Shares in British Land, one of the UK’s biggest real-estate companies, made gains today, despite a fall in full-year profits.
In the 12 months to March 31, British Land’s underlying profit – which strips out distorting factors such as exchange-rate movements and acquisition costs – declined from £390 million to £380 million.
Uncertainties lie ahead
There was good news for investors, with the total dividend pay-out rising by three per cent, from 29.2p a share to 30.08p.
British Land’s shares were up 14.4p, or 2.11 per cent, at 696p.
Chris Grigg, chief executive, said: “This has been another good year for British Land. Our financial performance has been robust following significant asset sales, and we have made further strategic and operational progress.”
But he added: “Looking forward, we are mindful of the uncertainties. In retail, market conditions are likely to remain challenging. In offices, demand for our space is healthy, with a range of businesses continuing to commit to London and the supply of high-quality new space relatively constrained in the short term.”
The fall in underlying profit, he said, should be seen in the light of the sale of £1.5 billion of income-producing assets during the last two years, of which £800 million was completed during the year to March.
Mr Grigg said: “We have maintained our capital discipline, completing a £300 million share buyback and increasing our dividend again…while reducing LTV [ratio of borrowings to the value of assets] to 28 per cent, further strengthening our financial position.”
Among British Land’s highest-profile recent projects is the Clarges Mayfair residential development in London’s Piccadilly, which offers views across Green Park to Buckingham Palace and which was completed in the year to the end of March.
Mission to create “outstanding places”
On the economic backdrop to the results, the company said: “The economic environment remained uncertain across the year, with consumer spending more subdued, as inflation…reached a high of 3.1 per cent in November.
“The impact of political and economic uncertainty relating to the ongoing Brexit negotiations weighed on investment decisions for UK businesses and in November 2017, we saw the first interest rate rise in ten years.”
Looking forward, British Land added: “Our strategy is to create outstanding places, which reflect the changing lifestyles of the people who work, live or spend time in our space - we call this creating Places People Prefer. We do this by understanding and responding to the evolving needs and expectations of our customers.”
British Land is a real-estate investment trust (REIT), a type of investment vehicle, available in Britain since 2007, that allows property assets to be traded in a similar way to an investment trust. Other UK real-estate groups that converted to REIT status included Hammerson, Land Securities, Liberty International and SEGRO.
REITS are obliged to return 90 per cent of their property rental income to investors. In return, they do not pay Corporation Tax or Capital Gains Tax.