ii view: Land Securities flags resilient results

Offices continue to trump retail, and a dividend yield of over 5% remains the core attraction for investors. 

Half-year results to 30 September 2019

• Revenue profit up 0.4% to £225 million
• Net assets per share down 3.2% to 1,298p
• Adjusted net debt up 2.7% to £3.8 billion
• Dividend payment up 2.7% to 23.2p per share

Chief executive Robert Noel said:

"Landsec had a good first half, delivering resilient results in unsettled market conditions.

"We have made excellent progress on our £3.0 billion pipeline of development opportunities, with 1.0 million square feet now on site. We have been proactive in the tough retail market, maintaining high occupancy and protecting income. 

"With a general election next month and the UK's proposed exit from the EU further delayed, we remain alert to market risks. However, Landsec enters the next six months with confidence; we're in a strong financial position, have an exciting development pipeline and are agile enough to seize value-creating opportunities as we see them."

ii round-up:

A Real Estate Investment Trust (REIT), Land Securities (LSE:LAND) owns manages and develops a portfolio of properties across the UK worth over £13 billion. 

Its properties comprise a mixture of London offices, retail destinations and leisure and hotel properties.  Office property examples include Cardinal Place and 123 Victoria Street London SW1. Retail outlets encompass One New Change in the City of London and the White Rose Centre in Leeds. 

London offices account for nearly 50% of its non-development properties by value, retail outlets nearly 40% and leisure and hotels around 10%. A focus on growing its development activity in London continues. 

In these half-year results, asset values declined by 2.8% in aggregate reflecting the weaker retail market, particularly for shopping centres and retail parks.

Like-for-like net rental income rose by 1.4%, with office up 2.5%, retail down 1.5% and specialist properties up 7.7%. Occupancy levels remained high, voids fell to 2.1% from 2.4% at the end of March. The dividend payment rose by 2.7% to 23.2p per share, on target for a tenth consecutive yearly increase. 

The share price was little changed in midday UK market trading. 

ii view:

Changing shopping habits have altered the property landscape for some years now. A move by consumers towards destination shopping centres with lots of parking and eating outlets in abundance have seen more traditional high streets and their shop value rents suffering. The rise of online shopping has increased pressure further, with deliveries from a warehouse preferable for many consumers than a trip to the shops. 

Land Securities has attempted to navigate these changes, with a focus on London office development its current strategic response. 

For investors, the dividend payment, underwritten by the group's rental income, provides the major attraction. A prospective dividend yield of around 5.3% remains attractive in today's low-interest rate environment. 

Positives: 

• The value of its office portfolio rose by 0.3%
• Attractive dividend payment (not guaranteed)

Negatives:

• The value of its retail parks fell by 11.1%
• Net assets per share declined by 3.2% to 1,298p

The average rating of stock market analysts:

Hold