Half-year Report

RNS Number : 2592H

British Land Co PLC

14 November 2018

The British Land Company PLC Half Year Results

14 November 2018

Chris Grigg, Chief Executive said: "This has been another period of good operational and strategic progress. Our London office developments are letting up ahead of schedule and on better terms than expected - a clear endorsement of our campus offering and the quality of space we are delivering. In a particularly challenging retail market, we remained focused on delivering operationally day-to-day while at the same time progressing our strategy and refining our portfolio. With £634m of retail assets sold or under offer in the last 12 months, we have sold a total of £2.8bn since April 2014. We remain thoughtful in our capital allocation, extending our share buyback after selling 5 Broadgate at book value. At the same time, we again reduced leverage so we are well placed to further progress the strategic initiatives we set out in May to build an increasingly mixed use business.

Looking forward, demand for the highest quality London office space is expected to continue, but we remain alert to potential uncertainties as the Brexit process unfolds. We expect retail to remain challenging in both the occupier and investment markets as the impact of long-term structural change is compounded by short-term headwinds. Against this backdrop, our strategy is clear, consistent and focused on the long term. We have created attractive options across our business to drive future growth and benefit from the expertise, financial strength and flexibility to deliver them."

Financial highlights

· Robust performance following £1.2bn of net sales of income producing assets in 18 months

· Strong 5.8% LFL rental growth in Offices more than offset £6m impact of CVAs & Admins

· Underlying EPS down 10% due to impact of one off surrender premia received last year

· Half year dividend up 3.0% to 15.50p

· Portfolio value down 1.9%; Retail down 4.5% and Offices up 0.7% with developments up 7.2%

· EPRA NAV 939p, down 2.9%; total accounting return of -1.3% (H118: +4.2%)

· Strong and flexible balance sheet with a disciplined approach to capital allocation

· £842m of asset sales, further reducing leverage to 26.7% (March 2018: 28.4%)

· 5 Broadgate sold for £1bn (our share £500m), delivering 18% return per annum

· £1.3bn of financing activity including £1.1bn of new debt facilities

· £94m of the £200m share buyback extension completed as at 13 November 2018

Progress on strategy

· Campus-focused London Offices: Unique campus offer is delivering

· 273,000 sq ft of leasing activity generating £7.5m of future headline rents; 98% occupancy

· Additional 148,000 sq ft let to McCann post period end; under offer on a further 162,000 sq ft

· Lettings and renewals on the investment portfolio 6.5% ahead of ERV

· Committed development pipeline generating £63m of future rent, now 69% pre-let/under offer

· Speculative development exposure remains low at 3.7%

· Storey operational across 130,000 sq ft; 87% let or under offer; further 186,000 sq ft identified

· Smaller, more focused Retail: Operational outperformance in a challenging market

· 457,000 sq ft of leasing activity; 5.0% ahead of ERV; 98% occupancy

· Continue to outperform benchmarks: total sales 150 bps ahead; footfall 210 bps ahead

· £634m assets sold or under offer in the last 12 months

· Annualised rental impact of CVAs & Admins over the last 18 months of £14.7m of which £5.5m already let or in negotiation

· Residential, principally Build to Rent: Working to establish scale in this growth market

· Exclusive discussions ongoing to acquire an operator to enhance scale and operational expertise

· 4,000 - 5,000 residential unit opportunities identified across our portfolio, including Canada Water

Summary

Income statement	HY 2017/18	HY 2018/19	Change
Diluted underlying earnings per share ²	19.2p	17.2p	(10.4)%
Underlying Profit	£198m	£169m	(14.6)%
IFRS profit/(loss) before tax	£238m	£(42)m
IFRS basic earnings per share	23.2p	(4.9)p
Dividend per share	15.04p	15.50p	+3.0%
Total accounting return ²	4.2%	(1.3)%
Balance sheet	31 March 2018	30 September 2018
Portfolio at valuation (proportionally consolidated)	£13,716m	£12,856m	(1.9)%¹
EPRA Net Asset Value per share²	967p	939p	(2.9)%
IFRS net assets	£9,506m	£9,261m
Loan to value ratio (proportionally consolidated)	28.4%	26.7%

Operational Statistics	HY 2017/18	HY 2018/19
Lettings and renewals, sq ft	1.3m	0.9m³
Gross investment activity	£1,141m	£1,102m
Committed development, sq ft	1.5m	1.6m
Sustainability Performance
MSCI ESG	AAA rating	AAA rating
GRESB	5* and Green Star	4* and Green Star

¹ Valuation movement during the period (after taking account of capex) of properties held at the balance sheet date, including developments (classified by end use), purchases and sales

²See Note 2 to the condensed interim set of financial statements

³ Including 148,000 sq ft let to McCann post period end

Results Presentation and Investor Conference Call

A presentation of the results will take place at 9.30am on 14 November 2018 and will be broadcast live via webcast (britishland.com) and conference call. The details for the conference call are as follows:

UK Toll Free Number:	0808 109 0700
Passcode:	British Land

A dial in replay will be available later in the day and will be available for 7 days. The details are as follows:

Replay number:	0208 196 1998
Passcode:	3301254#

A video replay of the event will be available at britishland.com from 2pm on 14 November 2018. The accompanying slides will be made available at britishland.com just prior to the event starting.

For Information Contact

Investor Relations
David Walker, British Land	020 7467 3418

Media
Charlotte Whitley, British Land	020 7467 2933
Guy Lamming/Gordon Simpson, Finsbury	020 7251 3801

CHIEF EXECUTIVE'S REVIEW

Financial performance in the half was robust despite ongoing uncertainties caused by Brexit and a particularly challenging retail environment. Our results reflect significant capital activity; over the last 18 months, we have made net sales of £1.2bn of income producing assets as we focus on reshaping our Retail portfolio and recycling capital out of dry or mature assets. The 10% reduction in Underlying EPS to 17.2p is primarily due to one off surrender premia in the prior period. Setting this aside, EPS is flat as strong like for like rental growth in Offices and the benefits of the share buyback offset the impact of retail CVAs and administrations and capital activity. Reinvestment in our development programme will add approximately 4p annualised to future EPS once income-producing. Overall, NAV was down 2.9% with valuations 1.9% lower. The Retail portfolio was down 4.5% reflecting challenges in the market, with Office valuations up 0.7% and developments delivering a strong performance up 7.2%, demonstrating the benefit of our proactive approach.

In May, we outlined our strategic plan to deliver an increasingly mixed-use business. As we do this, we have three key elements of our strategy: a campus-focused London Office business; a smaller, more focused Retail business; and Residential, primarily Build to Rent. We have made good progress against each of these in the half.

In Offices, developments have let up ahead of schedule and on better terms than expected meaning that 69% of our committed pipeline is now let or under offer. This equates to £43m of future income already secured and significantly reduces our development risk. Recently, we signed McCann, one of the world's leading advertising agency networks, alongside interdealer broker TP ICAP at 135 Bishopsgate clearly demonstrating how the transformation we are delivering at Broadgate is appealing to a broader range of occupiers than ever before. Regent's Place and Paddington Central are both full, and we have further progressed the rollout of Storey, which continues to perform well and is operational across our campuses.

In Retail, occupiers continue to face short term cyclical headwinds and rapid structural change. The clearest evidence of this was the number of CVAs from operators with challenged models. We have seen polarisation play out in the context of CVAs with the best stores seeing little or no reduction in rent and this is reflected in our portfolio, where we have seen fewer closures than the market overall. We are not immune however and the annualised rental impact of CVAs and administrations occurring over the last 18 months is £14.7m. £9.5m of this relates to space which has become vacant, which we have been focused on reletting with good early progress with £5.5m already let or in negotiation. At the same time, we have continued to reshape our portfolio to deliver a smaller Retail business focused on assets that meet our criteria of what will succeed long-term and have sold or placed under offer £634m of retail assets over the last 12 months.

In Residential, we have identified significant opportunities to progress a Build to Rent business across our existing portfolio and are in exclusive discussions with an operator to enhance the scale and expertise we need.

We continue to take a thoughtful approach to capital allocation. We sold 5 Broadgate at book value for £1bn (our share £500m) and extended our share buyback programme by £200m with £94m already completed, meaning we have bought back £394m in the last 18 months. At the same time we further reduced leverage, so we have the flexibility to pursue the many opportunities we have created across our business. These include Canada Water, where we submitted planning permission and signed our Master Development Agreement with our partners, Southwark Council during the half.

Looking forward, we expect retail to remain challenging but interest in the highest quality London office space to remain good. We are alert to potential uncertainties caused by Brexit and as a Board we have considered the impact of a range of outcomes on our business. We are confident in the quality of our portfolio and the long-term secure income profile of our business; our portfolio is virtually full, our committed developments are substantially pre-let so our speculative exposure is low, and we are encouraged by the continued good demand for our space. Against this backdrop, our strategy is clear, consistent and focused on the long term. We have created attractive options across our business and have the expertise, financial strength and flexibility to deliver them.

Chris Grigg, Chief Executive

BUSINESS REVIEW

Key metrics

As at:	31 March 2018	30 September 2018
Portfolio valuation	£13,716m	£12,856m
Occupancy	97.4%	97.8%¹
Weighted average lease length to first break	7.7 yrs	6.9 yrs
6 months to:	30 September 2017	30 September 2018

Total property return	+3.8%	+0.2
· Yield shift	0 bps	+7 bps
· ERV growth	+1.0%	(0.8)%
· Valuation movement	+1.4%	(1.9)%

Lettings/renewals (sq ft)	1,342,000	888,000²
Lettings/renewals vs ERV	+6.8%	+5.3%

Gross investment activity	£1,141m	£1,115m
· Acquisitions	£92m	£142m
· Disposals	£(926)m	£(842)m
· Capital investment	£123m	£131m
Net investment/(divestment)	£(711)m	£(569)m

On a proportionally consolidated basis including the Group's share of joint ventures and funds

¹ Where occupiers have entered CVA or administration but are still liable for rates, these are treated as occupied. If units expected to become vacant are treated as vacant, then the occupancy rate would reduce from 97.8% to 97.0%

²Including 148,000 sq ft let to McCann post period end

UK macro-economic backdrop

Despite the uncertainty caused by the ongoing Brexit process, UK GDP continued to grow in the half - albeit at moderate levels - and unemployment remained at its lowest level since 1975. However, consumers remained under pressure with only marginal real wage growth and some regions including London saw house prices fall. The period saw several high profile retailer failures and in this context, consumer confidence in the economic outlook weakened. In August, the Bank of England raised interest rates for only the second time since the Global Financial Crisis, reflecting continued economic momentum and with inflation remaining elevated.

London market

Prime London property remains a compelling investment proposition for investors, particularly those from overseas. The market was strong in the first quarter, reflecting several large sales to Asian investors but activity slowed in the second quarter. Well-let, best-in-class or trophy assets continue to generate good interest and transact at tight yields, but optimistic pricing for larger non-prime assets has seen a number withdrawn from the market as polarisation continues to be a key theme.

On the occupational side, take up overall was ahead of the 10 year average, and held up well in the City although was slightly weaker in the West End. The period saw strong demand from the creative sectors, representing 18% of take up and flexible workspace providers, representing 16%. Banking and Financial Services also showed good demand despite Brexit-related uncertainties, accounting for 15%. Vacancy levels in both the West End and the City are in line with ten year averages and the development pipeline across London is largely pre-let for those completing in 2018, demonstrating the growing focus on modern, quality space. The London supply pipeline is likely to shift further outwards as some 40% of space previously expected to be delivered in 2020 is not yet under construction.

In Residential, annual house price growth was low at just 1.6%, and was negative in London, with the prime and super prime markets most challenging as political uncertainty and proposed changes in the tax regime weighed on demand.

Retail market

In Retail, investment markets were significantly weaker, reflecting challenges in the occupational market. Demand remained good for well-let, solus assets, especially those with alternative use potential. However, the market was weak for all but the highest quality multi-let assets with transaction volumes low.

Structural and cyclical headwinds have continued to play out, and there have been further CVAs and administrations from retailers with more challenged models, particularly those with high leverage who have been slow to adapt to rapid structural change. These retailers have closed stores to focus on smaller networks generally at a lower overall rent.

Our strategy: Building the Specialist in Mixed Use

In May, we outlined the future shape of British Land. We are building an increasingly mixed use business, focusing on three core elements:

· A campus-focused London office business: with a blend of core and flexible space, including the further build out of Storey, integrated alongside a world-class retail and leisure offering

· A smaller, more focused Retail business: including high quality, well located Regional and Local assets. Focused on a smaller number of on average larger, multi-let places, especially those with mixed use potential

· Residential, primarily Build to Rent: progressing existing opportunities within our portfolio, including Canada Water and exploring ways to build scale and expertise including via bolt on acquisitions

These strategic aspirations are focused around the fundamental long term trends driving our markets.

A campus-focused London office business

In Offices we are focused on our London campuses where we can curate a mix of uses to meet a broader range of needs that reflect the demands of modern, urban lifestyles. Our development pipeline is focused on our central London campuses and will deliver best-in-class workspace in world-class mixed use environments. Today, people and businesses work more flexibly, with increasing demand from small and fast-growing companies, driving demand for quality space on more flexible terms. This is what Storey our flexible workspace business provides. It allows occupiers to differentiate their space through their own branding whilst benefitting from shared amenities in the building and on our campuses.

A smaller, more focused Retail business

Positioning our Retail portfolio to succeed in the long term is a key strategic focus.

We have a clear view of the important but evolving role retail will continue to play as part of our increasingly mixed-use business. This is based on our understanding of the rapid structural shifts, driven primarily by the internet, that are revolutionising the way people shop. The role of the store is changing, causing retailers to reassess the type and amount of physical retail space they need. One of these changes is the increasing role of click and collect, an important part of an omni-channel approach; surveys across our portfolio show usage has doubled in the last two years with c. 5% of visitors using the service on a given day, almost twice the national average. The importance of networks which provide this logistical support and also act as a showroom is clear but these trends continue to evolve.

Today, these long-term structural trends are being accelerated by short-term cyclical headwinds creating a challenging market backdrop. We know that the type of space that will remain successful has changed and reduced, and we expect this to continue. In this context, we remain ruthlessly focused on the long-term and are reshaping our portfolio to deliver a smaller overall Retail business focused on assets that can succeed.

We have been proactively reshaping our portfolio over several years, with c. £2.4bn of retail assets sold and a further £419m exchanged or under offer since April 2014. Of those assets sold, department stores account for £614m, reducing our exposure to 1% of the portfolio. Department store disposals mainly comprise a number of assets from a portfolio of Debenhams stores acquired in 2005 which has delivered an IRR since purchase of 9.4% to September 2018. Multi-let assets which do not fit our strategy have also been an important area of focus, accounting for £559m of assets sold; we have also sold £995m of superstores and £196m of leisure and other solus assets.

As we make progress, we have a clear and well-established set of demanding criteria that inform our investment activity and believe that the best of both Local and Regional retail assets can succeed.

We are focused on owning only the highest quality Local, multi-let assets with genuine mixed-use potential. These Local assets must have leading competitive positions in the most attractive consumer markets of the UK, primarily in London and the South East. Located in urban areas, they incorporate a good mix of retailers complemented by a high-quality food, beverage and leisure offer that reflects the needs of the specific market.

Alongside this, we see a role for best-in-class Regional centres which benefit from exceptional market positions, are well connected and are the right size with the right mix of units to underpin good supply/demand tension for the space and support pricing and occupancy.

Across our portfolio, we believe we can drive enduring demand for our space by curating world-class destinations that reflect modern consumer lifestyles.

Residential, primarily Build to rent:

Build to rent is a new area of focus for British Land but is complementary to our existing expertise and is an important part of our mixed use vision. The market is underpinned by sound fundamentals, with housing generally undersupplied relative to demand and ability to buy constrained, making renting an attractive option for a growing number of people. Added to this, ownership is relatively fragmented, creating an opportunity for professionally-managed, quality space especially in London and the south east.

We have made good progress against each of these areas since May. Key achievements and our indicative view of the shape of the business in five years is set out below:

Strategic priority	Indicative 5-year business mix	Progress
Office-led campuses	55-60% Of which Storey c.5%	· Progressing development on our campuses and de-risking through pre-lets with 69% now let or under offer · Storey operational across 130,000 sq ft on all three campuses with further 186,000 sq ft identified · Smart Places team established focused on delivering technology-enabled places and personalisation of the working environment
Refocused Retail	30-35%	· £139m assets sold in the half 7% ahead of book · Total sold and under offer in the last 12 months of £634m · Continued investment in assets which fit our strategy
Residential principally Build to rent	c.10%	· Opportunities for 4,000 - 5,000 units identified across our existing portfolio · In exclusive negotiations to acquire an operator to add scale and enhance operational expertise

Portfolio performance

HY 30 September 2018	Valuation movement %	Valuation £m	ERV growth %	Yield shift bps	Total property return %
Offices	0.7	6,130	0.2	+1	2.5
Retail	(4.5)	6,305	(1.5)	+14	(2.1)
Residential	(3.1)	128	na	na	na
Canada Water	0.3	293	na	na	na
Total	(1.9)	12,856	(0.8)	+7	0.2

The portfolio value was down 1.9% overall, primarily due to Retail, where valuations were down 4.5%. Office valuations were marginally ahead, up 0.7%, driven by Office developments, where our continued leasing success delivered an uplift of 7.5%. ERV growth was negative in Retail, led by Department Stores and Local retail centres, where occupier challenges were most pronounced; these categories saw outwards yield shift of 119 bps and 20 bps respectively. The Offices portfolio saw marginal ERV growth, against a market backdrop of broadly stable rents and incentives, with yields flat.

