Land Securities confident as it delivers strong results
Land Securities pleased the stock market yesterday with strong full-year results and a confident outlook. NAV per share was up 18% year-on-year to 885p at the end of March 2011 while pre-tax profits were 14.8% higher at £1,227.3m. The group said its ungeared total property return was 16.8%, which it noted clearly outperforms the IPD’s Quarterly Universe at 11.3%. Rental values across its portfolio were up 4.7% over the year and the level of voids in its portfolio on a like-for-like basis was cut to 4.3% from 5.3% a year earlier.
Chief Executive Francis Salway noted that the forthcoming lack of supply of new office space in London could be even more acute than originally forecast, and said Land Securities saw particularly strong growth prospects in the capital over the next few years. In general, he said, the group’s markets were in “recovery mode” – there might be continued “ripples in prices”, but the group was confident in its plans and well positioned to address growth opportunities.
The group’s portfolio is currently split 43% in central London office space and 61% in Greater London as a whole. Mr. Salway said the group’s portfolio “will remain weighted towards the capital for some time, as we focus on addressing the low point in the supply of new offices expected from 2012”. In the retail sector, while vacancy levels remain high in high streets and smaller towns, vacancy rates in good-quality shopping malls that are dominant in their region have fallen, and are moving closer to normal levels, he added. Land Securities expects this widening gap between shopping locations to continue, “and so we will continue to refine the composition of our retail portfolio through new development, where we can achieve significant pre-lettings, and through selective purchases and sales,” Mr. Salway added.
Chairman Alison Carnwath noted that questions remained as to the future of the UK banking industry and added that the effect of future rises in interest rates on commercial property was unclear – “particularly as much of the sector remains dependent on substantial refinancing arrangements being put in place over the medium term.” She added that the group was also waiting “to see whether government austerity measures serve to strengthen the long-term health of the economy.” However, she noted that while the economic outlook was uncertain, the group’s market sectors had provided more cheer. London remains “a desirable and popular place for multinational organisations”, she said, while in the retail sector the group sees “good potential for income opportunities as the more resilient retailers look to develop a multi-channel approach that combines online and physical retailing.”
