markets, driven both by stronger investment and occupational markets. The UK retail market materially improved, particularly from an investment perspective. Retailers are now undoubtedly more positive, not only in the outlook for consumer spending, but also the place that physical space plays in their omni-channel strategies.

Our underlying pre-tax profits were 8.4% ahead at £297 million as we invested the placing proceeds, benefited from development lettings and like-for-like rental growth improved. Underlying EPS at 29.4 pence was 3.0% lower, primarily as the result of the disposals we made last year. Our dividend is 2.3% up at 27.0 pence, in line with previous announcements, reflecting our successful investment of the placing proceeds and success in letting up developments. EPRA Net Asset Value increased by 15.4% to 688 pence per share. Taking into account the impact of the dividend, and the increase in Net Asset Value, we delivered an overall total accounting return for the period of 20.0%. Reflecting our confidence in the coming year, the Board is proposing a quarterly dividend of 6.92 pence per share, or 27.68 pence per share for the full year, an increase of 2.5%.

We generated total property returns of 14.2% and capital returns of 8.9%, once again outperforming the IPD benchmark, by 60 bps and 140 bps respectively. Our UK portfolio valuation uplift was 8.3% with our actions - asset management and development - driving around half the uplift and the balance coming from market yield shift. The strengthening performance was especially notable within our London Office and Residential portfolio where values were 14.5% higher. Our Retail valuations were 4.4% ahead reflecting our active asset management and improving market sentiment. Across our portfolio, rental values were 3.0% ahead of 2013, compared with 1.7% for the market as a whole.

Underpinning our business is the quality and sustainability of our rental income. It is these rental streams that enable us to support and increase the dividend and grow our business. Our customer orientation, focus on landlord services and asset management ensure we continue to attract and retain high quality occupiers. We signed over 2.3 million sq ft of lettings and lease extensions during the year, with investment lettings signed on average 6.3% ahead of ERV. Our like-for-like occupancy was 130 bps ahead, reflecting the strength of our letting activity. Overall occupancy was down at 96.1% as we completed West End developments which were moved into the standing portfolio.

Within our Retail business, our operational metrics strengthened reflecting the quality of the portfolio and our strong asset management. We signed 1.7 million sq ft of lettings and renewals with investment lettings and renewals 4.9% ahead of ERV. With occupancy up 110 bps to 98.5%, our portfolio is now virtually fully let. Footfall was flat for the year as a whole and up 1.2% in the second half, significantly outperforming the market.

In Offices, we made good progress with increased letting activity broadly balanced between standing investments and developments. Overall, investment deals were signed at 8.4% ahead of ERV. At Regent's Place we completed our development of 10-30 Brock Street; 10 Brock Street was fully let less than three months after practical completion to a diverse range of occupiers and the campus itself is now virtually full. At Paddington Central, within our first months of ownership we have increased occupancy and are already making good progress on our plans to improve the campus. Post our year end, we have seen an increase in occupier interest across our portfolio with over 150,000 sq ft of space let or under offer on attractive rental terms.

Our 2010 development programme is nearing completion and has been substantially de-risked through lettings and residential sales. It has now generated £608 million of profit with a further £45 million estimated to come. We have been actively replenishing our pipeline, including through the acquisition of development sites at Paddington Central and an option agreement to develop at Blossom Street, Shoreditch. These take our recently committed and near-term pipeline to almost 2 million sq ft. We also have significant medium-term opportunities at existing sites including at Eden Walk, Harmsworth and Surrey Quays.

Access to flexible and cost effective financing is a key differentiator for British Land. It allows us to respond quickly to opportunities. Our financial flexibility not only allows us to have ready access to financing to fund growth, but also allows us to access the capital markets at the optimal time so taking advantage of improving financing terms. Since 1 April 2013, we have raised £1.5 billion of new unsecured financing from a diverse range of lenders on competitive terms. These included a £200 million US Private Placement with a 12 year term and a £785 million, five year revolving credit facility.

Outlook

Our business is in good shape as evidenced by our strong results. We are well positioned to take advantage of London's continuing success and improving demand for the best retail space. We remain positive about the outlook for our markets although you could argue that political risks, both at home and abroad, are greater than they were a year ago and these may have an impact. In London, we see rental growth along with the letting up of completed development space being the key drivers of our Offices performance given yields have already compressed significantly. In Retail, away from London, investor appetite is strengthening and retailers are clearly more confident about the outlook for consumer spending and looking to take space in the best locations. We are more positive about the potential for further yield compression and expect rents for high quality space to benefit over time as consumer spending continues to improve.

We expect to be more balanced in our acquisitions and disposals in the coming year. We will continue to take advantage of market strength to sell more mature retail assets and we have a number of assets under offer or in the market. Although the market remains competitive, we believe we can continue to take advantage of more complex situations to make attractive acquisitions. We will also move forward progressively with our new development programme and expect to commit to 4 Kingdom Street at Paddington in the coming year. Overall, we have worked hard to position our business for growth and we look to the future with confidence.

Chris Grigg

Chief Executive

BUSINESS REVIEW

PORTFOLIO OVERVIEW

YE 31 March	2013	2014
UK portfolio valuation	£10,244m	£11,951m
Total property return	6.3%	14.2%
- ERV growth	1.0%	3.0%
- Capital return	1.2%	8.9%
Lettings/renewals vs ERV	7.6%	6.3%
Occupancy	97.1%	96.1%
Lease length to first break	11.0 yrs	10.3yrs
Gross investment activity	£1,663m	£1,970m
- Committed developments capex	£324m	£227m
- Acquisitions	£544m	£1,033m
- Disposals	£795m	£710m

Overview

Until this year, the UK property market has been sharply polarised between the London market, which emerged from the recession sooner and saw significant inflows of international capital, and the rest of the country. Over the past year, increasing confidence in the outlook of the UK economy and increased availability of debt has benefited the broader UK property market. Nevertheless, London continued to generate the strongest total returns reflecting improving occupational demand and continued strong investment flows.

Our portfolio performed strongly during the year as we benefited both from actions we have taken this year and in previous years and from rising markets. Our investment activity during the year was materially accretive to our property performance, notably the investment of our March 2013 equity placing along with our retail recycling where we have been taking advantage of market strength to sell more mature properties. We also continued to benefit from our decision in 2010 to commit to a £1.5 billion development programme, focused on London. Along with more recently committed projects, our developments contributed a third of our valuation uplift.

Today, London and the South East accounts for 61% of our portfolio on a pro-forma basis (including the estimated completed value of committed and near-term developments), up from 50% four years ago. On the same basis, within London, the West End now accounts for 60% of our Offices business, up from 35% four years ago. We continue to have a substantial pipeline of developments, both near and medium-term, focused on London. Our UK Retail portfolio, comprising 53% of the total portfolio, focuses on the best environments where people choose to spend their time and retailers want to be.

UK Portfolio Performance

		Valuation Uplift (%)
YE 31 March 2014	Valuation £m	Investment Portfolio	Developments	Total Portfolio
Retail & Leisure	6,852	4.4	2.2	4.4
Offices & Residential	5,099	11.4	22.3	14.5
Total	11,951	6.6	20.9	8.3

Overall our UK portfolio generated a total property return of 14.2%, made up of an income return of 4.9% and a capital return of 8.9%. We continued to outperform the IPD benchmarks, by 60 bps on total returns and 140 bps on capital returns.

The value of our UK portfolio increased by 8.3% to £12.0 billion with a 6.6% uplift in our investment portfolio and a 20.9% uplift from developments. Our investment portfolio was a more important contributor to portfolio performance than in recent years, driven by a combination of tightening market yields and our asset management activity. The performance of our Office and Residential portfolio was particularly strong up 14.5% over the year reflecting the strength of the London markets along with our development programme. Our UK Retail performance continued to improve with a valuation uplift of 4.4% with an acceleration in performance in the second half of the year.

There was a marked improvement in rental values across our UK portfolio which were 3.0% ahead (2013: 1.0%). This compares with growth of 1.7% for the property market as a whole. At 31 March 2014, our portfolio net equivalent yield was 5.5% compared to 6.4% for the market.

Investment Activity

The gross value of our investment activity since 1 April 2013, as measured by our share of acquisitions, disposals and capital investment in developments was £2.0 billion.

Acquisitions and Disposals

From 1 April 2013	Price (gross)	BL Share	Annual Passing Rent
	£m	£m	£m
Acquisitions
Retail	604	502	24
Offices	499	499	22
Residential	51	32	-
Total Acquisitions	1,154	1,033	46
Disposals
Retail	507	391	26
Offices	30	30	1
Residential	142	142	-
Europe	281	147	9
Total Disposals	960	710	36

Again we were able to successfully access transactions to grow our portfolio by taking advantage of our financial flexibility and our ability to source deals, move quickly and deal with complexity. The majority of the acquisitions we made during the year, including Paddington Central and SouthGate Bath, were secured off market. Our acquisitions were focused on both core income producing assets with good growth prospects from asset management and developments. Overall, we completed or exchanged £1,033 million of acquisitions, with income generating properties adding annual rental income of £46 million, with an average net initial yield of 5.4%. This includes over £100 million of potential development sites.

In UK Retail, we continued to sell mature assets where we believe the future returns will be below our internal hurdle rates of return. In Offices & Residential, the majority of our disposals were residential units sold after practical completion of our West End developments. We also sold two of our largest assets in Continental Europe in line with our aim of exiting from that market, and successfully outsourced the management of the remaining assets. Europe now accounts for less than 1% of our total portfolio. Overall, disposals completed or exchanged raised £710 million and were sold on an average NIY of 6.2% and at 4.2% ahead of book value.

