REG - Land Sec. Group PLC - Half-year Report
15/11/2024 07:00
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RNS Number : 3384M Land Securities Group PLC 15 November 2024
15 November 2024
LAND SECURITIES GROUP PLC ("Landsec")
Results for the half year ended 30 September 2024
Strong operational execution drives upgrade in EPS outlook and increase in
portfolio value
Mark Allan, Chief Executive of Landsec, commented:
"Our operational outperformance continues, with further growth in occupancy
and positive rental uplifts across our retail and London portfolio, which is
translating into accelerated income growth. Combined with our focus on cost
efficiencies, we therefore raise our outlook for EPRA EPS and now expect FY25
to be in line with last year's level despite £0.5bn of net disposals over the
past year, and for this outperformance to flow through into FY26.
At the same time, property values have stabilised, with growth in rental
values driving a modest increase in capital values, resulting in a positive
total return on equity. We expect these trends to persist, as customer demand
for our best-in-class space remains robust and investment market activity has
started to pick up. We have continued to reposition our portfolio towards
higher-return opportunities and are confident of deploying further capital
towards this in the second half. Having managed our balance sheet well as
markets corrected, we are now well placed to deliver growth and attractive
returns."
Financial highlights
30 Sep 2024 Prior ((1)) period 30 Sep 2024 Prior ((1)) period
EPRA earnings (£m)(2)(3) 186 198 Profit/(loss) before tax (£m) 243 (193)
EPRA EPS (pence)(2)(3) 25.0 26.7 Basic EPS (pence) 32.8 (24.4)
EPRA NTA per share (pence)(2)(3) 871 859 Net assets per share (pence) 873 863
Total return on equity (%)(2)(3) 3.9 (2.4) Dividend per share (pence) 18.6 18.2
Group LTV ratio (%)(2)(3) 34.9 35.0 Net debt (£m) 3,573 3,594
¾ EPRA earnings of £186m, up £1m vs prior period after adjusting for
£13m lower surrender receipts
¾ EPRA EPS at top end of expectations at 25.0p, as better than expected
3.4% LFL net income growth and 2.2ppt improvement in operating margin offset
earnings impact from non-core asset disposals
¾ Total dividend up 2.2% to 18.6p per share, in line with guidance of low
single digit percentage growth
¾ Profit before tax up to £243m, as 2.1% ERV growth resulted in £91m or
0.9% uplift in portfolio value
¾ Total return on equity of 3.9% over six months, with 1.4% increase in
EPRA NTA per share to 871p
¾ Maintained strong balance sheet with 7.4x net debt/EBITDA and a 34.9%
Group LTV
¾ Upgrade in EPS outlook due to higher LFL income growth and cost
efficiencies, with FY25 EPRA EPS now expected to be in line with the 50.1
pence delivered in FY24 and FY26 expected to be ahead of this, before any
upside from potential future acquisitions
Operational highlights
Strategic focus on creating best-in-class portfolio pays off, with 6% uplifts
on relettings/renewals across London and Major Retail, 40bps increase in
occupancy, 3.4% growth in like-for-like net rental income, and property
valuations returning to modest growth as rental values rise 2.1% and yields
stabilise. Well placed to deliver the 8-10% annual return on equity we target
over time, with current annual income return at NTA of 5.8%, continued growth
in like-for-like income and further rental value growth.
Central London income and capital values grow, as investment market stabilises
¾ Delivered 5.5% LFL net rental income growth, with occupancy up 60bps to
97.9%, £16m of lettings signed or in solicitors' hands 3% above ERV and
relettings/renewals 7% above previous rent
¾ Drove 2.2% ERV growth over first six months as customer demand remains
focused on high-quality space in best locations, on track vs FY guidance of
low to mid single digit percentage growth
¾ Portfolio valuation up 0.8%, as yields stabilised and investment market
activity starts to pick up
¾ Progressing two on-site developments in Victoria and Southbank, with
expected completion in late 2025 and attractive 7.1% gross yield on cost and
11% yield on capex
Major Retail assets reversion and capital values grow, as leading brands
expand in best locations
¾ Delivered 3.1% LFL net income growth, with LFL occupancy up 70bps to
96.0% and £26m of lettings signed or in solicitors' hands 7% above ERV and 4%
ahead of previous rent for relettings/renewals, underpinning growing
reversionary potential
¾ Capitalised on continued focus from brands on fewer, bigger, better
stores, with significant upsizes and lettings with leading brands such as
Primark, Pull&Bear, Bershka, Sephora and JD Sports
¾ Delivered ERV growth of 1.7%, on track vs FY guidance of low to mid
single digit percentage growth, supporting 2.8% increase in portfolio
valuation, as activity levels in investment markets pick up
¾ Acquired an additional £120m stake in Bluewater at attractive 8.5%
yield, with confidence in deploying further capital in major retail at
accretive returns in second half of the year
Further progress in unlocking substantial residential development pipeline
¾ Started on site with infrastructure works and secured vacant possession
for first phase of consented 1,800-homes Finchley Road scheme, ahead of
potential start of main development in 2026
¾ Renegotiated development agreement at Mayfield, Manchester, which already
benefits from outline consent, unlocking option to start delivery of c. 1,700
new homes from 2026 onwards
¾ Submitted planning application for masterplan in Lewisham, covering 1,700
homes plus over 1,000 student beds and co-living homes, with potential start
on site in 2027
¾ Growing visibility on overall pipeline of 6,000+ homes with expected IRRs
in the low double-digits
Returns underpinned by strong capital base and continued improvement in
efficiency
¾ Realised 10% reduction in overhead costs, with further efficiencies
expected next year
¾ Executed on £690m of transactions since March, including £464m of
non-core disposals in line with Mar-24 book value and £226m of acquisitions,
improving future return prospects
¾ Capitalised on sector-leading access to credit, with AA/AA- credit
ratings, via £350m 10-year bond issue at 4.625% coupon and refinancing of
£2.25bn revolving credit facilities at existing low margins
¾ Maintained strong capital base, with 10.0-year average debt maturity,
£2bn cash and undrawn facilities, 7.4x net debt/EBITDA and 34.9% LTV,
providing capacity to grow at attractive time
1. Prior period measures are for the six months ended 30 September 2023 other
than EPRA NTA per share, net assets per share, Group LTV ratio and net debt,
which are as at 31 March 2024.
2. An alternative performance measure. The Group uses a number of financial
measures to assess and explain its performance, some of which are considered
to be alternative performance measures as they are not defined under IFRS. For
further details, see the Financial review and table 13 in the Business
analysis section.
3. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Financial review. The condensed consolidated preliminary
financial information is prepared under UK adopted international accounting
standards (IFRSs and IFRICs) where the Group's interests in joint ventures are
shown collectively in the income statement and balance sheet, and all
subsidiaries are consolidated at 100%. Internally, management reviews the
Group's results on a basis that adjusts for these forms of ownership to
present a proportionate share. These metrics, including the Combined
Portfolio, are examples of this approach, reflecting our economic interest in
our properties regardless of our ownership structure. For further details, see
table 13 in the Business analysis section.
A live video webcast of the presentation will be available at 9.00am GMT. A
downloadable copy of the webcast will then be available by the end of the day.
We will also be offering an audio conference call line, details are available
in the link below. Due to the large volume of callers expected, we recommend
that you dial into the call 10 minutes before the start of the presentation.
Please note that there will be an interactive Q&A facility on both the
webcast and conference call line.
Webcast link: https://webcast.landsec.com/2024-half-year-results
(https://webcast.landsec.com/2024-half-year-results)
Call title: Landsec Half Year Results 2024
Conference call:
https://webcast.landsec.com/2024-half-year-results/vip_connect
(https://webcast.landsec.com/2024-half-year-results/vip_connect)
Forward-looking statements
These full year results, the latest Annual Report and Landsec's website may
contain certain 'forward-looking statements' with respect to Land Securities
Group PLC (the Company) and the Group's financial condition, results of its
operations and business, and certain plans, strategies, objectives, goals and
expectations with respect to these items and the economies and markets in
which the Group operates.
Forward-looking statements are sometimes, but not always, identified by their
use of a date in the future or such words as 'anticipates', 'aims', 'due',
'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans',
'targets', 'goal' or 'estimates' or, in each case, their negative or other
variations or comparable terminology. Forward-looking statements are not
guarantees of future performance. By their very nature forward-looking
statements are inherently unpredictable, speculative and involve risk and
uncertainty because they relate to events and depend on circumstances that
will occur in the future. Many of these assumptions, risks and uncertainties
relate to factors that are beyond the Group's ability to control or estimate
precisely. There are a number of such factors that could cause actual results
and developments to differ materially from those expressed or implied by these
forward-looking statements. These factors include, but are not limited to,
changes in the political conditions, economies and markets in which the Group
operates; changes in the legal, regulatory and competition frameworks in which
the Group operates; changes in the markets from which the Group raises
finance; the impact of legal or other proceedings against or which affect the
Group; changes in accounting practices and interpretation of accounting
standards under IFRS, and changes in interest and exchange rates.
Any forward-looking statements made in these full year results, the latest
Annual Report or Landsec's website, or made subsequently, which are
attributable to the Company or any other member of the Group, or persons
acting on their behalf, are expressly qualified in their entirety by the
factors referred to above. Each forward-looking statement speaks only as of
the date it is made. Except as required by its legal or statutory obligations,
the Company does not intend to update any forward-looking statements.
Nothing contained in these full year results, the latest Annual Report or
Landsec's website should be construed as a profit forecast or an invitation to
deal in the securities of the Company.
Chief Executive's statement
Strong operational performance drives upgrade in EPS and return to valuation
growth
Owning the right real estate has never been more important. Irrespective of
sector, there is a clear focus from customers on best-in-class space and as
this space remains in short supply, rents are growing. Our success in
positioning Landsec for this is reflected in our 3.4% like-for-like income
growth; a 40bp rise in occupancy to 96.6%, significantly outperforming market
averages; and a 0.9% rise in property values, driven by a 2.1% increase in
rental values, outperforming the MSCI All Property UK average.
Alongside an improvement in operating margin, this means our EPRA EPS for the
first half of the year is at the top end of expectations at 25.0 pence. Whilst
1.7 pence below the prior period, this reflects the fact that the prior half
year benefitted from £13m, or 1.7 pence, higher surrender receipts than the
last six months. The net divestment of non-core assets further reduced
earnings by £10m yet this was fully offset by an acceleration in operational
growth. Whilst six months ago we expected our EPS to be slightly below last
year's level because of our significant non-core disposals, we now expect FY25
EPS to be in line with last year's 50.1 pence and FY26 to be ahead of this,
before any potential benefit from future acquisitions.
Six months ago we also said that we expected yields to stabilise and values
for the best assets to return to growth. This is what happened, so combined
with our attractive income return, we delivered a 3.9% total return on equity
for the six months to September and NTA per share increased 1.4%. Our interim
dividend is up 2.2%, in line with our guidance for the full year.
We expect the trends in customer demand that underpinned our positive
performance over the last six months to persist for the foreseeable future. We
continue to see signs that investment market activity is picking up, with
selective competition emerging for the best offices and retail assets. The
good availability of credit remains supportive to this, although we are
mindful that changes in longer-term interest rates will likely influence the
pace at which momentum improves from here. Meanwhile, our balance sheet
remains strong, with net debt/EBITDA at a low 7.4x and an LTV of 34.9%, so
given where we are in the cycle, this provides further capacity to grow at an
attractive point in time.
Table 1: Highlights
Sep 2024 Sep 2023 Change %
EPRA earnings (£m)(1) 186 198 (6.1)
Profit/(loss) before tax (£m) 243 (193) n/a
Total return on equity (%) 3.9 (2.4) 6.3
Basic earnings/(loss) per share (pence) 32.8 (24.4) n/a
EPRA earnings per share (pence)(1) 25.0 26.7 (6.4)
Dividend per share (pence) 18.6 18.2 2.2
Sep 2024 Mar 2024 Change %
Combined portfolio (£m)(1) 9,957 9,963 (0.1)
IFRS net assets (£m) 6,545 6,447 1.5
EPRA Net Tangible Assets per share (pence)(1) 871 859 1.4
Adjusted net debt (£m)(1) 3,510 3,517 (0.2)
Group LTV ratio (%)(1) 34.9 35.0 (0.1)
Proportion of portfolio rated EPC A - B (%) 52 49
Average upfront embodied carbon reduction development pipeline (%) 41 40
Energy intensity reduction vs 2020 (%) 19 18
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information in the Financial
Review.
Well positioned to deliver further growth
Over the past four years, we have actively shaped a high-quality portfolio and
pipeline that is poised for growth. We sold £3.1bn of assets where forward
returns and our ability to add value were low, including £464m in the first
half of this year, and we reinvested £2.3bn in our key places in Central
London, high-return major retail destinations, and opportunities which offer
future development upside. This strategy has paid off, as demand for modern,
sustainable office space in London remains strong and in retail, brands
continue to focus on fewer, but bigger and better stores in key locations. As
supply of both is constrained, rents continue to increase.
Across our Central London portfolio, office utilisation continues to grow.
Customers are now planning for c. 25% more space per person than five years
ago, so c. 80% of our lettings over the past year have seen customers grow or
keep the same space. This means our occupancy is up 60bps to a high 97.9%,
with £16m of lettings completed or in solicitors' hands, on average 3% above
ERV. Our London portfolio is now 9% reversionary and ERVs continue to grow, up
2.2% in the first half. With 7% rental uplifts on relettings/renewals, this
drove 5.5% like-for-like income growth and underpins our future income growth.
In retail, brands remain focused on the best access to consumer spend. The top
1% of all UK shopping destinations provide access to 30% of the country's
in-store retail spend and as 95% of the locations in this top 1% are shopping
centres, city centres and outlets, these are the dominant focus for brands.
This means leading brands continue to take more space with us, such as Primark
who are expanding their store at White Rose from 37,000 to 71,000 sq ft and JD
Sports, who are moving into St. David's from elsewhere in the city centre. As
such, our occupancy is now higher than it was before Covid, up 70bps to 96.0%,
with £26m of leases signed or in solicitors' hands, 7% ahead of ERV. In
addition, relettings and renewals were 4% above previous passing rent and
like-for-like net rental income was up 3.1%. ERVs were up 1.7% and with
further growth ahead, we expect strong like-for-like income growth in the
future.
The attractive growth potential in our existing portfolio is complemented by
our significant development pipeline. Our two on-site projects in Victoria and
Southbank are expected to complete in late 2025 and are expected to deliver
£61m of ERV once fully let, reflecting a 7.1% yield on cost and high 11%
yield on total capex. We have optionality over a further c. £2.2bn of London
office developments with a potential ERV of c. £160m. Having made significant
progress on planning and other preparations, we now also have growing
visibility on a pipeline of over 6,000 homes across three sites in Manchester
and London. This could allow us to invest over £1bn in this structural growth
sector by 2030 and c. £3bn over the next decade, with expected IRRs in the
low teens and a potential start of the first phase in 2026.
Capital allocation and enhancing returns
Recognising the normalisation in cost of capital, over the past two years we
have consistently said we are targeting to deliver a total return on equity of
8-10% p.a. over time, comprising a combination of income and capital returns,
driven by rental value growth and selective development upside. We also said
we would not be exactly in this range each individual year, as valuation yield
movements are outside of our control on a short term basis. A softening in
yields affected returns over the past two years but this has now changed, as
yields stabilised in the first half of the year. As our current annual income
return at NTA is already an attractive 5.8% and rents continue to grow, the
outlook for our return on equity is positive.
