Land Sec. Group PLC - Half-year Report

Developing future opportunities from a position of strength

Robust performance

-   Revenue profit(1)(2) up 10.3% to £224m with net rental income up and costs down

-   Profit for the period of £42m (2017: £34m)

-   Adjusted diluted earnings per share(1)(2) up 17.9% to 30.3p

-   First half dividend up 14.7% to 22.6p

-   EPRA net assets per share(1) down 1.4% to 1,384p

-   Combined Portfolio(1)(2) valued at £14.0bn, with a valuation deficit(1)(2) of £188m or 1.4%

-    London offices up 0.2%; central London shops down 2.9%

-    Shopping centres and shops down 2.9% with outlets flat; retail parks down 4.5%; leisure and hotels down 0.2%

-   High occupancy with like-for-like voids(3) down to 1.9% (31 March 2018: 2.2%)

-   Ungeared total property return(3) 0.8%

-   London Portfolio 1.6% (IPD Quarterly Universe 2.8%)

-   Retail Portfolio (0.2)% (IPD Quarterly Universe (1.3)%)

-   Total business return(1) 0.4%

Healthy financial position

-   Group LTV ratio(1)(2) at 26.2% (31 March 2018: 25.8%)

-   Adjusted net debt(1)(2) of £3.7bn (31 March 2018: £3.7bn)

-   Weighted average cost of debt at 2.6% (31 March 2018: 2.6%)

-   Weighted average maturity of debt at 12.6 years (31 March 2018: 13.1 years)

-   Cash and available facilities(2) of £1.1bn

Increased development pipeline and new concepts

-    London office development pipeline increased to 2 million sq ft with an estimated cost of £2bn

-   Good progress on site at 21 Moorfields, EC2, with test piling completed successfully

-   Portland House, SW1 added to existing opportunities at Nova East, SW1, 1 Sherwood St, W1, Sumner St, SE1 and Red Lion Court, SE1

-   Mixed use development pipeline being worked up at suburban London retail locations

-   In design at Finchley Road, NW3 and Shepherd's Bush, W12, at an estimated cost of £1bn and including over 1,700 new homes

 -   Longer term opportunity at Lewisham town centre, SE13

-    Flexible office product to be launched in the new year at 123 Victoria Street, SW1

Environmental and social leadership

-     Ranked first in the UK among our peer group in the Global Real Estate Sustainability Benchmark (GRESB), achieving a Five Star rating and 90% score

-     Ranked first in the UK in the property sector in the Dow Jones Sustainability Index (DJSI), scoring 73 compared with an industry average of 37

-     Aerial window cleaning training academy opened at HM Prison Isis in south east London augmenting our Community Employment Programme

Chief Executive Robert Noel said:

"Landsec has delivered a robust performance in an uncertain market. With healthy growth in earnings per share and a strong financial position, we are looking forward with confidence, introducing new concepts and growing our pipeline of development opportunities.

"In Retail, our focus on vibrant destinations that offer the most engaging experiences for retailers and consumers has served us well in tough market conditions. We have made good progress on plans for mixed use development at several of our suburban London assets and will be submitting planning applications which will include over 1,700 homes in two of these locations.

"In London, we've expanded our pipeline of office development opportunities to £2bn and will be launching a new flexible office product in the new year, catering for increasing customer demand for flexible, serviced solutions.

"We remain alert to market risks but are confident in our current positioning and excited about the future."

Results summary



Six months ended 30 September 2018

Six months ended 30 September 2017(4)


Revenue profit(1)(2)



Up 10.3%

Valuation deficit(1)(2)



Down 1.4%(5)

Profit before tax




Basic earnings per share




Adjusted diluted earnings per share(1)(2)



Up 17.9%

Dividend per share



Up 14.7%


30 September 2018

31 March 2018(4)


Net assets per share



Down 1.4%

EPRA net assets per share(1)



Down 1.4%

Group LTV ratio(1)(2)





Chief Executive's statement

Landsec delivered a robust performance in the first half. We have benefitted from our excellent levels of leasing activity last year, high quality assets and good operational performance against a backdrop of near-term political uncertainty and tough retail markets. We've added substantial office and mixed use projects to our development pipeline and are expanding our customer offer in London.

