British Land has posted a modest 1% rise in both the value of net tangible assets (NTA) and underlying profit, after building “operational and financial momentum” in the half year to the end of September, the company said.
The group’s profit nudged up to £143m for the period, while its portfolio was valued at £8.87bn, up 0.2% up from six months earlier.
The company’s NTA per share came in at 567p, up from 562p at the end of March, with underlying earnings per share up 1% to 15.3p.
During the period, British Land sold £456m of non-core assets and deployed £711m into retail parks, one of its preferred subsectors.
Chief executive Simon Carter said: “We are pleased the operational and financial momentum in our business continues. Strong levels of leasing ahead of ERV [estimated rental values] and sustained cost discipline enabled us to grow profits again, despite significant development activity, which will be a key driver of future profit growth.”
Carter added: “Since 2021 we have increased our exposure to retail parks from 15% of the portfolio to 32% today. This conviction is paying off, with retailers competing for cost-efficient out-of-town space to support their online operations. This is leading to strong rental growth and valuation uplifts, which are outperforming all other subsectors.”
The group posted a total accounting return of 2.8% in the period, while its loan-to-value ratio nudged up from 37.3% at the end of March to 37.8%.
Investors will benefit from a 1% rise in the interim dividend, to 12.24p per share.
Carter said that “while geopolitical risk remains elevated” British Land’s portfolio is “well positioned for the inflection in the cycle”, and added: “The continued strength of our occupational markets underpins our guidance of 3% to 5% rental growth across the portfolio, and our ability to generate attractive future returns.”
Oli Creasey, property research analyst at Quilter Cheviot, said: “British Land has been one of the better-performing REITs so far in 2024, but today’s results are likely to give investors pause. As expected, the company’s retail assets have performed well. However, its central London campus portfolio is still struggling.
He added that the 1.6% valuation fall in the half year “is not enormous, but is behind the equivalent figure reported by Landsec, and behind recent analyst expectations. Most of the pain has been felt by development assets, which are always more prone to sharp valuation moves.
“Comparisons to Landsec are inevitable for the company, and not favourable this time around. However, we note that the opposite was true six months ago, and perhaps today’s news is simply a reversion to mean”.
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