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Article Excerpt
OPERATOR: Good day, and welcome to the British Land Q3 results analyst conference call. Today's conference is being recorded. At this time, I'd like to turn the call over to your host today, Mr. Chris Gibson-Smith, Chairman. Please go ahead, sir.
CHRIS GIBSON-SMITH, CHAIRMAN, BRITISH LAND PLC: Good morning, everybody, and welcome. It's Chris Gibson-Smith. We have a full agenda for you, so I think we'll take slightly more of your time than usual. Last time I stood before you, I said that we would remain proactive, that I hoped to get a Chief Executive announced before Christmas, and that the actions we'd taken to that point would be an indication of the degree of activity we'd continue going forward.
If we look at what the market has done top to bottom so far, it's fallen 34%, and we're on our into somewhere unprecedented, and so the suite of actions that we're going to talk through this morning reflect our response to managing that.
So first, we announced a rights issue this morning with the intention of raising GBP740 million net. We will talk about that in detail. We're going to make our -- issue our quarterly results, and Graham Roberts will talk about that. We can also talk about our JV action at Meadowhall which we announced earlier in the week. And then most importantly, I'd like to introduce Chris Grigg, our new Chief Executive. He's -- most of you have probably read his CV and background, but he's got a lifetime experience in the financial markets, he's got 20 years at Goldman's and finishing as a partner, he was treasurer of Barclays and CEO of their Commercial Bank, and he's a pleasure to have with us, adding to the core strength of the team here at British Land.
You can imagine it's been a fairly busy introductory four weeks, and I can announce he's hit the ground running. He's blended in seamlessly, and we are now motoring forward as one cavalcade.
So this is my final act as front of house. I withdraw back into the shadows of chairmanship with some regret, but let me give you Chris Grigg.
CHRIS GRIGG, CHIEF EXECUTIVE, BRITISH LAND PLC: Chris, many thanks for that introduction, and thank you. It's a pleasure to be here. I think on balance, I'd admit that it feels slightly longer than four weeks since I joined the Company. What I thought I'd do this morning is three things. I'd talk to you a little about the reasoning behind the rights issue, I'd talk to you and give you the outline of the transaction details, I'd touch on the Meadowhall announcement that we made earlier in the week, and then I'll turn things over to Graham to run through our Q3 numbers.
First of all, in terms of the rights issue what we've endeavored to do is take a two pronged approach to the market. And as Chris said, we have entered a period of considerable dislocation. And the first thing that we wanted to do in that context was to further strengthen the balance sheet so that we're in a position absolutely to go through this period of dislocation and come out of it the other side absolutely as a winner and in a very strong position. And I'm very comfortable that the transaction that we've announced today will achieve exactly that.
But the second part of what we have done here is to give ourselves the financial flexibility and to position ourselves to exploit real estate buying opportunities as they emerge. And whilst we don't know yet exactly the form of those opportunities, and that's the nature in my experience of market dislocation, we're absolutely confident that such opportunities will emerge.
We've had a very good reception from our shareholders to the announcement, and we were talking on a pre-marketing basis over a couple of days to some of largest shareholders, and I think that what -- one of the things that they have really embraced is the underlying strengths of the Company that go with the transaction. And I just wanted to pick out a couple of those things because I think they are critical.
The first is that the asset portfolio and the debt structure of the Company put us in a relatively strong position compared with other people in the market. And in ,particular and without wishing to go into too much detail, it's a story after all that most of you know very well, long leases, diversified customer base, high occupancy rates and substantial low cost debt facilities give us a very strong position. And they are very supportive of our dividend, and very supportive of the underlying strength of the Company.
The other thing I want to highlight this morning as the new boy is the strength of the management team that we have here. And in particular I'd point to the actions of the management team over the course of the last two or three years, and highlight again to you the fact that over the last three years, we sold GBP5.7 billion of assets which, clearly, has been very supportive in tough times in terms of the position we find ourselves in today.
The second thing to emphasize in that context, and I'll come back to that in a moment, is that we've continued to re-balance the asset portfolio. Meadowhall, the JV on Meadowhall in particular, represents an important and large piece of evidence in that regard.
Let me finally before I turn to the transaction details talk a little bit about the opportunities we expect to emerge over the course of the next couple of years. As Chris was kind enough to mention, I've been in financial markets of one sort or another for a long time, and over that period I've seen a number of periods of considerable dislocation. When you get stressed, when you get dislocation, you do see really strong opportunities that generate value for the strong players. What we have is deep sectoral property expertise. We have, as I've already said, a very strong management team, and I can assure you that all of the opportunities that we see, and we'll see more opportunities precisely because of the transactions we've announced this week, all of those opportunities will examined in a disciplined cautious manner, and will be used through the lens of using capital efficiently.
Let me just turn now, and for those of you on the slideshow it's set out on page two, the transaction details. First of all, as I've said, we've announced the transaction this morning; net proceeds around GBP740 million. That's a -- the basis for that transaction is two for three at 225p per new share, giving us on the basis of total number of shares following the issue of 852 million shares. Against the TERP for those of you interested at 374p, an issue discount of the TERP of 40%.
In terms of timetable, we've announced today obviously, we go ex-dividend on the March 25, and we have EGM to formally approve the transaction on March 3. The rights issue closes on March 18, dealing commences on March 19.
Just flipping on, and I'll be very brief on Meadowhall, it's a transaction that's been well flagged, but we have announced that London & Stamford and its partner required a 50% stake in Meadowhall. We'll continue to be the property manager, and this gives us a number of benefits in terms of reducing our exposure to our largest retail asset, whilst retaining a substantial share in the future upside. It's a unique asset. The transaction value of Meadowhall at GBP1.175 billion and, as I say, one of our unique assets.
And with that, if I may, I'll turn things over to Graham Roberts to take you through the Q3 results which take us on to page four. Graham.
GRAHAM ROBERTS, FINANCE DIRECTOR, BRITISH LAND PLC: Thank you, Chris. Just to go through the results as usual. The portfolio valuation reduced by 13.3% in the quarter, which was, as you will be aware, was the -- probably the worst quarter in IPD's history with a decline for IPD of over 15%. Our portfolio is now valued on a gross top-up initial yield of 7%, and a net equivalent yield of 6.9%, so an 85 basis points [yieldship] movement in Q3.
So our NAV is now at 718p. On the underlying earnings per share, these are 14% lower at 12p compared to the quarter in the previous calendar year. That is due essentially to the reduction in interest capitalization on developments, which you will appreciate, creates that sort of volatility in the income statement.
Our dividend for the quarter is 9.375p which is in line with the previous guidance. That will apply to the shares that are current extent, and the shares which will be issued in connection with the rights issue will rank for the Q4 dividend when we announce that in May. The policy remains to be progressive reflecting the strength of our underlying cash flow. The re-basing will be on -- in line with maintaining a pro forma dividend cover. It would be...
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