Like peer Land Securities (LAND), the deterioration in fortunes for UK retailers depressed British Land’s (BLND) performance through FY2019. Given the development group has a greater weighting to retail assets than its rival, it is unsurprising that it suffered a worse fall in adjusted net asset value (NAV), which declined 6.4 per cent to 905p. That was even after a £200m share buyback during the year – extended by £125m this year – which boosted that figure by 10p.
The overall portfolio suffered an 11.1 per cent devaluation, primarily due to smaller multi-let schemes that were disproportionately affected by administrations and tenants entering company voluntary agreements. The annualised rental impact of those over the past two years was £16.9m. Retail assets totalling £646m were sold above of book value, reducing the portfolio’s weighting to the sector to 44 per cent, from 66 per cent in 2010. Management plans to reduce retail assets to between 30 and 35 per cent over the next five years.
Campus-focused London offices offset some of the retail weakness, rising 1.1 per cent in value and generating a total return of 4.9 per cent. Lettings covering 1.1m square feet (sq ft) were completed at 1.2 per cent ahead of estimated rental value, although that was down on 1.2m and 5.6 per cent, respectively, in the prior year. More than half of leasing activity was at the Broadgate campus at 6.5 per cent ahead of estimated rental value.
Asset sales totalled £1.5bn, the largest of which was the group’s £500m share in 5 Broadgate, in line with book value. Those disposals meant the loan-to-value ratio of the portfolio remained steady at 28.1 per cent, despite the fall in valuation. Meanwhile, new financing of £1.4bn was arranged, with a weighted average interest rate of 2.9 per cent.
Analysts at Peel Hunt reduced their forecast NAV for the 2020 year-end by 2 per cent to 875p a share.
| BRITISH LAND (BLND) | ||||
| ORD PRICE: | 559p | MARKET VALUE: | £5.31bn | |
| TOUCH: | 558.8-559.4p | 12-MONTH HIGH: | 703p | LOW: 520p |
| DIVIDEND YIELD: | 5.5% | TRADING PROP: | £87m | |
| DISCOUNT TO NAV: | 38% | |||
| INVESTMENT PROP: | £11.5bn | NET DEBT: | 41% | |
| Year to 31 Mar | Net asset value (p)* | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p)** |
| 2015 | 829 | 1.79 | 168 | 27.68 |
| 2016 | 919 | 1.33 | 131 | 28.36 |
| 2017 | 915 | 0.20 | 18.8 | 29.20 |
| 2018 | 967 | -0.50 | 48.7 | 30.08 |
| 2019 | 905 | -0.32 | -30.0 | 31.00 |
| % change | -6 | - | - | +3 |
| Ex-div: | 27 Jun | |||
| Payment: | 02 Aug | |||
| *Adjusted NAV **Dividends paid quarterly, XD and pay date refers to fourth-quarter dividend of 7.75p †Includes £2.56bn in investments in joint ventures and funds. | ||||