The resilience of our returns is underpinned by our success in preserving our
strong capital base. This provides a clear competitive advantage in terms of
finance cost, as shown in our 10-year bond issue at a 97bps margin and the
refinancing of £2.25bn revolving credit facilities at stable margins. We
continue to focus on operating efficiently, with a 10% reduction in overhead
costs during the first half and further meaningful savings expected over the
next two years, partly due to our data and technology investments.
In terms of capital allocation, we still see the most attractive risk-adjusted
returns in major retail, where income returns are in the high single digits
and rents are growing. Capital values are roughly half of their replacement
cost, so new supply is non-existent, and for the best assets, such as those in
our portfolio, capex which does not add value is low, at c. 20bps of the
overall asset value p.a. This is very different for investors who own
secondary assets with high vacancy that have limited opportunity to price on
costs through service charges or increased rents, highlighting the importance
of quality. All this offers the potential for double-digit ungeared IRRs and
following the acquisition of an additional £120m stake in Bluewater in June,
we are confident in deploying further capital at accretive returns in the
second half.
Rents for highly sustainable, best-in-class offices continue to grow, yet
returns on development need to compensate for the fact that costs and exit
yields have increased. Supply chains are still dealing with the effects of the
spike in inflation just over a year ago, so we continue to carefully weigh
risks and returns on new developments, also relative to the returns on those
assets we choose to sell to fund these. Given the attractive returns in major
retail we will focus our investment for the remainder of this year on this,
rather than making any new office commitments. Outside of Central London, over
the past 12-18 months we have successfully adjusted plans for parts of our
pipeline and focused this mostly on residential, where return prospects remain
attractive on a risk-adjusted basis, with low double-digit IRRs. As borrowing
costs and our cost of capital have increased, we remain firmly focused on
enhancing our return on capital employed and overall income growth.
Outlook
Whilst global geopolitical uncertainty has increased, for the UK the general
election over the summer has created an element of political stability that
has eluded the country for nearly a decade, ever since the EU referendum.
Whilst political decisions always require an element of compromise, we are
mindful of the risk that the cost of increased taxes could slow down business
decision-making. The new Government's ambition to drive growth is admirable
though and unlocking urban residential development appears a key part of its
focus, which should bode well for the prospects of our growing residential
pipeline.
In line with the view we set out in May, investment activity has picked up in
London and retail and values have begun to return to growth for the best
assets. Credit availability remains supportive, so we expect this trend to
persist, although changes in long term interest rates will likely influence
the pace at which momentum continues to improve from here. Customer demand for
our best-in-class space remains robust and as supply is limited, we continue
to expect ERVs for our London and retail portfolio to grow by a low to mid
single digit percentage this year.
We continue to drive occupancy growth and positive leasing reversion across
our London and major retail portfolios. The latter turned positive for the
first time last year and has further improved since, hence we expect rental
uplifts to continue to grow. In May, we expected our like-for-like net rental
income growth for this year to be similar to last year's 2.8%, yet we now
expect this to be closer to 4%. Combined with our focus on managing costs,
this means we raise our guidance for EPRA EPS for FY25 and now expect EPS to
be in line with last year's 50.1 pence, despite £0.5bn of net disposals over
the past year. This supports our expectation for our dividend to grow by a low
single digit percentage this year and we expect further like-for-like growth
and operational efficiencies to drive continued growth in EPRA EPS in FY26.
Having been a net seller in the first half, we expect to expand our
high-quality retail portfolio in the second half of the year, although we have
not assumed any benefit from this in our increased EPS outlook at this stage.
With a current income return at NTA of 5.8%, further growth in like-for-like
income, a strong capital base and capital values returning to growth, the
outlook for our return on equity and EPS is positive.
Operating and portfolio review
Overview
Our combined portfolio was valued at £10.0bn as of September, comprising the
following segments:
¾ Central London (65%): our well-connected, high-quality office (84%) and
retail and other commercial space (16%), located in the West End (68%), City
(23%) and Southwark (9%).
¾ Major retail destinations (20%): our investments in six shopping centres
and three retail outlets, which are amongst the highest selling locations for
retailers in the UK.
¾ Mixed-use urban neighbourhoods (7%): our investments in mixed-use urban
places in London and a small number of other major UK cities, with future
repositioning or residential development potential.
¾ Subscale (8%): assets in sectors where we have limited scale or
competitive advantage and which we are therefore likely to divest over time,
split broadly equally between retail parks and leisure.
Investment activity
Our overall investment and divestment activity totalled £690m since March,
which equates to 7% of our portfolio value. In line with our strategy, we sold
£464m of assets, including our £400m hotel portfolio, a retail park in
Taplow and four small non-core assets, on average, in line with their March
2024 book values. The disposal of our hotel portfolio crystallised the strong
recovery in performance post Covid, yet as the income was 100% turnover linked
on long-term leases to Accor, there was no opportunity for us to influence or
enhance its future operational performance.
In the first six months, acquisitions totalled £140m and we spent £128m on
development capex. We acquired an additional 17.5% stake in Bluewater for
£120m, increasing our ownership in one of the UK's leading retail
destinations to 66.25%. With a yield of 8.5% and further income growth, this
is expected to deliver a double-digit unlevered return. We also bought a £15m
block opposite Buchanan Galleries. This means we now own c. 30% of the retail
frontage of the prime high street in Glasgow, which is the city with the
highest total retail spend outside London, ahead of a repositioning of our
existing centre.
Since the period-end, we also acquired the remaining 25% interest in MediaCity
from Peel, plus the 218-bed hotel and studio operations at the estate which
were wholly owned by Peel. The cash consideration was £23m and we assumed
£61m of debt, providing an overall consideration of £84m. This represents a
discount to the book value of our existing stake, reflecting the value of
future income from wrapper leases to Peel we agreed to surrender. Adjusted for
this, the deal is broadly in line with book value and earnings neutral in the
short term, but provides us with full control of MediaCity and the ability to
implement our plans for this unique estate, including the potential for
significant new living space at its adjacent land.
Since late 2020, we have sold £3.1bn of the c. £4bn assets we said we
intended to sell over a period of c. 6 years when we launched our updated
strategy. We will continue to selectively recycle capital over time, but
having been a material net seller over the past twelve months, our current
focus is on acquisitions and we are confident in making further progress on
deploying capital in major retail at accretive returns in the second half. Our
potential future investment in new developments is likely to be funded
principally through future disposals of mature or standalone assets, alongside
other, complementary sources of capital.
Portfolio valuation
Following two years of softening, property yields stabilised over the last six
months. In line with the view we set out six months ago, this means our
overall portfolio value increased 0.9%, as our successful leasing activity
drove 2.1% ERV growth.
Our Central London portfolio was up 0.8% over the period, as our 2.2% ERV
growth was partially offset by a small 7bps increase in yields, which overall
remain at 5.4%. West End office valuations were stable and our City offices
saw growth in valuations of 1.9%. Our West End offices, which are practically
full, saw 1.3% growth in ERVs. In the City, our asset management activity
drove 5.3% growth in ERVs. Retail and other assets were down 0.4%, whilst
development values were up 2.9% due to increased ERVs, reflecting the strong
demand and scarcity of supply of best in class space.
Our high-quality Major retail portfolio saw values increase 2.8%, driven by a
1.7% increase in ERVs and a 17bps reduction in yields. This reflected the
positive impact of our investment and asset management activity and improving
occupational and investment market sentiment. With income returns of 7-8% and
rents having returned to growth, this remains our preferred area for future
investment and again was the best performing segment in our portfolio, with a
total return for the period of 6.8% compared with Central London at 2.9% and
mixed-use at (0.7)%.
The value of our mixed-use assets was down 3.7%. This reflected some yield
softening at MediaCity, as the return of investor interest in regional offices
is still trailing London. The shortening of income at our three existing
retail assets in Glasgow and London which so far have been managed for
flexibility for future redevelopment also weighed on values, yet we expect
this to turn a corner over the next c. 12 months, as our future plans become
more tangible. In subscale, the value of our retail parks was up 5.6% as
strong investor demand pushed yields down 27bps. Our leisure assets were down
1.1%, primarily reflecting a modest reduction in rent related to Cineworld's
restructuring at the end of the period.
Table 2: Valuation analysis
Market value 30 Sep 2024 Surplus / (Deficit) Valuation change LFL rental value change(1) Net initial Topped up net initial Equivalent LFL equivalent yield change
yield
yield
yield
£m £m % % % % % bps
West End offices 3,083 1 0.0 1.3 3.9 5.7 5.3 4
City offices 1,251 22 1.9 5.3 4.3 5.3 6.1 7
Retail and other 1,028 (4) (0.4) (0.3) 4.2 4.6 5.0 11
Developments 1,080 30 2.9 n/a (0.2) (0.1) 5.4 n/a
Total Central London 6,442 49 0.8 2.2 4.1((2)) 5.4((2)) 5.4 7
Shopping centres 1,413 57 4.2 1.4 7.7 8.3 7.9 (22)
Outlets 611 (2) (0.3) 2.2 6.3 6.4 6.9 (10)
Total Major retail 2,024 55 2.8 1.7 7.3 7.7 7.6 (17)
London 189 (11) (5.6) 3.7 4.4 4.2 6.6 6
Major regional cities 516 (16) (3.0) 2.4 6.6 6.7 8.1 33
Total Mixed-use urban 705 (27) (3.7) 2.7 6.1 ((2)) 6.1((2)) 7.5 25
Leisure 420 (5) (1.1) (0.2) 8.4 8.6 8.7 (8)
Retail parks 366 19 5.6 1.1 5.8 6.6 6.6 (27)
Total Subscale sectors 786 14 2.0 0.3 7.2 7.7 7.7 (20)
Total Combined Portfolio 9,957 91 0.9 2.1 5.2((2)) 6.2((2)) 6.2 1
1. Rental value change excludes units materially altered during the period.
2. Excluding developments / land.
Looking ahead, the good availability and attractive pricing of credit for
high-quality assets is supportive to a further pick-up in investment market
activity. We have started to see competition for selective assets in both
retail and London offices from investors who are attracted by historically
attractive yields for assets with demonstrable rental growth, although the
outlook for longer-term interest rates will likely influence the pace at which
momentum continues to improve from here. Values for the best assets have
started to return to modest growth, yet we expect assets where the
sustainability of income is questionable to remain under pressure. Reflecting
continued customer demand, we still expect that ERVs for our London and retail
portfolio will grow by a low to mid single digit percentage this year.
Leasing and operational performance
Central London
Office customer demand continues to focus on buildings with the best
sustainability credentials, local amenities and transport connectivity,
particularly proximity to overground rail stations. Such assets remain scarce,
hence rental values continue to increase. Having sold virtually all of our
long-term, single-let HQ buildings since late 2020, our portfolio is now
almost exclusively focused on multi-let assets in a small number of key areas
in London, such as Victoria where market rents have already exceeded the
record levels we set with our newly completed n2 project last year.
The appeal of our offer is underlined by the fact that we continue to see
growth in daily turnstile tap-ins in our buildings. The rate of growth will
naturally plateau over time as customers near full capacity, yet September saw
average daily tap-ins reach the highest level on record. Our customers are now
planning for c. 25% more space per person than they did five years ago, so c.
80% of our lettings over the last twelve months have seen customers grow or
keep the same space.
This translates into continued growth in operational performance. Our
occupancy increased 60bps to 97.9%, significantly outperforming the London
market as a whole at 91.5%. We completed 21 lettings and renewals during the
half year, totalling £9m of rent, on average 4% ahead of ERV, with a further
£8m in solicitors' hands, 3% above ERV. Our relettings/renewals reflected a
7% uplift to previous passing rents, resulting in 5.5% LFL rental income
growth. With our London portfolio now 9% reversionary, we expect continued
growth in rental income.
Our two established Myo flex office locations in Victoria and Liverpool
Street, which combined make up 2% of our London portfolio, saw a reduction in
occupancy from 91% to 79% due to a small number of larger lease expiries, but
we expect most of this to recover in the second half. Our four recently opened
Myo locations are in lease-up and are currently 45% let or under offer, with a
further c. 20% in negotiations and rents on average in line with our
underwrites.
Major retail destinations
We continue to see growing demand for physical retail space in the very best
locations. For brands, the attraction of our major retail destinations sits in
the fact that these offer the best access to consumer spend, with the top 1%
of all UK shopping destinations providing access to 30% of the country's
in-store, non-food retail spend, resulting in higher sales densities and
productivity than other formats.
As such, brands continue to focus on 'fewer, bigger, better' stores, such as
for example at White Rose, where we agreed a deal with Primark to expand their
store from 37,000 to 71,000 sq ft; in Bluewater, where we are seeing new
openings of e.g. Bershka, Pull&Bear and Sephora; and at St. David's in
Cardiff, where JD Sports are moving into a major new store as they relocate
from elsewhere in the city centre. Over the last six months, 22 existing
brands increased their space, 23 new brands opened in our centres and 38
existing brands opened stores in new locations within our portfolio.
As a result, like-for-like occupancy was up 70bps to 96.0%, which means
occupancy is now higher than it was before the pandemic. We signed 105 leases
totalling £12m, on average 5% above ERV and have a further £14m of lettings
in solicitors' hands on average 9% ahead of ERV. Overall, relettings and
renewals were 4% above previous passing rent and like-for-like net rental
income increased 3.1%, adding further to our attractive income returns.
Overall retail sales in the UK were relatively subdued during Spring, which
from our conversations with brands was mostly attributed to the weather, as
brands typically expect a strong final quarter to 2024. Across our portfolio,
total sales are up 2.5% year-to-date. Like-for-like sales and footfall are
down 0.7% and 1.3%, partly reflecting the timing of Easter, which fell in
March this year.
Like-for-like net rental income increased 3.1%, which adds further to the
attractive 7%+ income yield of our high-quality major retail destinations. We
are progressing a number of accretive investments to further enhance our
existing assets, such as the creation of new public/leisure space at Cardiff,
a new F&B destination at Trinity, Leeds and a new waterfront F&B offer
at Gunwharf Quays. With c. £100m capex over the next 2-3 years, this is
expected to deliver low-risk double-digit IRRs and a high single digit / low
double digit yield on cost. For well-maintained, high-quality shopping centres
and outlets such as our portfolio, maintenance capex is limited to, on
average, c. 20bps of the overall asset value p.a. although this will be far
higher for those investors who own secondary assets which lack rental tension
and hence the ability to recover costs through service charge or increased
rents.
Mixed-use urban neighbourhoods
Our mixed-use portfolio principally comprises our MediaCity estate in Greater
Manchester and a number of assets with future redevelopment potential,
including our investment in Mayfield, Manchester and three existing shopping
centres in London and Glasgow. In recent years these had been managed to
maximise future development flexibility by working to full vacant possession
dates, which resulted in a shortening of income. We have changed our approach
to parts of this, which will result in lower capex, a greater retention and
improvement of the existing income and, ultimately, better overall
risk-adjusted returns.
Subscale sectors
Our retail parks saw a small decrease in occupancy to 94.7%, whilst occupancy
across our leisure assets was down marginally to 96.6%. We completed or are in
solicitor's hands on £5m of lettings on average in line with ERV. During the
period, Cineworld announced a restructuring plan which resulted in a rent
reduction in five of their 13 cinemas in our portfolio, although the loss of
income is limited to 0.2% of our overall rent and all of their venues continue
to trade.
