‘Good results in challenging markets’ – British Land

British Land today said it had achieved ‘good results in challenging markets’ as it reported full-year underlying pre-tax profits up 5.1% at £269m and 5.4% growth in net rental income. Net asset value per share (EPRA) rose 4.9% to 595p as of the end of March.

The group’s portfolio valuation rose 2.6% to £10.3bn and capital returns were 3%, outperforming the IPD benchmark by 250bp. Total property returns at portfolio level were 8.3%, outperforming by 200bp.

Footfall across the group’s retail portfolio was up 0.3% – in contrast to the industry average, which fell 2.0% – and occupancy was 98.3%. Tenants in administration at the year-end were 0.6% of total rent, compared with 0.5% a year earlier, although this figure has since risen to 1.0% following the administration of Clinton Cards.

The group said office leasing activity had remained subdued, but it had seen encouraging levels of activity in its offices portfolio, particularly in developments. It feels there is still significant value to come from its existing London offices development programme and is investing in expanding its future development pipeline, given “the ongoing shortage of quality space in both offices and retail”.

Acquisitions accounted for a ‘significant’ proportion of the increase in net rental income in the year to 31 March, with like-for-like net rental income growth up 1.5%. Total occupancy was up 20bp at 98.0% and leasing activity, including pre-lets, generated £10m of new annual rent during the year. Acquisitions generated a further £21m. British Land said estimated rental values for the portfolio rose by 2.1%.

“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,” the group cautioned. However, it added that it was defensively positioned in the current more difficult markets, and was well placed to benefit as the economic environment improved.

As a sign of its confidence, the group has increased its Q4 dividend by 1.5% to 6.6p per share, making a payout of 26.1p for the full year. It intends to pay at this higher level each quarter in 2012/13, to bring the total for the current year to 26.4p.