The portfolio underperformed the IPD all property total return index by 310 bps over the period, largely reflecting the continued strength of the industrial sector within the index, where we have no exposure. Offices underperformed the sector benchmark by 70 bps on a total returns basis, reflecting the relative strength of regional offices while Retail underperformed by 230 bps due to a relatively stronger performance by London high streets, superstores and solus retail parks across the market.

Investment and development

From 1 April 2018	Offices	Retail	Residential	Canada Water	Total
	£m	£m	£m	£m	£m
Purchases¹	32	110	-	-	142
Sales²	(500)	(139)	(203)	-	(842)
Development Spend	69	21	9	8	107
Capital Spend	8	16	-	-	24
Net Investment	(391)	8	(194)	8	(569)
Gross Investment	609	286	212	8	1,115

On a proportionally consolidated basis including the Group's share of joint ventures and funds

¹ Includes £32m Orsman Road, Haggerston, which exchanged in the period but has not yet completed

²Includes sale of Richmond which exchanged in FY18 and completed in the current period. Includes Clarges residential sales, all of which exchanged prior to FY19 and completed in the period

We completed £842m of asset disposals, bringing the total gross value of our investment activity since 1 April 2018 to £1.1bn. The most significant transaction in the period was the sale of 5 Broadgate for £1bn (our share £500m) in line with book value. Overall, this development generated a total property return of 18% per annum for British Land.

We also completed £139m of retail sales, on average 7% ahead of book value bringing the 12 month run rate to £215m with a further £419m exchanged or under offer. This means that together, we have sold, or placed under offer £634m of retail assets in the last year.

At Clarges, our prime residential-led development in Mayfair, we completed the sale of 19 units in the period for £203m. This brings total completed units to 21 and a further three units have exchanged but are yet to complete. We have commenced formal marketing of the remaining 10 units and interest remains encouraging although the wider market has become more challenging meaning the valuation of the remaining units has been reduced. To date, completed and exchanged sales at Clarges stand at £334m, and the scheme has delivered total profits of nearly £200m with £123m sales to go.

Development spend totalled £107m in the half with the majority on our committed pipeline at Broadgate and Regent's Place.

Development activity

At 30 September 2018	Sq ft	Current Value	Cost to complete	ERV	ERV let/under offer
	'000	£m	£m	£m	£m
Committed	1,617	715	353	63	43
Near term	440	30	364	26
Medium term	2,821
Canada Water Phase 1¹	1,917

On a proportionally consolidated basis including the Group's share of joint ventures and funds (except area which is shown at 100%)

¹Total site area is 5m sq ft

Across our portfolio, we have created attractive options for development that progress our strategic focus on mixed use places. Critical to our approach is the flexibility and optionality we have created; the majority of space in our pipeline is currently income producing or held at low cost meaning we have attractive options we can progress when the time is right. With limited opportunity to make accretive acquisitions in the current market, this is an important competitive advantage.

We are careful to manage our development risk and pre-letting our space is an important part of that approach. Reflecting our successful leasing activity 69% of our committed developments are pre-let or under offer and speculative exposure remains low at 3.7% of portfolio gross asset value. Including our near term pipeline, this will be under 7%, which is below our internal risk threshold for speculative development of 8%.

Construction cost forecasts continue to suggest that the rate of growth has moderated from the level in recent years. However, there is a risk that a disorderly Brexit increases material costs and reduces labour supply in 2019/20 potentially increasing cost inflation above the expected 3-4% per annum. To manage this, 93% of the costs on our committed development programme have been fixed.

Campus-focused London Offices: Unique campus offer is delivering

Offices key metrics

As at:	31 March 2018	30 September 2018
Portfolio Valuation (BL share)	£6,705m	£6,130m
· Of which campuses	£5,250m	£4,890m
Occupancy	96.7%	98.2%
Weighted average lease length to first break	7.3 yrs	6.3 yrs

6 months to:	30 September 2017	30 September 2018

Total property return	+4.8%	+2.5%
· Yield shift	(6) bps	+1 bp
· ERV growth	+1.2%	+0.2%
· Valuation movement	+2.6%	+0.7%

Lettings/renewals (sq ft)	741,000 sq ft	421,000 sq ft¹
Lettings/renewals vs ERV	+2.8%	+6.5%

On a proportionally consolidated basis including the Group's share of joint ventures and funds

¹ Including 148,000 sq ft let to McCann post period end

Office highlights

· Portfolio value up 0.7%, with the City up 1.4% and West End up 0.3%

· Yields stable, with no movement in the West End and 1 bp expansion in the City

· ERV growth of 20 bps in the West End and 10 bps in the City

· Further strong leasing activity, covering 273,000 sq ft, adding £7.5m of future rents; additional 148,000 sq ft let to McCann which completed post period end (421,000 sq ft total leasing activity)

· Under offer on a further 162,000 sq ft and in negotiations on a further 428,000 sq ft

· Investment lettings and renewals signed 6.5% ahead of ERV

· Rent reviews agreed on 171,000 sq ft, 6.0% ahead of passing rent

· Occupancy increased to 98.2%; Regent's Place and Paddington Central virtually full

· Activity generating like-for-like income growth of 5.8%

· 5 Broadgate sold at book value (our share £500m) generating a total property return of 18% pa for British Land

Campus Review

80% of our Offices are located on our three central London campuses, where we continue to expand the mix of uses, leveraging the benefits of these vibrant local neighbourhoods, which are some of London's most exciting areas as well as excellent transport infrastructure to curate places which meet a broader range of needs.

Broadgate

At Broadgate, our leasing activity has again been excellent, covering 369,000 sq ft. This included 148,000 sq ft to McCann, one of the world's leading advertising agency networks, who have signed a 15 year lease post period end at our 135 Bishopsgate development, relocating from the West End. This is the latest in a series of lettings to technology and creative businesses, demonstrating that our placemaking activity is transforming Broadgate and resonating with a much broader range of occupier than ever before. At the same time, TP ICAP re-commited to Broadgate with a 123,000 sq ft letting, also at 135 Bishopsgate.

At our 1 Finsbury Avenue development (1FA), Mimecast committed to an additional 34,000 sq ft bringing their total occupation to 113,000 sq ft, the largest technology letting in the City this year. We signed Everyman, the boutique cinema operator for a 3-sceen cinema, covering 11,000 sq ft and are let or under offer on a further 8,000 sq ft of retail and leisure space at 1FA and 100 Liverpool Street on terms significantly ahead of ERV. Our letting to Eataly, announced earlier in the year is driving interest from a broader mix of retail and leisure operators to Broadgate, building real momentum for a new London destination for food, retail and culture.

Elsewhere on the campus, we let 26,000 sq ft at 201 Bishopsgate to Bravura, a wealth management advisor, and completed 43,800 sq ft of lettings to tech and creative business at 3FA including Onfido, Tessian, Neyber and Publica.

The successful leasing activity we have delivered across our three developments at Broadgate was a key driver of value for the campus, which was our strongest performing, up 1.5% in the six months. The transformation and range of space we are delivering has attracted a more diverse mix of occupiers, and following the sale of 5 Broadgate, Banks and Financial Services now account for around half of rents (including developments) down from two thirds two years ago.

Paddington Central

At Paddington, where occupancy is 99%, we made 19,000 sq ft of lettings and renewals, nearly 11% ahead of ERV. We have continued to expand the retail and leisure offering, including Pall Mall, a boutique barber shop with six outlets in London and one in New York and Department of Coffee and Social Affairs, another boutique operator with coffee shops in London and Chicago. Following the successful launch of Storey at 4 Kingdom Street further space has now been allocated and take up has been encouraging.

In recent months, our placemaking activities have focused on enlivenment, including a floating market in August, film and sports screenings in the amphitheatre and the return of Pergola, an 850-cover outdoor dining experience, for a new season in April. This activity, together with the regeneration of the broader area driven in part by the arrival of Crossrail next year, has notably improved the overall perception of the campus. Our most recent engagement surveys showed our net promotor score as a place to work had increased from 43 to 63 with more than 80% of campus and local workers spending on food and beverage at the campus at least weekly.

Paddington saw an overall valuation uplift of 1%, benefitting from yield contraction (2 bps) with ERVs marginally ahead (+0.2%).

Regent's Place

At Regent's Place, where we are fully occupied, we signed 15,000 sq ft of new lettings, predominately by Storey at 338 Euston Road and agreed rent reviews on 42,000 sq ft, 9.5% ahead of previous passing rent. The campus saw a valuation gain of 0.8% again underpinned by our development activity, which at Regent's Place is focused on 1 Triton Square, where we are fully let on the office space to Dentsu Aegis Network, covering 310,000 sq ft.

We are currently developing plans for a programme of public realm improvements, which will enhance the existing connections with Regent's Park, the residential areas to the north and the Knowledge Quarter, an area one-mile in radius which is home to a cluster of academic, cultural, research, scientific and media organisations. Our plans will introduce more green space and support a more diverse range of uses, experiences and activities throughout the year.

Storey

The successful roll out of Storey, our flexible workspace brand has continued. It is now operational in five buildings across all three campuses, covering a total of 130,000 sq ft and 87% of space is let or under offer. All the space at Broadgate, Regent's Place and level 4 at 4 Kingdom Street, Paddington Central is fully let or under offer, with level 5 at 4 Kingdom Street, which was launched in July 2018 now 79% let or under offer. Progress has been slower at International House, Ealing Broadway, where we have reduced the overall space allocation and a new marketing plan is in place.

Storey is deliberately a differentiated concept, providing occupiers with the opportunity to brand the space themselves whilst benefiting from shared facilities in the building and the advantages our campuses provide. The average lease length is 21 months and the average occupier headcount is 50 people. It continues to achieve attractive premiums to ERV of 42% on leased space.

Overall, nearly 50% of Storey occupiers by area are in the technology or telecoms sector, but we are appealing to a broad mix. Nominet, the official registry for .uk domain names; UPL, a chemicals company; and Madison Square Gardens, a live sports and entertainment company all signed in the period. As well as these new occupiers, Storey provides overflow space for existing occupiers, with 41% of occupiers by rent being existing British Land customers.

Looking forward, we have identified a further 186,000 sq ft including 10,000 sq ft of club space at 4 Kingdom Street, 73,000 sq ft at our 1FA development in Broadgate and over 65,000 sq ft in standalone assets. These include Wells Street in our existing West End portfolio and Orsman Road in Haggerston, located in north of Shoreditch which was exchanged in the period.

Offices development

Developments were a key driver of value in the half, reflecting our strong success leasing up committed developments. 69% of the ERV in our committed pipeline is now let or under offer and this is part of our broader approach to risk management.

Committed developments

Our committed pipeline covers 1.5m sq ft. 366,000 sq ft is at 1 Triton Square, Regent's Place where we are fully pre-let on the office space to Dentsu Aegis Network on a 20-year lease.

The remaining 1.1m sq ft sits across three buildings at our Broadgate campus. 100 Liverpool Street is the largest at 521,000 sq ft and will be one of Europe's smartest office buildings, with a single digital spine connecting systems within the building to personalise elements of the working environment including temperature and light as well as monitor the use of space. We are aiming for a WiredScore platinum rating for internet connectivity and infrastructure and a Well Gold certification for wellbeing. The building is now 38% let or under offer by ERV; Sumitomo Mitsui Banking Corporation Europe are taking 160,000 sq ft and we have a number or retailers signed or under offer. We are phasing the completion of our Broadgate developments with 100 Liverpool Street completing in Q1 2020 and 1FA and 135 Bishopsgate completing during 2019. Following recent lettings these two developments are 42% and 94% respectively let or under offer by ERV, which at 1FA excludes an allocation to Storey of 73,000 sq ft.

Near-Term pipeline

Looking ahead, our near term pipeline covers 440,000 sq ft of consented opportunities we could potentially progress in the next twelve months. It includes our option for a mixed use scheme at Blossom Street, Shoreditch and the Gateway Building at Paddington Central, where we have planning for a hotel.

At Blossom Street our option covers more than two-acres of land. We have consent for a 335,000 sq ft mixed use development, integrating 258,000 sq ft of office space, alongside retail and residential, to create a mixed use development that builds on the historic fabric of the area. Our plans envisage a mix of floorplates, to appeal to small and growing businesses, particularly in the technology and creative sectors.

In line with our strategic focus on expanding the mix of uses at our campuses, our plans at Paddington Central include the Gateway, a 105,000 sq ft premium hotel. We are currently assessing our options in relation to this opportunity.

Medium-Term Pipeline

Looking further ahead, we have created opportunities within our existing portfolio to grow and develop our business well into the future. Our medium term pipeline covers 1.5m sq ft of which two-thirds has planning permission in place.

At Broadgate, we have consent for a 563,000 sq ft scheme at 2-3 Finsbury Avenue (2FA and 3FA) adding 374,000 sq ft to the existing space. In the meantime, these buildings are generating a good income through short term, more flexible lets including 53,500 sq ft Storey space at 2FA. In addition, our 1,700 sq ft events space at 3FA launched in the period. At 1-2 Broadgate, we submitted planning on a 533,000 sq ft redevelopment. Our plans include 160,000 sq ft of retail, leisure and dining connecting Finsbury Avenue Square with retail at 100 Liverpool Street and the Broadgate Circle to create a 350,000 sq ft retail, leisure and dining hub.

At 5 Kingdom Street, Paddington Central, we have existing consent for a 240,000 sq ft office-led scheme; our plans will increase this to more than 371,000 sq ft and we expect to submit a revised application later this year. The site sits above the Box, a 70,000 sq ft site which will become redundant on the completion of Crossrail, when ownership reverts to British Land. This represents an interesting opportunity to create an alternative use, potentially retail, leisure or events space.

Sustainability

At Broadgate, where work is ongoing to create a world class, mixed-use destination, we are maximising the social value created by development through a partnership with our major contractor, Sir Robert McAlpine, and around 40 sub-contractors. In the first year: 12 apprentices have gained experience on the site, building skills for the future; 14 construction workshops were run for children from the local primary school; and local Boroughs have received 44% of the construction spend.

The Regent's Place Community Fund, which supported 2,600 local people in FY18, has now attracted further partners and almost doubled its annual donations to £59,000. This will be invested in local projects that support employability, social cohesion, health and wellbeing in the surrounding neighbourhood.

Smaller, more focused Retail: Operational outperformance in a challenging market

Retail key metrics

As at:	31 March 2018	30 September 2018
Portfolio valuation (BL share)	£6,596m	£6,305m
· Of which multi-let	£5,328m	£5,167m
Occupancy¹	98.0%	97.6%
Weighted average lease length to first break	7.9 yrs	7.3 yrs

6 months to:	30 September 2017	30 September 2018

Total property return	+3.0%	(2.1)%
· Yield shift	+5 bps	+14 bps
· ERV growth	+1.0%	(1.5)%
· Multi-let ERV growth	+1.1%	(1.6)%
· Valuation movement	+0.3%	(4.5)%

Lettings/renewals (sq ft)	578,000	457,000
Lettings/renewals vs ERV	+11.9%	+5.0%

On a proportionally consolidated basis including the Group's share of joint ventures and funds

Retail highlights

· Total portfolio value down 4.5%, with performance mixed reflecting market challenges

· Yield expansion of 14 bps overall

· ERVs down 1.5%

· Robust leasing activity, covering 457,000 sq ft, 5.0% ahead of ERV, adding £2m to future rents

· Completed over 50 rent reviews, 2.1% ahead of passing rent

· High occupancy maintained at 98%

· Annualised rental impact of CVAs & admins over the last 18 months of £14.7m

· £9.5m of this impact relates to rent lost due to store closures with £5.5m already let or in negotiations

· Like for like income growth excluding the impact of CVAs and administrations of 0.2%

· Footfall down 1.2%, 210 bps ahead of benchmark; Total sales down 0.6%, 150 bps ahead of benchmark

· £634m sold or under offer in the last twelve months; total Retail disposals since April 2014 c. £2.8bn

Operational Review

In a challenging market, we have completed 154 lettings and renewals, covering 457,000 sq ft, 5.0% ahead of ERV. Looking forward, our pipeline of deals under offer is lower than in previous years but is broadly in line with ERV. Tenant incentives have not changed materially overall, although agreements have varied across our schemes, reflecting the relative variances in occupier demand. At Meadowhall we signed 15 long term deals, including G Star, Fat Face and Waterstones, totalling £800,000 of rent and the centre is 99% occupied. Our recent £60m refurbishment is delivering results and leaves us well placed to meet demand for the kind of modern, well-located space successful retailers demand. This is evidenced by our total sales performance, which were up 1% in the twelve months following refurbishment. At Ealing Broadway, conveniently located in the centre of this affluent London suburb and soon to benefit from Crossrail, we signed Neon Sheep, a new accessories brand and Explore Learning, a learning and tuition centre.

