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British Land writes down property value

As we’ve said before, who’d be a landlord right now? (Intu warning signals more high street trouble, 03/05/19). British Land today follows Land Securities in writing down its assets due to the collapse in the high street retail sector. The firm has written down its portfolio by 4.8%, with the retail part of that written down by 11.1%. Management notes candidly that difficulties were most pronounced in department stores – no great surprise there. Elsewhere things are strong – offices +1.1%, other developments +10.8%. LFL rental growth of £15m offset the £14m impact from CVAs.

As a percentage of its portfolio, department stores down have been cut to 1% from 5% in 2014, highlighting just how far the sector has fallen in just a few years. Overall the retail portfolio is being downgraded substantially – hardly surprising given the rate of store closures and well-documented problems for a number of large and small players in the sector. 

Property companies like British Land – just like Land Securities yesterday – need to react to this and protect their interests. Land Securities wrote down the value of its property by £557million to £13.8bbn, with retail parks asset value -15.5%, and shopping centre assets -11.7%.

Earlier this month Intu said LFL net rental income will be down 4-6% this year. Previously it had guided for incomes to decline by 1-2%. As we said at the time, it may not be the last time that the company has to disappoint the market. In February it took a big write down on its property values, which dragged the company into the red. Clearly tough times for landlords, but tougher for retailers.

Kingfisher struggles in France

Kingfisher is today hosting an Innovation Day for investors and analysts in London today where it will show off some spangly new products. All very nice, but one rather feels that investors would prefer to see what the new strategy is going to look like and who the next CEO will be first. 

Trading remains tough in France, but things are improving in the UK, where B&Q enjoyed a decent bump in like-for-like sales. 

UK & Ireland total sales rose 5%, or 3.4% on a LFL basis. B&Q LFLs rose 2.8%, a good performance driven by weather-related sales. A rare event where a retailer says the weather helped. Screwfix remains a real stalwart and growth shows no real tailing off – sales up 9.6% and LFL +4.5%. 

France is much tougher – total sales -3.4% (LFL -3.7%). Castorama sales were down 2.4%, with Brico Depot –4.5%, or –5.1% LFL. Romania and Poland sales were very strong still. 

Pressure on management to come up with a new plan will mount and this could well include a look at breaking up this company into smaller parts. Sometimes you are not greater than the sum of your parts. 

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