British Land grows NAV despite euro headwinds

published 21 May 2012

British Land, the real estate investment trust, says it has overcome Eurozone headwinds to produce profits ahead of expectations and net asset value (NAV) growth.

In the 12 months to the end of March the British Land NAV grew 4.9% to £5.1bn, or 595p per share, while the total portfolio value gained 2.6% to £10.3bn. Chris Grigg, British Land's Chief Executive, noted that after a couple of years of recovery in property values following the credit crunch, the last year has been much more challenging, reflecting the emergence of economic and political tensions in the Eurozone and, closer to home, faltering economic growth in the UK.

British Land borrowed £468m more in the 12 month reporting period to leave net debt at £4.9bn. The firm's loan to value ratio now stands at 45.3%.

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Underlying profits before tax were £269m during the year, up 5.1% on the £256m seen in 2010/2011 and ahead of the consensus forecast of £265.8m.

Rental income from the portfolio, which includes the Meadowhall shopping centre in Sheffield, came in at £546m, up 5.4% on the prior year, while portfolio occupancy increased to 98.0% from 97.8%.

Footfall across the group's UK retail portfolio was up 0.3%, significantly outperforming the industry average which fell 2.0%, Grigg noted. Occupancy remained high at 98.3%, he added.

On the Offices side of the business, the proportion of office rent subject to lease break or expiry over the next three years fell from 12.0% a year ago to 4.9%.

"These are good results, and that's in a tougher environment. Our profits, valuation and NAV are all up. We outperformed the broader UK commercial property market on almost all key measures and our balance sheet is strong," Grigg said, adding that the key market trends continue to favour its business mix, what with the firm's focus on London.

The group intends to reshape its portfolio more swiftly than in the past as it seeks to reinvest in higher growth opportunities.

"We do remain cautious about the overall economic environment which remains difficult; we expect it to remain so with the UK economy growing slowly at best and the Eurozone crisis unlikely to resolve quickly. Against this background, we expect property capital values in the UK to be variable in the near term," Grigg revealed.

The final dividend will be 6.6p per share bringing the total for the year to 26.1p - in line with expectations.

In the last 12 months British Land shares have dropped 17.5%, although they have gained 5.7% since the start of 2012.