Footfall was down 1.2% in the period, but we have continued to outperform the benchmark (210 bps ahead) demonstrating that despite changes in the way people shop, our centres are still relatively well placed. Total sales, which takes into account our asset management initiatives, were down 0.6% outperforming the benchmark by 150 bps, although same store sales, which strips out these improvements showed decline of 2.5% but was 90 bps ahead of the benchmark. These figures only capture instore sales and exclude online sales where the physical store plays a key role, including shipping direct from store, an approach more retailers are adopting, as well as click and collect and online purchases first browsed in store.

Our survey data show an increasingly important contribution of physical retail to an omni-channel strategy. Click and Collect usage has doubled at our centres in the last two years to 5.3% of visitors using the service that day - almost twice the national benchmark. Those who use Click and Collect are valuable visitors, spending nearly twice what non-Click and Collect users spend. 6.0% of visitors at our centres are returning an item, up from 4.4% two years ago, and of those, 76% go on to spend on retail with 24% spending on food and beverage. More of our visitors are also engaging with our food and beverage offer, with F&B spend up 5% this year.

The annualised impact of CVAs and administrations which occurred over the last 18 months is currently £14.7m. We have been focused on reletting the space that has become vacant and early progress has been good, with £5.5m of the £9.5m rent lost due to store closures already let or in negotiation. The full impact on our Retail portfolio is summarised below, including examples for Homebase and New Look:

Number of stores in our portfolio	All Admins / CVAs	Homebase	New Look
Total Exposure	114	12	20
Administrations	38	n/a	n/a
CVAs - stores unaffected	36	6	11
CVAs - stores on reduced rents	27	4	9
CVAs - stores due to close	13	2	0

Capital activity

In line with the strategy set out in May, we have been committed to re-shaping our retail portfolio for several years and have made further good progress. We completed £139m of asset disposals, on average 7% ahead of book value, bringing the 12-month run rate to £215m and are exchanged or under offer on a further £419m, in line with September book value. This brings total Retail disposals since April 2014 to c. £2.8bn. We have continued to see good demand for solus and leisure assets, which have sold well ahead of book although demand for smaller, multi-let assets is weaker and transactions are generally taking longer to complete.

Despite this, there are examples of larger, high quality multi-let assets transacting on attractive terms. This includes our own centre at Fort Kinnaird, Edinburgh, where we were pleased to welcome M&G Real Estate as our new joint venture partner, following the Crown Estate's sale of its 50% share. This transaction was slightly below March book value and demonstrates the continuing interest in good quality retail by major UK institutions. As part of this transaction, the Crown Estate also took full ownership of the Gallagher Shopping Park in Cheltenham, acquiring the 50% from HUT it did not already own. Again, this transaction was only slightly below March book value.

Our focus continues to be on well-located, high quality, multi-let assets with mixed use potential. This strategy underpins our acquisition of Royal Victoria Place in Tunbridge Wells, an affluent town with heritage architecture in London's commuter zone with strong demographics and an undersupply of good quality retail. The centre has consent for a redevelopment covering one-third of the space with potential to significantly expand the mix of uses. It was acquired for £91.8m in May 2018, equating to a capital value per sq ft of £330 and a 4.5% initial yield.

We made £37m of capex investment into our assets. Asset management initiatives accounted for £16m, of which two thirds was income producing capex and one third was spending on the public realm. Development capex of £21m accounted for the remaining investment.

Retail development

In line with our disciplined approach to capital allocation, we consistently review our capital spending plans and in the current environment would expect the overall level of capital spend to be lower than our usual run rate. However, we maintain a range of opportunities across our portfolio which preserve our optionality but would only commit where market conditions and long term prospects are supportive.

Committed developments

At Drake Circus, Plymouth, we are on site with a 108,000 sq ft leisure extension which will add a 12 screen cinema and 14 restaurants. The scheme is 62% let and under offer and we expect to reach practical completion in Autumn 2019.

Medium term pipeline

Our medium term pipeline is increasingly focused on mixed use opportunities and includes a £400m redevelopment of Eden Walk, Kingston (owned jointly with USS), where we have consent for 380 new homes, 28 new retail units, 12 restaurants and cafés and 35,000 sq ft of flexible office space. At Ealing Broadway, which will benefit from Crossrail in 2019, we are working up plans for a wider mixed use development covering nearly 300,000 sq ft. At Meadowhall, we have consent for a 333,000 sq ft leisure extension but are currently undertaking a review of our plans given broader market uncertainty which is expected to conclude towards the end of the year. We have further opportunities at George Street in Plymouth, adjacent to our Drake Circus Regional Retail centre which cover 45,000 sq ft.

Sustainability

At Fort Kinnaird, Edinburgh, the Retail & Skills Centre celebrated its fifth anniversary by winning the Estates Gazette Collaborators Award. Our innovative partnership with councils from East Lothian, City of Edinburgh and Midlothian, as well as the Capital City Partnership, Department of Work and Pensions, and Skills Development Scotland improves local skills and access to jobs for people who may not otherwise be provided with support. Since opening in 2013, the Centre has supported 652 employers, trained 2,663 people and helped 3,585 people into work, improving opportunities for people in surrounding neighbourhoods and creating the skilled workforce that our customers value.

Canada Water: A unique redevelopment opportunity in London

Highlights

· 5m sq ft mixed use development scheme

· Master development agreement signed with Southwark Council in May 2018

· Planning application including detailed planning submission on the first three buildings and outline planning for the whole scheme submitted May 2018

· Valuation up 0.3% to £293m

At Canada Water, we are working with the London Borough of Southwark to deliver a 5m sq ft mixed use scheme, including 3,000 new homes alongside a mix of commercial, retail and community space. The site benefits from excellent transport connectivity with Canary Wharf and the West End two and twelve minutes respectively on the Jubilee line and Shoreditch just ten minutes away by Overground. It covers 53 acres including the dock area, providing 48 acres of developable land.

We started engaging on our masterplan proposals in 2014 and since then have held over 120 public consultation and local outreach events. These have attracted over 11,000 people who provided 12,000 comments on our plans, enabling us to shape a design with strong local appeal. Together with Southwark Council, we have now committed to a Social Regeneration Charter which will ensure that residents in the borough benefit from the development.

In May, we submitted our planning application, which included a detailed application on the project's first three buildings together covering nearly 580,000 sq ft. Our plans include 265 homes of which 35% will be affordable. Building A1 will provide both residential and workspace and building A2 will be focused on workspace and a new leisure centre, with both providing a small amount of retail at ground floor. K1, the third building will be wholly residential. These buildings are part of a major first phase covering 1.9m sq ft of mixed use space.

The development agreement which we signed in May 2018 sets out the terms of a new headlease, which consolidates our holdings into a single 500 year headlease with Southwark Council as the Lessor. This structure effectively aligns the ownership of these assets, with British Land owning 80% and Southwark Council owning the remaining 20%. Southwark Council will have the opportunity to participate in the development of the individual plots, up to a maximum of 20% and returns will be pro-rated accordingly. This headlease becomes effective on the fulfilment of a number of conditions, most importantly achieving outline planning consent for the whole masterplan and detailed planning consent for the first three buildings.

Subject to planning approvals, construction of the first detailed plots could begin in the second half of 2019. Potential funding structures will be explored when we have greater visibility on timing, ahead of which, we are already seeing interest in the space from a range of sectors and discussions are underway on several buildings.

In the meantime, the Printworks has become an established live and electronic music venue, frequently hosting crowds of up to 5,000. Ticket sales and visitors are now up to 300,000 with 31 shows scheduled for the Autumn season.

The valuation of Canada Water increased to £293m benefitting from progress made with our planning application although we continue to incur feasibility costs in relation to the Masterplan.

FINANCE REVIEW

6 months to	30 September 2017	30 September 2018
Underlying earnings per share¹	19.2p	17.2p
Underlying Profit^1,2	£198m	£169m
IFRS profit (loss) before tax	£238m	£(42)m
Dividend per share	15.04p	15.50p
Total accounting return^1,3	+4.2%	(1.3%)
As at	31 March 2018	30 September 2018
EPRA net asset value per share^1,2	967p	939p
IFRS net assets	£9,506m	£9,261m
LTV ^1,4,5	28.4%	26.7%
Weighted average interest rate ⁵	2.8%	2.9%

¹See Glossary on website for definitions. ²See Table B within supplementary disclosure for reconciliations to IFRS metrics. ³See Note 2 within condensed interim financial statements for calculation. ⁴See Note 10 within condensed interim financial statements for calculation and reconciliation to IFRS metrics. ⁵On a proportionally consolidated basis including the Group's share of joint ventures and funds.

Overview

Financial performance for the period has been robust in the context of significant net divestment over the last 18 months and a challenging retail environment. Underlying earnings per share (EPS) are down 10.4% at 17.2p, while Underlying Profit is down 14.6% at £169m, reflecting one off surrender premia of £20m received in the prior period.

Setting aside the surrender premia, Underlying EPS is flat with strong like-for-like rental growth in Offices and the benefits of share buyback offsetting the impact of net divestment and retail CVAs and administrations. There is an estimated 4p of annualised uplift to come in future years from the committed development programme, which is already 69% pre-let or under offer, and a further c.0.8p expected on completion of the share buyback programme.

Valuations have reduced by 1.9% on a proportionally consolidated basis resulting in an EPRA net asset value per share (NAV) decline of 2.9%, albeit this was partially offset by the impact of the £50m shares bought back in the period.

We have completed £1.1bn of gross capital activity (£0.6bn of net capital activity) in the half. This comprises £639m sales of income producing assets, primarily our 50% interest in 5 Broadgate for £500m, which sold at book value, representing a net initial yield of 4%. In addition, we made Retail sales totalling £139m, 7% ahead of book value, at an average yield of 4.5%. We have a further £419m of Retail sales exchanged or under offer, in line with September book value. With the sales made in H2 last year, this brings our running total of assets sold, exchanged and under offer over the last 12 months to £634m. We completed on £203m of residential sales during the half, which exchanged prior to this financial year.

We remain thoughtful about the use of proceeds from these disposals. During the half we extended the share buyback programme by £200m, with £50m completed to September, adding 2p to NAV. The remainder is expected to complete by the end of the financial year. Share buybacks completed in the last 18 months have added 17p to NAV. We have also invested £273m into development, purchases and capital spend to position our business for future growth.

Our financial metrics remain strong. LTV has decreased by a further 170bps during the period to 26.7% despite the valuation fall. The reduction was driven by net sales reducing LTV by 350bps, partially offset by the share buyback and investment into the development programme. Our weighted average interest rate remains low at 2.9%. We have been active in debt markets, with £1.3bn of activity, including £1.1bn of new facilities.

Presentation of financial information

The Group financial statements are prepared under IFRS where the Group's interests in joint ventures and funds are shown as a single line item on the income statement and balance sheet and all subsidiaries are consolidated at 100%.

Management considers the business principally on a proportionally consolidated basis when setting the strategy, determining annual priorities, making investment and financing decisions and reviewing performance. This includes the Group's share of joint ventures and funds on a line-by-line basis and excludes non-controlling interests in the Group's subsidiaries. The financial key performance indicators are also presented on this basis.

A summary income statement and summary balance sheet which reconcile the Group income statements to British Land's interests on a proportionally consolidated basis are included in Table A within the supplementary disclosures.

Management monitors Underlying Profit as this more accurately reflects the Group's financial performance and the underlying recurring performance of our core property rental activity, as opposed to IFRS metrics which include the non-cash valuation movement on the property portfolio. It is based on the Best Practices Recommendations of the European Public Real Estate Association (EPRA) which are widely used alternate metrics to their IFRS equivalents.

Management also monitors EPRA NAV as this provides a transparent and consistent basis to enable comparison between European property companies. Linked to this, the use of Total Accounting Return allows management to monitor return to shareholders based on movements in a consistently applied metric, being EPRA NAV, and dividends paid.

Loan to value (proportionally consolidated) is also monitored by management as a key measure of the level of debt employed by the Group to meet its strategic objectives, along with a measurement of risk. It also allows comparison to other property companies who similarly monitor and report this measure.

Income statement

1. Underlying Profit

Underlying Profit is the measure that is used internally to assess income performance. No company adjustments have been made in the current or prior period and therefore this is the same as the pre-tax EPRA earnings measure which includes a number of adjustments to the IFRS reported profit before tax. This is presented below on a proportionally consolidated basis:

6 months to	Section	30 September 2017	30 September 2018
		£m	£m
Gross rental income		316	291
Property operating expenses		(19)	(24)
Net rental income	1.2	297	267
Net fees and other income		8	6
Administrative expenses	1.3	(41)	(42)
Net financing costs	1.4	(66)	(62)
Underlying Profit		198	169
Non-controlling interests in Underlying Profit		6	6
EPRA adjustments¹		34	(217)
IFRS profit before tax	2	238	(42)
Underlying EPS	1.1	19.2p	17.2p
IFRS basic EPS	2	23.2p	(4.9)p
Dividend per share	3	15.04p	15.50p

¹ EPRA adjustments consist of investment and development property revaluations, gains/losses on investment and trading property disposals, changes in the fair value of financial instruments and associated close out costs. These items are presented in the 'capital and other' column of the consolidated income statement.

1.1 Underlying EPS

Underlying EPS is 17.2p, a decline of 10.4% on the prior period. This reflects Underlying Profit decline of 14.6%, offset by the impact of £350m share buyback completed to date which added 0.6p in the period. The share buyback programme, once completed, is expected to add a further c.0.8p to EPS on an annualised basis, assuming current share price levels.

1.2 Net rental income

			£m
Net rental income for the six months ended 30 September 2017			297
Net divestment			(10)
Prior period surrender premia			(20)
Impact of CVAs and administrations			(6)
Like-for-like rental growth (excl. impact of CVAs and administrations)			7
Developments			(1)
Net rental income for the six months ended 30 September 2018			267

The £30m decrease in net rental income is primarily a result of surrender premia received in the prior period in addition to the impact of net divestment over the last 18 months. The impact of CVAs and administrations has been more than offset by like-for-like growth.

Net sales of income producing assets of £1.2bn over the last 18 months have reduced net rents by £10m in the period, including the £5m reduction from the sale of 5 Broadgate in June this year, and £3m reduction from the sale of The Leadenhall Building in May 2017. Proceeds from these sales are being reinvested in the committed development pipeline, which is expected to deliver £63m of ERV in future years.

Excluding the impact of CVAs and administrations, like-for-like rental growth across the portfolio is 2.3%, increasing net rents by £7m. This has been driven by 5.8% growth within Offices, resulting from strong leasing activity across our campuses, particularly at 4 Kingdom Street. Retail like-for-like growth is broadly flat at 0.2%.

Occupier CVAs and administrations in the Retail portfolio have reduced net rents by £6m from last half year, principally Fabb Sofas (£1.6m), Mothercare (£1.1m) and Poundworld (£0.8m).

1.3 Administrative expenses

Administrative expenses have marginally increased this period due to investment in key strategic areas. The Group's operating cost ratio has increased by 330 bps to 19.5% (H1 2017/18: 16.2%) driven by a combination of slightly increased costs and lower rents.

1.4 Net financing costs

			£m
Net financing costs for the six months ended 30 September 2017			(66)
Net divestment			6
Financing activity			4
Developments			(4)
Share buyback			(2)
Net financing costs for the six months ended 30 September 2018			(62)

Financing activity undertaken over the last 18 months has reduced costs by £4m in the period. Principally, this relates to the early redemption of our 9.125% 2020 Debenture and the tender and partial redemption of £84m of our 5.357% 2028 and 5.0055% 2035 Debentures.

The reduction in finance costs as a result of proceeds from net divestment has been offset by development spend and share buybacks.

We have a risk managed approach to financing and are mindful of the current interest rate environment. At 30 September 2018, on a spot basis, the interest rate on 92% of our debt is hedged. On average over the next five years, based on projected debt, we are 63% hedged.

2. IFRS profit before tax

The main difference between IFRS profit before tax and Underlying Profit is that it includes the valuation movement on investment and development properties and the fair value movements on financial instruments. In addition, the Group's investments in joint ventures and funds are equity accounted in the IFRS income statement but are included on a proportionally consolidated basis within Underlying Profit.