Development

Committed & Near-Term Development Pipeline
At 31 March 2014		BL Share
	Sq ft	Current Value	Cost to complete	ERV	Pre-let ERV	Resi End Value	Pre-sold Resi
	'000	£m	£m	£m	£m	£m	£m

Completed	1,354	897	19	46.9	29.1	165	143
Under Construction	1,315	516	92	38.1	28.2	-	-
Total 2010 Programme	2,669	1,413	111	85.0	57.3	165	143

Completed	21	5	-	0.3	0.3	-	-
Under Construction	1,232	417	335	17.2	6.7	664	5
Total Recently Committed	1,253	422	335	17.5	7.0	664	5

Total Committed	2,547	933	427	55.3	34.9	664	5

Total Near-Term Pipeline	719	79	351

In 2010, we committed to a major development programme, to deliver 2.7 million sq ft of space, principally in London. Well-timed to deliver high quality offices along with high-end residential units into a supply constrained London market along with a number of retail projects, the programme in total has generated £608 million of profit to date with a further £45 million estimated to come (based on valuers' estimates). This is more than double the estimate at the time we started the programme, reflecting strong market growth, leasing and pre-sales ahead of plan and release of contingencies. The total estimated annual rental value has increased from £79.0 million to £85.0 million over the same period. 76% of the space is already let or under offer and 96% of the residential units have been sold or are under offer.

We remain positive about the prospects for development returns in London, so, as the 2010 programme has been completing, we have been replenishing our development potential both for the near-term and also for our longer-term pipeline. We have already committed to a number of new projects. We will continue to manage our development exposure within our self-imposed limit of committed development being not more than 15% of our investment portfolio and for our exposure to the London residential market to remain below £500 million (total cost net of pre-sales).

During the year, the purchase of development sites, mainly at Paddington Central and our agreement with the City of London Corporation to become their development partner on Blossom Street, Shoreditch added 1.1 million sq ft to our pipeline. This brings total development opportunities acquired over the last two years to 1.6 million sq ft. We obtained planning permission on 1.0 million sq ft of office, residential and retail development during the year.

As a result of our activity, despite completing over 1.2 million sq ft of developments this year, we have 2.5 million sq ft of committed development under construction. We have contracted 77% of the costs of our committed developments. Excluding projects which are due to complete over the next year, principally 5 Broadgate and The Leadenhall Building, we have 43% of our costs contracted.

We have a further 719,000 sq ft in our near-term pipeline which are projects we could commit to over the next year to eighteen months. As we complete further projects, and the outlook for the market remains positive, we anticipate committing to more development in the coming year, including 4 Kingdom Street, Paddington. If we were to commit to all these projects over that time frame, our total capital commitment, including land, would be £1.2 billion with an anticipated profit to come of around £300 million. In terms of capital commitment, the majority of our recently committed projects are London residential, the most significant of which is the residential element at Clarges Mayfair.

Further out, we have a number of potential development projects primarily in up and coming areas of London and including mixed use schemes.

More details on the portfolio, property performance, individual developments and assets acquired during the year can be found in the Retail & Leisure and Offices & Residential reviews below and in the detailed supplementary schedules.

RETAIL & LEISURE REVIEW

Performance Highlights

YE 31 March	2013	2014
Portfolio valuation (BL share)	£6,382m	£6,852m
Total property return	4.2%	10.7%
- ERV growth	0.7%	1.5%
- Capital Return	(1.6%)	4.6%
Lettings/renewals vs ERV	7.6%	4.9%
Occupancy	97.4%	98.5%
Lease length to first break	11.6 yrs	11.3 yrs

Market Overview

The tentative signs we saw of an improving UK retail market at the beginning of 2013 have strengthened over the last 12 months, underpinned by better than expected economic growth and growing consumer confidence. Retailers have become noticeably more confident not only in the outlook for the market but also the role that physical space will play in their omni-channel strategies. While appetite for high quality space in the best locations has improved, retailers continue to reduce their exposure to more secondary locations which in many cases are becoming functionally and economically obsolete. Rental values in more secondary locations continued to decline while prime rental values rose modestly.

There was a marked improvement in the retail investment market, particularly in the second half of the year, reflecting increased interest and demand from a broad range of domestic and international investors including Sovereign Wealth Funds. The volume of transactions during the year was significantly higher than the prior year with yields across the retail market tightening, particularly on secondary assets where the greater volume of transactions took place. Market evidence for prime remained limited given the scarcity of available product, with owners reluctant to sell, and yields were more stable as a result.

We continued to actively reposition and upgrade our portfolio focusing on preferred destinations for both retailers and shoppers through investment in our existing properties and through recycling. This brings the total investment in the business over the last four years to £1.5 billion (acquisitions and capital spend) with £0.8 billion of disposals, being mainly smaller properties.

Portfolio Performance

Our retail and leisure portfolio grew in value to £6.9 billion, a 4.4% uplift over the year. Performance was driven by yield compression (26 bps), reflecting the significant improvement in the retail investment market, complemented by our asset management actions. The portfolio continued to outperform the market, by 40 bps on a capital returns basis, although not at the same level as previous years, reflecting the improvement in secondary asset valuations, particularly in the second half. There was a particularly strong performance from our department stores and leisure portfolio, with yield compression driven by appetite for fixed uplift backed income. Our retail parks, shopping centres and superstores also benefited from positive rental growth but with lesser yield compression due to a relative lack of transactional evidence. This was particularly the case for superstores with open-market rent reviews.

Our occupational metrics improved further during the year reflecting the strength of our offer. With good demand our portfolio is now virtually fully let with occupancy ahead of March 2013 by 110 bps to 98.5%. There was a notable reduction in units in administration down from 0.9% to 0.1% of total rent as we successfully let up units previously in administration. Footfall improved over the second half of the year, up 1.2% and was broadly flat over the year. We significantly outperformed the market where footfall was down 2.6% in the year. Our retail ERVs were 1.5% up compared with the market which was flat. Since the trough in June 2010, our rental values have now grown by over 3.3% compared with a fall of 1.0% for the market, reflecting the ongoing polarisation between the performance of the best space where retailers want to trade and less attractive, more secondary space. Our like-for-like rental income grew by 3.0%, in part benefiting from the successful letting of units previously in administration along with surrender premiums.

Asset Management

We had a stronger period for leasing with higher levels of letting volumes and an improvement in the breadth and quality of occupiers and on enhanced terms, particularly from fashion, home wares and leisure operators. We continued to benefit from retailers looking to take space in the best quality locations. Overall, we signed 1.7 million sq ft of lettings and renewals across the portfolio during the year, on average 4.9% ahead of ERV within the standing investment portfolio. Rent reviews were signed on average 5.0% above previous passing rent with particularly good uplifts being achieved at superstores, on average 11% ahead of previous passing rent. Although our portfolio is nearly fully let and we see an improving outlook for rental growth although given our high levels of occupancy and no major developments coming on stream, our overall leasing volumes are likely to reduce through the coming year. We currently have 273,000 sq ft of space under offer at terms overall ahead of ERV.

Our asset management activities remained focused on evolving and improving our overall retail offer, attracting new and existing occupiers to our properties, as well as upgrading the physical environment and expanding the range of services we offer. Our increased investment in consumer surveys continued to provide valuable insights and feedback.

We leveraged our existing strong retail relationships, signing five long-term deals each with Next and Arcadia totalling 140,000 sq ft, which for Arcadia included two out of town Outfit stores. We also worked successfully with retailers to expand new and existing formats, for example opening first out of town stores for Patisserie Valerie at Fort Kinnaird Retail Park; and Joules and Fat Face at Whiteley.

Quality physical environments are becoming increasingly important in creating the right places. We undertook and committed to almost 200 capital projects during the year to improve shop fascias and fit outs and to refurbish and extend our existing schemes. Major projects completed during the year included the refit of Debenhams flagship store in Oxford Street and the creation of a new out of town store for Next Home & Garden at Camberley. We also continued to expand our food and leisure offer with 148,000 sq ft of deals signed with catering and leisure operators. On our larger more experiential assets we now have 9% of rent from food and beverage, up from 8%.

Our digital strategy is to enhance the occupier and consumer experience at our retail assets and is an integral part of the physical experience, increasing convenience and widening our reach. At the beginning of the year, we signed a long-term deal with BT to provide free Wi-Fi on our shopping centres and retail parks. We now have free Wi-Fi in 11 of our shopping centres and free Wi-Fi hotspots at 6 of our major retail parks with further rollout planned over the next 6 months. Along with our customer exit surveys, this means we can monitor and improve the experience of consumers, increasing dwell time which will support our occupiers' sales.

Investment Activity

We continued to reshape our portfolio with £953 million of gross investment activity across our Retail and Leisure portfolio, including investment in developments, since the 1 April 2013. We have taken advantage of the strength of the investment markets to sell £391 million of more mature assets and have invested both in our existing portfolio and in acquisitions where we believe we can generate higher returns.

Our largest disposals during the year included Eastgate Shopping Centre, Basildon; Bon Accord shopping centre in Aberdeen; and St James' Retail Park, Northampton. We also sold 7 smaller retail parks and 6 small food stores. On average these sales were 2.4% ahead of book value. Post the year end, we sold Cwmbran Retail Park for a net initial yield of 6.4%.

We made £502 million of acquisitions over the period. This included a 50% interest in SouthGate, the main shopping destination in the centre of Bath, for £101 million, reflecting a fully let yield of 5.7%. The acquisition price was significantly below the original sum invested in constructing the newly built 430,000 sq ft, prime open air retail scheme. With a large and affluent catchment and an impressive occupier line up, the scheme has a high annual footfall of around 18 million visitors. It is anchored by Debenhams, H&M, Topshop and Boots and has attracted several new, high profile retailers to the city including Hollister, Apple, Urban Outfitters, All Saints and Superdry.

We increased our ownership of Hercules Unit Trust from 41.2% to 59.8% through the purchase of £154 million of units since the beginning of the year. On an average 4.2% below NAV, this represents an effective net initial yield of 6.0% (based on actual acquisition costs). This investment increased our share of gross assets by £262 million, reflecting the discount to NAV and the leverage within the HUT structure. HUT is the UK's largest specialist retail park property unit trust with a portfolio totalling £1.5 billion. We believe that HUT's portfolio is well positioned from a development perspective and to take advantage of the projected growth in "Click and Collect" which is increasingly a core component of retailers' strategies. We remain the property manager of the HUT assets.

We also acquired a 26% equity interest in a portfolio of Sainsbury's superstores for £83 million, at a reversionary yield of 5.7%. Held in a geared structure, the portfolio consists of 26 high quality superstores in affluent areas primarily in the South East. All rental income until maturity will be used to pay interest on the bonds and partially amortize the securitised debt. At maturity it is anticipated that the superstores will either be refinanced or sold to repay the outstanding debt. We expect to generate attractive returns from the investment and have already seen an uplift of more than 10%. This investment should be viewed in conjunction with the sale of smaller food stores within an overall objective of focusing our superstore portfolio on the highest quality locations.

