Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

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September 26, 2023


Company news

Driver Group (DRV, 28p, £15m mkt cap)

Legal claims, dispute resolution and expert witness consultancy to the global construction and engineering industries. FY (Sep) trading update.

Guidance: “As indicated in interim results in June, the start of H2 FY 23 was slower than expected. Q3 experienced reductions in the levels of activity, with an improvement seen in Q4 and a number of significant commissions secured in this period which will benefit FY 24. While the Q3 to Q4 trend is improving and is early evidence of a return to H1 levels of trading, the performance in H2 is expected to lead the group to deliver an underlying profit before tax in FY 23 (versus an underlying loss of £1.0m in FY22) at a slightly lower level than the £0.7m reported at the half year.  The group continues to have a robust balance sheet and expects to report an improvement in the September 2023 year end cash position (March,  £5.3m).

Trading: “Management has made significant progress with the planned cost reductions set out in the interim results. Actions have included the closure of overseas offices, reduction of existing office lease costs and adjustments to headcount in several locations”.

Outlook: “Implementation [of the cost reductions] is expected to be complete by December 2023, enabling the full positive benefits of a lower and leaner cost base to flow into next year. We have made significant progress in the delivery of our cost reduction plans as this positions the group for long term sustainable growth and enables us to further develop the business and maximise its potential”.

British Land Company (BLND, 316p, £2,931m)

Leading UK commercial property investment, development and services group. Business update.

Trading: “Operationally, we are seeing strong leasing activity which reflects the exceptional quality of our portfolio and has resulted in our recent upgrade of the expected ERV growth in retail parks.  We have also strengthened our balance sheet in the period and continue to actively recycle capital with the disposal of non-core assets ahead of book value.  Meta’s surrender of our building at 1 Triton Square also enables us to accelerate our plans to reposition Regent’s Place as London’s premier Innovation and Life Sciences campus”. Campuses – 262,000 sq ft of leasing completed 8.2% ahead of ERV, and a further 137,000 sq ft under offer, 10.5% ahead of ERV. In addition, there is 1.7m sq ft in negotiations “as demand continues to gravitate to best in class space”. Meta surrender of 1 Triton Square – one of the two buildings it has leased at Regent’s Place – for £149m, received on 25 September 2023.  Although this will result in a EPS dilution, post interest savings, of c.0.6p for the six months to March FY24 “we are comfortable with current market expectations for FY24 due to better collection of historic COVID arrears than anticipated”. Retail – 980,000 sq ft of Retail leasing completed, 15.0% ahead of ERV, with a further 951,000 sq ft under offer, 19.4% ahead of ERV. This includes 511,000 sq ft of deals across Retail Parks, 15.3% ahead of ERV and 677,000 sq ft under offer at 19.4% above ERV. Upgraded Retail Park ERV growth guidance for FY24 from 2-4% to 3-5% as a result of strong leasing activity ahead of ERV.

Finances: As a result of the Meta surrender and the disposal of the office and data centre portfolio, March 2023 LTV of 36.% on a pro-forma basis would be 33.6%. In August, Fitch affirmed British Land’s senior unsecured credit rating at ‘A’ with Stable Outlook. Strong liquidity maintained, with £1.7bn of undrawn facilities and cash, with no requirement to refinance until early 2026.

Prices are as at the previous day’s close. Where quoted, net debt is pre-IFRS16 (excluding leases) unless otherwise stated.

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