Table 3: Operational performance analysis
Annualised rental income Net estimated rental value EPRA occupancy(1) LFL occupancy change(1) WAULT(1)
£m £m % ppt Years
West End offices 158 188 98.7 (0.9) 6.4
City offices 71 98 96.5 2.8 7.4
Retail and other 41 55 98.1 0.9 5.4
Developments 9 100 n/a n/a n/a
Total Central London 279 441 97.9 0.6 6.5
Shopping centres 139 139 96.0 1.0 4.3
Outlets 47 50 95.9 (0.2) 2.9
Total Major retail 186 189 96.0 0.7 3.9
London 11 16 88.5 (1.7) 7.5
Major regional cities 37 41 94.9 1.4 6.9
Total Mixed-use urban 48 57 93.2 0.6 7.0
Leisure 44 42 96.6 (0.4) 10.5
Retail parks 25 27 94.7 (2.5) 5.6
Total Subscale sectors 69 69 95.8 (1.2) 8.6
Total Combined Portfolio 582 756 96.6 0.4 6.1
1. Excluding developments.
Development pipeline
We have created a significant pipeline of development opportunities in areas
of strong structural demand. In Central London, we have the potential to
deliver 1.6m sq ft of highly sustainable office space with the potential to
generate around £160m of rental income. In addition, we now have increasing
visibility on a pipeline of more than 6,000 homes across a select number of
mixed-use schemes in Manchester and London. This could potentially deliver
over £200m of annualised income in the next decade.
As demand for the best space continues to outweigh supply, rents continue to
grow across both sectors. In London, space under construction increased 6%
since March to 14.2m sq ft, of which 45% is pre-let or under offer. As a
result, speculative office space completing over the next two years is roughly
half of the long-term average new-build office take-up. In residential, the
forecast for population growth of c. 6 million people by 2036 and continued
urbanisation creates a structural need for more homes in major cities.
That said, the build cost inflation over the past few years, continued
challenges in supply chains and an increase in exit yields have put pressure
on development returns, despite growing rents. This has affected offices more
than residential, and regional offices more than London. We continue to make
good progress on adjusting our plans by e.g. changing scope, increasing
massing, or reducing cost to manage the impact of this. Still, we will
continue to carefully weigh risks and returns on any new commitments, also
relative to the returns on those assets we choose to sell to fund our
investments in this.
In terms of our two committed office developments, we are on track to deliver
both by late 2025. At Timber Square, we are starting to see early customer
interest in our highly-sustainable offices which benefit from strong transport
links and lively local amenities. Building on the success at n2, we will now
add clubrooms which are accessible to all customers to both the Print Building
and Ink Building. This will drive additional rent, yet combined with some
design refinements and a sub-contractor insolvency, overall costs are up £31m
and the expected gross yield on cost reduced slightly from 7.1% to 7.0%.
In Victoria, Thirty High will see us deliver 299,000 sq ft of space in a
sub-market where our adjacent 2.6 million sq ft of existing space is 98.3% let
and prime rents continue to break new records, now well over £100 per sq ft.
Given the smaller floorplates, leasing is planned closer to completion to
enable us to capture a premium for the unique views the building offers. We
are already in solicitors' hands with an operator for the top floor restaurant
and our expected gross yield on cost is 7.2%.
Table 4: Committed London pipeline
Project Sector Size Estimated completion Net income/ ERV Market value Costs to complete TDC Gross yield on TDC
date
£m
sq ft £m £m £m %
'000
Thirty High, SW1 Office 299 Oct-25 30 300 151 416 7.2%
Timber Square, SE1 Office 383 Dec-25 31 205 224 442 7.0%
Total 682 61 505 375 858 7.1%
In terms of our future pipeline, we do not envisage making any new commitments
to start schemes for the remainder of the financial year, as we focus our
investment activity in the near term on major retail. We expect to complete
the deconstruction of the existing building at Red Lion Court towards the end
of this year. At Liberty of Southwark, we are reviewing the impact of the new
Building Safety Act on the small residential component of the scheme, which
has pushed back the earliest start date to 2026.
We continue to progress our mixed-use pipeline, which we are increasingly
focusing on its significant residential potential. At Finchley Road, in zone
two London, we have started the demolition of the former Homebase, utilities
works are now on site and we have secured vacant possession for the first
phase. We have an existing detailed consent in place and, subject to some
small planning variations, we could potentially start the first phase of 600
homes in 2026. We expect the investment for this to be roughly around £350m,
which is expected to deliver a low double-digit IRR.
At Mayfield, adjacent to Manchester's main train station, we have agreed with
our JV partners to optimise the development strategy for this exciting 24-acre
site, unlocking significant residential potential. The first c. £250m phase
of the scheme consists of two offices buildings plus a multi-storey car park.
Manchester office demand is strong and of the current 843,000 sq ft committed
pipeline, 83% is already pre-let, with prime rents up 13% over the past two
years. Whilst we would not pursue office development in isolation, the returns
on this look acceptable and, importantly, delivery of this would unlock the
opportunity to invest c. £1bn into delivering c.1,700 homes across multiple
phases around Manchester's newest, 6-acre park. Manchester has seen one of the
highest levels of residential rental growth in the UK, with a 5-year annual
growth rate of 7%, so returns in this sector are very attractive.
At Lewisham, south-east London, we submitted a planning application last month
for our new masterplan, which has the potential to deliver up to 1,700 homes
with a further 445 co-living homes and 660 student beds over the next decade
across multiple phases. The plans have been developed after substantial
consultation, with over 2,500 visitors to our engagement hub, and will see the
creation of eight acres of new public space, a new pedestrianised high street
with shops, bars, restaurants and cafes, a new music venue, and new
pedestrianised walking routes.
Given the strong demand for stores in the best locations, we have changed our
plans for Buchanan Galleries, which sits at the top of Glasgow's prime high
street. Instead of a decade-long office-led regeneration scheme, we are now
progressing a less disruptive and more quickly delivered redevelopment of the
existing retail centre. This will create a new food hall and open the existing
centre up to the high street. Combined with our recent acquisition of a retail
block opposite our centre, this means we effectively control both sides of the
top of Glasgow's prime retail pitch. We are already seeing strong interest
from leading international brands in our plans, which could start on site in
2026.
Table 5: Future development pipeline
Project Proposed sq ft Indicative TDC Indicative ERV Gross yield on TDC((1)) Potential Planning status
start date
'000 £m £m %
Office-led
Red Lion Court, SE1 250 2025 Consented
Old Broad Street, EC2 290 2025 Consented
Liberty of Southwark, SE1 220 2026 Consented
Hill House, EC4 380 2026 Consented
Nova Place, SW1 60 2025 Design
Southwark Bridge Road, SE1 150 2026 Design
Timber Square Phase 2, SE1 290 2026 Design
Total 1,640 2,250 160 7.1
Residential-led
Mayfield, Manchester 1,820 2025 Consented
Finchley Road, NW3 1,400 2026 Consented
Lewisham, SE13 1,900 2027 Design
Total 5,120 3,100-3,900 200-260 c. 6-7
Total future pipeline 6,760
1. Indicative figures.
Delivering in a sustainable way
In 2023, we were one of the first real estate companies in the world to align
our carbon reduction targets to the Science Based Targets Initiative's (SBTi)
new Net-Zero Standard. We target to reduce direct and indirect greenhouse gas
emissions by 47% by 2030 versus a 2019/20 base year and to reach net zero by
2040. Importantly, this not only includes all of our Scope 1 and 2 emissions,
but also all of our reported Scope 3 emissions. We have reduced our emissions
by 27% vs our 2019/20 baseline. To support the achievement of our
science-based target, we have an energy intensity target, to reduce energy
intensity by 52% by 2030 from a 2019/20 baseline. The reduction in the six
months was 2%, which means we are currently tracking a 19% reduction versus
our baseline.
Our fully-funded net zero transition investment plan, launched in 2021, will
ensure we deliver our near-term science-based target and meet the proposed
Minimum Energy Efficiency Standard of EPC 'B' by 2030, although it appears
likely the originally proposed date for this minimum standard will be pushed
back. Still, the expected cost to deliver this plan is already reflected in
our current portfolio valuation. We have made further progress in the first
half of the year, as 52% of our portfolio is already rated 'B' or higher,
including 43% of our office portfolio, up from 49% at March. We are now on
site at four offices to retrofit air source heat pumps and plan to start work
on a fifth building by the end of March.
We are completing the installation of an additional 1,350 solar panels at
Gunwharf Quays which will be operational later this month. This new 550kWp
solar PV system combined with the already existing one will generate over
670,000 kWh per year, representing 23% of landlord total electricity demand.
Increasing on-site renewable energy generation through installation of solar
PVs helps us to achieve our energy and carbon targets while supporting the UK
electricity grid decarbonise. It also enhances the value of our assets and we
have already seen the positive impact of this project in the valuation of
Gunwharf Quays.
We design developments not only with energy efficiency in mind, but also to
minimise upfront embodied carbon. To this end, our target is to reduce upfront
embodied carbon by 50% vs a typical development by 2030, to below
500kgCO(2)e/sqm for offices and 400kgCO(2)e/sqm for residential. We have made
good progress on this, with our future pipeline currently tracking a 41%
reduction. Our two committed schemes, Timber Square and Thirty High, are
exemplary due to the high levels of retention of existing structures, with
upfront embodied carbon intensities of 522kgCO(2)e/sqm and 347kgCO(2)e/sqm
respectively.
Our Landsec Futures fund will invest £20m over 2023-2033 to improve social
mobility in real estate and to tackle issues local to our assets. To date, it
has created career pathways for 18 interns and supported 12 real estate
bursaries. This work contributes to our 2030 target to create £200m of social
value and empower 30,000 people towards the world of work. From our 2019/20
baseline, we have so far created £69m of social value and empowered 12,014
people.
Financial review
Overview
External market conditions remain supportive in terms of customer demand.
Moreover, investment activity has started to pick up and property yields have
begun to stabilise for the best assets, with continued rental value growth
driving modest capital growth. This is in line with the view we set out six
months ago and as we expect these trends to persist, our high-quality
portfolio, operational outperformance and robust capital base provide a solid
foundation for future growth.
EPRA earnings for the first half were at the top end of expectations at
£186m. Our continued focus on improving efficiencies saw overhead costs
reduce by 10%, offsetting a small rise in financing costs, whilst
like-for-like net rental income was up 3.4%. Our occupancy increased 40bps to
96.6%, whilst we agreed relettings and renewals 6% above previous passing
rents.
Whereas we initially expected like-for-like growth for the full year to be
broadly in line with last year's 2.8%, we now expect this to be closer to 4%.
As such, we raise our outlook for FY25 EPRA EPS and now expect this to be in
line with last year's level of 50.1 pence, despite our significant non-core
disposals over the past twelve months. As this flows through to future years,
we expect FY26 to be ahead of this. This increase in EPS outlook does not
reflect any benefit from potential future acquisitions. Our interim dividend
is up 2.2% to 18.6p, in line with our guidance of low single digit percentage
growth, and we continue to target a dividend cover of 1.2-1.3x on an annual
basis.
Driven by our strong leasing activity, ERV growth was 2.1%. As yields were
stable, this resulted in 0.9% growth in the valuation of our portfolio.
Combined with our EPRA earnings, this drove an overall IFRS profit before tax
of £243m and basic EPS of 32.8 pence, compared with a loss before tax of
£193m for the first half of last year. As a result, EPRA NTA per share
increased 1.4% to 871 pence. Including dividends paid, this means our total
return on equity was 3.9%, reflecting a 2.9% income return and 1.7% upside
from ERV growth and developments, as the impact from yield movements was
minimal.
In September, we issued a £350m 10-year Green bond at a 4.625% coupon and
last month we refinanced £2.25bn revolving credit facilities, further
strengthening our solid capital base. Net debt was stable at £3.5bn and we
remain comfortably within our operating guidelines. Net debt/EBITDA is low at
7.4x vs our target of below 8x; our LTV is at 34.9%, or 34.4% adjusted for an
element of deferred sales proceeds, comfortably within our target range of
25-40%; and our interest cover is a healthy 3.8x. Our average debt maturity is
long, at 10.0 years and we have no need to refinance any debt until 2027, so
with £2bn of cash and undrawn facilities, we have capacity to invest in
future growth.
Presentation of financial information
The condensed consolidated preliminary financial information is prepared under
UK adopted international accounting standards (IFRSs and IFRICs) where the
Group's interests in joint ventures are shown collectively in the income
statement and balance sheet, and all subsidiaries are consolidated at 100%.
Internally, management reviews the Group's results on a basis that adjusts for
these forms of ownership to present a proportionate share. The Combined
Portfolio, with assets totalling £10.0bn, is an example of this approach,
reflecting our economic interest in our properties regardless of our ownership
structure.
Our key measure of underlying earnings performance is EPRA earnings, which
represents the underlying financial performance of the Group's property rental
business, which is our core operating activity. A full definition of EPRA
earnings is given in the Glossary. This measure is based on the Best Practices
Recommendations of the European Public Real Estate Association (EPRA) which
are metrics widely used across the industry to aid comparability and includes
our proportionate share of joint ventures' earnings. Similarly, EPRA Net
Tangible Assets per share is our primary measure of net asset value.
Measures presented on a proportionate basis are alternative performance
measures as they are not defined under IFRS. This presentation provides
additional information to stakeholders on the activities and performance of
the Group, as it aggregates the results of all the Group's property interests
which under IFRS are required to be presented across a number of line items in
the statutory financial statements. For further details see table 13 in the
Business analysis section.
Income statement
Our high-quality portfolio of scarce assets and strong leasing performance
continue to deliver robust like-for-like income growth. This partly offset the
fact that our material net disposals over the past year, including our £400m
hotel portfolio in May, reduced rental income by £20m and surrender receipts
were down £13m, to £4m. Finance costs increased due to higher interest rates
but this was more than offset by reductions in other expenses, so as a result,
EPRA earnings are at the top end of expectations at £186m.
Table 6: Income statement(1)
Six months ended Six months ended
30 September 2024
30 September 2023
Central London Major retail Mixed-use urban Subscale sectors Total Central London Major retail Mixed-use urban Subscale sectors Total Change
£m £m £m £m £m £m £m £m £m £m £m
Gross rental income(2) 146 90 24 42 302 146 92 29 56 323 (21)
Net service charge expense (2) (3) (1) - (6) (3) (4) (1) (2) (10) 4
Net direct property expenditure (10) (16) (4) (6) (36) (11) (12) (5) (8) (36) -
Movement in bad/doubtful debts provisions - 4 3 2 9 - 4 - 1 5 4
Segment net rental income 134 75 22 38 269 132 80 23 47 282 (13)
Net administrative expenses (34) (38) 4
EPRA earnings before interest 235 244 (9)
Net finance expense (49) (46) (3)
EPRA earnings 186 198 (12)
Capital/other items
Valuation surplus/(deficit) 91 (375) 466
Loss on disposals (10) (3) (7)
Impairment charges (6) (4) (2)
Fair value movement on interest rate swaps (15) 2 (17)
Other (2) 1 (3)
Profit/(loss) before tax attributable to shareholders of the parent 244 (181) 423
Non-controlling interests (1) (12) 13
Profit/(loss) before tax 243 (193) 436
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
2. Includes finance lease interest, after rents payable.
Net rental income
Our gross rental income for the half year was down £21m to £302m driven by
non-core asset sales and the aforementioned £13m reduction in surrender
premiums. Surrender premiums in the first half were £4m, as a result of lower
levels of customer rightsizing or repurposing activity. The release of bad and
doubtful debt provisions was up £4m, which is a result of recovering
outstanding debts on a number of assets that were previously managed
externally and we now manage in-house. On a full year basis, we expect the
benefit of this to broadly offset the fact that surrenders will likely be
slightly lower than our original guidance.
Taking into account the above, overall net rental income reduced by £13m to
£269m, yet on a like-for-like basis, net rental income was up £7m. Direct
property expenditure was stable and net service charge expenses were down
£4m. Developments and the repurposing of conventional office space to Myo
increased net rental income by £9m. Our investment activity, with our
significant non-core asset sales, reduced income by £20m, ahead of recycling
this capital into assets with stronger return prospects.
