Land Securities warns Brexit could be “painful for the property industry” as it reports pre-tax profits plunge
Land Securities’ pre-tax profits almost halved in the year to 31 March amid “uncertainty in the lead up to the EU referendum”.
It said a Brexit could be “painful for the property industry and those it supports” but stated that it could “thrive” no matter what the outcome.
In the year to 31 March, Land Securities reported a pre-tax profit of £1.3bn, down from £2.4bn.
It reported revenue profit, meanwhile, of £362.1m, up 10 per cent year on year, and increased its dividend by 9.9 per cent to 35p.
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The company said its revenue profit is “our measure of underlying pre-tax profit, which is used internally to assess the group's income performance”.
Basic earnings per share (EPS) were down from 306.1p to 169.4p, while adjusted diluted EPS were up 10.1 per cent to 45.7p.
Over the year, Land Securities sold £1.1bn of assets “as we saw wider economic and political uncertainty increasing”.
Why it’s interesting
On its outlook, Land Securities noted that “risk has been rising outside the business”, highlighting the upcoming EU referendum.
A vote to leave the EU would “lead to business uncertainty while negotiations take place on an exit treaty” meaning slowed decision-making, the company said. It said that in the short term this would likely drive down occupational demand in the market, leading to falling rental values and a reduction in construction commitments, particularly in London.
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“So an exit could be painful for the property industry and those it supports,” it said. “But there is a higher principle at play here. This is a decision for the British people, not businesses.
“It is up to individuals – including those amongst our customers, communities and partners – to decide what's best. As guardians of shareholder capital, our responsibility is to position the company so it can thrive whatever the outcome. That's what we have done.”
What the analysts said
Liberum said in a note that earnings and the dividend are “comfortably ahead [of expectation] demonstrating confidence in the positioning of the portfolio”.
The note added: “The outlook appears healthy, albeit [estimated recovery growth] is unsurprisingly expected to rise at a slower pace and a large caveat is made in respect of the EU referendum.”
What the company said
Chief executive Robert Noel
We are pleased to report a strong performance for the year. Revenue profit and net asset value per share are up, lease terms are longer and, as planned, speculative development exposure and net debt are lower. Continued leasing momentum in our development programme combined with smart asset management and balance sheet discipline has put the business in a strong position. Our confidence is demonstrated by a proposed 9.9 per cent increase to the dividend.