The IFRS loss before tax for the year was £42m, compared with a profit before tax for the prior period of £238m. This reflects the change in valuation movement on the Group's properties which was £393m less than the prior period, and the capital and other income result from joint ventures and funds being £35m less than the prior period, both driven principally by outward yield shift of 14 bps and ERV decline in the Retail portfolio. In addition, the result on disposal of investment properties and investments was £26m lower than the prior period. These items were partially offset by £57m of additional trading property sale profits, as a result of the completion of a number of Clarges units in the period, along with a £146m positive movement in capital financing charges due to recycling of cumulative losses within the hedging and translation reserve in relation to a hedging instrument which was no longer hedge accounted in the prior period.

IFRS basic EPS was (4.9)p per share, compared to 23.2p per share in the prior period, driven principally by the decline in property valuations. The basic weighted average number of shares in issue during the period was 981m (H1 2017/18: 1,028m).

3. Dividends

As indicated in May 2018, we have increased the dividend by 3.0% for the 6 months to 30 September 2018 to 15.50p and propose a full year dividend to 31 March 2019 of 31.00p.

The second interim dividend payment for the quarter ended 30 September 2018 will be 7.75p. Payment will be made on 8 February 2019 to shareholders on the register at close of business on 4 January 2019. The second interim dividend will be a Property Income Distribution and no SCRIP alternative will be offered.

The dividend pay-out ratio is 90% for the period (H1 2017/18: 78%).

Balance sheet

	Section	FY 2017/18	H1 2018/19
		£m	£m
Properties at valuation		13,716	12,856
Other non-current assets		185	185
		13,901	13,041
Other net current liabilities		(368)	(290)
Adjusted net debt	6	(3,973)	(3,528)
Other non-current liabilities		-	-
EPRA net assets		9,560	9,223
EPRA NAV per share	4	967p	939p
Non-controlling interests		254	233
Other EPRA adjustments¹		(308)	(195)
IFRS net assets	5	9,506	9,261

Proportionally consolidated basis

¹ EPRA net assets exclude the mark-to-market on derivatives and related debt adjustments, the mark-to-market on the convertible bonds as well as deferred taxation on property and derivative revaluations. They include the trading properties at valuation (rather than lower of cost and net realisable value) and are adjusted for the dilutive impact of share options. No dilution adjustment is made for the £350m zero coupon convertible bond maturing in 2020. Details of the EPRA adjustments are included in Table B within the supplementary disclosures.

4. EPRA net asset value per share

			pence
EPRA NAV per share at 31 March 2018			967
Valuation performance			(28)
Underlying Profit			17
Dividends			(15)
Financing activity			(3)
Share buyback			2
Other			(1)
EPRA NAV per share at 30 September 2018			939

The 2.9% decrease in EPRA NAV per share reflects a valuation decrease of 1.9% across the portfolio. Valuation gains in the Office portfolio of 0.7% have been more than offset by a 4.5% fall in Retail values as a result of weakening sentiment and the impact of occupier CVAs and administrations.

Office valuations were up 0.7% driven by strong leasing at our developments, including 135 Bishopsgate where values are up 26%, with marginal ERV growth of 0.2% across the standing investments and relatively stable yields. ERV growth of 0.2% reflects specific asset lettings we've completed and the resulting washover effect.

Valuations in Retail are down 4.5%, with outward yield shift of 14bps and ERV decline of 1.5%, reflecting the impact of CVAs and administrations on both the investment and occupational markets, particularly at our smaller retail assets outside the South-East and department stores. However, the performance within the portfolio has been varied, and we continue to see ERV growth at high quality, well positioned assets with good supply/demand tension. Investment demand remains for long term, secure income assets.

The 3p impact of financing activity primarily relates to the commitment to repay a portion of secured Broadgate bonds and termination of the associated interest rate swaps, however the impact of this is NPV neutral overall. The £50m progress made on the share buyback programme during the half has contributed 2p to EPRA NAV. We expect to complete the remainder of the programme by the end of the financial year, being further accretive to NAV.

5. IFRS net assets

IFRS net assets at 30 September 2018 were £9,261m, a decrease of £245m from 31 March 2018. This was primarily due to IFRS loss before tax of £42m, along with £148m of dividends paid and £50m of share purchases under the share buyback programme.

Cash flow, net debt and financing

6. Adjusted net debt¹

			£m
Adjusted net debt at 31 March 2018			(3,973)
Disposals			774
Acquisitions			(113)
Development and capex			(106)
Net cash from operations			143
Dividends			(148)
Share buyback			(50)
Other			(55)
Adjusted net debt at 30 September 2018			(3,528)

¹ Adjusted net debt is a proportionally consolidated measure. It represents the Group net debt as disclosed in Note 10 to the interim financial statements and the Group's share of joint venture and funds' net debt excluding the mark-to-market on derivatives, related debt adjustments and non-controlling interests. A reconciliation between the Group net debt and adjusted net debt is included in Table A within the supplementary disclosures.

Net sales reduced debt by £661m in the period. Completed sales included 5 Broadgate for £500m (BL share) and, in line with our strategy of focusing on multi-let assets, 5 standalone assets totalling £110m (BL share) and one retail park (Cheltenham Gallagher). We completed purchases of £113m during the period, the majority of which is Tunbridge Wells, and exchanged on the purchase of Orsman Road, which is due to complete in the second half.

We've also spent £102m on developments and a further £4m on capital expenditure related to asset management on the standing portfolio. The value of committed developments is £715m, with £353m costs to come. Speculative development exposure is 3.7% of the portfolio after taking into account residential pre-sales. There are 440,000 sq ft of developments in our near term pipeline with anticipated cost of £364m.

7. Financing

	Group		Proportionally consolidated
	31 March 2018	30 September 2018	31 March 2018	30 September 2018
Net debt / adjusted net debt ¹	£3,046m	£2,609m	£3,973m	£3,528m
Principal amount of gross debt	£3,007m	£2,597m	£4,265m	£3,763m
Loan to value	22.1%	20.1%	28.4%	26.7%
Weighted average interest rate	2.0%	2.2%	2.8%	2.9%
Interest cover	5.3	5.0	4.0	3.7
Weighted average maturity of drawn debt	8.1 years	7.7 years	8.6 years	8.5 years

¹ Group data as presented in note 10 of the condensed interim financial statements. The proportionally consolidated figures include the Group's share of joint venture and funds' net debt and exclude the mark-to-market on derivatives and related debt adjustments and non-controlling interests.

The above include the impact of repayment of secured Broadgate bonds and associated swaps, committed prior to 30 September 2018 and completed in October 2018.

Since March, we have completed £1.3bn of financing activity, including £1.1bn of new facilities.

We completed the amendment and extension of our largest syndicated RCF at £735m, with 12 banks, at an initial margin of 90 bps and new maturity of five years. We also renewed a bi-lateral RCF of £125m for 5 years. Both may be extended by a further two years at our request and on each bank's approval.

We committed to the repayment of £223m (£111m our share) of secured Broadgate bonds, releasing 1-2 Broadgate and 2-3 Finsbury Avenue from the securitisation, providing greater flexibility and optionality over these buildings as we continue to progress our vision for Broadgate. This transaction completed in October 2018, initially reducing NAV, with a corresponding increase in earnings over the remaining life of the redeemed bonds. Our financing activity over the period has been overall NPV neutral.

In October, we issued £231m US Private Placement notes to four investors for 7-10 years (average of 8.2 years), at blended pricing of Libor +124bps.

We are pleased with the ongoing support from all the lenders, which provides liquidity and flexible finance from diverse sources.

At 30 September 2018, our proportionally consolidated LTV was 26.7%, down 170 bps from 28.4% at 31 March 2018 due to net disposals, offset by share buybacks, development spend and the valuation decline. This positions us well to enable investment into our development pipeline. Note 10 of the condensed interim financial statements sets out the calculation of the Group and proportionally consolidated LTV.

Our liability and debt management activity has enabled us to keep our weighted average interest rate low at 2.9%, despite the impact of net divestment and increase in market rates. Our interest cover has reduced to 3.7 times as a result of proportionately lower Underlying Profits.

Our weighted average debt maturity is largely unchanged at 8.5 years.

At 30 September 2018, British Land has £1.8bn of committed unsecured revolving bank facilities, £1.5bn undrawn. Based on our current commitments, these facilities and debt maturities, we have no requirement to refinance until late 2021.

The Group's senior unsecured credit rating is single 'A', having been upgraded during the last financial year.

The current environment reinforces the importance of a strong balance sheet and we have capacity to progress opportunities when the time is right.

Simon Carter

Chief Financial Officer

Notes to Editors

About British Land

Our portfolio of high quality UK commercial property is focused on Retail around the UK and London Offices. We own or manage a portfolio valued at £16.8bn (British Land share: £12.9bn) as at 30 September 2018 making us one of Europe's largest listed real estate investment companies.

Our strategy is to provide places which meet the needs of our customers and respond to changing lifestyles - Places People Prefer. We do this by creating great environments both inside and outside our buildings and use our scale and placemaking skills to enhance and enliven them. This expands their appeal to a broader range of occupiers, creating enduring demand and driving sustainable, long term performance.

Our Retail portfolio is focused on Regional and Local multi-let centres, and accounts for 49% of our portfolio. Our Offices portfolio comprises three office-led campuses in central London as well as high quality standalone buildings and accounts for 48% of our portfolio. Increasingly our focus is on providing a mix of uses and this is most evident at Canada Water, our 53 acre redevelopment opportunity where we have plans to create a new neighbourhood for London.

Sustainability is embedded throughout our business. Our places, which are designed to meet high sustainability standards, become part of local communities, provide opportunities for skills development and employment and promote wellbeing. In April 2016 British Land received the Queen's Award for Enterprise: Sustainable Development, the UK's highest accolade for business success for economic, social and environmental achievements over a period of five years.

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

RISK MANAGEMENT AND PRINCIPAL RISKS

For British Land, effective risk management is a cornerstone of delivering our strategy and integral to the achievement of our objective of delivering sustainable long term value. The Group's risk appetite and its integrated approach to managing risk remains as set out on pages 48-49 of the Annual Report and Accounts published in June 2018.

The Board has updated its assessment of the principal risks facing the Group, including those that would impact the business model, future performance, solvency or liquidity. Whilst, we consider there has been no material change to the Group's principal risks, as set out on pages 52-55 of the Annual Report and Accounts published in May 2018, several risks are elevated as a result of the challenging external environment, with the increased level of political uncertainty associated with the UK's departure from the European Union ('Brexit'), alongside the continued challenging trading conditions in retail.

The risk considered to be elevated since the year end due to continuing Brexit uncertainty is the political and regulatory outlook. While it is not possible to predict fully the impact Brexit will have on our business and our markets, the Board is continuing to monitor external events and is taking appropriate action to ensure we are prepared for short term risks that could be faced in an immediate aftermath of a deal not being reached between the UK and EU to ensure our business is both resilient and responsive in the short term, and well positioned for the long term.

In addition, we consider the principal risks of occupier demand and investor demand to be elevated since the year end due to the continued challenging trading conditions in retail with several recent high profile CVAs and administrations. This could impact our ability to execute our investment strategy and present an increased risk to income sustainability, albeit the latter is mitigated in part by significant progress in letting our committed development programme.

We have had an active period and made further good progress against our strategy, but are mindful of the continued uncertainty; in this context we will benefit from the resilience of our business, the quality of our portfolio and the strength of our finances.

Our principal risks and uncertainties are summarised below.

Principal External Risks

Economic outlook - The UK economic climate and future movements in interest rates present risks and opportunities in property and financing markets and the businesses of our customers which can impact both the delivery of our strategy and our financial performance.

Political and regulatory outlook - Significant political events and regulatory changes, including the UK's decision to leave the EU, bring risks both in terms of uncertainty until the outcome is known, and the impact of policies introduced. This could impact the businesses of our customers and the wider investment case for the UK.

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, the attractiveness of investment in the UK, availability of finance and the relative attractiveness of other asset classes.

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

Availability and cost of finance - Reduced availability of finance may adversely impact British Land's ability to refinance debt and/or drive up cost. These factors may also result in weaker investor demand for real estate. Regulation and capital costs of lenders may increase cost of finance.

Catastrophic business event - An external event such as a civil emergency, including a large-scale terrorist attack, cyber crime, extreme weather occurrence, environmental disaster or power shortage could severely disrupt global markets (including property and finance) and cause significant damage and disruption to British Land's portfolio and operations.

Principal Internal Risks

Investment strategy - In order to meet our strategic objectives, we aim to invest in and exit from the right properties at the right time. Underperformance could result from changes in market sentiment as well as inappropriate determination and execution of our property investment strategy, including: sector selection and weighting; timing of investment and divestment decisions; exposure to developments; asset, tenant, region concentration; and co-investment arrangements.

Development strategy - Development provides an opportunity for outperformance but usually brings with it elevated risk. This is reflected in our decision-making process around which schemes to develop, the timing of the development, as well as the execution of these projects. Development strategy addresses several development risks that could adversely impact underlying income and capital performance including: development letting exposure; construction timing and costs (including construction cost inflation); major contractor failure; and adverse planning judgements.

People - A number of 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 or impact the effectiveness of operations and decision making, in turn impacting business performance.

Capital structure - leverage - Our capital structure recognises the balance between performance, risk and flexibility. Leverage magnifies capital returns, both positive and negative. An increase in leverage increases the risk of a breach of covenants on borrowing facilities and may increase finance costs.

Finance strategy - Finance strategy addresses risks both to continuing solvency and profits generated. Failure to manage refinancing requirements may result in a shortage of funds to sustain the operations of the business or repay facilities as they fall due.

Income sustainability - We are mindful of maintaining sustainable income streams which underpin a stable and growing dividend and provide the platform from which to grow the business. 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.

Statement of directors' responsibilities

The directors' confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

· an indication of important events that have occurred during the first six months and their impact on the condensed interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The directors of The British Land Company plc are listed on the Company website www.britishland.com.

By order of the Board

Simon Carter

Chief Financial Officer 13 November 2018

Independent review report to The British Land Company PLC

Report on the condensed interim financial statements

Our conclusion

We have reviewed The British Land Company PLC's condensed interim financial statements (the "interim financial statements") in the half year results of The British Land Company PLC for the six month period ended 30 September 2018. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

· the consolidated balance sheet as at 30 September 2018;

· the consolidated income statement and consolidated statement of comprehensive income for the period then ended;

· the consolidated statement of cash flows for the period then ended;

· the consolidated statement of changes in equity for the period then ended; and

· the explanatory notes to the interim financial statements.

The interim financial statements included in the half year results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The half year results, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half year results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the half year results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the half year results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP
Chartered Accountants
London

13 November 2018

Consolidated income statement

For the six months ended 30 September 2018

		Six months ended 30 September 2018 Unaudited			Six months ended 30 September 2017 Unaudited
	Note	Underlying pre-tax1 £m	Capital and other £m	Total £m	Underlying pre-tax1 £m	Capital and other £m	Total £m
Revenue	3	282	217	499	282	50	332
Costs	3	(75)	(152)	(227)	(68)	(42)	(110)
	3	207	65	272	214	8	222
Joint ventures and funds (see also below)	8	42	(26)	16	64	9	73
Administrative expenses		(41)	-	(41)	(40)	-	(40)
Valuation movement	4	-	(252)	(252)	-	141	141
(Loss) profit on disposal of investment properties and investments		-	(6)	(6)	-	20	20
Net financing costs
- financing income	5	-	4	4	-	-	-
- financing charges	5	(33)	(2)	(35)	(34)	(144)	(178)
		(33)	2	(31)	(34)	(144)	(178)
Profit (loss) on ordinary activities before taxation		175	(217)	(42)	204	34	238
Taxation	6	-	(19)	(19)	-	7	7
(Loss) profit for the period after taxation				(61)			245
Attributable to non-controlling interests		6	(19)	(13)	6	-	6
Attributable to shareholders of the Company		169	(217)	(48)	198	41	239
Earnings per share:
- basic	2			(4.9p)			23.2p
- diluted	2			(4.9p)			23.2p

All results derive from continuing operations.