Over the coming year, we expect to make further disposals. We currently have over £150 million of properties either under offer or in the market.

Development

We have completed nearly 700,000 sq ft of developments over the last year including the 305,000 sq ft Old Market scheme in Hereford shortly after the year end.

Our largest development completion was at Whiteley Shopping in Hampshire, where we opened a new 321,000 sq ft retail and leisure shopping scheme in May 2013. Combining the configuration, set up and experience of high quality shopping centres and the accessibility and convenience of retail parks, Whiteley Shopping has quickly become the preferred destination for retailers and consumers in the area, attracting over 4 million shopper visits since opening. Whiteley Shopping is over 96% let to a strong mix of prominent national retail brands including YO! Sushi, Wagamama, Fat Face and Joules. In April 2014, it won the ICSC European Shopping Centre New Development Award 2014 and is rated BREEAM Excellent for sustainability.

In September, we opened a 46,000 sq ft leisure extension at our existing asset at Glasgow Fort Shopping Park. The development was fully pre-let to a multiplex Vue Cinema and 24,000 sq ft of restaurant space let to TGI Friday's, Prezzo, Harvester, Chiquito and Pizza Express. Since opening, the Glasgow Fort has seen significant uplifts in footfall, dwell time and average consumer spend.

Post the year end, we completed our 305,000 sq ft retail and leisure development in the centre of Hereford. It is already 96% let/under offer with a strong line-up of fashion retailers including H&M, Fat Face, Next, Outfit and an 85,000 sq ft Debenhams, the City's only department store. Leisure, comprising a multi-screen cinema along with 7 restaurant and café units, accounts for 21% of the scheme creating an evening economy and extending the centre's trading hours.

We have recently committed to 372,000 sq ft of new development primarily focused on upgrading and extending our existing assets, and increasingly our food and leisure offer, to improve the overall environment. This includes leisure extensions at Whiteley Shopping; Fort Kinnaird, Edinburgh; and Broughton Park in Chester. We are also on site building a new Next Home and Garden at Meadowhall and a major extension to Glasgow Fort anchored by an 80,000 sq ft M&S.

OFFICES & RESIDENTIAL REVIEW

Highlights

YE 31 March	2013	2014
Portfolio Valuation	£3,862m	£5,099m
Total Return	9.7%	19.4%
- ERV growth	1.5%	5.8%
- Capital Return	5.8%	15.5%
Lettings/renewals vs ERV	7.1%	8.4%
Occupancy Rate	96.3%	92.1%
Lease length to first break	7.8 yrs	8.4 yrs

Overview

London retained its position over the year as the property market of choice reflecting its ongoing global attractions as a place to work, live and visit. More domestic and international businesses are choosing to locate in London, drawing on its highly skilled workforce and quality working environments. More people want to live in London closer to where they work or with shorter commute times. Our increased investment in London has positioned our business well to take advantage of both the present market strength and longer term trends, serving the changing needs of its growing population. Accordingly, we are focused on mixed-use campuses with strong transport connections which include retail and residential elements. These great working environments are increasingly important in attracting and retaining the best people - not just good buildings to work in - but places to live, shop and enjoy leisure time.

The London property market had a strong year. Although the economic recovery started to take hold across the UK, London continued to outpace the regional markets, with all sectors performing strongly - offices, retail and residential - and with the second half noticeably stronger than the first. In the prime residential market in London, where our residential development is focused, international investors remained active although price increases were generally lower than in recent years.

The office market saw continued strong investment flows driven both by international investors along with the re-emergence of domestic investors. This strong investor demand led to prime office yields tightening further. Occupationally, after two years of more subdued demand, the leasing market was markedly busier, particularly in the second half with occupiers more willing to look in a number of different submarkets across London to find the right quality of space.

TMT and insurance occupiers remained the most active but there was also increased take-up from other sectors, notably financial services. Overall, letting activity in Central London was around 50% ahead of the previous year. With little new supply coming onto the market, vacancy rates declined, particularly for high quality, Grade A space. Accordingly, rents grew across London with growth in prime headline rents of 10% along with a reduction in incentives.

Portfolio Performance

Our Offices and Residential portfolio is well positioned to benefit from the strengthening London market and our greater exposure to up and coming areas. The value of our portfolio grew by over £1.2 billion to £5.1 billion reflecting both the investments made during the year along with a 14.5% overall uplift in valuation; our West End portfolio was up by 16.6% and the City by 11.8%. The portfolio produced a total property return of 19.4%, with our Offices outperforming the IPD sector benchmark by 80 bps.

In Offices, our standing investments contributed around 60% of the uplift driven by a 40 bps compression in yields along with asset management. ERVs were 5.8% ahead with a 7.9% increase in the City reflecting improving market conditions and increased opportunity from potential refurbishments. Our office and mixed use development programme continues to deliver strong returns, generating profits of £252 million over the year, and a valuation uplift of 23.0%. This uplift was driven by a combination of factors including pre-lets signed ahead of ERV, profit release as we complete our 2010 London development programme, and improving market conditions. Our standalone residential portfolio was up 15.4% driven primarily by increased sales values.

Asset Management

The strengthening occupational market was reflected in our leasing activity during the year. We signed 632,000 sq ft of lettings and renewals across our investment and development portfolio with investment lettings and renewals at an average of 8.4% above ERV. Our activity was primarily focused on new lettings with 289,000 sq ft of deals signed in our investment portfolio and 237,000 sq ft of development lettings.

We continued to see healthy demand across our portfolio from a range of occupiers from financial and professional services through to media, retail and technology companies, not only attracted by the quality of our buildings and built environments, but also our high levels of customer service. We were particularly successful in tapping demand from the growing technology and media sectors and the insurance sector which represented 51% of lettings. Driven by our leasing success, our like-for-like occupancy was 190 bps ahead, although overall it is lower at 92.1% reflecting our newly completed West End developments moving into the investment portfolio. Post our year end, we have seen an increase in occupier interest across our portfolio with over 150,000 sq ft of space let or under offer on attractive rental terms. Our vacant space is virtually all new Grade A accommodation, so we feel positive about the letting prospects in a strengthening occupational environment.

We made significant progress with the on-going re-positioning of our office-led campuses and strengthening of their income profiles. At Regent's Place, we completed our 505,000 sq ft office and residential development, 10-30 Brock Street. We continued to see strong demand for both the offices and residential units. As a result, all the office space at 10 Brock Street, which is the largest of the buildings, was let within three months of practical completion to a strong and diverse range of occupiers including Facebook and Manchester City Football Club achieving a new rental high on the campus of £71 per square foot. This added £18.8 million of annual rent on a weighted average lease of 15.7 years. 98% of the residential units at 20 Brock Street have been profitably sold or are under offer. The Brock Street development has completed Regent's Place, a vibrant 2 million sq ft mixed use campus where around 15,000 work and live. With an occupancy of over 98%, it is well served by major transport links, and is enhanced by restaurants, shops, a health club, a theatre, art studios, a children's nursery and landscaped open space.

At Paddington Central, which we acquired in July, we have let or put under offer 35,000 sq ft, at terms ahead of our acquisition assumptions, bringing occupancy on the campus to 94.2%. We are confident that we will further improve occupancy. We are also looking to improve on the existing planning consents at 4 and 5 Kingdom Street (see following development section) and public space in addition to works to the entrance of the campus and an introduction of a greater variety of uses and occupiers.

Broadgate is our largest campus with almost 4 million sq ft of office, retail and leisure space. We have a strong vision of how Broadgate will develop as a vibrant mixed use environment in the heart of the City and expect it to benefit from its position around one of London's most important transport hubs and from the completion of Crossrail in 2018. In December, we signed a joint venture agreement for Broadgate with GIC, the investment arm of the Government of Singapore, following their purchase of Blackstone's 50% stake. As one of our largest shareholders and with a long history in direct real estate investment, we look forward to working with them to deliver our vision.

We continued to make good progress both on our near-term and long-term plans at Broadgate. At 199 Bishopsgate, a building we recently fully refurbished, we let a further 63,000 sq ft of space, so the building is now 56% let. We signed over 89,000 sq ft of lettings on space surrendered by UBS at 1 & 2 Broadgate. These lettings tie in with the extension we signed with ICAP last year, enabling us to review options for refurbishment or redevelopment of the whole building in 2019. In the near term, activity is centred around Broadgate South, where we are developing a new office for UBS at 5 Broadgate, alongside a full redevelopment of Broadgate Circle, to provide a more vibrant retail and restaurant offer (see development section). The next phase will include a major refurbishment of 100 Liverpool Street, which will be well timed to benefit from the advent of Crossrail, and more widespread improvements to the surrounding area. We are working up a scheme and aim to put in a planning application by the end of financial year 2015.

Investment Activity

Our strategic aim has been to grow the level of investment in London through acquisitions and development. We invested £531 million in attractive, mainly off-market acquisitions, not only adding core income to the portfolio but also replenishing the development pipeline.

At £470 million, Paddington Central, an office led campus in the West End, was our most significant acquisition and our largest since 2005. Acquired on a net initial yield of 5.3% rising to 6.2% once fully let, the campus comprises 610,000 sq ft of income generating properties along with 355,000 sq ft of consented space at 4 and 5 Kingdom Street and an additional 80,000 sq ft of potential development. This acquisition increases our exposure to an up and coming part of the West End market which is expected to benefit from the opening of Crossrail. As our success at Regent's Place demonstrates, this is an asset which plays to all of our strengths in managing large mixed use schemes in London, delivering value through well-planned asset management and development. It is still early days, but we are confident we can deliver significant value at Paddington Central.

We also entered into an option agreement with The City of London Corporation for the re-development of Blossom Street, Shoreditch, further increasing our near-term development pipeline and broadening our access to occupiers in the vibrant and growing TMT sector. Blossom St comprises three sites covering 2 acres fronting onto Shoreditch High Street just north of the core City of London market, and which will be close to the new Liverpool Street Crossrail station. The sites have potential for around 320,000 sq ft of office, retail and residential accommodation in a mix of new, retained and refurbished buildings. We have the option to draw down a development agreement, subject to securing revised planning consent on the sites, and on practical completion will be granted a long leasehold interest in the sites.

