Land Securities ups full-year guidance
Commercial property group Land Securities Group Plc lifted its earnings forecasts on Friday, despite the economic backdrop, following a strong first half.
Net rental income at the blue chip landlord - which owns a mix of offices and retail, including in the City and West End - rose 5.6% in the six months to September end to £284m, or by 5.2% on a like-for-like basis.
Occupancy was 40 basis points higher at 97.7%, while overhead costs fell 6%. As a result, earnings per share rose 3.2% to 25.8p.
Pre-tax profits fell sharply, however, to £98m from £243m, following a £67m loss on the sale of £644m of assets which generated little or no return. As a result, net tangible assets per share eased 1.3%
Mark Allan, chief executive, said: "We continue to see clear, positive momentum across every part of our business, notwithstanding the wider economic environment.
"Owning the right real estate has never been more important, so we continue to benefit from our proactive portfolio repositioning over the last few years.
"Our entire business is also benefiting from a sharper focus on sustainable EPS growth as our primary performance objective."
Looking to the full year, Landsec now expects like-for-like net rental income to grow by between 4% and 5%, up from previous guidance for around 3% and 4%.
It also expects EPS growth at the top end of guidance for between 2% to 4%.
The firm is looking to expand into residential developments, and has secured planning consent for its first 879 homes in Manchester and outline approval for 2,800 in south east London.
Landsec believes the sector offers higher income growth and lower cyclicality over the longer-term.
It noted that returns were currently "insufficient", however, to justify the capital allocation required.
But it reiterated its commitment to the pivot, noting: "While returns are currently insufficient, positive shifts in public sector policy are helpful and could add around 50 to 75 basis points to current net yields on cost of around 5%."
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