British Land reports robust second-half rental growth
By Josh White
Date: Wednesday 22 May 2024
(Sharecast News) - British Land reported robust second-half rental growth and stable property values in its final results on Wednesday, as its underlying profit rose 2% to £268m, while underlying earnings per share increased 1% to 28.5p.
The FTSE 250 company declared a dividend of 22.8p per share, reflecting a 1% increase from the prior year.
Its EPRA cost ratio improved significantly, dropping to 16.4% for the 12 months ended 31 March, from 19.5% in the 2023 financial year.
Despite the gains, EPRA net tangible assets per share decreased 4.4% to 562p over the year.
The company's loan-to-value (LTV) ratio stood at 37.3% at the end of 2024, slightly up from 36% in the prior year.
On a pro forma basis, loan-to-value was 34.6%, while its net debt-to-EBITDA ratio was 6.8x, with a pro forma ratio of 6.4x.
Fitch reaffirmed the company's senior unsecured credit rating at 'A' with a stable outlook in August.
The firm maintained a strong liquidity position with £1.9bn in undrawn facilities and cash, following £1bn of financing activity during the year.
Its interest rate was fully hedged for the 2025 financial year, with 86% hedged on average over the next five years.
British Land reported disposal proceeds of £410m in the 2024 period, achieving an average sale price 11% above book value.
Notably, the company sold a 50% stake in Meadowhall Shopping Centre to Norges for £360m, expected to complete in July.
Additionally, it acquired Westwood Retail Park in Thanet for £55m at a net initial yield of 8.1%.
Operationally, British Land achieved a portfolio occupancy rate of 97%, with 3.3 million square feet leased, 15.1% ahead of estimated rental value (ERV).
Campus leasing was strong, with 679,000 square feet leased at 8.7% ahead of ERV, and a further 316,000 square feet signed since 31 March.
Its retail and London urban logistics sectors also performed well, with 2.6 million square feet leased at 17.8% ahead of ERV.
The company's portfolio saw an overall valuation decline of 2.6% for the year, although in the second half, values remained stable, down just 0.2%.
Retail parks and London urban logistics experienced value increases of 2.5% and 3.1%, respectively, offsetting a 1.5% decline in campuses.
Sustainability remained a key focus, with British Land receiving a 5-star GRESB rating for both standing investments and developments.
The percentage of the portfolio rated EPC A or B increased to 58% from 45% in 2023, with expectations to reach around 64% in 2025.
It also set a new 2030 social value target to generate £200m of direct value, equally split between social and economic contributions.
Looking ahead, British Land anticipated 3% to 5% ERV growth across its markets in the 2025 financial year.
The company said it was confident in meeting market expectations for underlying earnings per share of 27.9p, with committed and recently-completed developments expected to contribute 4.5p of earnings per share, of which 2.6p would be realised 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.
"ERV growth accelerated to 5.9%, exceeding our guidance in all sectors.
"We outperformed the MSCI benchmark by 300 basis points and values were stable in the second half."
Carter said the company's operational momentum continued 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, 93% of our portfolio is now in our 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 0810 BST, shares in British Land Company were flat at 394.8p.
Reporting by Josh White for Sharecast.com.
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