ii view: British Land builds on new strategy

A nice increase in net asset value and an estimated future dividend yield of over 3%. Buy, sell or hold?

First-half results to 30 September

• Adjusted or underlying profit up 12% to £120 million
• Underlying earnings per share up 22.9% to 12.9p
• Pre-tax profit of £370 million compared to a loss of £730 million last year
• EPRA Net Tangible Assets up 5.1% to 681p
• Interim dividend up 22.9% to 10.32p per share

Chief executive Simon Carter said:

“We have delivered good financial and operational performance.  Strong leasing activity, significantly improved rent collection and increasing values across our Campuses and Retail Parks have driven 6.1% total returns in the half.”

ii round-up:

British Land (LSE:BLND) is a Real Estate Investment Trust (REIT) and a constituent of the FTSE 100 index. Its core focus is on offices in central London and out of town retail properties. 

Its offices are mainly located across three main campuses: Broadgate in the City, Regents Place (Euston) and Paddington. 

Canada Water is also one of its development projects. 

For a round-up of these latest results, please click here. 

ii view:

Management is pursuing four strategic priorities to realise the potential of its campuses; continue with value accretive developments; target opportunities in retail and fulfilment and to actively recycle capital. Its first urban logistics acquisition was previously purchased in North London.

During this latest half-year, it continued to sell and reinvest capital into growth markets. Opportunity to replicate its Campus model at Canada Water is being progressed, while potential campuses outside of London are at an early stage following its £102 million acquisitions in both Cambridge and Guildford. A push towards warehouse logistics is underway at its Retail business, while the core focus remains on out-of-town retail parks. Retail parks account for 59% of its Retail & Fulfilment portfolio.

For investors, previous management outlook comments highlighting the uncertain trajectory of the pandemic and Covid variants are worth remembering. Its late arrival to retail fulfilment opportunities and established players such as Segro (LSE:SGRO) and Tritax Big Box (LSE:BBOX) also warrant consideration. As does greater home working following the pandemic in relation to its office portfolio. 

On the upside, over £800 million of capital has been redirected under its renewed strategy since early April. Leasing activity was close to a 10-year high and up to 3% rental growth is expected for its campuses going forward. The estimated forward dividend yield stands at close to 3.5%, and its latest EPRA net tangible assets per share value of 681p as of 30 September also stands above the current share price nearer to 528p. In all, progress is being made, with the stock offering exposure to the property sector, plus the attractive dividend yield potentially having appeal for income seekers.  

Positives: 

• A diversity of office, retail, logistical and residential property 
• Renewed strategy

Negatives:

• Uncertain Covid-19 outlook
• Some companies may now work from home permanently

The average rating of stock market analysts:

Hold