Our gross to net margin improved by 1.7ppt to 89.1% due to a reduction in
operating expenses and the improved credit control position. During the
period, Cineworld announced a restructuring plan which affected five of their
13 cinemas in our portfolio, although all of these continue to trade and the
loss of rental income was limited to 0.2% of our overall rent. All this meant
that on a like-for-like basis, our net rental income was up 3.4%, which is
ahead of our expectation in May that growth would be in line with last year's
2.8%. As such, we now expect like-for-like income growth for the full year to
be closer to 4%.
Table 7: Net rental income(1)
£m
Net rental income for the six months ended 30 September 2023 282
Gross rental income like-for-like movement in the period(2):
Increase in variable and turnover-based rents -
Operational performance 8
Total like-for-like gross rental income 8
Like-for-like net service charge expense 1
Like-for-like net direct property expenditure (2)
Decrease in surrender premiums received (13)
Developments(2) 9
Acquisitions since 1 April 2023(2) 1
Disposals since 1 April 2023(2) (21)
Movement in bad/doubtful debts 4
Net rental income for the six months ended 30 September 2024 269
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
2. Gross rental income on a like-for-like basis and the impact of
developments, acquisitions and disposals exclude surrender premiums received.
Net administrative expenses
Net administrative expenses were down £4m to £34m as a result of our
continued focus on managing our cost base. We now expect our net
administrative expenses for the full year to be lower than the prior year with
further efficiencies beyond this period, partly from our investments in data
and technology. Combined with our improved gross to net margin, this meant our
EPRA cost ratio reduced from 23.0% to 20.8%. We expect this to increase
slightly in the second half, but for the full year to be well below last
year's 25.0%. Our growth in like-for-like income shows our focus on
high-quality assets is paying off, even though the margin on managing our more
operational assets is lower than on long-let, single occupier assets.
Net finance expenses
Net interest costs increased by £3m to £49m, primarily due to higher average
net debt compared with the prior period and a small increase in average
borrowing costs, as capitalised interest was broadly flat. The increase in
borrowing costs is in line with our guidance and reflects our bond issue in
March to refinance some nearer term maturities. Our debt position was fully
fixed or hedged at the end of September.
Non-cash finance income, which includes the fair value movements on
derivatives, caps and hedging and which is not included in EPRA earnings,
decreased from a net income of £1m during the prior period to a net expense
of £16m. This is predominantly due to the fair value movements of our
interest-rate swaps.
Valuation of investment properties
The independent external valuation of our Combined Portfolio showed an
increase in value of £91m. Our continued strong leasing activity resulted in
2.1% ERV growth, and overall valuation yields were stable. As rents continue
to grow, we expect this will remain supportive to the outlook for capital
values.
IFRS profit/loss after tax
Substantially all our activity during the year was covered by UK REIT
legislation, which means our tax charge for the period remained minimal. The
IFRS profit after tax of £243m reflects our attractive income profile and the
positive fair value adjustment of our investment portfolio. This compares with
an IFRS loss after tax of £193m for the first half of 2023, which was
primarily driven by a softening in valuation yields.
Net assets and return on equity
Our total return on equity for the six months improved to 3.9%, compared with
-2.4% and -4.0% in the first and second halves of last year. Our income return
was 2.9%, whilst ERV growth and development drove a capital return of 1.7%. As
property yields were stable, the impact of yields movements was minimal. As
the outlook for rental value growth remains positive and our annual income
return at NTA is an attractive 5.8%, we are well placed to deliver the 8-10%
return on equity per annum we target over time.
After the £159m of dividends we paid, our EPRA Net Tangible Assets, which
reflects the value of our Combined Portfolio less adjusted net debt, increased
to £6,495m, or 871 pence per share, up 1.4% since March. Whilst the
accounting of this business combination is still in progress, the acquisition
of the remaining 25% interest in MediaCity since the period-end is likely to
give rise to c. £20m of goodwill for the studios business we acquired as part
of this. We intend to write this off in the second half of the year, in line
with our policy of not carrying goodwill on our balance sheet.
Table 8: Balance sheet(1)
30 September 2024 31 March 2024
£m £m
Combined Portfolio 9,957 9,963
Adjusted net debt (3,510) (3,517)
Other net assets/(liabilities) 48 (48)
EPRA Net Tangible Assets 6,495 6,398
Shortfall of fair value over net investment in finance leases book value 7 5
Other intangible asset 2 2
Excess of fair value over trading properties book value (25) (25)
Fair value of interest-rate swaps 11 22
Net assets, excluding amounts due to non-controlling interests 6,490 6,402
Net assets per share 873p 863p
EPRA Net Tangible Assets per share (diluted) 871p 859p
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Table 9: Movement in EPRA Net Tangible Assets(1)
Diluted per share
£m pence
EPRA Net Tangible Assets at 31 March 2024 6,398 859
EPRA earnings 186 25
Like-for-like valuation movement 34 5
Development valuation movement 30 4
Impact of acquisitions/disposals 27 3
Total valuation surplus 91 12
Dividends (159) (21)
Loss on disposals (10) (2)
Other (11) (2)
EPRA Net Tangible Assets at 30 September 2024 6,495 871
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Net debt and leverage
Adjusted net debt, which includes our share of JV borrowings, was effectively
unchanged over the six months, down £7m to £3,510m. Acquisitions totalled
£141m, principally reflecting the £120m acquisition of an additional 17.5%
stake in Bluewater, and we invested £200m in capex, including on our two
on-site London office developments. Disposals were £464m, including the sale
of our hotel portfolio for £400m. £50m of the consideration for this is
deferred for a maximum of two years with an annual coupon of 6%.
Since the half year, we acquired Peel's remaining 25% stake in MediaCity in
Greater Manchester for a cash consideration of £23m plus the assumption of
£61m in borrowings. This now gives us full control of the estate and allows
us to accelerate our asset management plans. The remaining committed capex on
our two London office developments, which are due to complete late 2025 /
early 2026, is £345m. We do not plan to commit to any new developments for
the remainder of this year, so we expect commitments to reduce to c. £236m by
the end of March.
The other key elements behind the decrease in net debt are set out in our
statement of cash flows and note 9 to the financial statements, with the main
movements in adjusted net debt shown below. A reconciliation between net debt
and adjusted net debt is shown in note 13 of the financial statements.
Table 10: Movement in adjusted net debt(1)
£m
Adjusted net debt at 31 March 2024 3,517
Adjusted net cash inflow from operating activities (107)
Dividends paid 157
Capital expenditure 200
Acquisitions 141
Disposals (417)
Other 19
Adjusted net debt at 30 September 2024 3,510
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
With borrowings effectively stable, net debt/EBITDA remained low at 7.4x at
the end of September, or 7.4x based on our weighted-average net debt for the
period. We target net debt/EBITDA to remain below 8x over time. Group LTV
which includes our share of JVs, has reduced marginally to 34.9%, and adjusted
for the aforementioned £50m deferred consideration, this would be 34.4%.
Given where we are in the cycle, we expect our LTV may temporarily increase
slightly from this level as we aim to capitalise on attractive acquisition
opportunities, yet to remain firmly within our 25% to 40% target range.
Table 11: Net debt and leverage
30 September 2024 31 March 2024
Net debt £3,573m £3,594m
Adjusted net debt(1) £3,510m £3,517m
Interest cover ratio 3.8x 3.9x
Net debt/EBITDA (period-end) 7.4x 7.4x
Net debt/EBITDA (weighted average) 7.4x 7.3x
Group LTV(1) 34.9% 35.0%
Security Group LTV 37.5% 37.0%
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Financing
We have gross borrowings of £3,624m, including £2,954m of Medium Term Notes
(MTNs), £196m of syndicated bank loans and £474m of commercial paper. Our
MTNs and the majority of our bank facilities form part of our Security Group,
which provides security on a floating pool of assets valued at £9.2bn. This
structure provides flexibility to include or exclude assets, and an attractive
cost of funding, with our MTNs currently rated AA and AA- with a stable
outlook respectively by S&P and Fitch.
Our Security Group has a number of tiered covenants, yet below 65% LTV and
above 1.45x ICR, these involve very limited operational restrictions. A
default only occurs when LTV is more than 100% or the ICR falls below 1.0x.
With a Security Group LTV of 37.5%, our portfolio could withstand a c. 42%
fall in value before we reach the 65% LTV threshold and c. 63% before reaching
100% LTV, whilst our EBITDA could fall by c. 61% before we reach the 1.45x ICR
threshold and c. 73% before reaching 1.0x ICR.
We had £2.2bn of cash and undrawn facilities at the end of September,
providing substantial flexibility. In September, we issued a £350m Green Bond
with a maturity of 10 years at 4.625%, representing a spread of 97bps over the
reference gilt yield. This spread shows the continued strength of our credit
profile, and ensured our overall debt maturity remains long, at 10.0 years,
providing clear visibility and underpinning the resilience of our attractive
earnings profile. Our average cost of debt rose from 3.3% to 3.5%, yet given
our strong financial position, we expect this to remain stable during the
second half.
In October, we put in place £2,250m of revolving credit facilities to replace
existing facilities that were due to expire across 2025-27. The new facilities
have two tranches, with terms of 3+1+1 and 5+1+1 years to spread refinancing
dates. The margin on the new facilities is the same level as the facilities
they replace, reflecting the strength of our credit profile. We now have no
material debt maturities until 2027.
Table 12: Available facilities(1)
30 September 2024 31 March 2024
£m £m
Medium Term Notes 2,954 2,607
Drawn bank debt 196 415
Outstanding commercial paper 474 681
Cash and available undrawn facilities 2,176 1,889
Total committed credit facilities 2,810 2,907
Weighted average maturity of debt 10.0 years 9.5 years
Percentage of borrowings fixed or hedged((1)) 102% 94%
Weighted average cost of debt((2)) 3.5% 3.3%
1. Calculated as fixed rate debt and hedges over gross debt based on the
nominal values of debt and hedges.
2. Including amortisation and commitment fees; excluding this the weighted
average cost of debt is 3.2% at 30 September 2024.
Principal risks and uncertainties
The principal risks and uncertainties of the business were set out on pages 41
- 45 of the 2024 Annual Report that was published in May. The Executive
Leadership Team and the Board review these risks regularly, as well as monitor
for changes and any emerging risks. Though the risk landscape continues to
evolve and change over time, they remain most relevant and the principal risks
at half year are unchanged from those disclosed in the Annual Report.
The macro-economic outlook remains our highest-rated risk and has some impact
on aspects of our other strategic risks related to the workplace and retail
occupier markets, development strategy and capital allocation. However,
long-term interest rates have been relatively stable for some time now, which
means investor confidence is increasing and activity has started to pick up.
Reflecting this, property yields have stabilised, with continued rental value
growth driving modest capital growth for the best assets.
Our ten principal risks and their current outlook are summarised as follows:
Macro-economic outlook - This risk incorporates the impacts resulting from
changes in the economic climate, including inflationary pressures, challenging
interest rates and business confidence. Whilst there is a general reduction in
the trend of this risk when considering the stabilisation in key factors,
primarily: inflation, interest rates, UK political environment and consumer
confidence, these factors are not considered significant enough to reduce the
score of this risk. For Landsec this risk impacts asset yields, income and
therefore valuations, and our cost base. This includes the cost of completing
development projects and our ability to recycle assets. It may also enable
opportunities to acquire assets.
Development risk - The market risk is considered to have marginally increased
since the year end due to the persistence of build cost inflation, continued
challenges in supply chains and an increase in exit yields in recent years
which are putting pressure on development returns. However, as the majority of
the development costs of our committed schemes is already fixed, this risk is
primarily a consideration for our future development projects where we have
the flexibility to manage the scale and timing of our activity.
Office, Retail and hospitality occupier markets - The risks associated with
these two markets are considered to have remained stable over the period. In
both markets, demand continues to focus on the best quality assets in the
strongest locations: both characteristics of our portfolio. As a result,
despite continued pressure on some areas of the wider market, our operational
performance remains strong and our portfolio well-positioned for further
growth.
Capital allocation - This risk is considered to have remained stable since the
year end, in line with the macroeconomic environment and our strong asset
position. We continue to invest in major retail, which we think will deliver
the most attractive risk-adjusted returns, and retain the flexibility to
manage our exposure to development activity in line with our risk-management
metrics.
Change projects - Landsec has various technology and operational change
projects underway - for example the upgrade and improvement of the ERP system
which encompasses both areas - which carry inherent risk that they do not
succeed in delivering the operational benefits set out in their business
cases. This risk has remained stable over the period, with specific programme
management resource allocated and assurance obtained where appropriate.
The four remaining operational principal risks (Health and safety, People and
skills, Information security and cyber threat and Climate change transition)
have remained stable in the six months since last year end.
Statement of Directors' Responsibilities
The Directors confirm to the best of their knowledge that these condensed
consolidated interim financial statements have been prepared in accordance
with IAS 34, 'Interim Financial Reporting', as contained in UK adopted
international accounting standards and that the interim management report
herein includes a fair review of the information required by the Disclosure
Guidance and Transparency Rules (DTR), namely:
¾ DTR 4.2.7 (R): an indication of important events that have occurred
during the six month period ended 30 September 2024 and their impact on the
condensed interim financial statements and a description of the principal
risks and uncertainties for the remaining six months of the financial year;
and
¾ DTR 4.2.8 (R): any related party transactions in the six month period
ended 30 September 2024 that have materially affected, and any changes in the
related party transactions described in the 2024 Annual Report that could
materially affect, the financial position or performance of the enterprise
during that period.
The Directors of Land Securities Group PLC are listed on pages 51-54 of the
2024 Annual Report and maintained on the Land Securities Group PLC website at
landsec.com.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial information differs from legislation in other jurisdictions.