During the year, we achieved planning consent on, and consequently also completed the purchase of Aldgate Place, a potential 365,000 sq ft residential development programme. We have committed to Phase 1 at Aldgate Place, a joint venture with Barratt Homes, in a fast changing area close to the City for 220,000 sq ft of residential including 154 private units.

Our sales activity was primarily focused on the residential development programme both within our mixed use and residential-led schemes where we have continued to actively recycle capital and crystallise development profits. During the year we sold a further £41 million of residential units 31% ahead of book value.

Development

Within our 2010 development programme, the office space is now 73% let or under offer with a weighted average lease length of 15.9 years. Having sold 114 units and with a further 3 under offer, we now have 96% sold or under offer. We also have a significant pipeline of potential development projects both from sites we have acquired in the last two years and from within our existing portfolio.

Over the year, we completed 820,000 sq ft of our West End developments including 10-30 Brock Street; 10 Portman Square; Marble Arch House; and 39 Victoria Street, generating an overall profit on cost of over 65%. In the City, the Leadenhall Building is on track to reach completion in the summer. We were pleased with our recent letting of Level 30 to Servcorp on a rent of £72.50 psf and with a further 13,500 sq ft under offer, we remain positive about the letting prospects for the remaining upper and smaller floor plates. 5 Broadgate was successfully topped out at the end of March and will be ready for UBS to take delivery of the building in early 2015 subject to fit out.

We made good progress on our recently committed development projects having secured planning for Clarges Mayfair, Yalding House and residential schemes at The Hempel and Aldgate Place. The majority of this development is residential and we will limit any future residential development until we have made further inroads with our forward sales. Although it is early days, we are seeing encouraging levels of interest. Demolition is progressing at Clarges Mayfair with construction expected to start early in the summer. Following a successful planning application we also committed to Yalding House, a refurbishment of 29,000 sq ft of office space in the West End and have recently started on site.

In terms of our near-term pipeline, we are progressing with planning to put ourselves in the position to be able to start as early as possible, while retaining the optionality on whether to commit. At Paddington, we have made improvements to the design of 4 Kingdom Street and anticipate being on site by the end of the year. On 5 Kingdom Street, as part of a wider master planning exercise for the whole campus, we are looking to resubmit planning for an improved, larger scheme next year. At Blossom Street, Shoreditch, we have appointed four architects to develop the design and we expect to submit a planning application in the Autumn.

FINANCIAL REVIEW

Highlights

YE 31 March	2013	2014	Change
Accounting return	4.6%	20.0%
Net Asset Value per share	596p	688p	+15.4%
Dividend per share	26.4p	27.0p	+2.3%
Net rental income	£541m	£562m	+3.9%
Underlying profit before tax	£274m	£297m	+8.4%
Underlying EPS	30.3p	29.4p	-3.0%
LTV	40%	40%
Average weighted interest rate	4.6%	4.1%
New finance raised	£0.9bn	£1.5bn
Available facilities	£2.1bn	£2.0bn

2014 was another active year for British Land as we continued to deliver our strategic objectives both driving strong results during the year as well as building more growth and opportunity into our portfolio for tomorrow.

We generated total accounting returns of 20.0% for the year which was significantly driven by our decisions and actions, not just at the property level but also financially. And here we benefited both from our capital structure as well our ability to access competitively priced finance. Our NAV, which was up 15.4% at 688p, was driven by an 8.3% increase in our valuation and our dividend was 2.3% ahead at 27.0 pence per share, in line with our previous announcements. It is measure of the Board's confidence in the prospects of the business that we are announcing our intention to increase the dividend by 2.5% for the 2014/15 financial year.

Over the year we continued to develop our financial and deal management and skills both in pricing property risk and managing complex situations. This enabled us to access transactions with few other competitive bidders. We successfully deployed the proceeds of our March 2013 equity placing ahead of the schedule we set ourselves. This was accretive to our earnings and net asset value performance during the year after taking into account the dilutive effects of the share placing. Rental income from our 2010 development programme, where all of our West End office projects completed during the year, significantly offset the income we have forgone through the sale of Ropemaker Place at the end of the 2013 financial year. By selling more mature assets and investing in ones with better long-term prospects, we have deliberately given up near-term income for longer-term total returns. This is likely to continue as we further reshape our Retail portfolio.

Despite this significant activity, all our financial metrics remain robust. Our LTV is unchanged over the year at 40%, at the bottom of our range, and our average weighted interest rate is lower at 4.1%. We have taken advantage of improving debt markets to raise £1.5 billion of new finance at competitive rates. This included a £785 million revolving facility, our largest single bank facility, with the lowest margin in the last 7 years, which is a great example of both our capabilities and the strength of our banking relationships. Our financing structure, which is flexible and low cost, continues to provide the business with the resources and liquidity to deliver its strategy.

INCOME STATEMENT

The group financial statements are prepared under IFRS where the after tax results of joint ventures and funds are shown as a single line item on the income statement, and the net investment in joint ventures and funds is shown as a single line on the balance sheet. Management reviews the performance of the business principally on a proportionally consolidated basis (i.e. on a line-by-line basis) and comments on movements in the income statement provided in the financial review below are made on this basis. Income statements and balance sheets which show British Land's interests on this basis are also included in Table A within the supplementary disclosures.


Year ended 31 March	2014			2013
	Group¹	JVs & Funds¹	Prop Consol	Group	JVs & Funds	Prop Consol
	£m	£m	£m	£m	£m	£m
Gross rental income	331	266	597	294	273	567
Property outgoings	(21)	(14)	(35)	(13)	(13)	(26)
Net rental income	310	252	562	281	260	541
Net financing costs	(79)	(123)	(202)	(80)	(126)	(206)
Net rental income less finance	231	129	360	201	134	335
Fees & other income	15		15	15		15
JVs & Funds underlying profit	123			130
Administrative expenses	(72)	(6)	(78)	(72)	(4)	(76)
JVs & Funds underlying profit		123			130
Underlying profit before tax	297		297	274		274
Underlying EPS	29.4p		29.4p	30.3p		30.3p
Dividend per share	27.0p		27.0p	26.4p		26.4p

¹ 2014 Group and JVs & Funds results are presented after elimination of HUT non-controlling interest

Net rental income, including our share of joint ventures and funds, increased by £21 million to £562 million for the year (2013: £541 million). The £690 million of investment in income producing assets following the placing added £31 million to full year rent. This was offset by a reduction of £26 million due to disposals made in the last financial year, principally Ropemaker. All our West End 2010 developments completed during the year and contributed materially to our income, adding £13 million during the year.

Net rental income increased by 2.2% on a like-for-like basis, adding £6 million. The retail portfolio like-for-like growth was 3.0%, driven by asset management initiatives and letting of units which became void following prior year administrations. Lettings in the year increased occupancy rates from 97.4% to 98.5%. In offices, like-for-like rental income increased 0.4%, reflecting new lettings in the City offset by the impact of lease extensions generating long-term income streams.

Net financing costs on a proportionally consolidated basis were £202 million, a decrease of £4 million compared to the prior year. The sale of Ropemaker and associated swap close-outs reduced our interest charge by £8 million and interest on completed West End developments added £5 million. Underlying profit before tax increased by £23 million, or 8.4%, to £297 million. The increase in underlying profit before tax is summarised in the table below on the following page.

Movement in underlying profit before tax		£m
Year ended 31 March 2013		274
Placing Investments		30
Completion of 2010 Developments		8
Like-for-like rental income		6
Disposal of Ropemaker		(18)
Other movements		(3)
Year ended 31 March 2014		297

Recycling was neutral to profits in the year, despite being active in reshaping our retail portfolio. We sold high yielding ex-growth assets and invested in assets which offer opportunity to add value through asset management initiatives or development.

We have a competitive advantage with our efficient operating model. Our EPRA cost ratio (including direct vacancy costs) for the year was 16.2% (2013:15.3%). This EPRA metric is substantially the same as the cost ratio the group has previously presented. Our EPRA cost ratio (excluding direct vacancy costs) for the year was 13.9% (2013: 12.8%). The increase was driven by the sale of Ropemaker and our continued investment in our people and infrastructure.

Underlying profits from joint ventures and funds for the year were £124 million. During the year we increased our ownership of Hercules Unit Trust to 58.6% as at 31 March 2014 and to 59.8% post our financial year end. As a result, HUT is treated as a subsidiary and fully consolidated in British Land's accounts, in line with international accounting standards. This includes HUT's debt, all of which is non-recourse to British Land. We therefore now include 100% of its results and financial position on a line by line basis in the financial statements. A deduction is then made for the equity in the subsidiary not attributable to the Group, i.e. the non-controlling interest. The change in basis of consolidation has had no impact on our KPIs.

Underlying diluted earnings per share for the year ended 31 March 2014 was 29.4 pence (2013: 30.3 pence) based on underlying profit after tax of £295 million (2013: £273 million) and weighted average diluted number of shares of 1,004 million (2013: 901 million). As expected, the relative dilution of EPS in the year is a consequence of the sale of Ropemaker at the end of the prior year. The equity placing was been accretive to earnings by 0.5 pence per share in the current year after taking into account of the additional shares in issue, ahead of the target set at the time of the placing.

IFRS profit after tax for the full year was £1,116 million (2013: £284 million), including £377 million from investments in joint ventures and funds (2013: £67 million). In addition to underlying profits, the most significant item impacting IFRS profit was the net valuation increase of £580 million for the Group and £258 million for our share of joint ventures and funds.

CASH FLOW

Net cash inflow from operating activities for the year was £249 million on a proportionally consolidated basis. The table below provides a summary of the increase in EPRA net debt on the same basis for the year:

Year ended 31 March 2014	Total £m
Opening Net Debt	4,266
Investment acquisitions	1,009
Disposals	(592)
Development and other capital expenditure	292
Net cash from operations	(249)
Dividend paid	159
Other	5
Closing Net Debt	4,890

Acquisitions absorbed £1,009 million, significant purchases being the investment of the placing proceeds at Paddington Central and the acquisition of SouthGate Bath. Disposals generated £592 million, with retail recycling at Bon Accord, Aberdeen and Basildon Eastgate Centre, in addition to the sale of Puerto Venecia, Zaragoza.

