British Land shares fall after solid full-year result

Published 23rd May 2011

British Land posted an improved full-year result and positive outlook for its core markets on Monday, but investors saw these as less bullish than rival Land Securities' and traded its shares lower.

British Land posted a 12.5 percent rise in net asset value (NAV) per share to 567 pence, from 504 pence. Its underlying pretax profit was 256 million pounds, up 2.8 percent from 249 million pounds a year earlier.

Chief Executive Chris Grigg said British Land's results for the year to March 31 had outperformed, noting the company was well placed to continue this strong performance.

"Our strong letting performance across our portfolio shows clearly that there is still demand from occupiers for the well-located prime retail and London office assets we provide and we expect this to continue," Grigg said.

At 10:57 a.m., British Land shares were down 3.12 percent at 574 pence, underperforming a fall of 1.65 percent in rival Land Securities' shares to 779 pence. The broader index of property stocks .FTELUK was down 1.7 percent.

"These results are strong, but not as strong as Land Securities' full-year results, but we thought this would be the case," said JP Morgan Cazenove property analyst Harm Meijer.

On May 18, Land Securities said it would develop more prime central London offices to capitalise on a wider than expected supply shortfall, after reporting a 19.5 percent rise in its full-year NAV to 826 pence a share.

Meijer rated British Land's as 'Overweight' with a 592 pence target. Other brokers downgraded the shares.

"Given last week's share price jump, we believe the results will have a neutral impact on its share price today and prefer peer Land Securities. However, the trend remains up and, hence, we see any weakness as a buying opportunity," he said.

SHADOWLANDS

The central London office shortage was caused by development projects being put on ice during the global recession, but now, as the property sector and economy rebound, international firms are in a growth phase and demand for space is rising.

British Land has a central London office development pipeline totalling 2.2 million square feet, including the Leadenhall Building, 5 Broadgate, and the NEQ building.

Evolution Securities analyst John Cahill said British Land was always going find it difficult to surprise the market with positive full-year results, principally because its assets were valued quarterly, unlike Land Securities' bi-annual valuations.

"The (British Land) shares are at a 4.6 percent premium to NAV whereas Land Securities shares are at a 4.5 percent discount and the latter has a stronger development pipeline on its London properties," Cahill said in a client note.

British Land's results showed it had investment properties worth 4.75 billion pounds, from 4.13 billion a year ago. Its investments in joint ventures and funds totalled 2.07 billion, from 1.59 billion a year earlier.

The company's total accounting returns were 17.7 percent for the year, which comprised its dividend (5.2 percent) and growth in NAV per share. Its estimated rental value growth was up 2.7 percent, while portfolio occupancy was 97.8 percent.

Source: ' Reuters '

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