By order of the Board
Mark Allan
Vanessa Simms
Chief Executive Chief Financial
Officer
Independent review report to Land Securities Group PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2024 which comprises the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated balance
sheet, the consolidated statement of changes in equity, the consolidated
statement of cash flows and the related notes to the financial statements. We
have read the other information contained in the half yearly financial report
and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2024 is not prepared,
in all material respects, in accordance with UK adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
14 November 2024
Financial statements
Unaudited income statement Six months ended Six months ended
30 September 2024 30 September 2023
EPRA earnings Capital and other items Total EPRA earnings Capital and other items Total
Notes £m £m £m £m £m £m
Revenue 5 372 11 383 385 27 412
Costs 6 (153) (21) (174) (157) (27) (184)
219 (10) 209 228 - 228
Share of post-tax profit/(loss) from joint ventures 12 11 5 16 10 (17) (7)
Loss on disposal of investment properties - (5) (5) - (3) (3)
Net surplus/(deficit) on revaluation of investment properties 10 - 84 84 - (371) (371)
Operating profit/(loss) 230 74 304 238 (391) (153)
Finance income 7 7 - 7 6 1 7
Finance expense 7 (51) (17) (68) (46) (1) (47)
Profit/(loss) before tax 186 57 243 198 (391) (193)
Taxation - - - - - -
Profit/(loss) for the period 186 57 243 198 (391) (193)
Attributable to:
Shareholders of the parent 244 (181)
Non-controlling interests (1) (12)
243 (193)
Profit/(loss) per share attributable to shareholders of the parent:
Basic earnings/(loss) per share 4 32.8p (24.4)p
Diluted earnings/(loss) per share 4 32.7p (24.4)p
Unaudited statement of comprehensive income Six months ended Six months ended
30 September 2024
30 September 2023
Total Total
£m £m
Profit/(loss) for the period 243 (193)
Items that will not be subsequently reclassified to the income statement:
Net re-measurement loss on defined benefit pension scheme - (1)
Other comprehensive profit/(loss) for the period - (1)
Total comprehensive profit/(loss) for the period 243 (194)
Attributable to:
Shareholders of the parent 244 (182)
Non-controlling interests (1) (12)
243 (194)
Unaudited balance sheet
30 September 2024 31 March
2024
Notes £m £m
Non-current assets
Investment properties 10 9,296 9,330
Intangible assets 3 3
Net investment in finance leases 20 21
Investments in joint ventures 12 537 529
Trade and other receivables 204 159
Other non-current assets 26 48
Total non-current assets 10,086 10,090
Current assets
Trading properties 11 97 100
Trade and other receivables 416 379
Monies held in restricted accounts and deposits 10 6
Cash and cash equivalents 37 78
Other current assets 12 11
Total current assets 572 574
Total assets 10,658 10,664
Current liabilities
Borrowings 14 (477) (975)
Trade and other payables (328) (348)
Provisions 15 (48) (30)
Other current liabilities (8) -
Total current liabilities (861) (1,353)
Non-current liabilities
Borrowings 14 (3,219) (2,805)
Trade and other payables (4) (4)
Provisions 15 (20) (42)
Other non-current liabilities (9) (13)
Total non-current liabilities (3,252) (2,864)
Total liabilities (4,113) (4,217)
Net assets 6,545 6,447
Equity
Capital and reserves attributable to shareholders
Ordinary shares 80 80
Share premium 319 319
Other reserves 26 23
Retained earnings 6,065 5,980
Equity attributable to shareholders of the parent 6,490 6,402
Equity attributable to non-controlling interests 55 45
Total equity 6,545 6,447
The financial statements on pages 24 to 42 were approved by the Board of
Directors on 14 November 2024 and were signed on its behalf by:
Mark Allan Vanessa Simms
Directors
Unaudited statements of changes in equity Attributable to shareholders of the parent
Ordinary shares Share premium Other reserves Retained earnings Non-controlling interests Total
equity
Total
£m £m £m £m £m £m £m
At 1 April 2023 80 318 13 6,594 7,005 67 7,072
Total comprehensive loss for the financial period - - - (182) (182) (12) (194)
Transactions with shareholders of the parent:
Share-based payments - 1 5 - 6 - 6
Dividends paid to shareholders of the parent 8 - - - (156) (156) - (156)
Total transactions with shareholders of the parent - 1 5 (156) (150) - (150)
Total transactions with shareholders - 1 5 (156) (150) - (150)
At 30 September 2023 80 319 18 6,256 6,673 55 6,728
Total comprehensive loss for the financial period - - - (139) (139) (10) (149)
Transactions with shareholders of the parent:
Share-based payments - - 5 (2) 3 - 3
Dividends paid to shareholders of the parent 8 - - - (135) (135) - (135)
Total transactions with shareholders of the parent - - 5 (137) (132) - (132)
Total transactions with shareholders - - 5 (137) (132) - (132)
At 31 March 2024 80 319 23 5,980 6,402 45 6,447
Total comprehensive profit for the financial period - - - 244 244 (1) 243
Transactions with shareholders of the parent:
Share-based payments - - 3 - 3 - 3
Dividends paid to shareholders of the parent 8 - - - (159) (159) - (159)
Total transactions with shareholders of the parent - - 3 (159) (156) - (156)
Dividends paid to non-controlling interests - - - - - (1) (1)
Issued share capital - - - - - 12 12
Total transactions with shareholders - - 3 (159) (156) 11 (145)
At 30 September 2024 80 319 26 6,065 6,490 55 6,545
Unaudited statements of cash flows Six months ended
30 September
2024 2023
Notes £m £m
Cash flows from operating activities
Net cash generated from operations 9 148 210
Interest received 10 15
Interest paid (42) (50)
Rents paid (7) (7)
Capital expenditure on trading properties (7) (8)
Disposal of trading properties 5 7
Other operating cash flows - (1)
Net cash inflow from operating activities 107 166
Cash flows from investing activities
Investment property development expenditure (124) (92)
Other investment property related expenditure (68) (65)
Acquisition of investment properties, net of cash acquired (137) (91)
Disposal of investment properties 393 1
Cash distributions from joint ventures 12 7 7
Net cash inflow/(outflow) from investing activities 71 (240)
Cash flows from financing activities
Net proceeds from new borrowings (net of finance fees) 14 541 284
Net repayment of borrowings 14 (601) (9)
Net cash outflow from derivative financial instruments 14 (10) (12)
Proceeds from non-controlling interest share capital issuance 12 -
Dividends paid to shareholders of the parent 8 (157) (153)
(Increase)/decrease in monies held in restricted accounts and deposits (4) 2
Other financing cash flows - 1
Net cash (outflow)/inflow from financing activities (219) 113
(Decrease)/increase in cash and cash equivalents for the period (41) 39
Cash and cash equivalents at the beginning of the period 78 41
Cash and cash equivalents at the end of the period 37 80
Notes to the financial statements
1. Basis of preparation and consolidation
Basis of preparation
This condensed consolidated interim financial information (financial
statements) for the six months ended 30 September 2024 has been prepared on a
going concern basis and in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority and IAS 34 'Interim Financial
Reporting' as contained in UK adopted international accounting standards
(IFRS). As applied by the Group, there are no material differences between UK
adopted international accounting standards and EU IFRS.
The condensed consolidated interim financial information does not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 March 2024, prepared in
accordance with UK adopted international accounting standards (IFRSs and
IFRICs) and in conformity with the Companies Act 2006, were approved by the
Board of Directors on 16 May 2024 and delivered to the Registrar of Companies.
The report of the auditor on those accounts was unqualified, did not contain
an emphasis of matter paragraph and did not contain any statement under
section 498(2) or (3) of the Companies Act 2006. The condensed consolidated
interim financial information has been reviewed, not audited, and should be
read in conjunction with the Group's annual financial statements for the year
ended 31 March 2024.
In preparing the condensed consolidated interim financial information, the
Group has considered the impact of climate change. Related capital expenditure
and the expected impact on ERVs associated with this commitment have been
factored within property valuations. On this basis, the Group has concluded
that climate change did not have a material impact on the financial reporting
judgements and estimates, consistent with the assessment that this is not
expected to have a significant impact on the Group's going concern assessment.
This condensed consolidated interim financial information was approved for
issue by the Directors on 14 November 2024.
Going concern
Following a prolonged period of high inflation, rising interest rates and
minimal GDP growth, the UK is now experiencing modest GDP growth, falling
inflation and interest rate cuts since 1 April 2024. Nevertheless, the
Directors have continued to place keen focus on the appropriateness of
adopting the going concern assumption in preparing the financial statements
for the half year ended 30 September 2024.
The Group's going concern assessment considers changes in the Group's
principal risks (see page 20) and is dependent on a number of factors,
including our financial performance and continued access to borrowing
facilities. The Group has successfully refinanced its revolving credit
facilities on 30 October 2024 of £2.3bn significantly ahead of its maturity
under the same financial covenant terms as the existing facilities. The new
facilities have two equally split tranches with initial maturities falling in
2027 and 2029 respectively. This refinancing is a testament to the Group's
strong financial position and performance and further enhances the Group's
financial capacity, flexibility and maturity profile across the going concern
assessment period. Moreover, access to our borrowing facilities is also
dependent on our ability to continue to operate the Group's secured debt
structure within its financial covenants, which are described in note 14.
In order to satisfy themselves that the Group has adequate resources to
continue as a going concern for the foreseeable future, the Directors have
reviewed base case, downside and reverse stress test models, as well as a cash
flow model which considers the impact of pessimistic assumptions on the
Group's operating environment (the 'mitigated downside scenario'). This
mitigated downside scenario reflects unfavourable macro-economic conditions, a
deterioration in our ability to collect rent and service charge from our
customers and removes uncommitted capital expenditure, acquisitions, disposals
and developments.
The Group's key metrics from the mitigated downside scenario incorporating the
impact of the refinanced revolving credit facilities as at the end of the
going concern assessment period, which covers the 16 months from the date of
authorisation of these financial statements to 31 March 2026, are shown below
alongside the actual position at 30 September 2024.
Key metrics 30 September 2024 31 March 2024
mitigated downside scenario
mitigated downside scenario
30 September 2024 31 March 2026 30 September 2025
Security Group LTV 37.5% 44.7% 42.8%
Adjusted net debt £3,510m £4,230m £3,885m
EPRA net tangible assets £6,495m £5,392m £5,559m
Available financial headroom £2.2bn £0.8bn £0.9bn
In our mitigated downside scenario, the Group has sufficient cash reserves,
with our Security Group LTV ratio remaining less than 65% and interest cover
above 1.45x, for a period of 16 months from the date of authorisation of these
financial statements. Under this scenario, the Security Group's asset values
would need to fall by a further 31% from the sensitised values forecasted at
31 March 2026 to be non‑compliant with the LTV covenant. This equates to a
42% fall in the value of the Security Group's assets as at 30 September 2024
for the LTV to reach 65%. The Directors consider the likelihood of this
occurring over the going concern assessment period to be remote.
The Security Group also requires earnings before interest of at least £186m
in the full year ending 31 March 2025 and at least £237m in the full year
ending 31 March 2026 for interest cover to remain above 1.45x in the mitigated
downside scenario, which would ensure compliance with the Group's covenant
through to the end of the going concern assessment period. Security Group
earnings post year end 31 March 2024 are above the level required to meet the
interest cover covenant for the year ended 31 March 2025. The Directors do not
anticipate a reduction in Security Group earnings over the period ending 31
March 2026 to a level that would result in a breach of the interest cover
covenant.
The Directors have also considered a reverse stress-test scenario which
assumes no further rent will be received, to determine when our available cash
resources would be exhausted. Even under this extreme scenario, although
breaching the interest cover covenant, the Group continues to have sufficient
cash reserves to continue in operation throughout the going concern assessment
period.
Based on these considerations, together with available market information and
the Directors' knowledge and experience of the Group's property portfolio and
markets, the Directors have adopted the going concern basis in preparing the
financial statements of the Group and parent for the half year ended 30
September 2024.
Presentation of results
The Group income statement is presented in a columnar format, split into those
items that relate to EPRA earnings and Capital and other items. The Total
column represents the Group's results presented in accordance with IFRS; the
other columns provide additional information. This is intended to reflect the
way in which the Group's Senior Management review the results of the business
and to aid reconciliation to the segmental information.
A number of the financial measures used internally by the Group to measure
performance include the results of partly-owned subsidiaries and joint
ventures on a proportionate basis. Measures that are described as being on a
proportionate basis include the Group's share of joint ventures on a
line-by-line basis and are adjusted to exclude the non-owned elements of our
subsidiaries. These measures are non-GAAP measures and therefore not presented
in accordance with IFRS. This is in contrast to the condensed consolidated
interim financial information presented in these half year results, where the
Group applies equity accounting to its interest in joint ventures and
associates, presenting its interest collectively in the income statement and
balance sheet, and consolidating all subsidiaries at 100% with any non-owned
element being adjusted as a non-controlling interest or redemption liability,
as appropriate. Our joint operations are presented on a proportionate basis in
all financial measures used internally by the Group.
2. Significant accounting judgements and estimates
The condensed consolidated interim financial information has been prepared on
the basis of the accounting policies, significant judgements and estimates as
set out in the notes to the Group's annual financial statements for the year
ended 31 March 2024, as amended where relevant to reflect the new standards,
amendments and interpretations which became effective in the period. There has
been no material impact on the financial statements of adopting these new
standards, amendments and interpretations.
3. Segmental information
The Group's operations are all in the UK and are managed across four operating
segments, being Central London, Major retail destinations (Major retail),
Mixed-use urban neighbourhoods (Mixed-use urban) and Subscale sectors.
The Central London segment includes all assets geographically located within
central London. Major retail destinations includes all regional shopping
centres and shops outside London and our outlets. The Mixed-use urban segment
includes those assets where we see the most potential for capital investment.
Subscale sectors mainly includes assets that will not be a focus for capital
investment and consists of leisure and hotel assets and retail parks.
Management has determined the Group's operating segments based on the
information reviewed by Senior Management to make strategic decisions. The
chief operating decision maker is the Executive Leadership Team (ELT),
comprising the Executive Directors and the Managing Directors. The information
presented to ELT includes reports from all functions of the business as well
as strategy, financial planning, succession planning, organisational
development and Group-wide policies.
The Group's primary measure of underlying profit before tax is EPRA earnings.
However, Segment net rental income is the lowest level to which the profit
arising from the ongoing operations of the Group is analysed between the four
segments. The administrative costs, which are predominantly staff costs for
centralised functions, are all treated as administrative expenses and are not
allocated to individual segments.
The Group manages its financing structure, with the exception of joint
ventures and non-wholly owned subsidiaries, on a pooled basis. Individual
joint ventures and non-wholly owned subsidiaries may have specific financing
arrangements in place. Debt facilities and finance expenses, including those
of joint ventures, are managed centrally and are therefore not attributed to a
particular segment. Unallocated income and expenses are items incurred
centrally which are not directly attributable to one of the segments.
All items in the segmental information note are presented on a proportionate
basis.
Segmental results
Six months ended 30 September 2024 Six months ended 30 September 2023(2)
EPRA earnings Central London Major retail Mixed-use urban Subscale sectors Total Central London Major Mixed-use urban Subscale sectors Total
retail
£m £m £m £m £m £m £m £m £m £m
Rental income 147 95 24 41 307 148 95 29 56 328
Finance lease interest - - - 1 1 - - - - -
Gross rental income (before rents payable) 147 95 24 42 308 148 95 29 56 328
Rents payable(1) (1) (5) - - (6) (2) (3) - - (5)
Gross rental income (after rents payable) 146 90 24 42 302 146 92 29 56 323
Service charge income 33 28 7 5 73 28 28 6 - 62
Service charge expense (35) (31) (8) (5) (79) (31) (32) (7) (2) (72)
Net service charge expense (2) (3) (1) - (6) (3) (4) (1) (2) (10)
Other property related income 10 4 2 1 17 9 5 2 1 17
Direct property expenditure (20) (20) (6) (7) (53) (20) (17) (7) (9) (53)
Movement in bad and doubtful debts provision - 4 3 2 9 - 4 - 1 5
Segment net rental income 134 75 22 38 269 132 80 23 47 282
Other income 1 2
Administrative expense (33) (38)
Depreciation (2) (2)
EPRA earnings before interest 235 244
Finance income 7 6
Finance expense (51) (46)
Joint venture net finance expense (5) (6)
EPRA earnings attributable to shareholders of the parent 186 198
1. Included within rents payable is lease interest payable of £2m across the
four segments (2023: £2m).
2. A reconciliation from the Group income statement to the information
presented in the segmental results table for the six months ended 30 September
2023 is included in table 24.
The following table reconciles the Group's income statement to the segmental
results.
Reconciliation of segmental information note to statutory reporting
Six months ended 30 September 2024
Group income statement Joint Adjustment for non-wholly owned subsidiaries(2) Total EPRA earnings Capital and other items
£m ventures(1) £m £m £m £m
£m
Rental income 290 21 (4) 307 307 -
Finance lease interest 1 - - 1 1 -
Gross rental income (before rents payable) 291 21 (4) 308 308 -
Rents payable (6) - - (6) (6) -
Gross rental income (after rents payable) 285 21 (4) 302 302 -
Service charge income 69 5 (1) 73 73 -
Service charge expense (74) (6) 1 (79) (79) -
Net service charge expense (5) (1) - (6) (6) -
Other property related income 16 1 - 17 17 -
Direct property expenditure (50) (4) 1 (53) (53) -
Movement in bad and doubtful debts provision 9 - - 9 9 -
Segment net rental income 255 17 (3) 269 269 -
Other income 1 - - 1 1 -
Administrative expenses (32) (1) - (33) (33) -
Depreciation, including amortisation of software (2) - - (2) (2) -
EPRA earnings before interest 222 16 (3) 235 235 -
Share of post-tax profit from joint ventures 16 (16) - - - -
Loss on disposal of trading properties (5) - - (5) - (5)
Loss on disposal of investment properties (5) - - (5) - (5)
Net surplus on revaluation of investment properties 84 5 2 91 - 91
Net long term development contract expenditure (1) - - (1) - (1)
Impairment of trading properties (4) - - (4) - (4)
Depreciation (1) - - (1) - (1)
Impairment of amounts due from joint ventures (2) - - (2) - (2)
Operating profit/(loss) 304 5 (1) 308 235 73
Finance income 7 - - 7 7 -
Finance expense (68) (5) 2 (71) (56) (15)
Profit/(loss) before tax 243 - 1 244 186 58
Taxation - - - -
Profit/(loss) for the period 243 - 1 244
1. Reallocation of the share of post-tax profit from joint ventures reported
in the Group income statement to the individual line items reported in the
segmental results table.
