Although real estate investment trusts are required to pay 100% of their profits as dividends, the FTSE 250-listed group said it will pay out 80% of underlying earnings per share in the previous six-month period, with payments made semi-annually instead on its previous quarterly basis.
Having scrapped its dividend in March as the coronavirus lockdown came in, the property developer said it continued to face challenging conditions as a result of the coronavirus pandemic while adding that “we also recognise the importance of the dividend to shareholders”, had a strong financial position and was reassured by the improving operational performance of its assets in recent months.
Collection rates for the June quarter have improved, with 57% of retail rents paid up and 98% for offices compared to 36% and 88% back in early July, while the landlord has collected 50% of retail rents for the September quarter and 91% for offices.
On the downside, however, retail clients continue to drop like flies, with 16% arranging CVAs or administrations since April, accounting for 80 store units and resulting in a £11.6mln reduction in annualised rents, while physical occupancy of London office is very low, at just 18%.
The balance sheet remains strong, including £1bn of undrawn borrowing facilities and cash, and A-rated credit, the group added, with £245mln of retail disposals also completed in the period.
LandSec also improving
Sector peer Land Securities PLC (LON:LAND) also provided a trading update on Friday, showing it has collected 89% of retail rents for September and 98% of office rents, taking £68mln of the £120mln of rent due, or £110mln if accounting for CVAs, concessions and deferrals into account.
LandSec has still only collected 84% of rent due on 25 March and 81% of rent due on 24 June, although up from 75% and 60% earlier.
British Land shares were up 4% to 381.22p on Friday morning, while those in LandSec were up 3% to 570p, down 40% and 42% since the start of the year respectively.
Broker Liberum increased its share price target for British Land to 380p from 350p, with analysts noting that 86% of stores in the portfolio were open, footfall was 21% ahead of the market and that retail parks are driving the outperformance.
The analysts noted that leasing activity shows progression on office rental values, but regression for retail, as expected.
Forecasts were tweaked slightly to reflect the new dividend policy and the disposals, with NAV per share now expected to fall 17% year on year to 639p, meaning the shares trade at more than a 40% discount to spot NAV.
Analysts at Peel Hunt said their current EPS forecast of 22.5p would imply a dividend of circa 18p, representing a 5% yield, against a previous forecast of 12.5p.
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