Tuesday 12 November 2019 8:00 am

Landsec swings to first-half loss after retail property values plunge

Landsec swung to a pre-tax loss in the first half of the year after the value of its retail and leisure assets suffered in an increasingly challenging market for tenants. 

The figures 

The company reported a pre-tax loss of £147m, compared to a profit of £42m the previous year, resulting in a loss per share of 19.6p.

Read more: Landsec chief executive Robert Noel to retire

Revenue profit, the firm’s measure of underlying pre-tax profit, increased from £224m to £225m in the six months to the end of September as net rental income in Landsec’s like-for-like portfolio was offset by a decline at proposed developments. 

The value of the company’s portfolio declined 2.8 per cent, driven by a 11.1 per cent fall in retail park value. 

Why it’s interesting 

As a commercial property developer and investment trust, Landsec has been hit by the challenges facing the UK retail industry. 

During the reporting period a number of shopping centre staples have closed stores, such as Arcadia’s Topshop and Dorothy Perkins. 

Landsec said it is “not immune from these trends” but “where we have been hit by CVAs, our assets remain popular with occupiers and customers”. 

In a statement today the company said: “The retail market continues to be challenging with retailers facing structural change, economic pressures and a rising cost base.

“This is reflected in asset pricing, with rental values and market yield movements driving significant valuation declines, particularly in regional retail and retail parks. 

“We have seen further high-profile CVAs and administrations in the period, notably Debenhams and Arcadia.”

Read more: Landsec: A tale of two portfolios

What Landsec said 

Chief executive Robert Noel said: “Landsec had a good first half, delivering resilient results in unsettled market conditions.

“We have made excellent progress on our £3bn pipeline of development opportunities, with 1m sq ft now on site. Our new products, Myo and Fitted, have landed well with customers.

“We have been proactive in the tough retail market, maintaining high occupancy and protecting income. We have extended our leadership in sustainability by setting further stretching targets.

“And we’ve upped our pace in innovation, introducing better ways to design, construct and manage space.

“With a general election next month and the UK’s proposed exit from the EU further delayed, we remain alert to market risks. However, Landsec enters the next six months with confidence; we’re in a strong financial position, have an exciting development pipeline and are agile enough to seize value-creating opportunities as we see them.”

Main image credit: Getty