Our strategy to create buildings and destinations that deliver a great experience has ensured continued high occupancy. Combined with the effect of refinancing some bonds in the last financial year, this has led to a rise in revenue profit of 10.3% compared with the same period last year, despite us being net sellers in the year to 31 March 2018. Adjusted diluted earnings per share are up 17.9% due to the increase in revenue profit combined with the effect of the capital return and share consolidation last year.

Asset values declined by 1.4% in aggregate over the six month period, reflecting negative sentiment in the retail sector, and this has led to a 1.4% reduction in EPRA net asset value per share to 1,384p. With our portfolio valued at £14.0bn and adjusted net debt at £3.7bn, our loan-to-value is 26.2%. This low gearing, combined with our AA rating, enables us to invest in our growing development pipeline and other opportunities as they arise.

Responding to changing needs

We continue to develop and test new concepts at Landsec Lab, our collaborative centre in Southwark, originally set up to develop our residential concepts in Victoria and our own office environment. Moving forward with new approaches that ensure our space and services meet changing customer expectations and reflect new patterns of work, we're set to launch a new flexible office product early next year, starting with 36,000 sq ft of space at 123 Victoria Street, SW1. This will provide customers with direct access to contemporary serviced space on flexible, all-inclusive terms. At both 80 Victoria Street, SW1 and 20 Eastbourne Terrace, W2, our Landsec Lounge concept has been a great success. This café space enables employees of all occupiers to connect, work, eat, socialise and relax within the building. It's been a popular addition that has helped us re-let space quickly at strong rental levels, and we're now working on introducing lounges elsewhere.

Structural and cyclical challenges have combined to create tough conditions for retailers. We're not immune but have been more resilient than the general market due to diversified income from dominant centres, outlet destinations, affordable retail parks, leisure assets and hotels. With consumer behaviour continuing to evolve, we're keeping a sharp focus on anticipating and meeting customers' changing needs and enhancing the experience we provide. We are very active asset managers in retail, and that includes developing alternative use strategies where we see potential to create value.

Growing the pipeline

Confident in the long-term future of London, we're growing our office-led development pipeline. We have

2 million sq ft either on site, in design, or in feasibility, representing a total development cost of around £2bn. 21 Moorfields, EC2 is on schedule to complete in 2021 when it will be handed over to Deutsche Bank for their new UK headquarters. We're working on revised plans for the development of Nova East, SW1 and are in pre-planning for the redevelopment of Portland House, SW1 underlining our strong belief in Victoria. And we are assessing new sites for the next generation of London developments.

In addition, we are working up plans for significant mixed use developments, including more than 4,000 homes on our suburban London retail sites. At two of these, Finchley Road, NW3 and Shepherd's Bush, W12, we intend to submit planning applications in the first half of 2019 with a total development cost of around £1bn. We also see excellent potential for a new town centre at Lewisham, with our ownership of Lewisham Shopping Centre, SE13 forming the core of a potential 8.3 acre mixed use destination. In addition to this, we are exploring the potential at other locations in London.

Leading on environmental and social issues

We are conscious of the broader impact of our business on our customers, communities, employees and partners. For the second consecutive year, we lead the UK listed real estate sector in the Dow Jones Sustainability Index, and in September we were named leader in both the UK Listed Company and UK Diversified (Office/Retail) categories in the 2018 Global Real Estate Sustainability Benchmark. Recognition in these benchmarking schemes reflects how we're constantly pushing ourselves to achieve more in terms of creating jobs and opportunities; efficient use of natural resources; and sustainable design and innovation. This requires us to take long-term action on both environmental and social issues. For example, in September, we opened the UK's first aerial window cleaning training academy at a prison, HMP Isis. This adds to our existing initiatives enabling prisoners to train in dry lining, scaffolding, hospitality and customer service, all of which help address the UK skills shortage and reduce reoffending.

Looking ahead with confidence

There are a number of potential outcomes to the UK's exit from the EU on 29 March 2019. We approach this date with an appropriate balance of low current risk and exciting future growth prospects. In the second half of the year, we will keep working on our development pipeline and bring more customer experience-led innovation to market.

Robert Noel

Chief Executive