British Land drives strong interim profits but proceeds with caution

British Land lifted profits strongly higher in the first half of its financial year but said it expects to proceed more cautiously in property development as it noted a change in the behaviour of property markets since the Brexit vote, with leasing momentum maintained in retail but more caution among office occupiers.

In the six months to 30 September, the FTSE 100 property developer grew income 3.4% on a like-for-like basis and, helped by lower finance and operating costs, drove underlying profit before tax up 16.4% to £199m.

With underlying earnings per share growth of 20.6% and a new policy announced at the end of the last year to increase dividends by 3%, the second quarter dividend of 7.3p hiked the half-year payout to 14.6p per share.

The portfolio decreased in value by 2.8% and the EPRA net asset value fell 3.0% to 891p per share, with total net assets of £9.2bn.

"We're mindful of future uncertainty but are confident that our secure income streams and strong finances will ensure our business remains resilient," said chief executive Chris Grigg.

"As occupiers become more discerning we expect our high quality portfolio to benefit from increasing polarisation. The evolving environment will be reflected in our tactical decisions, particularly on development where we expect to proceed more cautiously."

British Land had only a modest amount of speculative development commitments at present, which includes the development of 100 Liverpool Street in London's Broadgate, with partner GIC.

The largest opportunity in the company pipeline is at Canada Water where plans for a new mixed-use urban centre has seen some progress on developing a masterplan and "encouraging discussions" with potential occupiers across all possible uses, ahead of the submission of a planning application in 2017.

Broker Numis said: "The outlook is without doubt less certain, but in our view this is more than factored into the 32% discount
to NAV and 4.8% dividend yield. We expect the market to take today’s results well."