ii view: British Land sets out new strategy

This property group sat on a dividend yield of around 3% is changing its focus. Here’s what to. 

Full-year results to 31 March

• Pre-tax loss of £1.08 billion compared to a loss of £1.1 billion last year
• Net Tangible Assets per share down 16% to 648p
• Total dividend down 6% to 15.04p per share

Chief executive Simon Carter said:

“While Covid-19 has clearly impacted our performance, with the portfolio value down 10.8%, we have a strong balance sheet and have already delivered excellent progress against our four priorities. 

"Looking forward, we will further align our business to growth and value, benefitting from the pick up in economic activity that is now emerging.  We will maintain our focus on the everyday management of our spaces: driving rent collection, supporting our customers and making our space more sustainable."

ii round-up:

Shop and office property owner British Land (LSE:BLND) today announced a new strategy as its portfolio of properties dropped by nearly 11% in value to just over £9.1 billion. 

The value of its retail properties fell by nearly a quarter over the year, pressured by pandemic lockdowns and missed rental payments. Similarly, offices values retreated by a little under 4%. 

Now, British Land is to use its expertise in development and active management to reposition and invest in both campuses and retail and fulfilment.

British Land shares dropped by more than 4% in UK trading, leaving them up by around 50% since pandemic lows in March 2020. Shares forTritax Big Box (LSE:BBOX), warehouse owner and landlord to Amazon (NASDAQ:AMZN), have gained more than 90% over the same time. 

Falls in the value of properties at British Land contributed to a second consecutive year of pre-tax losses of over £1 billion. 

British Land’s emphasis across its office buildings has been evolving towards campuses and a wider view of the buildings and the spaces between them, which support wellbeing and changing ways of working. Its Regent's Place offering is now actively targeting life sciences occupiers, while its Broadgate development will continue to focus on creative and technology sectors including FinTech and traditional finance.

Its Canada Water planning was made deliberately flexible, allowing its to deliver between 2,000 and 4,000 residential units and from 500,000 square feet to 2.5 million square feet of workspace, depending on demand. 

In retail, its offering is being expanded to include fulfilment. Its first urban logistics acquisition is a warehouse in North London, Enfield, for £87 million. Its current focus on out-of-town retail parks will remain. Retail parks account for 53% of its retail portfolio. They are increasingly preferred by retailers due to their affordability and ability to support an online offering via click & collect, returns and ship from store. 

The total dividend for the year of 15.06p is down 6% on the previous year and less than half of the 31p per share paid out in the 2018/2019 full year. 

ii view:

British Land is now pursuing four core priorities. These are to realise the potential of its campuses; continue with value accretive developments; target opportunities in retail & fulfilment and to actively recycle capital. Under these themes it has delivered projects such as 100 Liverpool Street, its first net zero development; purchased the A1 retail park, Biggleswade; and sold £1.2 billion of assets since April 2020.  

For investors, management currently anticipates a fall in office rents of up to 5% before recovering. Retail occupational markets remain tough, with it expecting rents to fall further. Outlook comments note the uncertain trajectory of the pandemic given risks from future variants.

More favourably, and after being suspended, the dividend is back being paid, if at a rebased level. A European Public Real Estate Association (EPRA) net tangible assets per share value of 648p stands above the current share price nearer to 500p, and management is encouraged by the strong rebound it has seen in retail footfall and sales particularly at its retail parks. In all, while management action offers encouragement, patience remains key for investors.   

Positives: 

• A diversity of office, retail, logistical and residential property 
• £1.8 billion of undrawn facilities and cash

Negatives:

• Uncertain Covid-19 outlook
• Some companies may now work from home permanently

The average rating of stock market analysts:

Hold