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Values recover at British Land

Values recover at British Land

The key figure to look at from British Land's (BLND) figures for the year to March 2017 is the adjusted net asset value (NAV), which was all but unchanged from a year earlier. This confirms that values have largely bounced back from the post-referendum panic depression, when valuations were plucked out of the air rather than based on transactions, of which there were very few.

Even so, there was still a £144m negative valuation movement in the portfolio compared with a £616m uplift the previous year; hence the apparent drop in headline profits. In fact, underlying profits moved ahead by 7.4 per cent to £390m, and not only was the annual dividend maintained, but the proposed dividend for the year to March 2018 has been raised to 7.52p per share on a quarterly basis, totalling 30.08p per share.

For most of the asset classes within the portfolio, it was a case of two halves. City office valuations fell by 0.8 per cent after rebounding strongly from a 4.9 per cent fall in the first half, while West End offices fell by 0.6 per cent, having fallen 2.4 per cent in the first half. And, despite the lack of visibility caused by Brexit, a total of 1.7m sq ft of lettings and renewals were secured at 8 per cent ahead of estimated rental value (ERV), adding £22m of rent. Occupancy remained high at 98 per cent on an average lease length of 8.3 years. Even more impressive was the 1.3m sq ft of retail lettings and renewals, which were secured at 10.8 per cent ahead of ERV.

Capital recycling saw £1.5bn of disposals, 9 per cent ahead of valuation and including its half share in The Leadenhall Building - popularly known as the 'cheesegrater' - for £575m. Retail disposals included Debenhams in Oxford Street and £226m of superstore sales, taking the portfolio weighting on superstores down to just 4 per cent. Speculative construction is now under 4 per cent of the development pipeline.

Analysts at Peel Hunt are forecasting adjusted NAV of 900p per share at the year ending March 2018.

THE BRITISH LAND COMPANY (BLND)
ORD PRICE:655.5pMARKET VALUE:£6.75bn
TOUCH:655-655.5p12M HIGH773pLOW: 500p
DIVIDEND YIELD:4.5%TRADING STOCK:£334m
DISCOUNT TO NAV:28%
INVEST PROPERTIES:£11.9bn#NET DEBT:33%

Year to 31 MarNet asset value (p*)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)**
20135960.263226.4
20146881.1111127
20158291.7916827.68
20169191.3313128.36
20179150.201929.2
% change--85-86+3

Ex-div: 29 Jun

Payment: 4 Aug

*Adjusted NAV

**Dividends paid quarterly, XD and pay dates refer to fourth-quarter dividend of 7.3p

#Includes joint ventures

IC VIEW:

British Land has largely derisked its development pipeline and further developments are likely to be conducted on a pre-let basis for the most part. The shares trade at a 27 per cent discount to forecast NAV, but given the uncertainty caused by Brexit, this seems unlikely to narrow just yet. Hold for the dividend.

Last IC View: Hold, 586p, 17 Nov 2016

visible-status-Standard story-url-BritishLand_result_170517.xml

By Jonas Crosland,
17 May 2017

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