ii view: British Land stands tall as both income and value play

Full-year results to 31 March

• Adjusted earnings per share (EPS) up 1% to 28.9p
• Net tangible asset value (EPRA) up 4% to 590p per share
• Final dividend of 10.80p per share
• Total dividend payment for the year up 1% to 23.12p per share

Guidance:

• Expects adjusted EPS for the year ahead of at least 30.5p, underpinned by like-for-like net rental growth at the top end of a 3-5% forecast
• Expects EPS growth of 3% to 6% per annum in subsequent years

Chief executive Simon Carter said:

"A record year of leasing has driven strong ERV growth, like-for-like net rental growth and an attractive earnings outlook. We are benefiting from our leading positions in campuses and retail parks, where demand is growing and supply remains constrained.”

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ii round-up:

British Land Co (LSE:BLND) is a Real Estate Investment Trust (REIT) and a constituent of the FTSE 100 index.

Group properties range from London located campus developments holding a mix of offices, shops and restaurants, to retail parks, edge of town logistical warehouses and even an under construction residential housing development.

For a round-up of these latest results announced on 20 May, please click here.

ii view:

Started in 1856, British Land today owns a portfolio valued at just over £10 billion. Group properties include the Broadgate campus in the City of London, retail parks and shopping centres across the UK, logistical warehouses in outer London, as well as up to 4,000 homes being developed at Canada Water, London.

For investors, elevated inflation following the war in the Middle East now casts a shadow over interest rate policies globally, providing uncertainty for the group’s many business tenants. Potentially higher for longer interest rates could impact British Land’s own financing costs. Although down from last year’s 8.0 times, a net debt to adjusted profit ratio of 7.7 times continues to warrant consideration, while a relatively recent move into urban logistical developments leaves it up against established players Segro (LSE:SGRO) and Tritax Big Box Ord (LSE:BBOX).

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More favourably, the share price continues to trade at a discount to the net asset value of 590p per share. The recent acquisition of the Life Sciences REIT strengthens its existing focus on life sciences and tech tenants as well as differentiating it from rivals. Occupancy levels across the group’s portfolio remain robust, while in February credit rating agency Fitch gave it an ‘A’ rating with a stable outlook.

On balance, and while risks remain, a discounted valuation and forecast dividend yield of close to 6% appear to offer grounds for longer-term optimism.

Positives:

• A diversity of property types
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Elevated net debt to adjusted profit ratio

The average rating of stock market analysts:

Buy