ii view: income play British Land predicts profit growth

Full-year results to 31 March

• EPRA net tangible assets per share up 1% to 567p
• Adjusted profit up 4% to £279 million
• Adjusted Earnings Per Share (EPS) flat at 28.5p
• IFRS profit of £338 million, up from a profit of £1 million
• Final dividend of 10.56 per share
• Total dividend for the year unchanged at 22.8p per share

Guidance:

• Expects adjusted profit for the year ahead to grow by around 2%

Chief executive Simon Carter said:

"The continued occupational strength of our key markets and the resulting above inflation rental growth gives us confidence for the future and in our strategy, despite ongoing macro volatility. 

“Return to the office is in full swing, with mid-week occupancy back to pre-pandemic levels, and value and multi-channel retailers are competing aggressively for space on our retail parks. This, combined with the acute lack of supply in both these markets is resulting in strong rental tension, which will translate into future earnings growth.”

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ii round-up:

British Land Co (LSE:BLND) today detailed increased profit, with the owner of properties including offices and shops predicting a marginal increase in profits for the year ahead despite the uncertain economic environment. 

Like-for-like net rental growth of 3% and a 1.6% increase in property values helped annual adjusted profit for the year to late March gain 4% to £279 million. A final dividend of 10.56 per share, payable to eligible shareholders on 25 July, leaves the total annual payment unchanged at 22.8p per share. Continued occupational strength above inflation rental growth now underpin management’s hopes for an approximate 2% gain in adjusted profits for the year ahead. 

Shares in the FTSE 250 real estate investment trust fell 4% in UK trading having come into this latest news up around 14% year-to-date. That’s comfortably ahead of a less than 1% gain for the FTSE 250 index. Rival Land Securities Group (LSE:LAND) is up 5% during 2025. 

British Land properties include mixed office and shop developments in the City of London, Paddington and Canada Water, retail shopping parks across the UK and logistics warehouses on the outskirts of London. 

An overall portfolio value of £9.5 billion as of late March, up from £8.7 billion a year ago, helped drive adjusted Net Asset Value per share up 1% year-over-year to 567p.

The property REIT completed £597 million of disposals over the year, including the Meadowhall Sheffield shopping centre, and purchased £738 million of retail parks.  

Unadjusted or profits on a IFRS basis of £338 million rose from £1 million the year before. The group’s ratio of net debt to adjusted profit rose to 8 times from the previous year’s 6.8 times. 

Interim results are likely to be announced mid-to-late November. 

ii view:

Tracing its history back to 1856, British Land today employs around 600 people. Other group properties include the Regent’s Place campus development, Edinburgh’s Fort Kinnaird retail park and the Southgate retail park near Bath Spa train station. British Land estimates that it owns around 8% of UK retail parks. Exposure to residential properties includes the development of up to 4,000 homes at Canada Water in London. 

For investors, the difficult economic backdrop, including increased interest rate outlook uncertainty following the imposing of potentially inflation boosting US trade tariffs, cannot be ignored. A forecast one-year price/earnings (PE) ratio broadly in line with the three-year average may suggest the share are not obviously cheap. A ratio of group net debt to adjusted profit of 8 times warrants consideration, while a relatively recent move into urban logistical developments leaves it competing with more established players such as sector giant Segro (LSE:SGRO). 

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To the upside, the share price continues to trade at a discount to the net asset value of 567p per share. Occupancy levels across the group’s portfolio remain robust at an overall 98%. A focus on life science and tech company occupiers at its campus developments was previously flagged, while £1.8 billion of undrawn facilities and cash remain with no requirement to refinance until late 2028. 

In all, and while some caution remains sensible, a discounted valuation and forecast dividend yield of over 5% appears to offer grounds for longer-term optimism. 

Positives: 

• A diversity of property types 
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Increased net debt to adjusted profit ratio

The average rating of stock market analysts:

Buy