		Six months ended 30 September 2018 Unaudited			Six months ended 30 September 2017 Unaudited
	Note	Underlying pre-tax1 £m	Capital and other £m	Total £m	Underlying pre-tax1 £m	Capital and other £m	Total £m
Results of joint ventures and funds accounted for using the equity method
Underlying Profit		42	-	42	64	-	64
Valuation movement	4	-	(13)	(13)	-	26	26
Capital financing costs		-	(19)	(19)	-	(9)	(9)
Profit (loss) on disposal of investment properties, trading properties and investments		-	6	6	-	(8)	(8)
Taxation		-	-	-	-	-	-
	8	42	(26)	16	64	9	73

1 See definition in note 2.

consolidated statement OF COMPREHENSIVE INCOME

For the six months ended 30 September 2018

	Six months ended 30 September 2018 Unaudited £m	Six months ended 30 September 2017 Unaudited £m
(Loss) profit for the period after taxation	(61)	245
Other comprehensive income (expense):
Items that will not be reclassified subsequently to profit or loss:
Net actuarial gain on pension scheme	-	4
Valuation movements on owner-occupied properties	4	(3)
	4	1
Items that may be reclassified subsequently to profit or loss:
Gains on cash flow hedges
- Group	-	7
- Joint ventures and funds	-	1
	-	8
Transferred to the income statement (cash flow hedges)
- Interest rate derivatives	18	129
	18	129

Deferred tax on items of other comprehensive income	-	(4)

Other comprehensive income for the period	22	134
Total comprehensive (expense) income for the period	(39)	379
Attributable to non-controlling interests	(13)	7
Attributable to shareholders of the Company	(26)	372

consolidated BALANCE SHEET

AS AT 30 SEPTEMBER 2018

	Note	30 September 2018 Unaudited £m	31 March 2018 Audited £m
ASSETS
Non-current assets
Investment and development properties	7	9,351	9,507
Owner-occupied property	7	94	90
		9,445	9,597
Other non-current assets
Investments in joint ventures and funds	8	2,393	2,822
Other investments	9	174	174
Deferred tax assets		6	4
Interest rate and currency derivative assets	10	128	115
		12,146	12,712
Current assets
Trading properties	7	189	328
Debtors		77	35
Cash and short-term deposits	10	116	105
		382	468
Total assets		12,528	13,180
LIABILITIES
Current liabilities
Short-term borrowings and overdrafts	10	-	(27)
Creditors		(275)	(324)
Corporation tax		(49)	(22)
		(324)	(373)
Non-current liabilities
Debentures and loans	10	(2,721)	(3,101)
Other non-current liabilities		(90)	(62)
Interest rate and currency derivative liabilities	10	(132)	(138)
		(2,943)	(3,301)
Total liabilities		(3,267)	(3,674)
Net assets		9,261	9,506
EQUITY
Share capital		247	248
Share premium		1,302	1,300
Merger reserve		213	213
Other reserves		55	33
Retained earnings		7,211	7,458
Equity attributable to shareholders of the Company		9,028	9,252
Non-controlling interests		233	254
Total equity		9,261	9,506


EPRA NAV per share*		939p	967p

* See definition in note 2.

consolidated statement OF CASH FLOWS

For the six months ended 30 September 2018

	Note	Six months ended 30 September 2018 Unaudited £m	Six months ended 30 September 2017 Unaudited £m
Rental income received from tenants		203	225
Fees and other income received		25	34
Operating expenses paid to suppliers and employees		(92)	(94)
Cash generated from operations		136	165

Interest paid		(30)	(30)
Interest received		3	4
Corporation tax repayments (payments)		7	(1)
Distributions and other receivables from joint ventures and funds	8	27	45
Net cash inflow from operating activities		143	183

Cash flows from investing activities
Development and other capital expenditure		(76)	(101)
Purchase of investment properties		(97)	(57)
Sale of investment and trading properties		244	85
Sale of investments		11	-
Purchase of investments		(4)	(2)
Investment in and loans to joint ventures and funds		(81)	(137)
Disposal of joint venture held for sale		-	570
Proceeds from disposal of joint venture with Tesco		-	68
Capital distributions from joint ventures and funds		260	3
Loan repayments from joint ventures and funds		247	-
Indirect taxes paid in respect of investing activities		(13)	(8)
Net cash inflow from investing activities		491	421

Cash flows from financing activities
Issue of ordinary shares		2	1
Purchase of ordinary shares		(50)	(66)
Dividends paid		(148)	(151)
Dividends paid to non-controlling interests		(8)	(8)
Capital payments in respect of interest rate derivatives		(6)	(16)
Decrease in bank and other borrowings		(829)	(766)
Drawdown on bank and other borrowings		416	407
Net cash outflow from financing activities		(623)	(599)

Net increase in cash and cash equivalents		11	5
Cash and cash equivalents at 1 April		105	114
Cash and cash equivalents at 30 September		116	119

Cash and cash equivalents consists of:
Cash and short-term deposits		116	119

Consolidated Statement of Changes in Equity

For the six months ended 30 September 2018

Six month movements in equity

	Share capital £m	Share premium £m	Hedging and translation reserve £m	Re- valuation reserve £m	Merger reserve £m	Retained earnings £m	Total £m	Non-controlling interests £m	Total equity £m
Balance at 1 April 2018	248	1,300	11	22	213	7,458	9,252	254	9,506
Total comprehensive income (expense) for the period	-	-	-	22	-	(48)	(26)	(13)	(39)
Share issues	-	2	-	-	-	-	2	-	2
Fair value of share and share option awards	-	-	-	-	-	(2)	(2)	-	(2)
Purchase of own shares	(1)	-	-	-	-	(49)	(50)	-	(50)
Dividends payable in period (15.04p per share)	-	-	-	-	-	(148)	(148)	-	(148)
Dividends paid to non-controlling interests	-	-	-	-	-	-	-	(8)	(8)
Balance at 30 September 2018	247	1,302	11	44	213	7,211	9,028	233	9,261

Balance at 1 April 2017	260	1,298	(112)	15	213	7,547	9,221	255	9,476
Total comprehensive income for the period	-	-	131	(2)	-	243	372	7	379
Share issues	-	1	-	-	-	-	1	-	1
Fair value of share and share option awards	-	-	-	-	-	-	-	-	-
Purchase of own shares	(3)	-	-	-	-	(63)	(66)	-	(66)
Dividends payable in period (14.60p per share)	-	-	-	-	-	(150)	(150)	-	(150)
Dividends payable to non-controlling interests	-	-	-	-	-	-	-	(8)	(8)
Balance at 30 September 2017	257	1,299	19	13	213	7,577	9,378	254	9,632

Prior year movements in equity

	Share capital £m	Share premium £m	Hedging and translation reserve £m	Re- valuation reserve £m	Merger reserve £m	Retained earnings £m	Total £m	Non-controlling interests £m	Total equity £m
Balance at 1 April 2017	260	1,298	(112)	15	213	7,547	9,221	255	9,476
Total comprehensive income for the period	-	-	123	7	-	502	632	16	648
Share issues	-	2	-	-	-	-	2	-	2
Unit issues attributable to non-controlling interests	-	-	-	-	-	-	-	2	2
Purchase of own shares	(12)	-	-	-	-	(289)	(301)	-	(301)
Purchase of units from non-controlling interests	-	-	-	-	-	-	-	(4)	(4)
Dividends payable in year (29.64p per share)	-	-	-	-	-	(302)	(302)	-	(302)
Dividends payable by subsidiaries	-	-	-	-	-	-	-	(15)	(15)
Balance at 31 March 2018	248	1,300	11	22	213	7,458	9,252	254	9,506

Notes to the accounts
for the six months ended 30 September 2018

1 Basis of preparation

The financial information for the period ended 30 September 2018 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 March 2018 has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report, and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The financial information included in this announcement has been prepared on a going concern basis using accounting policies consistent with International Financial Reporting Standards (IFRS) as adopted by the European Union and in accordance with IAS 34 Interim Financial Reporting. The current period financial information presented in this document has been reviewed, not audited.

The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 March 2018, which have been prepared in accordance with IFRS as adopted by the European Union.

The same accounting policies, estimates, presentation and methods of computation are followed in the half year report as applied in the Group's latest annual audited financial statements, with the exception of updating accounting policies to reflect changes required by the adoption of IFRS 9 and IFRS 15 (see below), and the tax policy, which for the interim period is as follows: The current tax charge is calculated on profits arising in the period and in accordance with legislation which has been enacted or substantially enacted at the balance sheet date.

During the period the Group adopted the following standards:

IFRS 9 - Financial instruments

The new standard results in changes in the classification of all financial assets excluding derivatives. This re-classificaiton does not have a quantitative impact on the financial statements.

The new standard introduces an expected credit loss model, requiring expected credit loss to be recognised on all financial assets held at amortised cost. The quantitative impact for the period ended 30 September 2018 upon application of this new accounting policy for assessing asset impairment is to recognise an expected credit loss of £3m, with a corresponding reduction in financial assets held at amortised costs of £3m. The Group has previously provided for a materially similar balance against trade and other receivables and therefore the resulting reclassification of existing provisions has not had a material impact on the net assets of the Group.

IFRS 15 - Revenue from contracts with customers

The new standard sets out a five-step model for the recognition of revenue and establishes principles for reporting useful information to users of financial statements about the nature, timing and uncertainty of revenues and cash flows arising from an entity's contracts with customers. The new standard does not apply to rental income which is in the scope of IAS 17, but does apply to service charge income, management and performance fees and trading property disposals. Adoption of IFRS 15 has not had a quantitative impact upon the consolidated Group financial statements. It has resulted in some minor qualitative disclosure in relation to some revenue items, detailed in Note 3 to the financial statements.

A number of new standards and amendments to standards and interpretations have been issued but are not yet effective for the current accounting period. None of these are expected to have a material impact on the consolidated financial statements of the Group, except the following set out below:

IFRS 16 - Leases, is effective for the Group's year ending 31 March 2020. For lessees, it will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases will be removed. The accounting for lessors will not significantly change. As a result on adoption of the new standard, these changes are not expected to have a material impact on the consolidated financial statements of the Group.

The Directors believe that the Group is well placed to manage its financing and other business risks satisfactorily, and have a reasonable expectation that the Company and the Group have adequate resources to continue in operation for at least 12 months from the signing date of these financial statements. They therefore consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

The interim financial information was approved by the Board on 13 November 2018.

2 Performance measures

Earnings per share

The Group measures financial performance with reference to underlying earnings per share, the European Public Real Estate Association (EPRA) earnings per share and IFRS earnings per share. The relevant earnings and weighted average number of shares (including dilution adjustments) for each performance measure are shown below, and a reconciliation between these is shown within the supplementary disclosures (Table B).

EPRA earnings per share is calculated using EPRA earnings, which is the IFRS profit after taxation attributable to shareholders of the Company excluding investment and development property revaluations, gains/losses on investing and trading property disposals, changes in the fair value of financial instruments and associated close-out costs and their related taxation.

In the current period, diluted EPRA earnings per share did not include the dilutive impact of the 2015 convertible bond, as the Company's share price was below the current exchange price of 1,023 pence. IFRS diluted earnings per share would include the dilutive impact as IAS 33 ignores this hurdle to conversion, however due to the loss for the period, this would be anti-dilutive and therefore no adjustment has been made. In the prior period, both measures exclude the dilutive impact of the 2015 convertible bond, as the Company's share price had not exceeded the level required for the convertible conditions attached to the bond to trigger conversion into shares.

Underlying earnings per share is calculated using Underlying Profit adjusted for underlying taxation (see note 6). Underlying Profit is the pre-tax EPRA earnings measure, with additional Company adjustments. No Company adjustments were made in either the current or prior period.

	Six months ended 30 September 2018			Six months ended 30 September 2017
	Relevant earnings £m	Relevant number of shares million	Earnings per share pence	Relevant earnings £m	Relevant number of shares million	Earnings per share pence
Underlying
Underlying basic	169	981	17.2	198	1,028	19.3
Underlying diluted	169	984	17.2	198	1,031	19.2
EPRA
EPRA basic	169	981	17.2	198	1,028	19.3
EPRA diluted	169	984	17.2	198	1,031	19.2
IFRS
Basic	(48)	981	(4.9)	239	1,028	23.2
Diluted	(48)	981	(4.9)	239	1,031	23.2

Net asset value

The Group measures financial position with reference to EPRA net asset value (NAV) per share and EPRA triple net asset value (NNNAV) per share. The net asset value and number of shares for each performance measure is shown below. A reconciliation between IFRS net assets and EPRA net assets, and the relevant number of shares for each performance measure, is shown within the supplementary disclosures (Table B). EPRA net assets is a proportionally consolidated measure that is based on IFRS net assets excluding the mark-to-market on derivatives and related debt adjustments, the mark-to-market on the convertible bonds as well as deferred taxation on property and derivative valuations. They include the valuation surplus on trading properties and are adjusted for the dilutive impact of share options.

As at 30 September 2018, EPRA NAV and NNNAV did not include the dilutive impact of the 2015 convertible bond, as the Company's share price was below the current exchange price of 1,023 pence. IFRS net assets also does not include the convertible impact following the treatment of IFRS earnings per share. In the prior year period, EPRA and IFRS NAV measures excluded the dilutive impact of the 2015 convertible bond, as the Company's share price had not exceeded the level required for the convertible conditions attached to the bond to trigger conversion into shares.

	30 September 2018			31 March 2018
	Relevant net assets £m	Relevant number of shares million	Net asset value per share pence	Relevant net assets £m	Relevant number of shares million	Net asset value per share pence
EPRA
EPRA NAV	9,223	982	939	9,560	989	967
EPRA NNNAV	8,805	982	897	9,044	989	914
IFRS
Basic	9,261	976	949	9,506	983	967
Diluted	9,261	982	943	9,506	989	961

Total accounting return

The Group also measures financial performance with reference to total accounting return. This is calculated as the movement in EPRA net asset value per share and dividend paid in the period as a percentage of the EPRA net asset value per share at the start of the period.

	Six months ended 30 September 2018			Six months ended 30 September 2017
	Decrease in NAV per share pence	Dividend per share paid pence	Total accounting return	Increase in NAV per share pence	Dividend per share paid pence	Total accounting return
Total accounting return	(28)	15.04	(1.3%)	24	14.60	4.2%

3 Revenue and costs

	Six months ended 30 September 2018			Six months ended 30 September 2017
	Underlying £m	Capital and other £m	Total £m	Underlying £m	Capital and other £m	Total £m
Rent receivable	223	-	223	221	-	221
Spreading of tenant incentives and guaranteed rent increases	(3)	-	(3)	(5)	-	(5)
Surrender premia	-	-	-	6	-	6
Gross rental income	220	-	220	222	-	222
Trading property sales proceeds	-	217	217	-	50	50
Service charge income	38	-	38	33	-	33
Management and performance fees (from joint ventures and funds)	3	-	3	3	-	3
Other fees and commissions	21	-	21	24	-	24
Revenue	282	217	499	282	50	332

Trading property cost of sales	-	(152)	(152)	-	(42)	(42)
Service charge expenses	(38)	-	(38)	(33)	-	(33)
Property operating expenses	(19)	-	(19)	(15)	-	(15)
Other fees and commissions expenses	(18)	-	(18)	(20)	-	(20)
Costs	(75)	(152)	(227)	(68)	(42)	(110)
	207	65	272	214	8	222

4 Valuation movements on property

	Six months ended 30 September 2018 £m	Six months ended 30 September 2017 £m
Consolidated income statement
Revaluation of properties	(252)	141
Revaluation of properties held by joint ventures and funds accounted for using the equity method	(13)	26
	(265)	167
Consolidated statement of comprehensive income
Revaluation of owner-occupied properties	4	(3)
	(261)	164

5 Net financing costs

	Six months ended 30 September 2018 £m	Six months ended 30 September 2017 £m
Underlying Financing charges
Bank loans, overdrafts and derivatives	(13)	(11)
Other loans	(20)	(25)
Obligations under head leases	(1)	(1)
	(34)	(37)
Development interest capitalised	1	3
	(33)	(34)
Financing income
Deposits, securities and liquid investments	-	-
Net financing charges - underlying	(33)	(34)

Capital and other

Financing charges
Hedging reserve recycling1	-	(115)
Valuation movements on fair value debt	(14)	43
Valuation movements on fair value derivatives	15	(44)
Recycling of fair value movement on close-out of derivatives	-	(14)
Capital financing costs	(3)	(6)
Fair value movement on convertible bonds	-	(1)
Fair value movement on non-hedge accounted derivatives	-	(7)
	(2)	(144)
Financing income
Fair value movement on non-hedge accounted derivatives	4	-
	4	-
Net financing income (charges) - capital	2	(144)


Total financing income	4	-
Total financing charges	(35)	(178)
Net financing costs	(31)	(178)

Interest on development expenditure is capitalised at the Group's weighted average interest rate of 2.0% (Six months ended 30 September 2017: 2.1%). The weighted average interest rate on a proportionately consolidated basis at 30 September 2018 was 2.9% (Six months ended 30 September 2017: 3.0%).

1 Prior period charge of £115m represents a reclassification adjustment of cumulative losses within the hedging and translation reserve to capital profit and loss, in relation to a hedging instrument which was no longer hedge accounted. The recognition of this amount in capital financing charges had no impact on EPRA NAV.

