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Land Securities adopts a cautious stance

With low development risk and a modest loan-to-value ratio, it's well placed to ride out any Brexit storm
May 15, 2018

Land Securities (LAND) has positioned itself to withstand the effects of a tougher real estate market where some valuations, notably shopping centres and London offices, lost ground, contributing to a 1 per cent fall in adjusted net asset value (NAV). The headline loss reflected a £446m cost relating to the repurchase of £1.53bn of legacy bonds.

IC TIP: Hold at 959p

However, the subsequent fall in interest costs helped to push adjusted diluted earnings per share ahead by 9.9 per cent to 53.1p, more than enough to cover the increased dividend payout. And gross rental income rose from £637m to £661m.

Crucially, the company has managed its risk profile well, with 97 per cent of its Victoria development, Nova, now let and 96 per cent of Westgate Oxford. Of the remaining development projects, Selly Oak in Birmingham is 95 per cent pre-let, while Deutsche Bank has taken 469,000 sq ft of the 564,000 sq ft development at 21 Moorfields. Capital recycling included disposals of £1.1bn, while £534m was spent mainly on development and refurbishments. Around one-third of the portfolio comprises shopping centres, and valuations fell by 3 per cent despite rental growth, with Bluewater dropping in value by 11 per cent.

Analysts at Peel Hunt are forecasting adjusted NAV at the March 2019 year-end of 1,409.6p, from 1,403p in 2018.

LAND SECURITIES (LAND)  
ORD PRICE:959pMARKET VALUE:£7.11bn
TOUCH:958.2-959.2p12-MONTH HIGH:1,135pLOW: 900p
DIVIDEND YIELD:4.6%TRADING PROPERTIES:£24m
DISCOUNT TO NAV:32%NET DEBT:35%
INVESTMENT PROPERTIES:£13.5bn*   
Year to 31 MarNet asset value (p)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
20141,0691.1114230.7
20151,3432.4230631.85
20161,4821.3416935.0
20171,4580.1114.338.55
20181,418-0.25-32.944.2
% change-3--+15
Ex-div:21 Jun   
Payment:27 Jul   
*Includes joint ventures. Dividends paid quarterly. XD and pay date refer to fourth-quarter dividend of 14.65p