£292 million was utilised on development and capital expenditure, reflecting spend on our committed development programme and on replenishing the development pipeline. We anticipate prospective development spend of £399 million over the next 3 years on our 2010 and recently committed development programmes and £307 million on our near term prospective programme. Our investment portfolio has strong rental growth potential giving a platform for future growth which the table below summarises:

Annualised Gross Rents	Cash Flow Basis £m	Accounting Basis £m
Current Passing Rent	557
Expiry of Rent-free Periods	51	584
Fixed, Minimum Uplifts	13
2010 Non-Completed Developments Pre-let	28	25
Recently Committed Developments Pre-let	7	5
Total Contracted	656	614
Developments - 2010 Committed Developments to let	28	23
Developments - Recently Committed	11	9
Developments - Near-term to let	31	25
Investments - RPI and rent review uplifts	12	12
Investments - Letting of Expiries and Vacancies	21	18
Potential Rent in 5 Years	759	701
Increase	36%	20%

Current cash rent is £557 million with potential to grow by around £200 million over the next five years. We already have around £100 million of further rent contracted and when fully let the balance of the 2010 programme will add £28 million to rents. Recently committed developments and the near term pipeline should add a combined further £42m of rent. The investment portfolio benefits from around 10% of rents being subject to RPI and letting of vacancies will add £21m.

DIVIDENDS

The quarterly dividend was increased to 6.75 pence per share in the year, bringing the total dividend declared for the current financial year to 27.0 pence per share. This is in line with the announcement made by the Board in July 2013. The dividend paid in the financial year was 26.7 pence (2013: 26.4 pence). The fourth quarter dividend of 6.75 pence per share, totalling £68 million was approved by the Board on 13 May 2014 and is payable on 8 August 2014 to shareholders on the register at the close of business on 4 July 2014. The Board will announce the availability of the Scrip Dividend Alternative via the Regulatory News Service and on our website (www.britishland.com), no later than 4 business days before the ex-dividend date of 2 July 2014. The Board expects to announce the split between PID and non-PID income at that time. In respect of the 2014 third quarter dividend of 6.75 pence per share, totalling £68 million, 30% of shareholders elected for the scrip alternative in lieu of £48 million in cash dividends. It is the Board's intention that for the 2014/15 financial year the dividend will be increased 2.5% to not less than 6.92 pence per share per quarter, reflecting confidence in future cash flows.

BALANCE SHEET

At 31 March 2014, EPRA Net Asset Value per share was 688 pence per share, an increase of 15.4% compared to the prior year (2013: 596 pence per share).

	As at 31 March 2014			As at 31 March 2013
	Group	JVs & Funds	Prop Consol	Group	JVs & Funds	Prop Consol
	£m	£m	£m	£m	£m	£m
Properties at valuation¹	7,194	4,846	12,040	5,554	4,945	10,499
Investment in JVs & Funds	2,634			2,463
Other non-current assets	262	(68)	194	76	(23)	53
	10,090	4,778	12,234	8,093	4,922	10,552
Other net current liabilities	(191)	(113)	(304)	(158)	(116)	(274)
Net debt	(2,877)	(2,013)	(4,890)	(1,963)	(2,303)	(4,266)
Other non-current liabilities	5	(18)	(13)	(5)	(40)	(45)
JVs & Funds' net assets		2,634			2,463
EPRA net assets	7,027		7,027	5,967		5,967
Non-controlling interest²			371
EPRA adjustments³			(281)			(280)
IFRS net assets³			7,117			5,687
EPRA NAV per share			688p			596p

¹ Includes European portfolio of £89m and UK portfolio of £11,951m

² The EPRA net asset figures are presented after elimination of HUT non-controlling interest

³ EPRA net assets exclude the mark to market on effective cash flow hedges and related debt adjustments, as well as deferred taxation on revaluations. It also includes trading properties at fair value and is diluted for the impact of share options.

At 31 March 2014, 40% of the property portfolio and 41% of net debt was held within joint ventures and funds. The IFRS balance sheet shows our investment in joint ventures and funds grouped together and shown net. On this basis, our net investment at 31 March 2014 was £2,634 million, up from £2,463 million at the previous year end, reflecting the increase in the property portfolio valuations and our investment in developments.

Movement in EPRA net asset value per share¹		Pence
At 31 March 2013		596
Valuation movement
- Offices		36
- Retail		29
- Developments		27
Underlying profit after tax		29
Dividends		(27)
Other		(2)
At 31 March 2014		688

¹ EPRA net assets exclude the mark to market on effective cash flow hedges and related debt adjustments, as well as deferred taxation on revaluations

The 15.4% increase in EPRA NAV reflects the 8.3% valuation increase and is spread almost equally across developments, offices and retail and evenly split between the impact of our actions and yield compression. Standing investment delivered 7% uplift, development 21%. The robust NAV growth and increase in the dividend in the year have translated into a strong total accounting return for the year ended 31 March 2014 of 20.0%.

NET DEBT AND FINANCING

Our balance sheet metrics remain strong. Net debt (EPRA) at 31 March 2014 was £2.9 billion for the Group and £4.9 billion including our share of joint ventures and funds. The principal value of gross debt excluding cash, short term deposits and liquid investments was £3.0 billion for the Group and £5.2 billion on a proportionally consolidated basis. The strength of the Group's balance sheet has been reflected in British Land's senior unsecured credit rating which remains rated by Fitch at A-.

Financing statistics	Group	Proportionately Consolidated
EPRA Net debt¹	£2,877m	£4,890m
Principal value of gross debt¹	£2,990m	£5,198m
Loan to value²	29%	40%
Weighted average interest rate of drawn debt	3.5%	4.1%
Interest cover³	3.2	2.5
Weighted average debt maturity	8.2 years	8.7 years

¹Group EPRA Net debt and Principal value of gross debt presented after elimination of HUT non controlling interest

² Debt to property and investments

³Underlying profit before interest and tax / net interest

Our weighted average interest rate at 4.1% on a proportionally consolidated basis, is lower than the previous year's 4.6% and 4.2% at 30 September 2013. Average debt maturity has decreased from the prior year's 9.9 years, in part due to our choosing to draw on lower cost facilities which are towards the end of their agreed terms. The proportionally consolidated LTV held at 40% at 31 March 2014 (40% at 31 March 2013), at the bottom of our 40-50% range.

We continue to achieve attractive financings which improve liquidity. We have raised over £1.5 billion of debt finance in the last 12 months, on competitive terms from a broad range of sources, adding further flexibility and term to our already strong and well diversified debt portfolio. Most recently, in April 2014, we signed a £785 million unsecured revolving credit facility with a syndicate of 14 banks at an initial margin of 115 bps per annum. The facility has a maturity of five years which may be extended to a maximum of seven years on our request, and on each bank's approval for its participation.

At the end of March 2014, we drew down as scheduled on the 12 year, £200 million USPP fixed rate notes, swapped to an effective floating rate of 103 bps per annum over LIBOR, which we had signed in August 2013. In May 2013 we signed a £310 million unsecured revolving credit facility, with an initial margin of 135 bps per annum. All these unsecured borrowings include our standard financial covenants.

British Land has £2.6 billion of committed banking facilities, including the £785 million facility signed in April 2014, and £142 million of cash and short-term deposits. Of these facilities, £2.3 billion have maturities of more than 2 years.

We continue to manage our interest rate exposure in accordance with our policy, and currently an average 73% of projected net debt (including our share of joint ventures and funds) over the next five years is fixed. This significantly mitigates the potential impact of increasing interest rates, while retaining valuable flexibility.

ACCOUNTING JUDGEMENTS

In preparing these financial statements, the key accounting judgement relates to the carrying value of the properties and investments, which are stated at fair value. The Group uses external professional valuers to determine the relevant amounts. The primary source of evidence for property valuations should be recent, comparable market transactions on an arms-length basis. However, the valuation of the Group's property portfolio is inherently subjective, as it is made on the basis of assumptions made by the valuers which may not prove to be accurate.

REIT status: the Company has elected for REIT status. To continue to benefit from this regime, the Group is required to comply with certain conditions as defined in the REIT legislation. Management intends that the Group should continue as a REIT for the foreseeable future.

Accounting for joint ventures and funds: an assessment is required to determine the degree of control or influence the Group exercises and the form of any control to ensure that financial statement treatment is appropriate. Interest in the Group's joint ventures is commonly driven by the terms of the partnership agreements which ensure that control is shared between the partners. These are accounted for under the equity method, whereby the consolidated balance sheet incorporates the Group's share of the net assets of its joint ventures and associates. The consolidated income statement incorporates the Group's share of joint venture and associate profits after tax upon elimination of upstream transactions.

Accounting for transactions: property transactions are complex in nature and can be material to the financial statements. Assessment is required to determine the most appropriate accounting treatment of assets acquired and of potential contractual arrangements in the legal documents for both acquisitions and disposals. Management consider each transaction separately and, when considered appropriate, seek independent accounting advice.

FINANCIAL POLICIES AND PRINCIPLES

We focus on having sufficient competitively priced and flexible borrowings available to deliver our property strategy.

DEBT FINANCE

The scale of our business combined with the quality, security and stability of our rental income means that we are attractive to a broad range of debt providers and able to arrange finance on attractive terms. Good access to the capital and debt markets is a competitive advantage, both reducing our cost of funding and allowing us to take opportunities when they arise.

Debt financing involves risk from adverse changes in the property and financing markets. In arranging and monitoring our financing we include important risk disciplines, ensuring that relevant risks are fully evaluated and managed. We choose the appropriate gearing level and follow five guiding principles explained below that govern the way we structure and manage our debt.

GEARING

In deciding our gearing level we weigh up the potential increased returns obtainable from greater leverage (through borrowing to buy property) against the risks of having more debt. We use a loan to value ratio (debt as a percentage of the value of our assets, LTV) to measure our gearing and settle on an LTV range which reflects the strength of our operational business and reliability of cash flows, where we are comfortable that overall returns will be enhanced without exposing the Group to undue risk.

