Great Portland Estates has launched a share buyback to return £200m to its shareholders, it said today.
The property developer is set to repurchase 42m of its own shares over the next 12 months, in a deal backed by Merrill Lynch and JP Morgan Securities.
The company said it had decided to re-invest £200m of cash which is yielding a very low return.
However, it warned of “ongoing economic and political uncertainty” caused by Brexit, and said the buyback programme could be halted “as the future direction of the UK economy becomes clearer.”
Profit before tax almost doubled in the first half of the year ending September, compared to 2017, increasing by £17.6m to £40.4m.
Revenue, meanwhile, fell 22 per cent to £50.8m.
Net debt fell to £149.6m from £587m, or to £116.3m when excluding the company’s joint ventures.
Basic earnings per share increased to 12p, an rise from 7.7 in the first six months of last financial year, while the interim dividend went up 7.5 per cent to 4.3p.
Why it’s interesting
With Brexit negotiations hanging over the market, Great Portland said it remains well positioned with over 90 per cent of its properties close to a Crossrail station.
The company said it has no need to buy new property with nearly 1.3m sq ft of growth potential in its development pipeline.
However, it still has the financial muscle to start snapping up more property if prices fall.
Shares in the investor shot up from 658p to 756p after it signed a £450m revolving credit facility with six banks in early October. Shares increased as high as 760p, a two per cent rise, this morning.
The buyback will not be the first time Great Portland has returned money to shareholders this year. In April it gave back £306 million after selling its 240 Blackfriars Road and 30 Broadwick Street developments.
What Great Portland Estates said
Chief executive Toby Courtauld said: “We are pleased to report another strong operational performance, led by leasing successes and development progress, delivering a solid set of financial results for the first half and continued capital discipline through a further return of surplus capital to shareholders.”
What the analysts said
Ed Monk at Fidelity Personal Investing said: “Great Portland Estates showed at its full-year results in May that it weathered Brexit-related devaluations of its portfolio well. Rents increased and debt was slashed.
“Great Portland described rental demand in the capital as “healthy” despite the uncertainty created by Brexit. Some 92% of its properties are in close proximity to a Crossrail station and the portfolio has the capacity to add 1.3m sq feet of space without the need for purchases, meaning the company is very well positioned to deal with any Brexit-related knocks to demand.”