ii view: Land Securities raises growth forecasts

First-half results to 30 September

• Like-for-like (LFL) net rental income up 5.2%
• Adjusted Earnings Per Share (EPS) up 3.2% to 25.8p
• Adjusted Net Asset Value (NAV) per share down 1.3% to 863p
• Interim dividend up 2.2% to 19p per share
• Adjusted net debt up 1.6% to £4.37 billion

Guidance:

• Now expects growth in LFL net rental income of 4 to 5%, up from 3-4% guidance
• Now expects full-year 2030 EPS of 62p, up from a previous estimate of 60p

Chief executive Mark Allan said:

“We continue to see clear positive momentum across every part of our business, notwithstanding the wider economic environment. Owning the right real estate has never been more important, so we continue to benefit from our proactive portfolio repositioning over the last few years.”

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ii round-up:

Land Securities Group (LSE:LAND) today raised its estimate for growth in annual LFL net rental income as it continued to refocus towards destination properties such as major shopping centres and housing. 

Growth in LFL net rental income during the half year to late September of 5.2% was aided by 5% growth in retail properties including its Liverpool One shopping centre complex. Full-year growth is now expected to come in at 5% versus 3-4% previously. 

Shares in the FTSE 100 company fell 4% in UK trading, although the wider market is down amid further tax uncertainty ahead of the UK Budget. LandSec shares came into these latest results up by a tenth so far in 2025. That’s similar to fellow office and shop owner British Land Co (LSE:BLND). The FTSE 100 index is up around 17% year-to-date.

Land Securities properties include offices in the City of London, an interest in Kent's Bluewater shopping centre, as well as planning approved housing developments in both London and Manchester. The majority of its 9,000-home pipeline now has consent.

Growth in LFL net rental income helped drive a 2.2% increase in the interim payment to 19p per share, payable to eligible shareholders on 9 January. 

Adjusted net asset value had decreased to 863p as of late September from a previous 874p, hindered by losses on the sale of £644 million of properties and including sales of office buildings where rental increases are more difficult to achieve. 

Reduced office development, a continued focus on costs, and the ongoing portfolio refocus are all expected to help adjusted earnings for the 2030 full year hit 62p, up from a previous estimate of 60p and a potential 23% increase from 2025. 

Group net debt rose 1.6% from late March to £4.37 billion giving a net debt-to-adjusted profit (EBITDA) ratio of 8.6 times, although management now targets a ratio of under 7 times within the next two years, down from a previous target of below 8 times.   

Broker UBS repeated its ‘buy’ stance on the shares post the results. Full-year results are expected mid-May.  

ii view:

Started in 1944, today the group's property portfolio spans 25.7 million square feet. Properties range from the Myo flex office complex in Kings Cross, to the Media City development in Manchester and Leeds Trinity shopping centre. A move towards mixed usage but residential-led properties is being made, with a push to invest £2 billion and over in the sector by 2030. 

For investors, stretched UK government finances, an imminent UK Budget and the potential impact on interest rates cannot be ignored. Increased UK national insurance contributions are pressuring small retailers and likely hitting rental potential. Net debt rose to £4.37 billion and compares to a stock market value of £4.6 billion, while this year’s total dividend of 40.4p per share is still less than the 45.55p paid out before the pandemic 2019.  

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On the upside, management continues to progress a rejig of the group’s portfolio towards properties where rental increases are more likely to be achieved. A diversity of property types is owned. Average group debt maturity sits at close to nine years with no need to refinance any debt until 2027, while the share price continues to sit at a discount to a net asset value of 863p per share. 

In all, and while an uncertain economic outlook remains an overhang, a sizeable share price discount to NAV and forecast dividend yield above 6% make the shares interesting.

Positives: 

• Discounted valuation
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Rise of e-commerce shopping

The average rating of stock market analysts:

Buy