Our preferred LTV range is between 40% and 50% on a proportionally consolidated basis, i.e. including our share of joint ventures and funds. At 31 March 2014, this ratio was 40%. From time to time we may fall below this as a result of phasing of recycling activity or valuation increases; we would not increase gearing as a result of market improvements in investment yields.

Overall, and subject to transaction activity, we aim to manage the level of gearing over the property cycle such that when values are rising from the low part of the cycle, LTV will be at a higher level in the range, while when values are around the high point of the cycle, LTV will be in the lower level of the range. It is in the nature of real estate that transactions are often large in size which can cause significant movements in LTV within our range.

We leverage our scale through joint ventures and funds which are financed with debt, in securitisations and loans, which are non-recourse to British Land. In doing so, the LTV at 40% on a proportionally consolidated basis is higher than the Group measure for our unsecured lenders, which is around 30%. Accordingly we can operate with a higher level of gearing on a proportionally consolidated basis without putting pressure on the British Land credit profile.

GROUP BORROWINGS

Unsecured financing for the Group is raised through bilateral and syndicated unsecured revolving bank facilities, most with terms of five years; US Private Placements with maturities up to 2027; and the convertible bond maturing in 2017.Secured debt is provided by debentures with longer maturities up to 2035 at fixed rates of interest.

Unsecured borrowings

The same unsecured financial covenants apply across each of the Group's unsecured facilities. These covenants, which have been consistently agreed with all unsecured lenders since 2003, are:

· Net Borrowings not to exceed 175% of Adjusted Capital and Reserves; and

· Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets.

COVENANT RATIOS

As at 31 March	2010	2011	2012	2013	2014
Net borrowings to adjusted capital and reserves¹	37%	36%	44%	31%	40%
Net unsecured borrowings to unencumbered assets²	14%	25%	34%	23%	31%
Highest during the year to 31 March 2014:43% (1): 36% (2)

No income/interest cover ratios apply to these facilities, and there are no other unsecured debt financial covenants in the Group.

The Unencumbered Assets of the Group, not subject to any security, stood at £5.1 billion as at 31 March 2014.

Although secured assets are excluded from Unencumbered Assets for the covenant calculations, unsecured lenders beneﬁt from the surplus value of these assets above the related debt and the free cash ﬂow from them. During the year ended 31 March 2014, these assets generated £44 million of surplus cash after payment of interest. In addition, while investments in joint ventures do not form part of Unencumbered Assets, our share of proﬁts generated by these ventures are regularly passed up to the Group.

Secured borrowings

Secured debt with recourse to British Land is provided by debentures at fixed interest rates with long maturities and no amortisation. These are secured against a single combined pool of assets with common covenants; the value of those assets is required to cover the amount of these debentures by a minimum of 1.5 times and net rental income must cover the interest at least once. We use our rights under the debentures to withdraw, substitute or add properties (or cash collateral) in the security pool, in order to manage these cover ratios effectively and deal with any asset sales.

Debentures without recourse to British Land and secured by specific properties comprise two fixed rate debentures of £73 million in total.

Borrowings in our joint ventures and funds

Our joint ventures and funds are each financed in 'ring-fenced' structures without recourse to British Land for repayment and secured on the assets of the relevant entity, where gearing can often be satisfactorily maintained at a higher level than Group debt. External debt for these entities has been arranged through long dated securitisations or bank debt, according to the requirements of the business of each venture.

Hercules Unit Trust has term loan facilities maturing in calendar years 2016 and 2017 arranged for its business and secured on its property portfolios, without recourse to British Land. These loans include value and income based covenants.

The securitisations of the Broadgate Estate (£1,765 million), Meadowhall (£747 million) and the Sainsbury's Superstores portfolio (£589 million), have weighted average maturities of 13.3 years, 11.6 years, and 8.0 years respectively. The only ﬁnancial covenant applicable to these securitisations is that income must cover interest and scheduled amortisation (1 times); there are no loan to value covenants. These securitisations provide for quarterly principal repayments with the balance outstanding reducing to approximately 20%-30% of the original amount raised by expected ﬁnal maturity, thus mitigating reﬁnancing risk.

Other debt arrangements with banks and other lenders include loan to value ratio covenants with levels ranging from 40%-90%; and most have rental income to interest or debt service cover requirements. There is no obligation on British Land to remedy any breach of these covenants and any remedy needed would be considered by the parties on a case-by-case basis.

OUR FIVE GUIDING PRINCIPLES

Diversify our sources of finance

We monitor the finance markets and seek to access different types of finance when the relevant market conditions are favourable to meet the needs of our business. The scale and quality of the Group's business enables us to access a broad range of secured and unsecured, recourse and non-recourse debt. We arrange our finance across different types of debt to meet our own and, where appropriate, our partner's needs.

We enjoy and encourage long-term relationships with banks and debt investors. We aim to avoid reliance on particular sources of funds and borrow from a large number of lenders from different sectors in the market and a range of geographical areas, with a total of 41 debt providers of bank facilities and private placements alone. We also aim to ensure that potential debt providers understand our business and we adopt a transparent approach so that lenders can understand the level of their exposure within the overall context of the Group. These factors increase our attractiveness to debt providers, and since 1 April 2011 we have arranged £4 billion (British Land share £3.5 billion) of new finance in unsecured and secured bank loan facilities, US private placements and convertible bonds.

Maintain liquidity

In addition to our drawn term debt, we aim always to have a good level of undrawn, committed, unsecured revolving bank facilities. These facilities provide financial liquidity, reduce the need to hold resources in cash and deposits, and minimise costs arising from the difference between borrowing and deposit rates while reducing credit exposure. We arrange these revolving credit facilities in excess of our committed and expected requirements to ensure we have adequate financing availability to support business requirements and opportunities.

Extend and stretch maturity of debt portfolio

The maturity profile of our debt is managed by spreading the repayment dates and extending or renewing facilities. We monitor the various debt markets so that we have the ability to act quickly to arrange new finance as opportunities arise. Maturities of different types of debt are well spread, taking into account term debt and undrawn revolving facilities, reducing our refinancing risk in respect of timing and market conditions. As a result of our financing activity, we are comfortably ahead of our preferred two year refinancing date horizon. The range of debt maturities is one to 21 years.

Maintain flexibility

We negotiate flexibility into our debt facilities to support the operations of our business across investment, development and asset management. Our bank revolving credit facilities provide full flexibility of drawing and repayment (and cancellation if we require) at short notice without additional cost. These are arranged with standard terms and financial covenants and are committed for terms of generally five years. Operational flexibility is maintained with our combination of this unsecured revolving debt and secured term debt with good substitution rights, where we have the ability to move assets in and out of our debentures.

Maintain strong balance sheet metrics

British Land's operational metrics are strong. The strength of our property portfolio is emphasised by the quality of our cash flows; high occupancy (96.1%); the in-built growth of our portfolio (28.9% with fixed or RPI linked uplifts); low levels of lease expiries over the next three years (12.4% of income); and managed levels of development risk (with £64.2 million already contracted future income from pre-lets).

The strength of our debt portfolio and low refinancing risk is illustrated by the range of debt maturities; the diversified pool of finance confirming our avoidance of reliance on single debt sources; our efficiency with a weighted average interest rate of 4.1%; our interest cover of 2.5 times proportionally consolidated; our use of non-recourse debt; and the operational flexibility, supported by our continued success at raising debt at competitive prices.

MONITORING AND CONTROLLING OUR DEBT

We monitor our projected LTV and our debt requirement using several key internally generated reports focused principally on borrowing levels, debt maturity, covenant headroom and interest rate exposure. We also undertake sensitivity analysis to assess the impact of proposed transactions, movements in interest rates and changes in property values on the key balance sheet, liquidity and profitability ratios.

In assessing our ongoing debt requirements, including those of our development programme, we consider potential downside scenarios such as an unexpected fall in valuations and the effect that might have on our covenants.

MANAGING INTEREST RATE EXPOSURE

We manage our interest rate risk independently from our debt. The Board sets an appropriate maximum level of sensitivity of underlying earnings and cash flows to movements in market rates of interest over a rolling five-year period. The proportion of fixed rate debt required to remain within the target sensitivity varies with the levels of gearing and interest cover.

Our debt finance is raised at both fixed and variable rates. Derivatives (primarily interest rate swaps) are used to achieve the desired interest rate profile across proportionally consolidated net debt. Currently 73% of projected net debt (including our share of joint ventures and funds) is at fixed rate over the five year policy time period. The use of derivatives is managed by a Derivatives Committee. The interest rate management of joint ventures and funds is addressed by each entity for its business.

COUNTERPARTIES

We monitor the credit standing of our counterparties to minimise our risk exposure in respect of placing cash deposits and derivatives. Regular reviews are made of the external credit ratings of the counterparties.

FOREIGN CURRENCY

Our policy is to have no material unhedged net assets or liabilities denominated in foreign currencies. When attractive terms are available, the Group may choose to borrow in freely available currencies other than sterling, and will fully hedge the foreign currency exposure.

TAX

British Land is a Real Estate Investment Trust (REIT) and does not pay tax on its property income or gains on property sales, provided that we distribute as a dividend at least 90% of our property income to shareholders, which becomes taxable in their hands. In addition, we have to meet certain conditions such as ensuring our property rental business represents more than 75% of our total profits and assets. We are subject to tax on overseas properties depending on the requirements of each jurisdiction. Any UK income that does not qualify as property income within the REIT rules (such as fees and interest) is subject to tax in the normal way. We also collect VAT and withholding tax on the dividends, as well as employment taxes, on behalf of HMRC.

We administer the tax compliance for 466 companies covering Group and joint ventures and funds (377 UK companies and 89 overseas companies); details of which are shown in our annual return filed with Companies House on 28 February 2014.

HMRC continue to award us a Low Risk tax rating which is in part a reflection of our REIT status together with our transparent approach where we keep them informed. Also, we maintain a regular dialogue with HMRC and, in complex areas where there is a range of ways in which a transaction could be undertaken, we seek clearance from HMRC for what we do. We also discuss with HMRC potential or proposed changes in the taxation system that might affect us, particularly those relating to REIT legislation.