6 Taxation

	Six months ended 30 September 2018 £m	Six months ended 30 September 2017 £m
Taxation (expense) income
Current taxation
Current period UK corporation taxation (30 September 2018: 19%; 30 September 2017: 19%)	(20)	-
Adjustments in respect of prior periods	-	1
Total current taxation (expense) income	(20)	1
Deferred taxation on revaluations and derivatives	1	6
Group total taxation	(19)	7
Attributable to joint ventures and funds	-	-
Total taxation (expense) income	(19)	7

Taxation expense attributable to Underlying Profits for the six months ended 30 September 2018 was £nil (Six months ended 30 September 2017: £nil).

7 Property

Property reconciliation

	Six months ended 30 September 2018				Year ended 31 March 2018
	Investment and development properties Level 3 £m	Trading properties £m	Owner-occupied Level 3 £m	Total £m	Investment and development properties Level 3 £m	Trading properties £m	Owner-occupied Level 3 £m	Tota £m
Carrying value at the start of the period/year	9,507	328	90	9,925	9,073	334	94	9,501
Additions
- property purchases	128	-	-	128	245	5	-	250
- development expenditure	54	13	-	67	86	46	-	132
- capitalised interest and staff costs	2	-	-	2	5	5	-	10
- capital expenditure on asset management initiatives	23	-	-	23	30	-	-	30
	207	13	-	220	366	56	-	422
Depreciation	-	-	-	-	-	-	(1)	(1)
Disposals	(108)	(152)	-	(260)	(136)	(62)	-	(198)
Revaluations included in income statement	(252)	-	-	(252)	202	-	-	202
Revaluations included in OCI	-	-	4	4	-	-	(3)	(3)
Movement in tenant incentives and contracted rent uplift balances	(3)	-	-	(3)	2	-	-	2
Carrying value at the end of the period/year	9,351	189	94	9,634	9,507	328	90	9,925
Head lease liabilities				(90)				(62)
Valuation surplus on trading properties				58				134
Group property portfolio valuation at the end of the period/year				9,602				9,997
Non-controlling interests				(288)				(315)
Group property portfolio valuation at the end of the period/year attributable to shareholders				9,314				9,682

The Group's total property portfolio was valued by external valuers on the basis of fair value, in accordance with the RICS valuation - Professional Standards 2014, ninth edition, published by The Royal Institute of Chartered Surveyors. The information provided to the valuers, and the assumptions and valuations models used by the valuers are reviewed by the property portfolio team, the Head of Offices, the Head of Retail and the Chief Financial Officer. The valuers meet with the external auditors and also present directly to the Audit Committee on a half yearly basis.

Property valuations are inherently subjective as they are made on the basis of significant unobservable inputs, including assumptions made by the valuer which may not prove to be accurate. For these reasons, and consistent with EPRA's guidance, we have classified the valuations of our property portfolio as Level 3 as defined by IFRS 13. There were no transfers between levels in the period. Inputs to the valuation, including equivalent yields, rental values and costs to complete, are 'unobservable' as defined by IFRS 13.

Additional property covenant information

Properties valued at £1,175m (year ended 31 March 2018: £1,202m) were subject to a security interest and other properties of non-recourse companies amounted to £1,190m (year ended 31 March 2018: £1,245m), totalling £2,365m (year ended 31 March 2018: £2,447m).

8 Joint ventures and funds

Summary movement for the period of the investments in joint ventures and funds

	Joint ventures £m	Funds £m	Total £m	Equity £m	Loans £m	Total £m
At 1 April 2018	2,600	222	2,822	2,392	430	2,822
Additions	48	33	81	35	46	81
Disposals	(258)	-	(258)	-	(258)	(258)
Share of profit after taxation	26	(10)	16	16	-	16
Distributions and dividends:
- Capital	(260)	-	(260)	(260)	-	(260)
- Revenue	(21)	(6)	(27)	(27)	-	(27)
Hedging and exchange movements	18	1	19	19	-	19
At 30 September 2018	2,153	240	2,393	2,175	218	2,393

Summary income statement for the period of the investments in joint ventures and funds

	Six months ended 30 September 2018		Six months ended 30 September 2017
	£m 100%	£m BL Share	£m 100%	£m BL Share
Revenue1	196	98	250	125
Costs	(50)	(25)	(52)	(26)
	146	73	198	99
Administrative expenses	-	-	(2)	(1)
Net financing costs	(62)	(31)	(68)	(34)
Underlying Profit before taxation	84	42	128	64

Valuation movement	(26)	(13)	52	26
Capital financing costs	(38)	(19)	(18)	(9)
Profit (loss) on disposal of investment properties, trading properties and investments	12	6	(16)	(8)
Profit on ordinary activities before taxation	32	16	146	73

Taxation	-	-	-	-
Profit on ordinary activities after taxation	32	16	146	73

Profit split between controlling and non-controlling interests
Attributable to non-controlling interests		(3)		-
Attributable to shareholders of the Company		19		73

1 Included within revenue for the prior period is a £29m (£15m British Land share) payment received in June 2017 from the Royal Bank of Scotland in relation to their surrender of a lease at 135 Bishopsgate.

Operating cash flows of joint ventures and funds (Group share)

	Six months ended 30 September 2018 £m	Six months ended 30 September 2017 £m
Rental income received from tenants	76	100
Operating expenses paid to suppliers and employees	(13)	(12)
Cash generated from operations	63	88
Interest paid	(38)	(38)
Cash inflow from operating activities	25	50
Cash inflow from operating activities deployed as:
Cash (deficit) surplus following revenue distributions	(2)	5
Revenue distributions per consolidated statement of cash flows	27	45
Revenue distributions split between controlling and non-controlling interests
Attributable to non-controlling interests	1	1
Attributable to shareholders of the Company	26	44

9 Other investments

	30 September 2018 £m	31 March 2018 £m
Other investment	98	98
Loans, receivables and other	45	42
Property, plant and equipment	21	24
Intangible assets	10	10
	174	174

The other investment comprises interests as a trust beneficiary. The trust's assets comprise freehold reversions in a pool of commercial properties, comprising Sainsburys superstores. The interest was categorised as Level 3 in the fair value hierarchy, is subject to the same inputs as those disclosed in note 7, and its fair value was determined by the Directors, supported by an external valuation.

10 Net debt

10.1 Fair value and book value of net debt

	30 September 2018			31 March 2018
	Fair value £m	Book value £m	Difference £m	Fair value £m	Book value £m	Difference £m
Debentures and unsecured bonds	1,745	1,660	85	1,783	1,682	101
Convertible bonds	337	337	-	337	337	-
Bank debt and other floating rate debt	731	724	7	1,116	1,109	7
Gross debt	2,813	2,721	92	3,236	3,128	108
Interest rate and currency derivative liabilities	132	132	-	138	138	-
Interest rate and currency derivative assets	(128)	(128)	-	(115)	(115)	-
Cash and short-term deposits	(116)	(116)	-	(105)	(105)	-
Net debt	2,701	2,609	92	3,154	3,046	108
Net debt attributable to non-controlling interests	(104)	(104)	-	(110)	(109)	(1)
Net debt attributable to shareholders of the Company	2,597	2,505	92	3,044	2,937	107

The fair values of debentures, unsecured bonds and the convertible bonds have been established by obtaining quoted market prices from brokers. The bank debt and other floating rate debt has been valued assuming it could be renegotiated at contracted margins. The derivatives have been valued by calculating the present value of expected future cash flows, using appropriate market discount rates, by an independent treasury advisor. Short-term debtors and creditors and other investments (see note 9) have been excluded from the disclosures on the basis that the fair value is equivalent to the book value.

10.2 Loan to value

Group loan to value (LTV)

	30 September 2018 £m	31 March 2018 £m
Group loan to value (LTV)	20.1%	22.1%

Principal value of gross debt	2,597	3,007
Less debt attributable to non-controlling interests	(111)	(119)
Less cash and short-term deposits (balance sheet)	(116)	(105)
Plus cash attributable to non-controlling interests	7	10
Total net debt for LTV calculation	2,377	2,793
Group property portfolio valuation (note 7)	9,602	9,997
Investments in joint ventures and funds (note 8)	2,393	2,822
Other investments (note 9)	174	174
Less property and investments attributable to non-controlling interests	(329)	(366)
Total assets for LTV calculation	11,840	12,627

Proportionally consolidated loan to value (LTV)

	30 September 2018 £m	31 March 2018 £m
Proportionally consolidated loan to value (LTV)	26.7%	28.4%

Principal value of gross debt	3,874	4,399
Less attributable to non-controlling interests	(111)	(135)
Less cash and short-term deposits	(288)	(331)
Plus cash attributable to non-controlling interests	9	10
Total net debt for proportional LTV calculation	3,484	3,943
Group property portfolio valuation (note 7)	9,602	9,997
Share of property of joint ventures and funds	3,594	4,102
Other investments (note 9)	174	174
Less other investments attributable to joint ventures and funds	(1)	(2)
Less property attributable to non-controlling interests	(340)	(383)
Total assets for proportional LTV calculation	13,029	13,888

10.3 British Land Unsecured Financial Covenants

The two financial covenants applicable to the Group unsecured debt including convertible bonds are shown below:

	30 September 2018 £m	31 March 2018 £m
Net Borrowings not to exceed 175% of Adjusted Capital and Reserves	25%	29%

Principal amount of gross debt	2,597	3,007
Less the relevant proportion of borrowings of the partly-owned subsidiary / non-controlling interests	(111)	(119)
Less cash and deposits (balance sheet)	(116)	(105)
Plus the relevant proportion of cash and deposits of the partly-owned subsidiary / non-controlling interests	7	10
Net Borrowings	2,377	2,793
Share capital and reserves (balance sheet)	9,261	9,506
EPRA deferred tax adjustment (EPRA Table A)	5	5
Trading property surpluses (EPRA Table A)	58	134
Exceptional refinancing charges (see below)	227	233
Fair value adjustments of financial instruments (EPRA Table A)	105	137
Less reserves attributable to non-controlling interests (balance sheet)	(233)	(254)
Adjusted Capital and Reserves	9,423	9,761

In calculating Adjusted Capital and Reserves for the purpose of the unsecured debt financial covenants, there is an adjustment of £227m (31 March 2018: £233m) to reflect the cumulative net amortised exceptional items relating to the refinancings in the years ended 31 March 2005, 2006 and 2007.

	30 September 2018 £m	31 March 2018 £m
Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets	18%	23%

Principal amount of gross debt	2,597	3,007
Less cash and deposits not subject to a security interest (being £107m less the relevant proportion of cash and deposits of the partly owned subsidiary of £6m)	(101)	(84)
Less principal amount of secured and non-recourse borrowings	(1,151)	(1,159)
Net Unsecured Borrowings	1,345	1,764
Properties (note 7)	9,602	9,997
Investments in joint ventures (note 8)	2,393	2,822
Other investments (note 9)	174	174
Less investments in joint ventures (note 8)	(2,393)	(2,822)
Less encumbered assets (note 7)	(2,365)	(2,447)
Unencumbered Assets	7,411	7,724

10.4 Convertible bond

0% Convertible bond 2015 (maturity 2020)

On 9 June 2015 British Land (White) 2015 Limited (the 2015 Issuer), a wholly owned subsidiary of the Group, issued £350 million zero coupon guaranteed convertible bonds due 2020 (the 2015 bonds) at par. The 2015 Issuer is fully guaranteed by the Company in respect of the 2015 bonds.

Subject to their terms, the 2015 bonds are convertible into preference shares of the Issuer which are automatically transferred to the Company in exchange for ordinary shares in the Company or, at the Company's election, any combination of ordinary shares and cash. Bondholders may exercise their conversion right at any time up to but excluding the 7th dealing day before 9 June 2020 (the maturity date).

The initial exchange price was 1103.32 pence per ordinary share. The exchange price is adjusted based on certain events, such as the Company paying dividends in any year above a threshold amount in pence-per-ordinary-share. As at 30 September 2018 the exchange price was 1023.28 pence per ordinary share.

From 30 June 2018, the Company has the option to redeem the 2015 bonds at par if the Company's share price has traded above 130% of the exchange price for a specified period, or at any time once 85% by nominal value of the 2015 bonds have been converted, redeemed, or purchased and cancelled. The 2015 bonds will be redeemed at par on 9 June 2020 (the maturity date) if they have not already been converted, redeemed or purchased and cancelled.

10.5 Fair value hierarchy

The table below analyses financial instruments carried at fair value, by the valuation method. The different levels are defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	30 September 2018				31 March 2018
	Level 1 £m	Level 2 £m	Level 3 £m	Total £m	Level 1 £m	Level 2 £m	Level 3 £m	Total £m
Interest rate and currency derivative assets	-	(128)	-	(128)	-	(115)	-	(115)
Other investments - fair value through profit and loss	(14)	-	(98)	(112)	(14)	-	(98)	(112)
Assets	(14)	(128)	(98)	(240)	(14)	(115)	(98)	(227)
Interest rate and currency derivative liabilities	-	132	-	132	-	138	-	138
Convertible bonds	337	-	-	337	337	-	-	337
Liabilities	337	132	-	469	337	138	-	475
Total	323	4	(98)	229	323	23	(98)	248

There have been no transfers between levels in the period. No gain or loss has been recorded in the six months ended 30 September 2018 (30 September 2017: £3m valuation gain). Further disclosures in relation to the valuation of the other investments are included within note 9.

11 Dividend

The 2019 second quarter dividend of 7.75 pence per share is payable on 8 February 2019 to shareholders on the register at close of business on 4 January 2019.

The second interim dividend will be a Property Income Distribution ('PID') and no SCRIP alternative will be offered. PID dividends are paid, as required by REIT legislation, after deduction of withholding tax at the basic rate (currently 20%), where appropriate. Certain classes of shareholders may be able to elect to receive dividends gross. Please refer to our website (www.britishland.com) for details.

The 2019 first quarter dividend of 7.75 pence per share, totalling £76m was paid on 9 November 2018. The whole of the first quarter dividend was a PID and no scrip alternative was offered. £65m was paid to shareholders, and £11m of withholding tax was retained.

The Consolidated Statement of Changes in Equity shows total dividends in the six months to 30 September 2018 of £148m, £74m being the third quarter 2018 dividend of 7.52 pence per share paid on 4 May 2018, and the fourth quarter 2018 dividend of 7.52 pence per share, paid on 3 August, totalling £74m. No scrip alternatives were offered for the third or fourth quarters and the fourth quarter dividend was PID.

12 Segment information

Operating segments

The Group allocates resources to investment and asset management according to the sectors it expects to perform over the medium term. Its three principal sectors are Offices, Retail and Canada Water. The Retail sector includes leisure, as this is often incorporated into Retail schemes. Residential properties were included within offices in the segment result disclosure in the prior period, but have been reclassified within Other/unallocated in the current period, with the prior period comparatives represented.

The relevant gross rental income, net rental income, operating result and property assets, being the measures of segment revenue, segment result and segment assets used by the management of the business, are set out below. Management reviews the performance of the business principally on a proportionally consolidated basis, which includes the Group's share of joint ventures and funds on a line-by-line basis and excludes non-controlling interests in the Group's subsidiaries. The chief operating decision maker for the purpose of segment information is the Executive Committee.

Gross rental income is derived from the rental of buildings. Operating result is the net of net rental income, fee income and administrative expenses. No customer exceeded 10% of the Group's revenues in either period.

Segment result

	Six months ended 30 September
	Offices		Retail		Canada Water		Other/unallocated		Total
	2018 £m	2017 £m	2018 £m	2017 £m	2018 £m	2017 £m	2018 £m	2017 £m	2018 £m	2017 £m
Gross rental income
British Land Group	74	68	132	138	5	4	2	2	213	212
Share of joint ventures and funds	36	60	42	44	-	-	-	-	78	104
Total	110	128	174	182	5	4	2	2	291	316

Net rental income
British Land Group	67	62	120	131	4	4	3	2	194	199
Share of joint ventures and funds	34	57	39	41	-	-	-	-	73	98
Total	101	119	159	172	4	4	3	2	267	297

Operating result
British Land Group	67	61	117	127	2	2	(23)	(21)	163	169
Share of joint ventures and funds	31	56	37	39	-	-	-	-	68	95
Total	98	117	154	166	2	2	(23)	(21)	231	264

Reconciliation to Underlying Profit before taxation	Six months ended 30 September 2018 £m	Six months ended 30 September 2017 £m
Operating result	231	264
Net financing costs	(62)	(66)
Underlying Profit	169	198
Reconciliation to profit on ordinary activities before taxation
Underlying Profit	169	198
Capital and other	(217)	34
Underlying Profit attributable to non-controlling interests	6	6
Total (loss) profit on ordinary activities before taxation	(42)	238

Of the gross rental income above, £nil (six months ended 30 September 2017: £nil) was derived from outside the UK.

