Overview

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Operational performance continued to improve driven by strong like-for-like rental growth and our focus on cost control. Underlying Profit was up 6.9% at £264m, while Underlying earnings per share (EPS) was up 4.8% at 28.3p. Based on our policy of setting the dividend at 80% of Underlying EPS, the Board has proposed a final dividend of 11.04p per share, resulting in a full year dividend of 22.64p, up 3.3%. The growth in the dividend is lower than Underlying EPS growth due to the impact of the rental concession restatement in the prior year.

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IFRS loss after tax for the year was £1,039m, compared with a profit after tax for the prior year of £965m. The movement year-on-year primarily reflects the downward valuation movement on the Group’s properties and those of its joint ventures as property values adjusted to the higher rate environment, offset by the mark-to-market movement on the derivatives hedging the interest rate on our debt.

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Overall valuations have fallen by 12.3% on a proportionally consolidated basis, resulting in a decrease in EPRA NTA per share of 19.5%. Including dividends of 23.20p per share paid during the year, total accounting return was –16.3%. Loan to value (LTV) on a proportionally consolidated basis increased by 310 bps from 32.9% at 31 March 2022 to 36.0% at 31 March 2023, reflecting the valuation declines noted above and capital expenditure on our committed pipeline. This was partially offset by the sale of a 75% interest in the majority of our assets in Paddington Central, which completed in July 2022.

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Group Net Debt to EBITDA decreased by 1.5x to 6.4x, and Net Debt to EBITDA on a proportionally consolidated basis decreased by 1.3x to 8.4x, improving as a result of net divestment made in the year and growth in underlying earnings.

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We completed £1.4bn (£0.9bn British Land share) of financing activity in the year on favourable terms, at margins in line with our in place facilities, with banks whom we have longstanding relationships and two which are new relationships to the Group and its joint ventures. For British Land, we agreed £375m of new revolving credit facilities (RCF), all for initial 5 year terms, as well as the extension of a further £100m RCF, and agreed with Homes England the continuation of the £100m loan facility to fund specified infrastructure works at Canada Water following the formation of the joint venture.

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For this joint venture we completed a £150m Green development loan facility for Canada Water, Phase 1 and for the Paddington joint venture we completed a £515m loan for Paddington Central. Our weighted average interest rate at 31 March 2023 was 3.5%, a 60 bps increase from 31 March 2022. This increase was primarily due to the repayment of our lower cost bank RCFs with the proceeds of the Paddington transaction, as well as the impact of rising market rates. The impact on our interest costs is limited by our hedging which includes swaps to fixed rate and caps where the strike rates are now below current SONIA. The interest rate on our debt is 97% hedged for the next year and 76% of our projected debt is hedged on average over the next 5 years. Our financial position remains strong with £1.8bn of undrawn facilities as at 31 March 2023. Based on our current commitments and facilities, we have no requirement to refinance until early 2026.

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We retain significant headroom to our debt covenants, meaning the Group could withstand a fall in asset values across the portfolio of 36% prior to taking any mitigating actions. Fitch Ratings, as part of their annual review in August 2022, affirmed all our credit ratings with a Stable Outlook, including the senior unsecured rating at ‘A’.