ii view: Land Securities dumps the dividend

Shop values are down by 20% and office rentals may now be reassessed. 

Full-year results to 31 March 2020

• Loss before tax of £837 million (2019: loss of £123 million)
• Net assets per share down 11.6% to 1192p
• Adjusted net debt up 5.5% to £3.9 billion
• No final dividend - full year dividend down 49.1% to 23.2p per share

Chief executive Mark Allan said:

“The effects of Covid-19 are accelerating ongoing structural trends across the real estate sector, while its longer-term societal and economic consequences are yet to be determined. Landsec's strong balance sheet and resilient operational performance have enabled us to respond to immediate challenges posed by Covid-19 with speed and decisiveness.

“I am confident Landsec is approaching the future from a position of strength. We are prepared to be bold in our thinking as we navigate both the challenges and opportunities arising in the long term from changing market trends and will not lose sight of our wider sustainability objectives.”

ii round-up:

A Real Estate Investment Trust (REIT), Land Securities (LSE:LAND) owns manages and develops a portfolio of properties across the UK worth around £12.8 billion. 

Its properties are comprised of a mixture of London offices, retail destinations and leisure and hotel properties. Offices account for just over 50% of its non-development properties by value, retail outlets a little over 35%, leisure and hotels at around 10% and other properties the balance. 

For a round-up of these full-year results, please click here.

ii view:

Changing shopping habits have been shifting the property landscape for some years now. First, a move away from high streets towards destination shopping centres hit, which offer lots of free parking, restaurants and cinemas. Then, the rise of online shopping allowed many consumers to bypass bricks and mortar shops all together. 

Now the corona crisis is both reinforcing the consumer experience of online shopping while closing the doors of the traditional high street and shopping centre outlets – if only temporary. 

For Land Securities, some of its retail tenants are now struggling to pay the rent. Many of its office tenants, having successfully worked from home under Covid-19, may now be re-evaluating their need for office property, or at least the size of property going forward.

For investors, the loss of both the previous third quarter and now final dividend payments is seismic and almost unimaginable just months ago. The outlook for both retail and office property may now be changed forever. But a 55% share price discount to the Net Asset Value does arguably price in the reassessment of prospects while the new chief executive will be eager to make his mark. 

Positives: 

• Loan-to-value (LTV) ratio of 30.7% offers further balance sheet capacity
• New CEO now assessing the long-term strategic direction

Negatives:

• Retail assets fell in value by 20.5%
• Third and final dividend payments cancelled

The average rating of stock market analysts:

Buy