2. Removal of the non-wholly owned share of results of the Group's
subsidiaries. The non-wholly owned subsidiaries are consolidated at 100% in
the Group's income statement, but only the Group's share is included in EPRA
earnings reported in the segmental results table.
4. Performance measures
In the tables below, we present earnings per share attributable to
shareholders of the parent, calculated in accordance with IFRS, and net assets
per share attributable to shareholders of the parent together with certain
measures defined by the European Public Real Estate Association (EPRA), which
have been included to assist comparison between European property companies.
Three of the Group's key financial performance measures are EPRA earnings per
share, EPRA Net Tangible Assets per share and Total return on equity. Refer to
table 13 in the Business Analysis section for further details on these
alternative performance measures.
EPRA earnings, which is a tax adjusted measure of underlying earnings, is the
basis for the calculation of EPRA earnings per share. We believe EPRA earnings
and EPRA earnings per share provide further insight into the results of the
Group's operational performance to stakeholders as they focus on the rental
income performance of the business and exclude Capital and other items which
can vary significantly from period to period.
Earnings per share Six months ended Six months ended
30 September 2024
30 September 2023
Profit for the period EPRA earnings Loss for the period EPRA earnings
£m £m £m £m
Profit/(loss) attributable to shareholders of the parent 244 244 (181) (181)
Valuation and (loss)/profit on disposals - (77) - 383
Net finance expense/(income) (excluded from EPRA earnings) - 15 - (2)
Impairment of amounts due from joint ventures - 2 - -
Other - 2 - (2)
Profit/(loss) used in per share calculation 244 186 (181) 198
IFRS EPRA IFRS EPRA
Basic earnings/(loss) per share 32.8p 25.0p (24.4)p 26.7p
Diluted earnings/(loss) per share(1) 32.7p 24.9p (24.4)p 26.7p
1. In the six months ended 30 September 2023, share options are excluded from
the weighted average diluted number of shares when calculating IFRS and EPRA
diluted earnings/(loss) per share because they are not dilutive.
Net assets per share 30 September 2024 31 March 2024
Net assets EPRA NDV EPRA NTA Net assets EPRA NDV EPRA NTA
£m £m £m £m £m £m
Net assets attributable to shareholders of the parent 6,490 6,490 6,490 6,402 6,402 6,402
Shortfall of fair value over net investment in finance leases book value - (7) (7) - (5) (5)
Other intangible asset - - (2) - - (2)
Fair value of interest-rate swaps - - (11) - - (22)
Excess of fair value of trading properties over book value - 25 25 - 25 25
Shortfall of fair value of debt over book value (note 14) - 319 - - 313 -
Net assets used in per share calculation 6,490 6,827 6,495 6,402 6,735 6,398
IFRS EPRA NDV EPRA NTA IFRS EPRA NDV EPRA NTA
Net assets per share 873p n/a n/a 863p n/a n/a
Diluted net assets per share 870p 915p 871p 859p 904p 859p
Number of shares
Six months ended 30 September 2024 Six months ended 31 March 2024
30 September 2024 30 September 2023
Weighted average Weighted average
million million million Million
Ordinary shares 752 752 751 752
Treasury shares (7) (7) (7) (7)
Own shares (2) (2) (3) (3)
Number of shares - basic 743 743 741 742
Dilutive effect of share options 3 3 3 3
Number of shares - diluted 746 746 744 745
Total return on equity is calculated as the cash dividends per share paid in
the period plus the change in EPRA NTA per share, divided by the opening EPRA
NTA per share. We consider this to be a useful measure for shareholders as it
gives an indication of the total return on equity over the period.
Total return on equity based on EPRA NTA Six months ended Six months ended
30 September 2024 30 September 2023
pence pence
Increase/(decrease) in EPRA NTA per share 12.0 (43.0)
Dividend paid per share in the period (note 8) 21.3 21.0
Total return (a) 33.3 (22)
EPRA NTA per share at the beginning of the period (b) 859 936
Total return on equity (a/b) 3.9% (2.4)%
5. Revenue
All revenue is classified within the 'EPRA earnings' column of the income
statement, with the exception of proceeds from the sale of trading properties,
income from long-term development contracts and the non-owned element of the
Group's subsidiaries which are presented in the 'Capital and other items'
column.
Six months ended Six months ended
30 September 2024 30 September 2023
EPRA earnings Capital and other items Total EPRA earnings Capital and other items Total
£m £m £m £m £m £m
Rental income (excluding adjustment for lease incentives) 272 4 276 305 4 309
Adjustment for lease incentives 14 - 14 3 - 3
Rental income 286 4 290 308 4 312
Service charge income 68 1 69 58 1 59
Trading property sales proceeds - 6 6 - 7 7
Other property related income 16 - 16 17 - 17
Development contract and transaction income - - - - 15 15
Finance lease interest 1 - 1 - - -
Other income 1 - 1 2 - 2
Revenue per the income statement 372 11 383 385 27 412
The following table reconciles revenue per the income statement to the
individual components of revenue presented in the segmental results table in
note 3.
Six months ended Six months ended
30 September 2024 30 September 2023
Group Joint ventures Adjustment for non-wholly owned subsidiaries Total Group Joint Adjustment Total
ventures
for non- wholly owned subsidiaries
£m £m £m £m £m £m £m £m
Rental income 290 21 (4) 307 312 20 (4) 328
Service charge income 69 5 (1) 73 59 4 (1) 62
Other property related income 16 1 - 17 17 - - 17
Finance lease interest 1 - - 1 - - - -
Other income 1 - - 1 2 - - 2
Revenue in the segmental information note 377 27 (5) 399 390 24 (5) 409
Development contract and transaction income(1) - - - - 15 - - 15
Trading property sales proceeds 6 - - 6 7 - - 7
Revenue including Capital and other items 383 27 (5) 405 412 24 (5) 431
1. Development contract and transaction income for the six months to 30
September 2023 includes income released from the contract liability recorded
on the disposal of 21 Moorfields, recognised in line with costs incurred on
the development in note 6.
6. Cost
All costs are classified within the 'EPRA earnings' column of the income
statement, with the exception of the cost of sale and impairment of trading
properties, costs arising on long-term development contracts, amortisation and
impairments of intangible assets, other attributable costs arising on business
combinations and the non-owned element of the Group's subsidiaries which are
presented in the 'Capital and other items' column.
Six months ended Six months ended
30 September 2024
30 September 2023
EPRA earnings Capital and other items Total EPRA earnings Capital and other items Total
£m £m £m £m £m £m
Rents payable 6 - 6 5 - 5
Service charge expense 73 1 74 67 1 68
Direct property expenditure 49 1 50 51 1 52
Movement in bad and doubtful debts provisions (9) - (9) (5) - (5)
Administrative expenses 32 - 32 37 - 37
Depreciation, including amortisation of software 2 1 3 2 1 3
Cost of trading property disposals - 11 11 - 8 8
Development contract expenditure(1) - 1 1 - 12 12
Impairment of amounts due from joint ventures - 2 2 - - -
Impairment of trading properties - 4 4 - 4 4
Total costs per the income statement 153 21 174 157 27 184
The following table reconciles costs per the income statement to the
individual components of costs presented in the segmental results table in
note 3.
Six months ended Six months ended
30 September 2024 30 September 2023
Group Joint ventures Adjustment for non-wholly owned subsidiaries Total Group Joint Adjustment Total
ventures
for non-wholly owned subsidiaries
£m £m £m £m £m £m £m £m
Rents payable 6 - - 6 5 - - 5
Service charge expense 74 6 (1) 79 68 5 (1) 72
Direct property expenditure 50 4 (1) 53 52 2 (1) 53
Administrative expenses 32 1 - 33 37 1 - 38
Depreciation, including amortisation of software 2 - - 2 2 - - 2
Movement in bad and doubtful debts provision (9) - - (9) (5) - - (5)
Costs in the segmental information note 155 11 (2) 164 159 8 (2) 165
Impairment of trading properties 4 - - 4 4 - - 4
Cost of trading property disposals 11 - - 11 8 - - 8
Development contract and transaction expenditure(1) 1 - - 1 12 - - 12
Depreciation 1 - - 1 1 - - 1
Impairment of amounts due from joint ventures 2 - - 2 - - - -
Costs including Capital and other items 174 11 (2) 183 184 8 (2) 190
1. Development contract and transaction expenditure for the six months to 30
September 2024 mainly related to St Marks Commercial, Bromley (2023: related
to 21 Moorfields following the sale of the property).
The Group's costs include employee costs for the period of £42m (2023:
£40m), of which £5m (2023: £3m) is within service charge expense, £7m
(2023: £7m) is within direct property expenditure and £30m (2023: £30m) is
within administrative expenses.
7. Net finance expense
Six months ended Six months ended
30 September 2024 30 September 2023
EPRA earnings Capital and other items Total EPRA earnings Capital and other items Total
£m £m £m £m £m £m
Finance income
Interest receivable from joint ventures 5 - 5 6 - 6
Fair value movement on interest-rate swaps - - - - 1 1
Other interest receivable 2 - 2 - - -
7 - 7 6 1 7
Finance expense
Bond (47) - (47) (44) - (44)
Bank and other short-term borrowings (17) (1) (18) (14) (1) (15)
value movement on interest-rate swaps - (16) (16) - - -
(64) (17) (81) (58) (1) (59)
Interest capitalised in relation to properties under development 13 - 13 12 - 12
(51) (17) (68) (46) (1) (47)
Net finance expense (44) (17) (61) (40) - (40)
Joint venture net finance expense (5) (6)
Net finance expense included in EPRA earnings (49) (46)
Finance lease interest payable of £2m (2023: £2m) is included within rents
payable as detailed in note 3.
8. Dividends
Dividends paid Six months ended
30 September
Pence per share 2024 2023
Payment date PID Non-PID Total £m £m
For the year ended 31 March 2023:
Third interim 6 April 2023 9.00 - 9.00 67
Final 21 July 2023 12.00 - 12.00 89
For the year ended 31 March 2024:
Third interim 12 April 2024 9.30 - 9.30 69
Final 26 July 2024 12.10 - 12.10 90
Gross dividends 159 156
Dividends in the statement of changes in equity 159 156
Timing difference on payment of withholding tax (2) (3)
Dividends in the statement of cash flows 157 153
On 4 October 2024, the Company paid a first interim dividend in respect of the
current financial year of 9.2p per ordinary share (2023: 9.0p), wholly as a
Property Income Distribution (PID), representing £68m in total (2023: £67m).
The Board has declared a second interim dividend of 9.4p per ordinary share to
be payable wholly as an ordinary dividend (2023: 9.2p) on 8 January 2025 to
shareholders registered at the close of business on 29 November 2024.
A Dividend Reinvestment Plan (DRIP) has been available in respect of all
dividends paid during the period. The last day for DRIP elections for the
second interim dividend is close of business on 13 December 2024.
9. Net cash generated from operations
Reconciliation of operating profit/(loss) to net cash generated from Six months ended Six months ended
operations
30 September 2024 30 September 2023
£m £m
Operating profit/(loss) 304 (153)
Adjustments for:
Net (surplus)/deficit on revaluation of investment properties (84) 371
Loss on disposal of trading properties 5 1
Loss on disposal of investment properties 5 3
Share of (profit)/loss from joint ventures (16) 7
Share-based payment charge 4 6
Impairment of amounts due from joint ventures 2 -
Non-cash development contract and transaction expenditure 2 -
Rents payable 4 5
Depreciation and amortisation 2 3
Impairment of trading properties 4 4
232 247
Changes in working capital:
Increase in receivables (30) (23)
Decrease in payables and provisions (54) (14)
Net cash generated from operations 148 210
Reconciliation to adjusted net cash inflow from operating activities Six months ended Six months ended
30 September 2024 30 September 2023
£m £m
Net cash inflow from operating activities 107 166
Joint ventures net cash outflow from operating activities - -
Adjusted net cash inflow from operating activities(1) 107 166
1. Includes cash flows relating to the interest in MediaCity which is not
owned by the Group as at 30 September 2024 or as at 30 September 2023, but is
consolidated in the Group numbers.
10. Investment properties
Six months ended Six months ended Six months ended
30 September 2024
31 March 2024
30 September 2023
£m £m £m
Net book value at the beginning of the period 9,330 9,562 9,658
Acquisitions of investment properties 133 53 91
Net movement in head leases capitalised(1) (1) (30) -
Capital expenditure 199 201 173
Capitalised interest 12 7 12
Disposals(2) (461) (206) (1)
Net surplus/(deficit) on revaluation of investment properties 84 (257) (371)
Net book value at the end of the period 9,296 9,330 9,562
1. See note 14 for details of the amounts payable under head leases and note 6
for details of the rents payable in the income statement.
2. Includes impact of disposals of finance leases.
The fair value of investment properties at 30 September 2024 was determined by
the Group's external valuers, CBRE and JLL. The valuations are in accordance
with RICS standards and were arrived at by reference to market evidence of
transactions for similar properties. The valuations performed by the valuers
are reviewed internally by Senior Management and other relevant people within
the business. This process includes discussions of the assumptions used by the
valuers, as well as a review of the resulting valuations. Discussions of the
valuation process and results are held between Senior Management, the Audit
Committee and the valuers on a half-yearly basis. The Group considers all of
its investment properties to fall within 'Level 3', as defined by IFRS 13.
There have been no transfers of properties within the fair value hierarchy in
the financial period.
The market value of the Group's investment properties, as determined by the
Group's external valuers, differs from the net book value presented in the
balance sheet due to the Group presenting tenant finance leases, head leases
and lease incentives separately. The following table reconciles the net book
value of the investment properties to the market value.
30 September 2024 31 March 2024
Group Joint ventures Adjustment for non-wholly owned subsidiaries Combined Portfolio Group Joint Adjustment Combined Portfolio
ventures
for non-
wholly owned subsidiaries
£m £m £m £m £m £m £m £m
Market value 9,451 622 (116) 9,957 9,465 616 (118) 9,963
Less: properties treated as finance leases (13) - - (13) (18) - - (18)
Plus: head leases capitalised 72 1 - 73 77 1 - 78
Less: tenant lease incentives (214) (30) - (244) (194) (32) - (226)
Net book value 9,296 593 (116) 9,773 9,330 585 (118) 9,797
Net surplus/(deficit) on revaluation of investment properties 84 5 2 91 (628) (19) 22 (625)
As at 30 September 2024, the Group had contractually committed development
capital expenditure obligations of £355m (31 March 2024: £367m)
11. Trading properties
Development land and infrastructure Residential Total
£m £m £m
At 1 April 2023 98 20 118
Capital expenditure 3 1 4
Disposals (7) - (7)
Impairment provision (4) - (4)
At 30 September 2023 90 21 111
Capital expenditure 3 6 9
Capitalised interest - 1 1
Disposals (14) - (14)
Impairment provision (7) - (7)
At 31 March 2024 72 28 100
Acquisitions 3 - 3
Capital expenditure 3 3 6
Capitalised interest - 1 1
Disposals (9) - (9)
Impairment provision (4) - (4)
At 30 September 2024 65 32 97
The cumulative impairment provision at 30 September 2024 in respect of
Development land and infrastructure was £30m (31 March 2024: £36m); and in
respect of Residential was £nil (31 March 2024: £nil).
