British Land reports strong rental growth, fall in net tangible assets

23rd May 2024 09:26

(Sharecast News) - British Land highlighted strong rental growth and stable values in the second half of the year in its final results on Thursday.

The FTSE 250 company's underlying profit rose 2% to £268m, while underlying earnings per share increased 1% to 28.5p.

Its dividend per share saw a 1% increase to 22.8p.

Despite those positive figures, EPRA net tangible assets per share fell 4.4% to 562p.

The firm maintained a solid balance sheet with a pro forma loan-to-value ratio of 34.6% and a group net debt-to-EBITDA ratio of 6.4x.

It said it had £1.9bn in undrawn facilities and cash, with £1bn in financing activity conducted during the year.

Additionally, the interest rate on debt was fully hedged for 2025 and 86% hedged on average over the next five years.

British Land reported disposal proceeds of £410m for the 2024 financial year, which were 11% above book value on average.

Significant transactions included the sale of a 50% stake in Meadowhall Shopping Centre to Norges for £360m, expected to complete in July, and the acquisition of Westwood Retail Park in Thanet for £55m at a net initial yield of 8.1%.

Operationally, the company said its portfolio occupancy stood at 97%, with retail parks and London urban logistics achieving 99% and 100% occupancy, respectively.

British Land leased 3.3 million square feet, 15.1% ahead of estimated rental value (ERV), with campus leasing particularly strong at 679,000 square feet, 8.7% ahead of ERV.

The firm said it had signed a further 316,000 square feet since 31 March at 13.1% ahead of ERV.

Portfolio valuation saw ERV growth of 5.9%, with retail parks and London urban logistics showing the highest increases at 7.2% and 10%, respectively.

However, overall portfolio values decreased by 2.6%, driven by a 5.3% decline in campus values.

Notably, second-half values remained relatively stable with a slight decrease of 0.2%.

Looking ahead, British Land said it expected 2025 ERV growth of 3% to 5% across its markets, adding that it was comfortable with market expectations for underlying earnings per share of 27.9p.

The company anticipated that its committed and recently-completed developments would contribute 4.5p to earnings per share, with 2.6p expected in the 2026 financial year.

"Our strategy of focusing on campuses, retail parks and London urban logistics is delivering," said chief executive officer Simon Carter.

"Our operational momentum continues with high occupancy, strong leasing and good cost discipline driving Underlying Profit growth of 2%.

"We have achieved much this year - the surrender and joint venture of 1 Triton Square, the commitment to 2 Finsbury Avenue following the record breaking pre-let to Citadel, and the sale of Meadowhall are all good examples of our active approach to capital recycling."

As a result, Carter said 93% of the company's portfolio was now in its chosen markets.

"Although the geopolitical and economic landscape remains uncertain, with a portfolio net equivalent yield over 6%, 3% to 5% forecast rental growth and development upside, we expect to generate attractive future returns."

At 1006 BST, shares in British Land Company were down 1.09% at 398.8p.

Reporting by Josh White for Sharecast.com.