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British Land reduces retail exposure

Greater emphasis on residential and flexible office space
November 14, 2018

With half the portfolio in retail assets, it was no surprise to see British Land (BLND) deliver a negative return in the six months to September 2018. The retail side of the portfolio was devalued by 4.5 per cent, while offices delivered a valuation uplift of 0.7 per cent and developments 7.2 per cent.

IC TIP: Hold at 626.4p

Rental income in the past 18 months lost through tenants going bust or entering company voluntary arrangements reached £14.7m, with £5.5m re-let or under negotiation. The plan now is to reshape the portfolio, with £634m of retail assets sold in the past 12 months.

This is part of a drive to create a more mixed-use business based on a smaller retail exposure, London offices and residential. On the office side, developments have been let ahead of schedule and at better terms, with 69 per cent of the committed pipeline either let or under offer. Greater emphasis is being placed on accommodating changes in lifestyle, with tenants increasingly looking for flexible workspace.

British Land is also moving into the build-to-rent market, and is working with Southwark council on a 5m square feet mixed use scheme at Canada Water, which will include 3,000 new homes. Subject to planning approvals, construction could begin in the second half of 2019.

Analysts at Peel Hunt are forecasting adjusted net asset value (NAV) of 957.9p at the year ending March 2019 (from 966.6p in 2018).

BRITISH LAND (BLND)   
ORD PRICE:626.4pMARKET VALUE:£6.06bn
TOUCH:626.4-627p12-MONTH HIGH:703pLOW: 554p
DIVIDEND YIELD:4.9%TRADING PROP:£328m
DISCOUNT TO NAV:33%   
INVESTMENT PROP:£9.6bnNET DEBT:28%
Half-year to 30 SepNet asset value (p)*Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)**
201794523823.215.04
2018939-42-4.915.5
% change-1--+3
Ex-div:03 Jan   
Payment:08 Feb   
*Adjusted NAV **Dividends paid quarterly Ex-div and payment dates refer to second interim of 7.75p per share