Great Portland Estates flags fall in half-year earnings

Great Portland Estates reported a fall in earnings per share in an update on Thursday, despite progress in strategic acquisitions and resilient leasing performance.

It said it recorded an IFRS profit after tax of £29.7m, while EPRA earnings declined to £8.5m for the six months ended 30 September, reflecting a 41% drop in earnings per share.

The FTSE 250 company said it had started deploying the proceeds from its recent rights issue, securing three new acquisitions totaling £106.1m, or £201m including capital expenditure, at a significant 61% discount to replacement cost.

It said it was continuing to pursue growth, with a £1bn pipeline under review, of which £125m was currently under negotiation.

GPE said it maintained significant liquidity, ending the six months to 30 September with £670m in cash and undrawn facilities, and an EPRA loan-to-value (LTV) ratio of 23.3%.

The group also strengthened its funding base with a new £250m sustainable sterling bond in September and a £150m revolving credit facility in October, extending its weighted average debt maturity to seven years.

It said the leasing segment performed strongly, with 28 new leases and renewals signed, delivering £10.5m in annual rent at 7% above estimated rental value (ERV) from March.

GPE’s Flex office offer reached 525,000 square feet, with plans to expand to one million square feet.

Additionally, £7.1m in lettings was currently under offer, surpassing the March ERV by 16.2%.

Although the vacancy rate rose to 4% due to ongoing refurbishments, the board said it remained within manageable levels.

The group's portfolio value increased 0.8% to £2.5bn, driven by a 1.1% rise in rental values.

Offices, including its Fully Managed spaces, saw an ERV increase of 2.6%, while retail grew by 1.2%.

GPE reaffirmed its portfolio ERV growth forecast of 3% to 6% for the year, with prime offices expected to rise by 5.0% to 10.0%.

The group said it remained optimistic, forecasting a positive total accounting return in the 2025 financial year, and a compound annual growth rate of over 10% in the medium term.

It said its active development pipeline was projected to yield £225m in surplus value.

Seven ongoing projects were progressing, with three headquarters developments already 51% pre-let.

GPE added that it planned to initiate six additional projects from the first quarter of 2025, with total capital expenditure expected to reach £401m.

“We are pleased to report on another successful operational performance, despite challenging political and economic conditions and fluctuating sector sentiment over the first half,” said chief executive officer Toby Courtauld.

“With deep customer demand for prime, sustainable spaces in our core markets and an increasing shortage of such supply, we are well placed to capitalise; our leasing is strong, beating the valuer's estimates by 7% on average with our spaces currently under offer some 16% ahead.

“We expect our rents to continue rising, reaffirming our rental growth guidance, as we fill our well-timed and located, sustainable developments and refurbishments, growing our rent roll by some 99% from our existing commitments alone.”

Courtauld said the company “added substantially” to our platform for growth during the half through its successful £350m rights issue in June and a further £400m of debt issuance since then.

“With investment capacity in excess of £650m, and asset pricing at or near cyclical lows, we acquired £106m of new HQ development and Flex opportunities in the West End at deep discounts to replacement cost.

“With a circa £1 billion pipeline of potential purchases under review, we expect to transact further in the second half, supplementing our exceptional on-site and near-term development programme which already covers 1.2 million square feet and will generate significant surpluses.”

At 0934 GMT, shares in Great Portland Estates were down 0.55% at 298.36p.

Reporting by Josh White for Sharecast.com.