British Land Company PLC (LON:BLND) shares dipped in lunchtime trading Tuesday after a challenging retail environment weighed on its results for the first quarter, offsetting a hike in its first interim dividend.
In a statement ahead of its annual general meeting, the FTSE 100-real estate group said it retained a strong financial position with its loan-to-value (LTV) ratio reduced to 26%, and that it would be increasing its first interim dividend by 3% to 7.75p compared to the first dividend last year.
READ: British Land up on annual profit jump after property revaluations despite challenging market conditions
In its offices division, the group said its portfolio was 98% occupied with 64% of its total development pipeline now let or under offer, up from 55% in May. As a result, the firm said its speculative exposure remained low at around 4.4% as development costs would be covered mostly by residential sales receipts.
British Land also said it was progressing with the rollout of Storey, its flexible workspace business, which was already operational across the companies' central London campuses.
However, in its retail arm, the company said the market remained challenging with companies entering administration and company voluntary arrangements (CVAs) impacting its rent figures, with the combined effect on its total group contracted rent rising from 1% at the time of its preliminary results in May to 1.6% since 1 April 2017, with retail occupancy at 96.4%.
The group also said that it had completed the sale of 5 Broadgate alongside its joint venture partner for £1bn, in line with book value, and had commenced a £200mln extension to its share buyback programme using funds from the disposal.
In a note to clients, analysts at Liberum commented that despite a flat market, British Land was continuing to “balance activity to deliver future value creation, while limiting its overall financial and speculative risk exposure”.
Mike van Dulken, head of research at Accenda Markets, commented: "Weighing on sentiment this morning, is not the observation that Retail remains challenging - it’s no secret that the UK high street faces tough times and management even highlights “The impact of long-term structural change driven by the internet being compounded by short term trading headwinds"".
He added that the clarification of CVAs compromising 1.6% of the company's rents was "even more worrying" and that despite the small figure, it was still a 60% increase on the previous figure of 1% in the results published in May. With this in mind, he said investors were sure to "keep a beady eye on both occupation levels and CVAs rates going forwards, especially if they continue to diverge unfavourably".
British Land shares were down 1.4% at 642.6p.
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