In the year to 31 March 2014, British Land paid and collected more than £200 million across all taxes to HMRC.

PRINCIPAL RISKS AND UNCERTAINTIES

The strengthening economic environment has improved the outlook for our performance however our risk appetite remains broadly unchanged.

The most significant judgements affecting our risk exposure include our property sector selection, our level of development risk and our gearing. We maintain our focus on sectors where we see outperformance over the medium term, that is high-quality UK retail and London offices, and we want to increase further our exposure to London and the South East. As our 2010 development programme lets up, we continue to replenish our pipeline of opportunities to maintain an appropriate level of risk exposure - commensurate with our return aspirations. Our approach to gearing is unchanged but we see our LTV being towards the lower end of, and possibly below our target range as valuations increase.

OUR APPROACH TO RISK MANAGEMENT

At British Land, we take the view that our assessment of risk is a cornerstone of our strategy and our embedded risk management is fundamental to its delivery. Our integrated approach combines a top-down strategic view with a complementary bottom-up operational process.

The top-down approach involves a review of the external environment in which we operate, to guide an assessment of the risks which we are comfortable exposing the business to in pursuit of our performance objectives - this is our risk appetite. This evaluation frames the determination of the actions we take in executing our strategy. Key risk indicators (KRIs) have been identified for each of our principal risks and are used to monitor our risk exposure. The KRIs are reviewed quarterly by the Risk Committee to ensure that the activities of the business remain within agreed risk appetite tolerances.

The bottom-up approach involves identification, management and monitoring of risks in each area of our business meaning that risk management is embedded in our everyday operations. Control of this process is provided through maintenance of risk registers in each area. These risk registers are aggregated and reviewed by the Risk Committee, with significant and emerging risks escalated for Board consideration as appropriate.This process complements the top-down view by informing the identification of our principal risks, ensuring that operational risks are fully considered in determining the risk appetite and the corresponding strategy of the business.

Our principal risks are detailed in the table that follows. This year, we recognise the increasing risks associated with upcoming political events, such as the UK general election, by expanding the risk of Economic Outlook to be Economic and Political Outlook.

RISK GOVERNANCE

The Board takes overall responsibility for risk management with a particular focus on determining the nature and extent of significant risks it is willing to take in achieving its strategic objectives. The Audit Committee assesses the principal risks facing the Company, including those that would threaten its solvency or liquidity. Their evaluation of these solvency risks is described further in the Going Concern section of the annual report and a description of how these risks are managed and mitigated is included in the Financial Strategy Execution risk in the table of principal risks which follows.

The Audit Committee takes responsibility for overseeing the effectiveness of sound risk management and internal control systems and more information on the system of internal controls can be found in the annual report.

The Executive Directors are responsible for delivering the company's strategy and managing operational risk and a Risk Committee has been established to provide a forum to fulfil these responsibilities.

The Directors in turn place reliance on their teams to monitor and manage operational risks on an ongoing basis, as well as identifying emerging risks. The risk registers provide a framework for all staff to feed into this process recognising their shared responsibility for effective management of risk in delivering our strategy.

RISK MANAGEMENT AT A GLANCE

The table below summarises the complementary top-down and bottom-up aspects of our integrated approach to risk management.

TOP-DOWN

Strategic risk management

BOTTOM-UP

Operational risk management

Review external environment

Set risk appetite and parameters

Determine strategic action points

BOARD AND AUDIT COMMITTEE

Assess effectiveness of risk

management systems

Report principal risks

Direct delivery of

strategic actions

Monitor key risk indicators

RISK COMMITTEE

(EXECUTIVE

DIRECTORS)

Consider completeness

of identified risks and

adequacy of mitigating actions

Consider aggregation of risk

exposures across the business

Executive strategic actions

Report on key risk indicators

BUSINESS UNITS

Report priority and

emerging risks

Identify, evaluate, prioritise,

mitigate and monitor

operational risks recorded

in risk register

PRINCIPAL RISKS

Managing our social and environmental impacts is central to how we do business and deliver value to our shareholders. To reflect this, rather than reporting social and environmental factors separately, we have integrated them within the principal risks disclosure which follows, as indicated by these social and environmental icons.

Our principal key risk indicators are highlighted within 'How we manage the risk'.

EXTERNAL RISKS

Risks and impacts

How we manage the risk

Movement in the period

ECONOMIC AND POLITICAL OUTLOOK

The economic recovery and the prospect of increasing interest rates present risks and opportunities in property and financing markets and the businesses of our occupiers.

Significant upcoming political events bring risks in two areas:

- reluctance of investors and businesses to make investment decisions while the outcome remains uncertain, and

- on determination of the outcome, the impact on the case for investment in the UK, and of specific policies and regulation introduced - particularly those which directly impact real estate.

· The Risk Committee reviews the economic environment on a quarterly basis to assess whether any changes to the economic outlook present risks or opportunities which should be reflected in the execution of our strategy. Indicators such as forecast GDP growth, unemployment, business and consumer confidence, interest rates and inflation are considered, as well as central bank guidance and government policy updates.

· We are not able to influence the outcome of significant political events, but take the uncertainty related to such events and the range of possible outcomes into account when making strategic investment and financing decisions.

· We engage public affairs consultants to ensure that we are properly briefed on the potential policy and regulatory implications of political events. Where appropriate, we act with other industry participants to influence the debate on these policies.

Risk exposure has reduced

The UK recorded strong GDP growth and falling unemployment in 2013, with these trends forecast to continue in 2014. This is anticipated to result in increased consumer demand and to be beneficial for the businesses of our occupiers. Risks to this recovery remain, including the prospect of rising interest rates, geo-political conflicts and a slowdown of economic growth in emerging markets.

Risk exposure has increased

Political: European Parliament elections, the referendum on Scottish independence and the UK general election are all scheduled within the next 12 months. Beyond that, there is the possibility of a UK referendum on membership of the EU. Each of these events has the potential to impact the appeal and performance of investment in the UK in general and real estate in particular, both through the related uncertainty and resultant implementation of policies and regulation

COMMERCIAL PROPERTY

INVESTOR DEMAND

Reduction in investor demand for UK real estate may result in falls in asset

valuations and could arise from variations in the:

health of the UK economy;

attractiveness of investment

in the UK;

availability of finance; and

relative attractiveness of other asset classes.

· The Risk Committee reviews the property market on a quarterly basis to assess whether any changes to the market outlook present risks or opportunities which should be reflected in the execution of our strategy. The Committee considers indicators such as the margin between property yields and borrowing costs and property capital growth forecasts which are considered alongside the Committee members' knowledge and experience of market activity and trends.

· We maintain a focus on those sectors which we believe will deliver outperformance over the medium term benefitting from continuing occupier demand and, consequently, investor appetite.

Risk exposure has reduced

The weight of money seeking

investment opportunities in UK

commercial property, both from

international and traditional

institutional sources, continues to

grow. Investor appetite has been

further enhanced by the improving

economic outlook and increasing

availability of finance at low rates with

interest now extending beyond prime

properties and locations.

CATASTROPHIC

BUSINESS EVENT

An external event such as a civil emergency, including a large-scale terrorist attack, extreme weather occurrence or environmental disaster could severely disrupt global markets (including property and finance) and cause significant damage and

disruption to British Land's portfolio and operations.

· Asset risk assessments (e.g. security, flood, environmental, health and safety).

· Regular security threat information service.

· Physical security measures at properties and development sites.

· Asset emergency procedures reviewed and scenario tested.

· Head office business continuity plan in place and regularly tested.

· Comprehensive insurance.

No significant change in risk exposure

The evaluation of the likely impact of this risk on the performance of the Group has not changed since the prior year. The Home Office threat level from

international terrorism remains 'substantial'. The portfolio has remained resilient to the storms and flooding experienced in the year with minimal damage and disruption experienced.

OCCUPIER DEMAND

AND TENANT

DEFAULT

Underlying income, rental growth and capital performance could be adversely affected by weakening occupier demand resulting from variations in the health of the UK economy and corresponding weakening of consumer confidence and business activity and investment.

Occupier failures may adversely impact underlying income and capital performance.

Changing consumer and business practices (including the growth of internet retailing, flexible working

practices and demand for energy efficient buildings), new technologies, new legislation and alternative locations may result in

earlier than anticipated

obsolescence of our buildings if evolving occupier and regulatory requirements are not met.

· The Risk Committee regularly reviews indicators of occupier demand including consumer confidence surveys, employment forecasts for relevant occupier sectors and ERV growth forecasts. These are considered alongside the Committee members' knowledge and experience of occupier plans, trading and leasing activity in guiding execution of our strategy.

· We have a Key Occupier Account programme through which we work together with our occupiers to find ways to best meet their evolving requirements - including understanding how our stores fit with their omni-channel offer.

· We perform rigorous occupier covenant checks and review these on an ongoing basis so that we can be proactive in managing exposure to weaker occupiers.

· We are constantly assessing how best to 'future proof' our buildings and maintain sustainability briefs across the investment portfolio as well as on acquisitions and developments.

· British Land prides itself on taking a leadership position on defining and responding to environmental legislation impacting the built environment. All our office developments are BREEAM Excellent and 94% of our major retail developments are BREEAM Very Good or Excellent. We have achieved significant landlord influenced energy reductions, benefitting our occupiers.

Risk exposure has reduced

We are seeing improving demand

for office space in London

underpinned by increasing take up

from TMT occupiers.

In retail, occupiers are becoming more

confident in the role of physical space

in an omni-channel world. With a

reduced number of administrations as

the economy recovers, we are seeing

signs of increasing demand for flexible

space in the best locations.

AVAILABILITY AND

COST OF FINANCE

Reduced availability of property financing may adversely impact British Land's ability to refinance facilities and result in weaker

investor demand for real estate.

Increasing finance costs would reduce British Land's underlying income.

· Benchmark borrowing rates and measures of real estate credit availability are monitored by the Risk Committee on a quarterly basis and considered alongside Committee members' awareness of financing activity in the industry to guide our financing actions in executing our strategy.

· We maintain strong relationships with our key financing partners and advisors to maintain an awareness of financing market activity.