Segment assets

	Offices		Retail		Canada Water		Other / unallocated		Total
	30 September 2018 £m	31 March 2018 £m	30 September 2018 £m	31 March 2018 £m	30 September 2018 £m	31 March 2018 £m	30 September 2018 £m	31 March 2018 £m	30 September 2018 £m	31 March 2018 £m
Property assets
British Land Group	4,215	4,371	4,698	4,915	293	283	108	113	9,314	9,682
Share of funds and joint ventures	1,915	2,334	1,607	1,681	-	-	20	19	3,542	4,034
Total	6,130	6,705	6,305	6,596	293	283	128	132	12,856	13,716

Reconciliation to net assets

British Land Group	30 September 2018 £m	31 March 2018 £m
Property assets	12,856	13,716
Other non-current assets	185	185
Non-current assets	13,041	13,901

Other net current liabilities	(290)	(368)
Adjusted net debt	(3,528)	(3,973)
Other non-current liabilities	-	-
EPRA net assets	9,223	9,560
Non-controlling interests	233	254
EPRA adjustments	(195)	(308)
Net assets	9,261	9,506

13 Related party transactions

There have been no material changes in the related party transactions described in the last annual report.

14 Contingent liabilities

The Group, joint ventures and funds have contingent liabilities in respect of legal claims, guarantees and warranties arising in the ordinary course of business. It is not anticipated that any material liabilities will arise from contingent liabilities.

15 Share capital and reserves

	£m	Ordinary shares of 25p each
Issued, called and fully paid
At 1 April 2018	248	993,857,125
Issues	-	374,689
Repurchased and cancelled	(1)	(7,405,852)
At 30 September 2018	247	986,825,962

At 30 September 2018, of the issued 25p ordinary shares, 7,376 shares were held in the ESOP trust (31 March 2018: 7,376), 11,266,245 shares were held as treasury shares (31 March 2018: 11,266,245) and 975,552,341 shares were in free issue (31 March 2018: 982,583,504). No treasury shares were acquired by the ESOP trust during the year. All issued shares are fully paid.

In the six months ended 30 September 2018, the Company repurchased 7,795,053 ordinary shares, of which 7,405,852 were cancelled. The weighted average share price of repurchases was 640 pence. During the period from 1 October 2018 to 13 November 2018, a further 7,548,912 shares were repurchased, of which 7,087,198 were cancelled. The weighted average share price of these repurchases was 589 pence.

SUPPLEMENTARY DISCLOSURES

UNAUDITED

Table A: Summary income statement and balance sheet

Summary income statement based on proportional consolidation for the six months ended 30 September 2018

The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. It presents the results of the Group, with its share of the results of joint ventures and funds included on a line by line basis and excluding non-controlling interests.

	Six months ended 30 September 2018				Six months ended 30 September 2017
	Group £m	Joint ventures and funds £m	Less non-controlling interests £m	Proportionally consolidated £m	Group £m	Joint ventures and funds £m	Less non-controlling interests £m	Proportionally consolidated £m
Gross rental income	220	80	(9)	291	222	103	(9)	316
Property operating expenses	(19)	(7)	2	(24)	(15)	(4)	-	(19)
Net rental income	201	73	(7)	267	207	99	(9)	297

Administrative expenses	(41)	-	(1)	(42)	(40)	(1)	-	(41)
Net fees and other income	6	-	-	6	7	-	1	8
Ungeared Income Return	166	73	(8)	231	174	98	(8)	264

Net financing costs	(33)	(31)	2	(62)	(34)	(34)	2	(66)
Underlying Profit	133	42	(6)	169	140	64	(6)	198
Underlying taxation	-	-	-	-	-	-	-	-
Underlying Profit after taxation	133	42	(6)	169	140	64	(6)	198

Summary balance sheet based on proportional consolidation as at 30 September 2018

The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. It presents the results of the Group, with its share of the results of joint ventures and funds included on a line-by-line basis and excluding non-controlling interests.

	Group £m	Share of joint ventures & funds £m	Less non-controlling interests £m	Share options £m	Deferred tax £m	Mark-to-market on derivatives and related debt adjustments £m	Head leases £m	Valuation surplus on trading properties £m	EPRA Net assets 30 September 2018 £m	EPRA Net assets 31 March 2018 £m
Retail properties	5,046	1,688	(358)	-	-	-	(71)	-	6,305	6,596
Office properties	4,172	1,915	-	-	-	-	(15)	58	6,130	6,705
Canada Water properties	308	-	-	-	-	-	(15)	-	293	283
Other properties	108	20	-	-	-	-	-	-	128	132
Total properties	9,634	3,623	(358)	-	-	-	(101)	58	12,856	13,716
Investments in joint ventures and funds	2,393	(2,393)	-	-	-	-	-	-	-	-
Other investments	174	(1)	-	-	-	-	-	-	173	172
Other net (liabilities) assets	(331)	(103)	23	27	5	-	101	-	(278)	(355)
Net debt	(2,609)	(1,126)	102	-	-	105	-	-	(3,528)	(3,973)
Net assets	9,261	-	(233)	27	5	105	-	58	9,223	9,560
EPRA NAV per share (note 2)									939p	967p

	30 September 2018		31 March 2018
	£m	Pence per share	£m	Pence per share
Opening EPRA NAV	9,560	967	9,498	915
Income return	169	17	380	37
Capital return	(308)	(32)	285	29
Dividend paid	(148)	(15)	(302)	(29)
Purchase of own shares	(50)	2	(301)	15
Closing EPRA NAV	9,223	939	9,560	967

Table B: EPRA Performance measures

EPRA Performance measures summary table

		Six months ended 30 September 2018		Six months ended 30 September 2017
		£m	Pence per share	£m	Pence per share
EPRA Earnings	- basic	169	17.2	198	19.3
	- diluted	169	17.2	198	19.2
EPRA Net Initial Yield			4.4%		4.3%
EPRA 'topped-up' Net Initial Yield			4.7%		4.6%
EPRA Vacancy Rate			2.7%		2.9%

	30 September 2018		31 March 2018
	Net assets £m	Net asset value per share pence	Net assets £m	Net asset value per share pence
EPRA NAV	9,223	939	9,560	967
EPRA NNNAV	8,805	897	9,044	914

Calculation and reconciliation of EPRA/IFRS earnings and EPRA/IFRS earnings per share

	Six months ended 30 September 2018 £m	Six months ended 30 September 2017 £m
(Loss) profit attributable to the shareholders of the Company	(48)	239
Exclude:
Group - taxation	19	(7)
Group - valuation movement	252	(141)
Group - loss (profit) on disposal of investment properties and investments	6	(20)
Group - profit on disposal of trading properties	(65)	(8)
Joint ventures and funds - valuation movement (including result on disposals)	7	(18)
Joint ventures and funds - capital financing costs	19	9
Changes in fair value of financial instruments and associated close-out costs	(2)	144
Non-controlling interests in respect of the above	(19)	-
EPRA earnings - basic	169	198
Dilutive effect of 0% convertible bond	-	-
EPRA earnings - diluted	169	198

(Loss) profit attributable to the shareholders of the Company	(48)	239
Dilutive effect of 0% convertible bond	-	-
IFRS earnings - diluted	(48)	239

	Six months ended 30 September 2018 Number million	Six months ended 30 September 2017 Number million
Weighted average number of shares	992	1,039
Adjustment for Treasury shares	(11)	(11)
IFRS/EPRA weighted average number of shares (basic)	981	1,028
Dilutive effect of share options	1	1
Dilutive effect of ESOP shares	2	2
EPRA weighted average number of shares (diluted)	984	1,031
Remove dilutive effect of anti-dilutive share options	(3)	-
IFRS weighted average number of shares (diluted)	981	1,031

Net assets per share

	30 September 2018		31 March 2018
	£m	Pence per share	£m	Pence per share
Balance sheet net assets	9,261		9,506
Deferred tax arising on revaluation movements	5		5
Mark-to-market on derivatives and related debt adjustments	105		137
Dilution effect of share options	27		32
Surplus on trading properties	58		134
Less non-controlling interests	(233)		(254)
EPRA NAV	9,223	939	9,560	967
Deferred tax arising on revaluation movements	(11)		(31)
Mark-to-market on derivatives and related debt adjustments	(105)		(137)
Mark-to-market on debt	(302)		(348)
EPRA NNNAV	8,805	897	9,044	914

EPRA NNNAV is the EPRA NAV adjusted to reflect the fair value of the debt and derivatives and to include the deferred taxation on revaluations
and derivatives.

	30 September 2018 Number million	31 March 2018 Number million
Number of shares at period/year end	987	994
Adjustment for treasury shares	(11)	(11)
IFRS/EPRA Number of shares (basic)	976	983
Dilutive effect of share options	2	1
Dilutive effect of ESOP shares	4	-
IFRS/ EPRA number of shares (diluted)	982	989

EPRA Net Initial Yield and 'topped-up' Net Initial Yield

	30 September 2018 £m	30 September 2017 £m
Investment property - wholly-owned	9,314	9,502
Investment property - share of joint ventures and funds	3,542	4,013
Less developments, residential and land	(1,158)	(1,242)
Completed property portfolio	11,698	12,273
Allowance for estimated purchasers' costs	760	813
Gross up completed property portfolio valuation (A)	12,458	13,086
Annualised cash passing rental income	565	581
Property outgoings	(11)	(13)
Annualised net rents (B)	554	568
Rent expiration of rent-free periods and fixed uplifts1	27	32
'Topped-up' net annualised rent (C)	581	600
EPRA Net Initial Yield (B/A)	4.4%	4.3%
EPRA 'topped-up' Net Initial Yield (C/A)	4.7%	4.6%
Including fixed/minimum uplifts received in lieu of rental growth	11	11
Total 'topped-up' net rents (D)	592	611
Overall 'topped-up' Net Initial Yield (D/A)	4.8%	4.7%
'Topped-up' net annualised rent	581	600
ERV vacant space	17	19
Reversions	29	32
Total ERV (E)	627	651
Net Reversionary Yield (E/A)	5.0%	5.0%

1 The weighted average period over which rent-free periods expire is 1 year (30 September 2017: 1 year).

EPRA Net Initial Yield (NIY) basis of calculation

EPRA NIY is calculated as the annualised net rent (on a cash flow basis), divided by the gross value of the completed property portfolio. The valuation of our completed property portfolio is determined by our external valuers as at 30 September 2018, plus an allowance for estimated purchaser's costs. Estimated purchaser's costs are determined by the relevant stamp duty liability, plus an estimate by our valuers of agent and legal fees on notional acquisition. The net rent deduction allowed for property outgoings is based on our valuers' assumptions on future recurring non-recoverable revenue expenditure.

In calculating the EPRA 'topped-up' NIY, the annualised net rent is increased by the total contracted rent from expiry of rent-free periods and
future contracted rental uplifts where defined as not in lieu of growth. Overall 'topped-up' NIY is calculated by adding any other contracted future uplift to the 'topped-up' net annualised rent.

The net reversionary yield is calculated by dividing the total estimated rental value (ERV) for the completed property portfolio, as determined
by our external valuers, by the gross completed property portfolio valuation.

The EPRA vacancy rate is calculated as the ERV of the un-rented, lettable space as a proportion of the total rental value of the completed
property portfolio.

EPRA Vacancy Rate

	30 September 2018 £m	30 September 2017 £m
Annualised potential rental value of vacant premises	17	19
Annualised potential rental value for the completed property portfolio	636	662
EPRA Vacancy Rate	2.7%	2.9%

EPRA Cost Ratios

		Six months ended 30 September 2018 £m	Six months ended 30 September 2017 £m
Property operating expenses		17	15
Administrative expenses		42	40
Share of joint ventures and funds expenses		7	5
Less:	Performance & management fees (from joint ventures & funds)	(3)	(3)
	Other fees and commissions	(3)	(5)
	Ground rent costs and operating expenses de facto included in rents	(4)	(1)
EPRA Costs (including direct vacancy costs) (A)		56	51
Direct vacancy costs		(8)	(10)
EPRA Costs (excluding direct vacancy costs) (B)		48	41

Gross Rental Income less ground rent costs and operating expenses de facto included in rents		209	212
Share of joint ventures and funds (Gross Rental Income less ground rent costs and operating expenses de facto included in rents)		78	103
Total Gross Rental Income (C)		287	315

EPRA Cost Ratio (including direct vacancy costs) (A/C)		19.5%	16.2%
EPRA Cost Ratio (excluding direct vacancy costs) (B/C)		16.7%	13.0%

Overhead and operating expenses capitalised (including share of joint ventures and funds)		3	3

In the current and prior periods employee costs in relation to staff time on development projects are capitalised into the base cost of relevant development assets.

Table C: Gross rental income

	Six months ended 30 September 2018 £m	Six months ended 30 September 2017 £m
Rent receivable	297	304
Spreading of tenant incentives and guaranteed rent increases	(7)	(8)
Surrender premia	1	20
Gross rental income	291	316

The current and prior period information is presented on a proportionally consolidated basis, excluding non-controlling interests.

Table D: Property related capital expenditure

	Six months ended 30 September 2018			Year ended 31 March 2018
	Group	Joint ventures and funds	Total	Group	Joint ventures and funds	Total
Acquisitions	128	-	128	250	-	250
Development	67	41	108	132	52	184
Like-for-like portfolio	20	7	27	23	27	50
Other	5	2	7	17	5	22
Total property related capex	220	50	270	422	84	506

The above is presented on a proportionally consolidated basis, excluding non-controlling interests and business combinations. The 'Other' category contains amounts owing to tenant incentives of £2m (31 March 2018: £10m), letting fees of £1m (31 March 2018: £nil), capitalised staff costs of £3m (31 March 2018: £5m) and capitalised interest of £1m (31 March 2018: £7m).

SUPPLEMENTARY TABLES

(Data includes Group's share of Joint Ventures and Funds)

Since 1 April 2018		Price (100%)	Price (BL Share)	Annual Passing Rent
Purchases	Sector	£m	£m	£m¹
Completed
Royal Victoria Place, Tunbridge Wells	Retail	92	92	3
Hercules Unit Trust units	Retail	18	18	1
Exchanged
Orsman Road, Haggerston	Offices	32	32	2
Total		142	142	6
¹BL share of annualised rent topped up for rent frees

Since 1 April 2018		Price (100%)	Price (BL Share)	Annual Passing Rent
Sales	Sector	£m	£m	£m³
Completed
Richmond Homebase¹	Retail	45	45	1
Cheltenham Gallagher Retail Park	Retail	73	29	1
Southampton David Lloyd	Retail	15	15	1
5 Broadgate	Offices	1,000	500	18
B&Q Glasgow	Retail	28	28	2
Hamilton David Lloyd	Retail	10	10	1
Brentwood Virgin Active	Retail	12	12	1
Clarges, Mayfair²	Residential	203	203	-
Aldgate Phase 1	Residential	1	-	-
Total		1,387	842	25
¹Exchanged during the year ended 31 March 2018, completed in the period
²All of which exchanged prior to FY19 and completed in the period
³BL share of annualised rent topped up for rent frees

Portfolio Valuation by Sector
At 30 September 2018	Group	JVs & Funds	Total	H1 Change¹
	£m	£m	£m	%	£m
West End	4,097	-	4,097	0.3	14
City	118	1,915	2,033	1.4	36
Offices	4,215	1,915	6,130	0.7	50
Regional	1,087	1,863	2,950	(4.0)	(122)
Local	1,826	391	2,217	(6.8)	(163)
Multi-let	2,913	2,254	5,167	(5.2)	(285)
Department Stores and Leisure	539	-	539	(3.1)	(18)
Superstores	96	262	358	(0.7)	(3)
Solus and Other	241	-	241	(0.2)	(1)
Retail	3,789	2,516	6,305	(4.5)	(307)
Residential²	108	20	128	(3.1)	(4)
Canada Water	293	-	293	0.3	1
Total	8,405	4,451	12,856	(1.9)	(260)
Standing Investments	7,941	3,977	11,918	(2.5)	(323)
Developments	464	474	938	7.2	63
¹ Valuation movement during the period (after taking account of capital expenditure) of properties held at the balance sheet date, including developments (classified by end use), purchases and sales
² Stand-alone residential

Retail Portfolio Valuation - Previous Classification Basis
At 30 September 2018	Group		JVs & Funds		Total		H1 Change¹
	£m		£m		£m		%		£m
Shopping Parks	1,827		1,105		2,932		(5.5)		(175)
Shopping Centres	1,116		1,132		2,248		(3.7)		(87)
Superstores	96		262		358		(0.7)		(3)
Department Stores	147		-		147		(24.9)		(49)
High Street	179		1		180		(1.1)		(2)
Leisure	424		16		440		2.0		9
Retail	3,789		2,516		6,305		(4.5)		(307)
¹ Valuation movement during the period (after taking account of capital expenditure) of properties held at the balance sheet date, including developments (classified by end use), purchases and sales

