ii view: Land Securities sees fastest rent growth in almost 20 years

Full-year results to 31 March

• Like-for-like (LFL) net rental income up 4.6%
• Adjusted earnings per share (EPS) up 2.2% to 51.4p
• Adjusted net asset value (NAV) per share up 0.9% to 882p
• Final dividend of 22.2p per share
• Total dividend for the year up 2% to 41.2p per share
• Adjusted net debt down 2.1% to £4.21 billion

Guidance:

• Expects growth in LFL net rental income for the year ahead of 3% to 5%
• Continues to expect a compound annual growth rate (CAGR) in adjusted earnings of 5% to 2030

Chief executive Mark Allan said:

"Over the past few years we have actively positioned Landsec for a higher inflation and higher interest rate world. We have focused our portfolio on the best quality locations where customer demand is highest, scaled back development, reduced our overhead costs and maintained our strong capital base.

"Occupancy is now up to a 20-year high and rents are growing at their fastest pace in nearly two decades. As a result of our actions, our strong top line growth will increasingly flow through to an acceleration in EPS growth in the near and medium term. Despite elevated geopolitical risks, we remain confident in the potential to deliver c. 5% CAGR in EPRA EPS between now and 2030."

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ii round-up:

Land Securities Group underlined its ongoing property rejig with the owner of shopping malls including Trinity Leeds and Liverpool One reiterating its prediction for compound growth in adjusted earnings of 5% per year to 2030.

The fastest growth in rents for nearly two decades and occupancy rates at a 20-year high helped drive adjusted earnings up 2.2% in the year ended March to 51.4p per share. A recycling of capital from properties where rents are harder to raise to destination locations is expected to help deliver adjusted earnings of 62p per share come 2030.

Shares in the FTSE 100 company rose around 2% having come into these latest results down by close to a tenth so far in 2026. That’s similar to rival British Land Co. The FTSE 100 index is up around 4% year-to-date.

Like-for-like (LFL) net rental growth of 4.6% over the year to late March helped drive a 2% rise in total annual dividend payments to 41.2p per share. A final dividend of 22.2p per share is payable to eligible shareholders on 24 July.

Other Land Securities properties include offices in the City of London, an interest in the Bluewater shopping centre in Kent, as well as planning approved housing developments in both London and Manchester.

Sales include £346 million worth of offices and £261 million of retail parks over this last year. Major retail acquisitions remain LandSec’s priority for sale proceeds with around £800 million expected to be deployed in that direction over coming years.

An adjusted net asset value (NAV) of 882p per share was up 0.9% from a year ago. Group net debt fell 2.1% to £4.21 billion, leaving a net debt to adjusted profit ratio of 8.4 times.

Broker UBS repeated its ‘buy’ stance on the shares post the results, flagging fair value price of 705p per share.

First-half results are likely to be announced mid-November.  

ii view:

Started in 1944, the Victoria, London headquartered company’s property portfolio is today valued at around £10.8 billion. Other properties range from the Myo flex office complex in Kings Cross to the Media City development in Manchester and the Gunwharf Quays shopping complex in Portsmouth. Further interests include four projects across the UK and potentially delivering 9,000 homes over the next decade.

For investors, rising inflation in the wake of the Middle East war could push interest rates higher, putting consumers under pressure and subsequently the group’s retail tenants. AI and its impact on jobs and required office space is tough to predict. Group net debt of just over £4 billion is similar to the company’s stock market value, while this year’s total dividend of 41.2p per share still sits below the 45.55p paid before the pandemic in 2019.  

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More favourably, 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. Increasing income is expected to help reduce the net debt-to-adjusted profits ratio to below seven times within the next two years, while the share price remains at a discount to the net asset value of 882p per share

For now, and while risks remain, a sizeable share price discount to NAV and forecast dividend yield of around 7% are likely to see investors remain interested.

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