· We maintain a diverse range of sources of finance to provide flexibility to access funding as required.

· We closely monitor relevant emerging banking regulation, working with industry bodies and other relevant organisations to participate in the debate where our interests are affected. In the current year, we contributed to the Vision for Real Estate Finance in the UK recommendations which were drafted by a cross-industry real estate finance group.

Risk exposure has reduced

We have seen a continuing increase

in the availability of finance to

commercial property across a range

of sources. Financing costs remain

near historic lows but are expected

to increase.

INTERNAL RISKS

Risks and impacts

How we manage the risk

Movement in the period

INVESTMENT STRATEGY

In order to meet our strategic objectives we must invest in and exit from the right properties at the right time.

Significant underperformance could result from inappropriate determination

and execution of our property

investment strategy, including:

- sector selection and weighting;

- timing of investment and divestment decisions;

- exposure to developments;

- sector, asset, tenant, region concentration;

- and co-investment arrangements.

Responsible Executive: Chris Grigg

· Our investment strategy is determined to be consistent with our target risk appetite based on the evaluation of the external environment.

· Progress against the strategy and continuing alignment with our risk appetite is monitored at each Risk Committee by reviewing relevant indicators including a comparison of forecast portfolio returns against the IPD benchmark.

· Individual investment decisions are subject to robust risk evaluation overseen by our Investment Committee including consideration of returns relative to risk-adjusted hurdle rates.

· We foster collaborative relationships with our coinvestors and enter into ownership agreements which balance the interests of the parties.

No significant change in risk exposure

Chris Grigg commented, "We have been active in delivering our investment strategy in the year. We have increased our exposure to London and the South

East, taking advantage of strengthening

investor interest in retail across the UK

to rebalance our portfolio. As our 2010

development programme concludes

we have been replenishing our development pipeline. We remain confident that our chosen sector focus

will deliver outperformance over the medium term, although our outperformance against benchmarks

may narrow in the short term as a result of strengthening investor demand in secondary property and other sectors. As investor appetite intensifies we will remain disciplined in our investment approach."

DEVELOPMENT

Development provides an opportunity for outperformance but this brings with it elevated risk. The care with which we

make our decisions around which schemes to develop when, as well as our execution of these projects, must reflect this.

Development risks could adversely impact underlying income and capital performance including:

- development letting exposure;

- construction timing and costs; and

- adverse planning judgements.

Responsible Executives:

Charles Maudsley

Tim Roberts

· We maintain our levels of total and speculative development exposure as a proportion of the investment portfolio value within a target range taking into account associated risks and the impact on key financial metrics. This is monitored quarterly by the Risk Committee, along with progress of developments against plan.

· For each project we make a judgement about apportionment of construction risk. Where we retain this risk we fix costs early in the process, subject to other market factors, with key contractors subject to financial covenant review.

· Pre-let targets are used to reduce development letting risk where considered appropriate.

· We actively engage with the communities in which we operate, as detailed in our Community Charter, to ensure that our development activities consider the interests of all stakeholders.

· We manage social and environmental risks across our development supply chain by engaging with our suppliers, including through our Sustainability Brief for Developments and Health and Safety Policy.

No significant change in risk exposure

Tim Roberts commented, "We

are now well advanced on our

2010 development programme and

have achieved considerable letting

success. Reducing the risk exposure

on this programme has provided us

with the confidence to commit to

further developments, including the

residential-led Clarges Estate on

Piccadilly, and we are continuing to

progress opportunities to further

replenish our pipeline. We are

conscious of the prospect of rising

construction costs in evaluating these

opportunities. The balance of these

risks is managed within overall

development exposure metrics which

are monitored across the

organisation."

PEOPLE

British Land runs a heavily outsourced model which means that critical business processes and decisions lie in

the hands of a few people.

Failure to recruit, develop and retain staff and Directors with the right skills and experience may result in significant underperformance.

Responsible Executive:

Chris Grigg

Our HR strategy is designed to minimise

risk through:

- informed and skilled recruitment processes;

- highly competitive compensation and benefits;

- people development and training;

- employee engagement surveys and other

- initiatives; and

- monitoring of unplanned executive departures and conducting exit interviews.

Our supply chain strategy is designed to

manage key social and environmental risks with our outsourced suppliers, including health and safety, fraud and bribery.

No significant change in risk exposure

Chris Grigg commented "Our

expert people are a key asset

and their decisions and actions drive

our performance. We remain confident

in our appeal as an employer but are

conscious that competition for the best

people is escalating in our industry,

mirroring the increased level of

investor activity. We were pleased to

appoint an HR Director and launch a

new HR Strategy in the year to continue

to improve our attractiveness as an

employer and our capacity to develop

our staff. Our high level of staff

engagement was recognised by the

award of a One Star rating in The

Sunday Times Best Companies to

Work For survey."

INCOME SUSTAINABILITY

We must be mindful of maintaining sustainable income streams in order

to continue to generate returns for our shareholders and provide the platform from which to grow the business through development and capital appreciation.

We consider sustainability of our income streams in:

- execution of investment strategy and capital recycling, notably timing of reinvestment of sale proceeds;

- nature and structure of leasing activity;

- and nature and timing of asset management and development activity.

Responsible Executives:

Charles Maudsley

Tim Roberts

· We monitor our market letting exposure including vacancies, upcoming expiries and breaks and tenants in administration as well as our weighted average lease length.

· We undertake comprehensive profit and cash flow forecasting incorporating scenario analysis to model the impact of proposed transactions.

· We perform rigorous occupier covenant checks and review these on an ongoing basis so that we can be proactive in managing exposure to weaker occupiers.

· We are proactive in addressing key lease breaks and expiries to minimise periods of vacancy.

· We have a diversified occupier base and monitor concentration of exposure to individual occupiers or sectors.

· We actively engage with the communities in which we operate, as detailed in our Community Charter, to ensure that we provide buildings that meet the needs of all relevant stakeholders.

Risk exposure has reduced

Charles Maudsley commented,

"In a challenging market, we have

demonstrated the enduring appeal of

our retail properties with lettings above

ERV, footfall above benchmarks and

improving occupancy throughout the

year. We are investing further in our

properties, including with the provision

of wi-fi and increased food and

beverage options, to ensure that they

continue to meet the evolving needs of

our occupiers and their customers."

Tim Roberts commented, "Occupier

demand across our Office portfolio is

robust, supported by the increasingly

diverse range of occupiers which our

buildings appeal to. Nowhere is this

better demonstrated than at Regent's

Place where 10 Brock Street was fully

let within three months of completion

to a broad range of occupiers including

Debenhams, Facebook, Manchester

City Football Club and Whitefoord LLP."

CAPITAL STRUCTURE EXECUTION

We must maintain a capital structure which recognises the balance between performance, risk and flexibility.

Gearing magnifies returns both positive and negative.

An increase in the gearing level increases the risk of a breach of covenants on borrowing facilities and may increase finance costs.

Responsible Executive:

Lucinda Bell

· We set the LTV range to reflect the strength of our portfolio and the longevity of our cash flows, management of our debt book and our refinancing risk.

· We monitor our LTV on an ongoing basis and manage gearing levels over the cycle.

· We manage our investment activity, which can be lumpy, as well as our development commitments, to ensure that we will remain within an appropriate range of LTV.

No significant change in risk exposure

Lucinda Bell commented,

"During the year, our LTV has

been in the lower half of our range as

we successfully invested the proceeds

from our March 2013 placing, sold

retail assets and benefited from

valuation increases. As values

increase, we will continue our rigorous

assessment of the appropriate LTV, which may fall below 40%, and

will not gear up on market yield shift."

FINANCE STRATEGY EXECUTION

We must be judicious in the

management of our financing as our strategy here addresses risks both to

our continuing solvency and the stability of our profits.

Failure to manage the refinancing

requirement may result in a shortage of funds to sustain the operations of the business or repay facilities as they

fall due.

This and a breach of financing covenant limits are considered to be the most significant risks to the continuing operation of British Land as a going concern.

Responsible Executive:

Lucinda Bell

· We have five key principles guiding the financing of the Group which together are employed to manage the risks in this area: diversify our sources of finance, maintain liquidity, extend and stretch maturity of debt portfolio, maintain flexibility, maintain strong balance sheet metrics.

· We closely monitor the period until refinancing is required, which is a key determinant of financing activity, and use scenario modelling tools to evaluate the likelihood of covenant breach.

· We are committed to maintaining and enhancing relationships with our key financing partners.

· We closely monitor relevant emerging regulation which has the potential to impact the way that we finance the Group and to introduce operating constraints.

· As with other regulatory and public affairs matters which impact us, we engage with Government and other industry participants to influence the debate.

No significant change in risk exposure

Lucinda Bell commented,

"We were again successful

in raising finance from a range of

sources in the year including

unsecured corporate facilities and

a US Private Placement. The attractive

terms of these arrangements mean

that we continue to operate an efficient

debt book which provides both

flexibility to effect our property

investment activity and, in conjunction

with our hedging policy, stability of

financing costs."

DIRECTORS' RESPONSIBILITY STATEMENT

The responsibility statement below has been prepared in connection with the company's full annual report for the year ending 31 March 2014. Certain parts thereof are not included within this announcement.

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

· the management report, which is incorporated into the strategic report, includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

· the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

GOING CONCERN

The Group's business activities, together with the factors likely to affect its future performance and position are set out in the Strategic report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities, together with the Group's financing policy, are described in the Performance Review.

The Group currently has considerable undrawn debt facilities and cash deposits which are expected to be sufficient to meet its financing requirements for several years. The Group's recent record of raising £1.5 billion of financing over the last 12 months gives the Directors confidence in the Group's ability to raise further finance as and when required.

The Group has substantial headroom against covenants on unsecured banking facilities and is not overly reliant on any single lender. It also benefits from a secure income stream from leases with long average lease terms, and is not over reliant on any single occupier or industry group.

As a consequence of these factors, the Directors believe that the Group is well placed to manage its financing and other business risks satisfactorily in the current economic environment. The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis in preparing the Annual Report and Accounts.

By order of the Board, Lucinda Bell, Finance Director

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR USRARSAAVARR

Companies

British Land Company (BLND)

Wednesday, 22nd May 2024

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