Gross Rental Income¹
Accounting Basis £m		6 months to 30 September 2018				Annualised as at 30 September 2018
		Group	JVs & Funds	Total		Group		JVs & Funds	Total
West End		70	-	70		136		-	136
City		4	36	40		6		63	69
Offices		74	36	110		142		63	205
Regional		30	45	75		57		89	146
Local		47	13	60		93		26	119
Multi-let		77	58	135		150		115	265
Department Stores and Leisure		20	-	20		39		-	39
Superstores		1	10	11		2		19	21
Solus and Other		8	-	8		13		-	13
Retail		106	68	174		204		134	338
Residential²		2	-	2		4		-	4
Canada Water		5	-	5		8		-	8
Total		187	104	291		358		197	555
¹Gross rental income will differ from annualised rents due to accounting adjustments for fixed & minimum contracted rental uplifts and lease incentives
² Stand-alone residential

Portfolio Net Yields^1,2
At 30 September 2018	EPRA net initial yield %	EPRA topped up net initial yield %³	Overall topped up net initial yield %⁴	Net equivalent yield %	Net equivalent yield movement bps	Net reversionary yield %	ERV Growth %⁵
West End	3.6	4.0	4.0	4.3	-	4.7	0.2
City	4.4	4.5	4.5	4.7	1	5.3	0.1
Offices	3.9	4.2	4.2	4.4	1	4.9	0.2
Regional Lifestyle	4.5	4.7	4.8	5.1	9	5.2	(0.8)
Local Lifestyle	5.2	5.3	5.4	5.7	20	5.5	(2.5)
Multi-let	4.8	5.0	5.0	5.3	14	5.3	(1.6)
Department Stores & Leisure	6.0	6.0	7.1	6.0	33	4.4	(2.8)
Superstores	5.7	5.7	5.7	5.4	(1)	5.2	(0.2)
Solus & Other	5.2	5.5	5.7	5.2	(13)	4.4	(0.1)
Retail	5.0	5.1	5.3	5.4	14	5.2	(1.5)
Canada Water	3.1	3.2	3.2	3.9	(4)	3.8	0.4
Total	4.4	4.7	4.8	4.9	7	5.0	(0.8)
On a proportionally consolidated basis including the Group's share of joint ventures and funds
¹Including notional purchaser's costs
²Excluding committed developments, assets held for development and residential assets
³Including rent contracted from expiry of rent-free periods and fixed uplifts not in lieu of rental growth
⁴ Including fixed/minimum uplifts (excluded from EPRA definition)
⁵As calculated by IPD

Total Property Return (as calculated by IPD)
6 months to 30 September 2018	Offices		Retail		Total
%	British Land	IPD	British Land	IPD	British Land	IPD
Capital Return	0.8	1.3	(4.6)	(2.2)	(1.9)	1.1
- ERV Growth	0.2	0.6	(1.5)	(1.1)	(0.8)	0.3
- Yield Movement¹	1 bps	(3) bps	14 bps	5 bps	7 bps	(5) bps
Income Return	1.6	1.9	2.6	2.4	2.1	2.2
Total Property Return	2.5	3.2	(2.1)	0.2	0.2	3.3
On a proportionally consolidated basis including the Group's share of joint ventures and funds ¹Net equivalent yield movement

Occupiers Representing over 0.5% of Total Contracted Rent
At 30 September 2018	% of total rent		% of total rent
Tesco¹	4.5	Microsoft	1.0
Sainsbury's	3.9	Sports Direct	0.9
Debenhams²	3.8	Virgin	0.9
Government	2.9	Deutsche Bank	0.8
Next plc	2.6	David Lloyd	0.8
Kingfisher	2.3	Reed Smith	0.8
Facebook	2.0	Steinhoff	0.8
Dentsu Aegis³	1.8	Mayer Brown	0.7
Marks & Spencer	1.8	H&M	0.7
Spirit Group	1.8	River Island	0.7
Visa Inc	1.7	TGI Fridays	0.7
Alliance Boots	1.7	NEX Group	0.6
Dixons Carphone	1.6	Primark	0.6
Arcadia Group	1.4	Bridgestreet	0.6
Herbert Smith	1.4	Credit Agricole	0.6
Homebase⁴	1.3	Hutchison	0.6
TK Maxx	1.2	Pets at Home	0.6
Gazprom	1.1	Henderson	0.6
Vodafone	1.1	Armaco	0.5
JD Sports	1.0	Wilko Retail	0.5
New Look	1.0	Lend Lease	0.5
Asda Group	1.0

¹Includes £3.4m at Surrey Quays Shopping Centre

²Of which 1.8% relates to rent received at the Head Office, 10 Brock Street

³Represents current occupation of 10 Triton Street covering 118,000 sq ft of space. Taking into account their pre-let of 310,000 sq ft at 1 Triton Square, % of contracted rent would rise to 5.3%. As part of this new letting, Dentsu Aegis have an option to return their existing space at 10 Triton Street in 2021. If this option is exercised, there is an adjustment to the rent free period in respect of the letting at 1 Triton Square to compensate British Land.

⁴ Taking into account rent adjustments following CVA. Reduces to 1.1% taking account of asset sales under offer.

Major Holdings
At 30 September 2018	BL Share	Sq ft	Rent	Occupancy	Lease
	%	'000	£m pa^1,4	rate %^2,4	Length yrs^3,4
Broadgate	50	4,133	140	98.9	7.9
Regent's Place	100	1,740	76	99.6	7.4
Paddington Central	100	958	45	98.9	6.2
Meadowhall, Sheffield	50	1,500	89	98.9	5.9
Glasgow Fort	78	510	21	99.1	5.9
Teesside, Stockton	100	569	17	95.3	5.1
Drake's Circus, Plymouth	100	1,082	19	97.2	6.0
Ealing Broadway	100	540	15	90.9	4.6
Sainsbury's Superstores⁵	51	1,457	34	100.0	8.3
10 Portman Square	100	134	10	100.0	6.6
¹Annualised EPRA contracted rent including 100% of Joint Ventures & Funds
² Including accommodation under offer or subject to asset management
³ Weighted average to first break
⁴Excludes committed and near term developments
⁵ Comprises stand-alone stores

Lease Length & Occupancy
At 30 September 2018	Average lease length yrs		Occupancy rate %
	To expiry	To break	EPRA Occupancy	Occupancy^1,2,4
West End	8.2	6.7	97.0	97.8
City	6.3	5.5	98.4	98.9
Offices	7.5	6.3	97.4	98.2
Regional	7.3	6.1	96.5	97.3
Local	7.0	5.8	96.7	97.0
Multi-let	7.2	6.0	96.6	97.1
Department Stores and Leisure	15.9	15.9	99.8	99.8
Superstores	8.9	8.8	100.0	100.0
Solus and Other	11.7	10.7	100.0	100.0
Retail	8.3	7.3	97.1	97.6
Canada Water³	6.0	5.8	95.4	97.1
Total	8.0	6.9	97.2	97.8
¹Space allocated to Storey is shown as occupied where there is a Storey tenant in place otherwise it is shown as vacant. Total occupancy would rise from 97.8% to 97.9% if Storey space were assumed to be fully let.
²Includes accommodation under offer or subject to asset management ³ Reflects standing investment only. Removing the impact of Tesco reduces the term to break to 3.2 years. ⁴ Where occupiers have entered administration or CVA but are still liable for rates, these are treated as occupied. Reflecting units currently occupied but expected to become vacant, then the occupancy rate for Retail would reduce from 97.6% to 96.1%, and total occupancy would reduce from 97.8% to 97.0%

Portfolio Weighting
At 30 September	2017	2018	2018	2018
		(current)	(current)	(pro-forma¹)
	%	%	£m	%
West End	30.6	31.9	4,097	32.0
City	17.6	15.8	2,033	17.5
Offices	48.2	47.7	6,130	49.5
Regional	22.1	22.9	2,950	22.3
Local	16.3	17.2	2,217	16.5
Multi-let	38.4	40.1	5,167	38.8
Department Stores & Leisure	4.4	4.2	539	4.0
Superstores	3.3	2.8	358	2.7
Solus & Other	2.7	1.9	241	1.8
Retail	48.8	49.0	6,305	47.3
Residential²	1.0	1.0	128	1.0
Canada Water	2.0	2.3	293	2.2
Total	100.0	100.0	12,856	100.0
London Weighting	57%	58%	7,428	60%
On a proportionally consolidated basis including the Group's share of joint ventures and funds
¹ Pro forma for developments under construction at estimated end value (as determined by the Group's external valuers), excludes Clarges Residential
² Stand-alone residential

Annualised Rent & Estimated Rental Value (ERV)
At 30 September 2018	Annualised rent (valuation basis) £m¹			ERV £m	Average rent £psf
At 30 September 2018	Group	JVs & Funds	Total	Total	Contracted²	ERV
West End³	137	-	137	179	57.9	66.8
City³	6	68	74	88	49.5	56.9
Offices³	143	68	211	267	54.8	63.2
Regional	59	90	149	167	31.3	33.9
Local	103	25	128	139	23.3	24.9
Multi-let	162	115	277	306	27.1	29.1
Department Stores & Leisure	34	-	34	26	17.8	13.2
Superstores	5	16	21	19	22.7	20.6
Solus & Other	13	-	13	11	19.8	16.8
Retail	214	131	345	362	25.2	25.8
Residential⁴	5	-	5	4	47.4	37.9
Canada Water⁵	8	-	8	10	17.9	21.8
Total	370	199	569	643	31.0	33.5
On a proportionally consolidated basis including the Group's share of joint ventures and funds
¹ Gross rents plus, where rent reviews are outstanding, any increases to ERV (as determined by the Group's external valuers), less any ground rents payable under head leases, excludes contracted rent subject to rent free and future uplift
² Annualised rent, plus rent subject to rent free
³ £psf metrics shown for office space only
⁴ Stand-alone residential
⁵Reflects standing investment only

Rent Subject to Open Market Rent Review
For period to 31 March	2019	2020	2021	2022	2023	2019-21	2019-23
At 30 September 2018	£m	£m	£m	£m	£m	£m	£m
West End	4	15	10	9	13	29	51
City	13	4	9	-	-	26	26
Offices	17	19	19	9	13	55	77
Regional	10	10	19	12	11	39	62
Local	9	11	12	6	18	32	56
Multi-let	19	21	31	18	29	71	118
Department Stores and Leisure	7	-	-	-	-	7	7
Superstores	3	8	6	1	1	17	19
Solus and Other	-	-	-	-	-	-	-
Retail	29	29	37	19	30	95	144
Residential	-	-	-	1	-	-	1
Canada Water¹	-	-	-	-	-	-	-
Total	46	48	56	29	43	150	222

On a proportionally consolidated basis including the Group's share of joint ventures and funds

¹ Reflects standing investment only

Rent Subject to Lease Break or Expiry
For period to 31 March	2019	2020	2021	2022	2023	2019-21	2019-23
At 30 September 2018	£m	£m	£m	£m	£m	£m	£m
West End	3	4	20	22	25	27	74
City	4	14	9	1	3	27	31
Offices	7	18	29	23	28	54	105
Regional	10	15	9	13	20	34	67
Local	11	12	10	12	12	33	57
Multi-let	21	27	19	25	32	67	124
Department Stores and Leisure	-	-	-	-	-	-	-
Superstores	-	-	-	-	2	-	2
Solus and Other	1	-	-	-	-	1	1
Retail	22	27	19	25	34	68	127
Residential	-	4	-	-	-	4	4
Canada Water¹	1	1	1	-	1	3	4
Total	30	50	49	48	63	129	240
% of contracted rent	4.9%	8.3%	8.1%	8.1%	10.4%	21.3%	39.8%

On a proportionally consolidated basis including the Group's share of joint ventures and funds

¹ Reflects standing investment only

Committed Developments
At 30 September 2018	Sector	BL Share	100% sq ft	PC Calendar Year	Current Value	Cost to come	ERV	Let & Under Offer
At 30 September 2018		%	'000	PC Calendar Year	£m	£m¹	£m²	£m

1 Finsbury Avenue	Office	50	288	Q1 2019	122	26	8.2	3.4
135 Bishopsgate	Office	50	334	Q3 2019	121	54	9.6	9.0
Plymouth (Leisure)	Retail	100	108	Q4 2019	20	21	3.2	2.0
100 Liverpool Street	Office	50	521	Q1 2020	201	96	18.9	7.2
1 Triton Square⁴	Office	100	366	Q4 2020	251	156	23.1	21.8
Total Committed			1,617		715	353	63.0	43.4
Retail Capex³						58
¹ From 1 October 2018. Cost to come excludes notional interest as interest is capitalised individually on each development at our capitalisation rate
² Estimated headline rental value net of rent payable under head leases (excluding tenant incentives)
³ Capex committed and underway within our investment portfolio relating to leasing and asset management
⁴ERV let & under offer of £21.8m represents space taken by Dentsu Aegis. As part of this letting, Dentsu Aegis have an option to return their existing space at 10 Triton Street in 2021. If this option is exercised, there is an adjustment to the rent free period in respect of the letting at 1 Triton Square to compensate British Land

Near Term Development Pipeline
At 30 September 2018	Sector	BL Share	100% sq ft	Expected Start On Site	Current Value	Cost to Come	ERV	Let & Under Offer	Planning Status
At 30 September 2018	Sector	%	'000		£m	£m¹	£m²	£m	Planning Status

Blossom Street, Shoreditch	Office	100	335	Q2 2019	23	241	20.6	-	Consented
Gateway Building	Leisure	100	105	Q3 2019	7	123	6.0	-	Consented
Total Near-Term			440		30	364	26.6	-
Retail Capex ³						102
¹ From 1 October 2018. Cost to come excludes notional interest as interest is capitalised individually on each development at our capitalisation rate
² Estimated headline rental value net of rent payable under head leases (excluding tenant incentives)
³ Forecast capital commitments within our investment portfolio over the next 12 months relating to leasing and asset enhancement

	Medium Term Development Pipeline
At 30 September 2018		Sector	BL Share %	100% Sq ft	Planning Status
				'000

2-3 Finsbury Avenue		Office	50	563	Consented
1-2 Broadgate		Office	50	533	Submitted
5 Kingdom Street¹		Office	100	371	Consented
Meadowhall (Leisure)		Retail	50	333	Consented
Ealing - 10-40 The Broadway		Retail	100	298	Pre-submission
Aldgate Place Phase 2		Residential	50	145	Consented
Eden Walk Retail & Residential		Mixed Use	50	533	Consented
Plymouth, George Street		Retail	100	45	Pre-submission
Total Medium Term excl. Canada Water				2,821

Canada Water - Phase 1^2,3,4		Mixed Use	100	1,917	Submitted outline
	¹Planning consent for previous 240,000 sq ft scheme
	² Canada Water site covers 5m sq ft in total based on net area (gross area of 7m sq ft)
	³Phase 1 consists of Phase 1a, 1b, 1c. Detailed planning submitted for Phase 1a, outline planning submitted for total Phase 1
	⁴On drawdown of the Master Development Agreement, ownership reduces to 80% with LBS owning 20%. LBS ownership will adjust over time depending on level of investment by Southwark

Forward-looking statements

This Press Release contains certain 'forward-looking' statements. Such statements reflect current views on, among other things, our markets, activities, projections, objectives 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', 'due', 'plans', 'projects', 'goal', 'outlook', 'schedule', 'target', 'aim', 'may', 'likely to', 'will', 'would', 'could', 'should' or similar expressions or in each case their negative or other variations or comparable terminology. By their nature, forward-looking statements involve inherent risks, assumptions and uncertainties because they relate to future events and depend on circumstances which may or may not occur and may be beyond our ability to control or predict. Forward-looking statements should be regarded with caution as actual results may differ materially from those expressed in or implied by such statements.

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: (a) general business and political, social and economic conditions globally, (b) the consequences of the referendum on Britain leaving the EU, (c) industry and market trends (including demand in the property investment market and property price volatility), (d) competition, (e) the behaviour of other market participants, (f) 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), (g) inflation and consumer confidence, (h) labour relations and work stoppages, (i) natural disasters and adverse weather conditions, (j) terrorism and acts of war, (k) British Land's overall business strategy, risk appetite and investment choices in its portfolio management, (l) legal or other proceedings against or affecting British Land, (m) reliable and secure IT infrastructure, (n) changes in occupier demand and tenant default, (o) changes in financial and equity markets including interest and exchange rate fluctuations, (p) changes in accounting practices and the interpretation of accounting standards and (q) the availability and cost of finance. The Company's principal risks are described in greater detail in the section of this Press Release headed Risk Management and Principal Risks. Forward-looking statements in this Press Release, or the British Land website or made subsequently, which are attributable to British Land or persons acting on its behalf should therefore be construed in light of all such factors.

Information contained in this Press Release 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, and nothing in this Press Release should be construed as a profit forecast or profit estimate. Any forward-looking statements made by or on behalf of British Land speak only as of the date they are made. Such forward-looking statements are expressly qualified in their entirety by the factors referred to above 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, Transparency Rules, and the Market Abuse Regulation), 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. This document shall not, under any circumstances, create any implication that there has been no change in the business or affairs of British Land since the date of this document or that the information contained herein is correct as at any time subsequent to this date.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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