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18 November 2020

Struggling Retail Sector Hits British Land

British Land on Wednesday produced a set of financial results not uncharacteristic of the bleak environment in which businesses find themselves in at present. While the results did contain some encouraging news, the story, both in the short and long-term, remains uncertain.

The property firm this morning reported falling financials across the majority of metrics, highlighting the tough environment for commercial landlords. The Coronavirus pandemic helped push down the value of its retail portfolio to the tune of 14.9% during the first half of its financial year, forcing the firm to post a near 30% drop in underlying profit to £107m.

The firm has witnessed a larger number of tenants forced into CVAs or administration than usual, with many requiring rent deferrals or cancellations in order to remain afloat. COVID-19 has severely impacted the retail sector as restrictions on movement, as well as the number of people allowed into a store at any one time, tightens.

The company, however, remains in a fairly healthy cash position despite the challenges it faces. During the period it announced that it had completed the sale of the large Clarges building in Mayfair for 7.6% above book value, for approximately £177m. Alongside this, the firm also stated that it had access to £1bn in untapped credit, leading to the reinstatement of their dividend, the news many had been waiting for.

While it is an encouraging sign to see the firm moving back towards dividend payments and raising cash, the long-term and headwinds for the sector remain. With an increasing amount of shopping now carried out online, further fuelled by the pandemic, retail outlets are likely to continue to struggle as they grapple with lower demand and potentially higher costs at the hands of a so called ‘hard’ Brexit.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
 
Struggling Retail Sector Hits British Land
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