British Land restores dividend despite losses and rent write-offs

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British Land PLC (LON:BLND) has resumed dividend payments even though the property giant remained deep in the red in its latest half-year.

In his final statement, departing chief executive Chris Grigg said despite facing many challenges due to COVID-19, the company’s financial position and strong rental collection from its office portfolio had given it the confidence to resume payments.

British Land suspended its dividend in March when the initial lockdown came into force but announced a payment of 8.4p today.

Results for the half-year to end September showed more scars from COVID-19 with losses widening to GBP730mln (404mln) reflecting a GBP625mln property value write-down.

Underlying profits fell by 39% to GBP107mln, which included a GBP44mln write-off for rent provisions while net assets per share dropped 10.3% to 693p

British Land said it had received 97% of rents due from its offices in the quarter to September, though retail was running at 62% collections.

Incoming chief executive Simon Carter said its office tenants were taking a long term view of the situation and looking through Covid “to acquire prime London offices at pricing close to pre-pandemic levels”.

“Many of our customers have seen that their people can work more flexibly, but they are clear that great office space, such as we deliver at our mixed-use campuses, will continue to play a crucial role in their success, by promoting innovation, collaboration, training and culture.”

Retail was more difficult but Carter said there is a clear preference from shoppers and retailers for out of town, open-air retail parks.

British Land will also continue to streamline its portfolio, he added, and today announced the sale of the Clarges development in Mayfair in London for GBP177mln or 7.6% above its valuation in September.

Since April, British Land has now sold property worth GBP675mln. At the end of September, the FTSE 100 group had GBP1bn undrawn cash facilities and said it has no requirement to refinance until 2024.

Brokers cautious

Peel Hunt added that a first look at the ‘new’ strategy suggests evolution not revolution, building on existing competitive advantages and we think a commitment to execute at greater pace.

The shares trade on a 26% discount to assets offering a 3.8% dividend yield, which is reinstated at an 80% payout of earnings.

AJ Bell’s Russ Mould added if internet-demand co continues to rise more companies may look to reduce their physical footprint with negative implications for the already bombed-out valuations in British Land’s retail estate.

“The company is also experiencing a fall in office leasing volumes thanks to the pandemic and Brexit uncertainty and, given a post-Covid future may involve more working from home, the impact on its portfolio of offices could be lasting.

“This raises the question of whether the sort of pick and mix approach pursued by British Land – owning a mixture of offices, shops, perhaps a bit of residential and some industrial and alternative assets – is a viable one for the long term.”

Shares dropped 3% to 495.5p but had rallied more than 40% since the end of October.

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