12. Joint arrangements
The Group's principal joint arrangements are described below:
Joint ventures Percentage owned & voting rights(1) Business Year end date(2) Joint venture partner
segment
Held at 30 September 2024
Nova, Victoria(3) 50% Central London 31 March Suntec Real Estate Investment Trust
Southside Limited Partnership 50% Major retail 31 March Invesco Real Estate European Fund
Westgate Oxford Alliance Limited Partnership 50% Major retail, Subscale sectors 31 March The Crown Estate Commissioners
Harvest(4) 50% Subscale sectors 31 March J Sainsbury plc
The Ebbsfleet Limited Partnership 50% Subscale sectors 31 March Ebbsfleet Property Limited
West India Quay Unit Trust 50% Subscale sectors 31 March Schroder UK Real Estate Fund
Mayfield(5) 50% Mixed-use urban 31 March LCR Limited, Manchester City Council, Transport for Greater Manchester
Curzon Park Limited 50% Subscale sectors 31 March Derwent Developments (Curzon) Limited
Plus X Holdings Limited 50% Subscale sectors 31 March Paul David Rostas, Matthew Edmund Hunter
Landmark Court Partnership Limited 51% Central London 31 March TTL Landmark Court Properties Limited
Opportunities for Sittingbourne Limited 50% Mixed-use urban 31 March Swale Borough Council
Cathedral (Movement, Greenwich) LLP 52% Mixed-use urban 31 March Mr Richard Upton
Circus Street Developments Limited 50% Mixed-use urban 31 March High Wire Brighton Limited
Joint operation Ownership interest Business Year end date(2) Joint operation partners
segment
Held at 30 September 2024
Bluewater, Kent(6) 66.25% Major retail 31 March M&G Real Estate,
Royal London Asset Management,
Aberdeen Standard Investments
1. Investments under joint arrangements are not always represented by an equal
percentage holding by each partner. In a number of joint ventures, the Group
holds a majority shareholding but has joint control and therefore the
arrangement is accounted for as a joint venture.
2. The year end date shown is the accounting reference date of the joint
arrangement. In all cases, the Group's accounting is performed using financial
information for the Group's own reporting year and reporting date.
3. Nova, Victoria includes the Nova Limited Partnership, Nova Residential
Limited Partnership, Nova GP Limited, Nova Business Manager Limited, Nova
Residential (GP) Limited, Nova Residential Intermediate Limited, Nova Estate
Management Company Limited, Nova Nominee 1 Limited and Nova Nominee 2 Limited.
4. Harvest includes Harvest 2 Limited Partnership, Harvest Development
Management Limited, Harvest 2 Selly Oak Limited, Harvest 2 GP Limited and
Harvest GP Limited.
5. Mayfield includes Mayfield Development Partnership LP and Mayfield
Development (General Partner) Limited.
6. On 24 June 2024, the Group acquired an additional 17.5% interest in
Bluewater from GIC.
All of the Group's joint arrangements listed above have their principal place
of business in the United Kingdom. All of the Group's principal joint
arrangements own and operate investment property, with the exception of:
- The Ebbsfleet Limited Partnership and Plus X Holdings Limited, which
are holding companies;
- Harvest, which is engaged in long-term development contracts; and
- Curzon Park Limited, Landmark Court Partnership Limited, Opportunities
for Sittingbourne Limited and Circus Street Developments Limited, which are
companies continuing their business of property development.
The activities of all the Group's principal joint arrangements are therefore
strategically important to the business activities of the Group.
All joint ventures listed above are registered in England and Wales with the
exception of Southside Limited Partnership and West India Quay Unit Trust
which are registered in Jersey.
Joint ventures
Total
Net investment Group share
£m
At 1 April 2023 528
Total comprehensive loss (7)
Cash distributions (7)
Other non-cash movements (1)
At 30 September 2023 513
Total comprehensive income 10
Cash distributions (10)
Other non-cash movements 8
At 31 March 2024 521
Total comprehensive income 16
Cash and other distributions (7)
At 30 September 2024 530
Comprised of:
At 31 March 2024
Non-current assets 529
Non-current liabilities(1) (8)
At 30 September 2024
Non-current assets 537
Non-current liabilities(1) (7)
1. The Group's share of accumulated losses of a joint venture interest are
recognised as net liabilities where there is an obligation to provide for
these losses.
13. Capital structure
30 September 2024 31 March 2024
Group Joint ventures Adjustment for non-wholly owned subsidiaries Combined Group Joint ventures Adjustment for non-wholly owned subsidiaries Combined
£m £m £m £m £m £m £m £m
Property portfolio
Market value of investment properties 9,451 622 (116) 9,957 9,465 616 (118) 9,963
Trading properties and long-term contracts 97 - - 97 100 - - 100
Total property portfolio (a) 9,548 622 (116) 10,054 9,565 616 (118) 10,063
Net debt
Borrowings 3,624 - (49) 3,575 3,703 - (73) 3,630
Monies held in restricted accounts and deposits (10) - 1 (9) (6) - - (6)
Cash and cash equivalents (37) (30) 3 (64) (78) (31) 4 (105)
Fair value of interest-rate swaps (12) - - (12) (23) - 2 (21)
Fair value of foreign exchange swaps and forwards 8 - - 8 (2) - - (2)
Net debt (b) 3,573 (30) (45) 3,498 3,594 (31) (67) 3,496
Add/(less): Fair value of interest-rate swaps 12 - - 12 23 - (2) 21
Adjusted net debt (c) 3,585 (30) (45) 3,510 3,617 (31) (69) 3,517
Adjusted total equity
Total equity (d) 6,545 - (55) 6,490 6,447 - (45) 6,402
Fair value of interest-rate swaps (12) - - (12) (23) - 2 (21)
Adjusted total equity (e) 6,533 - (55) 6,478 6,424 - (43) 6,381
Gearing (b/d) 54.6% 53.9% 55.7% 54.6%
Adjusted gearing (c/e) 54.8% 54.2% 56.3% 55.1%
Group LTV (c/a) 37.5% 34.9% 37.8% 35.0%
EPRA LTV(1) 36.1% 36.3%
Security Group LTV 37.5% 37.0%
Weighted average cost of debt 3.5% 3.5% 3.3% 3.3%
1. EPRA LTV differs from Group LTV as it includes net payables and receivables
and includes trading properties at fair value and debt instruments at nominal
value rather than book value. Group LTV remains our core performance measure
used by external investors and lenders.
14. Borrowings
30 September 2024 31 March 2024
Secured/ Fixed/ Effective Nominal/ notional value Fair Book value Nominal/ notional value Fair Book value
unsecured
floating
interest rate
value
value
£m
£m £m
£m
% £m £m
Current borrowings
Commercial paper
Sterling Unsecured Floating Various((1)) 30 30 30 15 15 15
Euro Unsecured Floating Various((1)) 287 287 287 518 518 518
US Dollar Unsecured Floating Various((1)) 157 157 157 148 148 148
474 474 474 681 681 681
Secured Floating SONIA + margin 1 1 1 292 292 292
Syndicated and bilateral bank debt
Total current borrowings 475 475 475 973 973 973
Amounts payable under head leases 2 2 2 2 2 2
Total current borrowings including amounts payable under head leases
477 477 477 975 975 975
Non-current borrowings
Medium term notes (MTN)
A5 5.391% MTN due 2027 Secured Fixed 5.4 87 86 87 87 86 87
A16 2.375% MTN due 2029 Secured Fixed 2.5 350 330 349 350 325 349
A6 5.376% MTN due 2029 Secured Fixed 5.4 65 65 65 65 66 65
A13 2.399% MTN due 2031 Secured Fixed 2.4 300 274 299 300 270 299
A7 5.396% MTN due 2032 Secured Fixed 5.4 77 79 77 77 78 77
A18 4.750% MTN due 2033 Secured Fixed 4.9 300 301 297 300 299 297
A17 4.875% MTN due 2034 Secured Fixed 5.0 400 405 393 400 403 393
A19 4.625% MTN due 2036 Secured Fixed 4.5 350 342 347 - - -
A11 5.125% MTN due 2036 Secured Fixed 5.1 50 49 50 50 48 50
A14 2.625% MTN due 2039 Secured Fixed 2.6 500 389 495 500 387 495
A15 2.750% MTN due 2059 Secured Fixed 2.7 500 299 495 500 309 495
2,979 2,619 2,954 2,629 2,271 2,607
Syndicated and bilateral bank debt Secured Floating SONIA + margin 195 195 195 123 123 123
Total non-current borrowings 3,174 2,814 3,149 2,752 2,394 2,730
Amounts payable under head leases Unsecured Fixed 4.0 70 86 70 75 98 75
Total non-current borrowings including amounts payable under head leases
3,244 2,900 3,219 2,827 2,492 2,805
Total borrowing including amounts payable under head leases
3,721 3,377 3,696 3,802 3,467 3,780
Total borrowings excluding amounts payable under head leases
3,649 3,289 3,624 3,725 3,367 3,703
1. Non-Sterling commercial paper is immediately swapped into Sterling. The
interest rate is fixed at the time of the issuance for the duration (1 to 3
months) and tracks SONIA swap rates.
Reconciliation of the movement in borrowings Six months ended Year ended
30 September 2024 31 March 2024
£m £m
At the beginning of the period 3,780 3,538
Net (repayments)/proceeds from ECP issuance (185) 378
Net (repayments)/proceeds from bank debt (221) 33
Repayment of MTNs - (427)
Issue of MTNs (net of finance fees) 346 297
Foreign exchange movement on non-Sterling borrowings (19) (9)
Other (5) (30)
At the end of the period 3,696 3,780
Reconciliation of movements in liabilities arising from financing activities Six months ended 30 September 2024
Non-cash changes
At the beginning of the period Cash flows Foreign exchange movements Other changes in fair values Other changes At the end
of the period
£m £m £m £m £m £m
Borrowings 3,780 (60) (19) - (5) 3,696
Derivative financial instruments (25) (10) 19 12 - (4)
3,755 (70) - 12 (5) 3,692
Year ended 31 March 2024
Borrowings 3,538 281 (9) - (30) 3,780
Derivative financial instruments (38) (18) 10 21 - (25)
3,500 263 1 21 (30) 3,755
Medium Term Notes (MTNs)
The MTNs are secured on the fixed and floating pool of assets of the Security
Group. The Security Group includes wholly owned investment properties,
development properties and a number of the Group's investment in other assets,
in total valued at £9.2bn at 30 September 2024 (31 March 2024: £9.2bn). The
secured debt structure has a tiered operating covenant regime which gives the
Group substantial flexibility when the loan-to-value and interest cover in the
Security Group are less than 65% and more than 1.45x respectively. If these
limits are exceeded, the operating environment becomes more restrictive with
provisions to encourage a reduction in gearing. The interest rate of each MTN
is fixed until the expected maturity, being two years before the legal
maturity date of the MTN. The interest rate for the last two years may either
become floating on a SONIA basis plus an increased margin (relative to that at
the time of issue), or subject to a fixed coupon uplift, depending on the
terms and conditions of the specific notes.
The effective interest rate is based on the coupon paid and includes the
amortisation of issue costs and discount to redemption value. The MTNs are
listed on the Irish Stock Exchange and their fair values are based on their
respective market prices.
Committed syndicated and bilateral bank debt
Authorised Drawn Undrawn
Maturity as at 30 Sept 2024 31 March 2024 30 Sept 2024 31 March 2024 30 Sept 2024 31 March 2024
30 September 2024
£m £m £m £m £m £m
Syndicated debt 2024-27 2,585 2,682 195 415 2,390 2,267
Bilateral debt 2026 225 225 - - 225 225
2,810 2,907 195 415 2,615 2,492
At 30 September 2024, the Group's committed facilities totalled £2,810m (31
March 2024: £2,907m). All the committed syndicated and bilateral facilities
are secured on the assets of the Security Group, with the exception of
facilities secured on the assets at MediaCity. During the period ended 30
September 2024, the amounts drawn under the Group's facilities decreased by
£220m.
The MediaCity bank facility was successfully refinanced on 13 June 2024 with
£195m of this facility drawn at 30 September 2024 (31 March 2024: £292m
drawn). The difference in the facility outstanding between both periods was
financed via proportional equity contributions by the MediaCity shareholders
of £49m in aggregate and a shareholder loan extended by Landsec only of
£49m.
The terms of the Security Group funding arrangements require undrawn
facilities to be reserved where syndicated and bilateral facilities mature
within one year, or when commercial paper is issued. The total amount of cash
and available undrawn facilities, net of commercial paper, at 30 September
2024 was £2,176m (31 March 2024: £1,889m).
Fair values
The fair value of the Group's net investment in tenant finance leases is
calculated by the Group's external valuer by applying a weighted average
equivalent yield of 9.3% (31 March 2024: 7.8%).
The fair values of any floating rate financial liabilities are assumed to be
equal to their nominal and book value. The fair values of the MTNs fall within
Level 1 of the fair value hierarchy, the syndicated and bilateral facilities,
commercial paper, interest-rate swaps and foreign exchange swaps fall within
Level 2, and the amounts payable and receivable under leases fall within Level
3.
The fair values of the financial instruments have been determined by reference
to relevant market prices, where available. The fair values of the Group's
outstanding interest-rate swaps have been estimated by calculating the present
value of future cash flows, using appropriate market discount rates. These
valuation techniques fall within Level 2.
15. Provisions
Building and fire safety remediation Transaction and contract related Total
£m £m £m
At 1 April 2023 - - -
At 30 September 2023 - - -
Transfer from other current liabilities 14 4 18
Charge for the period 12 45 57
Reversed during the period (3) - (3)
At 31 March 2024 23 49 72
Charge for the period 3 1 4
Utilised during the period (3) (3) (6)
Reversed during the period (1) (1) (2)
At 30 September 2024 22 46 68
Current 22 26 48
Non-current - 20 20
At 30 September 2024 22 46 68
16. Contingencies
The Group has contingent liabilities in respect of legal claims, contractor
claims, remediation for building defects, developer contractual arrangements,
defined benefit pension scheme member liabilities((1)), guarantees and
warranties arising in the ordinary course of business. A provision for such
matters is only recognised to the extent that the Group has a legal or
constructive obligation as a result of a past event and it is probable that an
outflow of economic benefit will be required to settle the obligation.
1. Refer to note 35 of the Group's annual financial statements for the year
ended 31 March 2024.
17. Related party transactions
There have been no related party transactions during the period that require
disclosure under Section 4.2.8 (R) of the Disclosure and Transparency Rules or
under IAS 34 Interim Financial Reporting.
18. Events after the reporting period
On 30 October 2024, the Group refinanced its existing revolving credit
facilities of £2.3bn that was due to expire in 2025 on substantially the same
terms as the existing facilities. The new facilities have two equally split
tranches with initial maturities falling in 2027 and 2029 respectively.
On 30 October 2024, the Group acquired the residual 25% interest in the
MediaCity assets as well as a 100% interest in entities which operate a
218-bed hotel and studio operations that were previously wholly owned by The
Peel Group. The cash consideration is £23m and the Group will assume £61m of
debt, providing an overall consideration of £84m for this acquisition. As
part of the acquisition, the existing bank facility relating to the MediaCity
assets of £195m was terminated on 5 November 2024. Given the proximity of the
acquisition to the results release date, the accounting of this business
combination will be performed by the year end.
