London Merchant Securities says it expects development profits and asset management initiatives to drive future earnings growth.
LMS on Thursday reported a 62.3% boost in pretax profits to £17.3m, in its interim results for the six months to 30 September. Profits were boosted by a 5.6% increase in rental income, and disposals from its non-property venture capital portfolio.
Net asset value per share rose to 233p from 229p, thanks to retained profits rather than a revaluation of the portfolio.
Chief executive Robert Rayne said: “In the next 12 to 18 months we are not relying on large rental inflation. Instead we will look to asset management and development angles to drive rents up.”
Depending on planning success, LMS will complete 2m sq ft of development in the next five years, of which forward funding will be sought for 1.3m-1.5m sq ft.
Excluding its 1m sq ft Greenwich Reach development, for which LMS will resubmit planning applications in the first quarter of next year, its development pipeline is expected to cost £300m-£350m over this time.
In addition to the forward sale of the developments’ residential elements, the pipeline will be financed through £50m-£100m sales of LMS’s venture capital assets and borrowings. LMS will seek forward funding for Greenwich Reach, which is expected to cost £350m, and expects to maintain 40% gearing.
