British Land has reported a rise in underlying profits in the year to the end of March, boosted by the City's tallest tower the Cheesegrater, and said it will remain resilient in the face of ongoing Brexit uncertainty.
Shares dipped 3.06 per cent to 653.00p in morning trading.
British Land reported underlying profit rising 7.4 per cent to £390m compared to £363m last year. It was boosted by the sale of the capital's Cheesegrater to China's CC Land for £1.15bn.
IFRS pre-tax profits though, dropped to £195m, down from £1.3bn last year.
Still, British Land reported 1.7m sq ft of lettings and renewals "despite the low level of vacancy", eight per cent ahead of estimated value, and added £22m of rent. Occupancy rates improved to 98 per cent, with an average lease length of 8.3 years.
The property developer also said it had reduced the amount of space it was building without secured tenants to under four per cent.
It has proposed a full year dividend of 30.08p per share.
Why it's interesting
The developer racked up headlines earlier this year when it announced it had put one of London's tallest buildings up for sale. The Leadenhall Building, commonly known as the Cheesegrater, stands at 225m (737ft) tall and was developed in a 50-50 joint venture between British Land and Canada's Oxford Properties. The price for the deal was 26 per cent above the building's most recent valuation of £915m last September.
That sale has given the developer a boost amid Brexit uncertainty, but British Land did warn it expects uncertainty in the property market to continue for "some considerable" time as Britain's withdrawal from the European Union gets underway.
What the company said
Chris Grigg, chief executive said:
We are reporting a good set of results today despite an uncertain environment over the last 12 months.
The increase in valuations in the second half is also better than many expected six months ago. These results reflect the continuing execution of our strategy, providing space that responds to changing lifestyles and really fulfils customers' needs. We expect to be operating in an uncertain environment for some time; in this context we will benefit from the resilience of our business, the quality of our portfolio and the strength of our finances.
We also look forward with cautious optimism as we believe that we can generate incremental returns by allocating capital to development opportunities we have created, whilst keeping risk at an appropriate level and maintaining flexibility to respond to changes in our markets.
The analyst's take
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “The headline numbers for 2016/17 are actually pretty good, valuations haven’t tumbled and rental income has remained robust, even improved. The dividend continues to grow at a steady rate, which will be what matters most for many investors."
He does though note, that the firm is "clearly uncomfortable about the future".
"Speculative developments have been reined right back and leverage is falling as the group sells some high profile assets, including a 50 per cent stake in the Cheesegrater," Hyett said. "That’s sensible given the group’s disproportionate exposure to the prestige London office space most likely to be hit if Brexit results in a mass exodus of bankers, lawyers and the like. However, it suggests the group feels there could be stormy weather ahead.”