Impressions of the British Land AGM

I attended the Annual General Meeting of British Land Plc (BLND) today. This is a large FTSE-100 property company of course, focused on London offices (39% of portfolio) and Retail stores (most of the balance).

The trading statement issued in the morning was a mixed bag. Loan-to-value (LTV) further reduced to 26% (they have been selling off developments and repaying debt plus buying back shares with the resulting cash). There were positive comments about the office sector – the Chairman indicated in the meeting that the Brexit threat had put new developments on hold so there was a growing shortage of good quality office space in London. But retail comments were less positive – long term structural change driven by the internet and short-term trading headwinds, so the market “remains challenging”. The share price fell this morning as it has been doing since mid-June.

The Chairman, John Gildersleeve, mentioned NAV was up 6% last year but profits were down because of disposals (which reduce the rental income). He gave the impression that he thought British Land have been doing a good job of managing their property holdings and “reshaping” their retail portfolio. He also talked about their new ventures in flexible office space (“Storey” – now 80% let) and in homes to rent (e.g. on Canada Water). Whether these new ventures will be sufficient to offset the negative trends in retail property in general is not yet clear.

Shareholder questions focused on whether the portfolio valuations were accurate – the Chairman defended them; should they be developing offices in Dublin – answer No; or warehouses – no clear answer but general impression is to focus on what they know and stick to the UK; and the risk of rent controls on housing – risks are uncertain and it’s only a small element in their portfolio. There were some other questions of little consequence.

More than one shareholder questioned the large buy-backs undertaken by the company – they could have doubled the dividend instead (dividend yield will be about 4.0% this year, but they are doing more buy-backs). The Chairman said as they can buy their own shares (i.e. their assets) at 30% discount why should they not do it? Can’t say I am convinced by such arguments. The company is clearly reducing its size by selling assets and hence generating surplus cash but if they cannot find a good use for it they should return it to shareholders via dividends or a tender offer, not market share buy-backs.

I asked whether they could use the new “hybrid” AGM capability (part physical, part on-line) capability in the new Articles but the Chairman seemed to think that investors were not yet ready for that, which is a disappointment. It would have saved us all traipsing into the West End of London on a hot day.

The questions only lasted about an hour before we moved to a poll vote. No questions on remuneration which is excessive (4.5% voted against), or on why they need 13 directors a number of whom seemed to have no relevant backgrounds. Thirteen directors must surely make for dysfunctional board meetings. Perhaps more questions were deterred by the witty put-downs given by the Chairman to some shareholders which is a style I do not like even if it makes such events somewhat less boring.

There were also 14% of shareholders voted against the change to 14 days notice for General Meetings – good for them. But we did not see the voting figures until later so no opportunity to comment on them.

In summary, an unexciting AGM at an unexciting company. A typical PR event for geriatric shareholders on the whole so only useful to a limited extent.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Hybrid AGMs and British Land

The British Land Plc (BLND) Annual General Meeting is coming up on the 17th July and I took the opportunity to review the agenda items as some are particularly interesting this year. One resolution refers to a change in the Articles which have been substantially revised. They include:

  • A new resolution to permit “hybrid” General Meetings where some members can participate electronically instead of attending in person. But “all electronic” meetings are still not permitted. This is surely a good initiative and would enable many more shareholders to “attend” such meetings. The disappointing aspect is that apparently the company has “no current intention” to use this capability.
  • A new provision is to allow the current directors to continue in office, with limited capabilities, if they are all voted off at an AGM. This is not very likely to happen, particularly when there are 13 directors on the board as in this company, although I have seen it threatened at smaller companies. Perhaps it is not an unreasonable provision. But why does any company need 13 directors? That surely makes board meetings either very long-winded or some directors are not likely to be saying much. It makes for dysfunctional board meetings. Looking at the backgrounds of some of the directors, where there is no obvious relevance to a property company, it would look like the board could be reduced in size without too much difficulty.
  • Another change is to up the limit on the total pay of non-executive directors from £600,000 to £900,000. Does that sound high? Perhaps not when the Chairman has a fee set at £385,000 per year and the non-executives get a base fee of £62,500 with other additions for sitting on various committees. Indeed the odd thing is that the total fees paid to non-executive directors were £986,000 last year. Surely that means the new limit it not enough and the limit was breached by a wide margin last year? Perhaps not because the limit excludes any additional fees for serving on committees or for acting as chairman which presumably can be set at whatever the board thinks are reasonable. In reality it’s a limit voted upon by shareholders that can be easily side-stepped. It’s surely worth asking for justification at the AGM! So I’ll be voting against the change to the Articles even though most of the revisions are sensible.

The registrar in this case is Equiniti. They sent me a paper proxy voting form but no paper Annual Report, which is somewhat annoying as reading a 186 page report on-line is not easy. I’ll have to request a paper one. But at least they provide an easy on-line voting system unlike some others I could mention – I am still on correspondence with Link Asset Services (Capita as was) on that subject.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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