British Land reports 'robust' financial performance despite slip in underlying profits

Oscar Lopez
British Land announced its Canada Water redevelopment planning submission this week.

British Land's share price picked up two per cent this morning after the company posted its annual results, with the real estate development firm reporting a slip in underlying profits.

The figures

Underlying profits fell 2.6 per cent to £380m, which British Land said came following £1.5bn net sales of income producing assets over the last two financial years.

Profit before tax however rose from £195m last year to £501m thanks to a rise in the value of the business' properties.

The company said its offices business, which includes 1.2m square feet (sq ft) of leasing activity, had increased 4.5 per cent in value.

In development activity, British Land said that its property pipeline had doubled to 1.6 million sq ft, generating estimated future rent of £63m, of which 55 per cent was pre-let or under offer.

Read more: British Land submits planning application for Canada Water development

The commercial property company also said that 90 per cent of its leases which had expired were either renewed or replaced, while occupancy has remained at 98 per cent.

Why it's interesting

The UK property sector is facing a challenging time, with house prices in London in particular predicted to slump.

A highly-regarded survey published by the Royal Institution of Chartered Surveyors (Rics) last week revealed that 65 per cent more property surveyors saw London prices fall during April rather than rise, the weakest reading since February 2009.

Data from Halifax released also released last week showed that UK house prices fell over three per cent in April, following a 1.6 per cent rise in March. According to the Rics survey, prices could drop further in the next 12 months.

British Land said today it plans to expand its “build to rent” portfolio as it looks to top up its income, underscoring the continued strength of the UK rental market.

The company’s results come after it announced earlier this week that it had submitted an outline planning application for its Canada Water regeneration, which will see the company develop 1.8m square feet (sq ft) of mixed use space in the first phase.

Nicholas Hyett, equity analyst at Hargreaves Lansdown said:

“With Brexit threatening to force bankers from London and retailers struggling in the face of ever rising costs and online competition, conditions are hardly rosy for British Land.

"However, the group’s strategy of targeting high quality destination shopping centres and mixed use London campuses have been insulating it from the worse effects. That its portfolio valuation has actually improved this year is testament to that."

What the company said

Chris Grigg, British Land's chief executive said: “Our financial performance has been robust following significant asset sales and we have made further strategic and operational progress."

Grigg said that the company’s campus offering in its London office business had driven up demand for space, and pointed to the launch of its flexible workspace Storey, which is now 77 per cent let.

Read more: British Land has bought this south London estate for £103m

“Looking forward, we are mindful of the uncertainties. In retail, market conditions are likely to remain challenging,” Grigg added.

“As the ways in which businesses and people use space evolves, our strong and flexible balance sheet means we can capitalise on the opportunities we have created, which broaden the type of space we offer."

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