17th May 2016 10:11
LONDON (Alliance News) - Land Securities Group PLC Tuesday said it has been reducing risk inside the company, with its gearing at the lowest level in "many years", as it reported its pretax profit had almost halved over the year due to a reduction in the valuation surplus.
Land Securities, which is focused on the London development market and prime retail properties, said it sold GBP1.54 billion of buildings in the year to March 31, reducing its adjusted net debt at year-end to GBP3.24 billion, from GBP4.17 billion a year earlier. Land Securities said this was the lowest level its debt has been "in many years".
"As risk has been rising outside the business, we have been reducing risk inside the business. Ongoing challenges include appropriately managing the changing balance between supply and demand in London offices and responding to the evolution of consumer habits in retail. And next month, we face the prospect of a UK exit from the European Union," said Chief Executive Robert Noel.
"We believe a vote to leave the EU would lead to business uncertainty while negotiations take place on an exit treaty. Uncertainty slows decision-making. Over the short term, we anticipate this would drive down occupational demand in our market. In turn, this would lead to falling rental values and a reduction in construction commitments, particularly in London. So an exit could be painful for the property industry and those it supports," Noel added.
In light of this reduction of net debt, along with a "strong year for lettings" which left it with just 500,000 square feet left to let in London, Land Securities said it was hiking its final dividend to 10.55p from 8.15p. As such, its dividend for the year was 35.00p, up from 31.85p a year earlier.
The real estate development trust posted a total business return of 13.4% for the year to March 31, with basic net asset value per share rising to 1,482.00 pence from 1,343.00p a year earlier and adjusted diluted NAV rising to 1,434.00p from 1,293.00p.
Pretax profit, however, fell to GBP1.34 billion from GBP2.42 billion a year earlier, despite a 10% increase in revenue profit to GBP362.1 million, after valuation increases "were unable to match the sharp increases" seen the year earlier. Valuation surplus fell to GBP907.4 million, from GBP2.04 billion a year earlier.
Revenue profit is an underlying measure which strips out valuation movements and any profits or losses on the sale of investment properties, along with any one-off items.
Land Securities said its revenue profit rose due to higher net rental income, of GBP603.7 million up from GBP599.5 million, as well as lower net indirect expenses and lower net interest expense.
The company said its development programme had a market value of GBP1.80 billion at year end, down from GBP2.15 billion a year earlier.
"In London, we continued to lease up our well-timed and well-executed speculative development programme with over 500,000 square feet of new lettings and made progress on our future pipeline with 900,000 square feet of planning consents. We also took advantage of the strong market conditions during the year to sell some assets," said Chief Executive Robert Noel.
"Our strategy is delivering value for our shareholders, great space for our customers and positive change for our communities. We have a strong balance sheet with better assets and longer income streams. Despite the current political and economic uncertainty, Land Securities is well placed," Noel added.
By Hannah Boland; [email protected]; @Hannaheboland
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