Landsec stock drops 4% after H1 loss on sales offsets rise in rental income

Investing.com -- Land Securities Group Plc (LON:LAND) shares fell more than 4% on Friday after the British property group posted a £67 million loss on disposals and a small drop in asset values, even as first-half earnings and rental income increased.

Landsec, one of the UK’s largest commercial landlords, reported EPRA earnings of £192 million for the six months to Sept. 30, up from £186 million a year earlier. 

EPRA earnings per share rose 3.2% to 25.8p, helped by a 5.2% rise in like-for-like net rental income. The interim dividend increased 2.2% to 19p.

IFRS profit before tax climbed to £98 million from £24 million. The company said the figure was shaped by £644 million of capital recycling, including the planned sale of Queen Anne’s Mansions for £245 million.

The disposal generated “a c. 0% total return” and produced a £67 million loss, which contributed to a reduction in EPRA net tangible assets per share to 863p from 874p.

Chief executive Mark Allan in a statement said, “We continue to see clear positive momentum across every part of our business, notwithstanding the wider economic environment,” adding that the group’s portfolio repositioning in recent years supported performance.

Occupancy across the combined portfolio increased 40 basis points to 97.7% on a like-for-like basis, the company said. Office-led assets reported 6.8% like-for-like income growth, with occupancy rising to 98.8%. 

Retail-led income increased 5%, with occupancy steady at 96.3%. Estimated rental values rose 2.5% across the portfolio over the period.

Valuations were broadly flat, down 0.1% overall. Office values fell 1%, reflecting yield movements, the depreciation of Queen Anne’s Mansions ahead of sale and an increase in business rates at Piccadilly Lights. Retail values rose 2.3%, supported by leasing and ERV growth. Other assets fell 0.5%.

Landsec invested £244 million in capex during the period, including £118 million on office developments and £83 million on retail projects.

Development exposure is expected to fall to about £0.2 billion by mid-2026 as major London office schemes complete. 

The company said it does not plan to commit meaningful balance-sheet capital to new developments in the next 12–18 months.

Adjusted net debt rose to £4.4 billion, but disposals exchanged or completed after the reporting date reduced it to £4.1 billion on a pro-forma basis. 

The group’s loan-to-value ratio stood at 40.3%, or 38.9% pro-forma. Net debt/EBITDA was 8.6x. Landsec is targeting a reduction to below 7x within two years.

Average debt maturity was 8.9 years, and the company had £1.1 billion in cash and undrawn facilities at the end of September.

Landsec said planning progress continued across its residential-led pipeline, including detailed consent for 879 homes at Mayfield in Manchester and part-detailed consent for 2,800 homes in Lewisham. 

The company said returns for residential development remain insufficient at present, with capex to stay limited until conditions improve.