Alternative performance measures
Table 13: Alternative performance measures
The Group has applied the European Securities and Markets Authority (ESMA)
'Guidelines on Alternative Performance Measures' in these results. In the
context of these results, an alternative performance measure (APM) is a
financial measure of historical or future financial performance, position or
cash flows of the Group which is not a measure defined or specified in IFRS.
The table below summarises the APMs included in these results and where the
reconciliations of these measures can be found. The definitions of APMs are
included in the Glossary.
Alternative performance measure Nearest IFRS measure Reconciliation
EPRA earnings Profit/loss before tax Note 3
EPRA earnings per share Basic earnings/loss per share Note 4
EPRA diluted earnings per share Diluted earnings/loss per share Note 4
EPRA Net Tangible Assets Net assets attributable to shareholders Note 4
EPRA Net Tangible Assets per share Net assets attributable to shareholders Note 4
Total return on equity n/a Note 4
Adjusted net cash inflow from operating activities Net cash inflow from operating activities Note 9
Combined Portfolio Investment properties Note 10
Adjusted net debt Borrowings Note 13
Group LTV n/a Note 13
EPRA LTV n/a Note 13
EPRA disclosures
Table 14: EPRA net asset measures
EPRA net asset measures 30 September 2024
EPRA NRV EPRA NTA EPRA NDV
£m £m £m
Net assets attributable to shareholders 6,490 6,490 6,490
Shortfall of fair value over net investment in finance lease book value (7) (7) (7)
Other intangible asset - (2) -
Fair value of interest-rate swaps (11) (11) -
Shortfall of fair value of debt over book value - - 319
Excess of fair value of trading properties over book value 25 25 25
Purchasers' costs(1) 605 - -
Net assets used in per share calculation 7,102 6,495 6,827
EPRA NRV EPRA NTA EPRA NDV
Diluted net assets per share 952p 871p 915p
31 March 2024
EPRA NRV EPRA NTA EPRA NDV
£m £m £m
Net assets attributable to shareholders 6,402 6,402 6,402
Shortfall of fair value over net investment in finance lease book value (5) (5) (5)
Other intangible asset - (2) -
Fair value of interest-rate swaps (22) (22) -
Shortfall of fair value of debt over book value - - 313
Excess of fair value of trading properties over book value 25 25 25
Purchasers' costs(1) 605 - -
Net assets used in per share calculation 7,005 6,398 6,735
EPRA NRV EPRA NTA EPRA NDV
Diluted net assets per share 940p 859p 904p
1. EPRA NTA and EPRA NDV reflect IFRS values which are net of purchasers'
costs. Purchasers' costs are added back when calculating EPRA NRV.
Table 15: EPRA performance measures
30 September 2024
Measure Definition for EPRA measure Notes EPRA
measure
EPRA earnings Earnings from core operational activity 4 £186m
EPRA earnings per share EPRA earnings per weighted number of ordinary shares 4 25.0p
EPRA diluted earnings per share EPRA diluted earnings per weighted number of ordinary shares 4 24.9p
EPRA Net Tangible Assets (NTA) Net assets adjusted to exclude the fair value of interest-rate swaps, 4 £6,495m
intangible assets and excess of fair value over net investment in finance
lease book value
EPRA Net Tangible Assets per share Diluted Net Tangible Assets per share 4 871p
EPRA net disposal value (NDV) Net assets adjusted to exclude the fair value of debt and goodwill on deferred 4 £6,787m
tax and to include excess of fair value over net investment in finance lease
book value
EPRA net disposal value per share Diluted net disposal value per share 4 915p
EPRA loan-to-value (LTV) (1) Ratio of adjusted net debt, including net payables, to the sum of the net 13 36.1%
assets, including net receivables, of the Group, its subsidiaries and joint
ventures, all on a proportionate basis, expressed as a percentage
Table
Voids/vacancy rate ERV of vacant space as a % of ERV of Combined Portfolio excluding the 16 3.4%
development programme(2)
Net initial yield (NIY) Annualised rental income less non-recoverable costs as a % of market value 5.2%
plus assumed purchasers' costs(3)
Topped-up NIY NIY adjusted for rent free periods(4) 6.2%
Cost ratio(4) Total costs as a percentage of gross rental income (including direct vacancy 20.8%
costs)
Total costs as a percentage of gross rental income (excluding direct vacancy 16.6%
costs)
1. EPRA LTV differs from the Group LTV presented in note 13 as it includes net
payables and receivables and includes trading properties at fair value and
debt instruments at nominal value rather than book value. Group LTV remains
our core performance measure used by external investors and lenders.
2. This measure reflects voids in the Combined Portfolio excluding only
properties under development.
3. This measure relates to the Combined Portfolio, excluding properties
currently under development, and are calculated by our external valuer.
Topped-up NIY reflects adjustments of £86m for rent free periods and other
incentives.
4. This measure is calculated based on gross rental income after rents payable
and excluding costs recovered through rents but not separately invoiced of
£6m.
Table 16: EPRA vacancy rate
The EPRA vacancy rate is based on the ratio of the estimated market rent for
vacant properties versus total estimated market rent, for the Combined
Portfolio excluding properties under development. There are no significant
distorting factors influencing the EPRA vacancy rate.
30 September 2024
£m
ERV of vacant properties 21
ERV of Combined Portfolio excluding properties under development 622
EPRA vacancy rate (%) 3.4
Table 17: Change in net rental income from the like-for-like portfolio(1)
30 September 2024 30 September 2023
Change
£m £m £m %((2))
Central London 118 112 6 5.5%
Major retail 70 68 2 3.1%
Subscale sectors 30 28 2 6.6%
Mixed-use 17 20 (3) (12.1%)
235 228 7 3.4%
1. Excludes surrender premiums received during the period.
2. Percentage change is disclosed on unrounded figures.
Table 18: Acquisitions, disposals and capital expenditure
Six months ended Six months ended
30 September 2024 30 September
2023
Investment properties Group Joint Adjustment for Combined Combined
ventures
Portfolio
Portfolio
(excl. joint ventures)
non-wholly owned subsidiaries(1)
£m
£m £m
£m £m
Net book value at the beginning of the period 9,330 585 (118) 9,797 10,120
Acquisitions 133 - - 133 91
Capital expenditure 199 3 - 202 173
Capitalised interest 12 - - 12 12
Net movement in head leases capitalised (1) - - (1) -
Disposals (461) - - (461) (1)
Net surplus/(deficit) on revaluation of investment properties 84 5 2 91 (375)
Net book value at the end of the period 9,296 593 (116) 9,773 10,020
Loss on disposal of investment properties (5) - - (5) (3)
Trading properties £m £m £m £m £m
Net book value at the beginning of the period 100 - - 100 118
Acquisitions 3 - - 3 -
Capital expenditure 6 - - 6 4
Capitalised interest 1 - - 1 -
Disposals (9) - - (9) (7)
Movement in impairment (4) - - (4) (4)
Net book value at the end of the period 97 - - 97 111
Loss on disposal of trading properties (5) - - (5) (1)
Acquisitions, development and other capital expenditure Investment Trading Combined Combined
properties(2) properties Portfolio Portfolio
£m £m £m £m
Acquisitions(3) 133 3 136 91
Development capital expenditure(4) 128 3 131 110
Other capital expenditure 74 3 77 67
Capitalised interest 12 1 13 12
Acquisitions, development and other capital expenditure 347 10 357 280
Disposals £m £m
Net book value - investment property disposals 461 1
Net book value - trading property disposals 9 7
Net book value - other net assets of investment property disposals 1 -
Loss on disposal - investment properties (5) (3)
Loss on disposal - trading properties (5) (1)
Other 1 4
Total disposal proceeds 462 8
1. This represents the interest in MediaCity which we did not own during the
six months ended 30 September 2024 or the six months ended 30 September 2023
but consolidate in the Group numbers.
2. See EPRA analysis of capital expenditure table 19 for further details.
3. Properties acquired in the period.
4. Development capital expenditure for investment properties comprises
expenditure on the future development pipeline and completed developments.
Table 19: EPRA analysis of capital expenditure
Six months ended 30 September 2024
Other capital expenditure
Acquisitions(1) Development capital expenditure(2) Incremental lettable space(3) No incremental lettable space Tenant improvements Total Capitalised interest Total capital expenditure - Combined Portfolio Total capital expenditure - joint ventures Total capital expenditure - non-wholly owned subsidiaries Total capital expenditure -
£m £m £m £m £m £m £m £m (Group share) £m Group
£m
£m
Central London
West End offices - 6 - 7 - 7 - 13 - - 13
City offices - - - 31 - 31 1 32 - - 32
Retail and other - - - 8 - 8 - 8 - - 8
Developments - 112 - - - - 11 123 - - 123
Total Central London - 118 - 46 - 46 12 176 - - 176
Major retail
Shopping centres 116 - 2 7 2 11 - 127 2 - 125
Outlets - - - 6 1 7 - 7 - - 7
Total Major retail 116 - 2 13 3 18 - 134 2 - 132
Mixed-use urban
London 2 9 - - - - - 11 - - 11
Major regional cities 15 1 - 5 - 5 - 21 1 - 20
Total Mixed-use urban 17 10 - 5 - 5 - 32 1 - 31
Subscale sectors
Leisure - - - - 3 3 - 3 - - 3
Hotels - - - - - - - - - - -
Retail parks - - - - 2 2 - 2 - - 2
Total Subscale sectors - - - - 5 5 - 5 - - 5
Total capital expenditure 133 128 2 64 8 74 12 347 3 - 344
Timing difference from accrual to cash basis (20) (1) - (19)
Total capital expenditure on a cash basis 327 2 - 325
1. Investment properties acquired in the period.
2. Expenditure on the future development pipeline and completed developments.
3. Capital expenditure where the lettable area increases by at least 10%.
Table 20: Top 12 occupiers at 30 September 2024
% of Group rent(1)
Central Government 5.9%
Deloitte 2.3%
Cineworld 1.8%
Taylor Wessing 1.6%
Boots 1.4%
Peel 1.4%
Qube RT 1.3%
BBC 1.3%
Inditex UK 1.2%
H&M 1.0%
Sainsbury's 1.0%
Primark 1.0%
21.2%
1. On a proportionate basis.
Table 21: Committed development pipeline and trading property development
schemes at 30 September 2024
Central London
Property Description Ownership Size Letting Market value Net income/ ERV Estimated completion Total development costs to date Forecast total development cost
of use
interest
status
£m
date
% sq ft
% £m £m £m
Committed development pipeline
Thirty High, SW1 Office 100 299,000 - 300 30 Oct-2025 265 416
Timber Square, SE1 Office 100 383,000 - 205 31 Dec-2025 218 442
Property Description Ownership Size Number Sales exchanged by unit Estimated completion Total development costs to date Forecast total development cost
of use
interest
date
% sq ft of units % £m £m
Trading property development schemes
Castle Lane, SW1 Residential 100 52,000 89 99 Jan-2025 43 49
Where the property is not 100% owned, floor areas and letting status shown
above represent the full scheme whereas all other figures represent our
proportionate share. Letting % is measured by ERV and shows letting status at
30 September 2024.
Total development cost
Refer to the Glossary for definition.
Net income/ERV
Net income/ERV represents headline annual rent on let units plus ERV at 30
September 2024 on unlet units, both after rents payable.
Table 22: Combined Portfolio analysis
Total portfolio analysis
Market value(1) Valuation Rental income(1) Annualised rental income(2) Net estimated rental value(3)
movement(1)
30 September 2024 31 March 2024 Surplus/ (deficit) Surplus/ (deficit) 30 September 2024 30 September 2023 30 September 2024 31 March 2024 30 September 2024 31 March 2024
£m £m £m % £m £m £m £m £m £m
Central London
West End offices 3,083 3,109 1 0.0 80 68 158 160 188 186
City offices 1,251 1,192 22 1.9 35 35 71 70 98 93
Retail and other 1,028 991 (4) (0.4) 28 27 41 43 55 55
Developments(4) 1,080 926 30 2.9 4 18 9 8 100 93
Total Central London 6,442 6,218 49 0.8 147 148 279 281 441 427
Major retail
Shopping centres 1,413 1,226 57 4.2 71 64 139 121 139 122
Outlets 611 605 (2) (0.3) 24 31 47 48 50 49
Total Major retail 2,024 1,831 55 2.8 95 95 186 169 189 171
Mixed-use urban
London 189 191 (11) (5.6) 6 9 11 11 16 16
Major regional cities 516 510 (16) (3.0) 18 20 37 37 41 38
Total Mixed-use urban 705 701 (27) (3.7) 24 29 48 48 57 54
Subscale sectors
Leisure 420 423 (5) (1.1) 25 23 44 46 42 42
Hotels - 400 - - 2 18 - 35 - 29
Retail parks 366 390 19 5.6 15 15 25 27 27 29
Total Subscale sectors 786 1,213 14 2.0 42 56 69 108 69 100
Combined Portfolio 9,957 9,963 91 0.9 308 328 582 606 756 752
Properties treated as finance leases - - - - (1) -
Combined Portfolio 9,957 9,963 91 0.9 307 328
Represented by:
Investment portfolio 9,335 9,347 86 0.9 287 308 544 569 715 712
Share of joint ventures 622 616 5 0.9 20 20 38 37 41 40
Combined Portfolio 9,957 9,963 91 0.9 307 328 582 606 756 752
Total portfolio
analysis
Notes:
Net initial yield(5) Equivalent yield(6) 1. Refer to Glossary for definition.
30 September 2024 Movement in like-for-like(7) 30 September 2024 Movement in like-for-like(7)
% bps % bps 2. Annualised rental income is annual 'rental income' (as defined in the
Central London Glossary) at the balance sheet date, except that car park and
West End offices 3.9 (30) 5.3 4 commercialisation income are included on a net basis (after deduction for
City offices 4.3 44 6.1 7 operational outgoings). Annualised rental income includes temporary lettings.
Retail and other 4.2 (15) 5.0 11
Developments(4) (0.2) n/a 5.4 n/a 3. Net estimated rental value is gross estimated rental value, as
Total Central London 4.1 (10) 5.4 7 defined in the Glossary, after deducting expected rent payable.
Major retail
Shopping centres 7.7 (33) 7.9 (22) 4. Comprises the development pipeline - refer to Glossary for
Outlets 6.3 1 6.9 (10) definition.
Total Major retail 7.3 (21) 7.6 (17)
Mixed-use urban 5. Net initial yield - refer to Glossary for definition. This
London 4.4 26 6.6 6 calculation includes all properties including those sites with no income.
Major regional cities 6.6 2 8.1 33
Total Mixed-use urban 6.1 8 7.5 25 6. Equivalent yield - refer to Glossary for definition. Future
Subscale sectors developments are excluded from the calculation of equivalent yield on the
Leisure 8.4 (28) 8.7 (8) Combined Portfolio.
Retail parks 5.8 (23) 6.6 (27)
Total Subscale sectors 7.2 (30) 7.7 (20) 7. The like-for-like portfolio - refer to Glossary for definition.
Combined Portfolio 5.2 (12) 6.2 1
Represented by:
Investment portfolio 5.2 n/a 6.2 n/a
Share of joint ventures 5.7 n/a 6.1 n/a
Combined Portfolio 5.2 n/a 6.2 n/a
1. Refer to Glossary for definition.
2. Annualised rental income is annual 'rental income' (as defined in the
Glossary) at the balance sheet date, except that car park and
commercialisation income are included on a net basis (after deduction for
operational outgoings). Annualised rental income includes temporary lettings.
3. Net estimated rental value is gross estimated rental value, as
defined in the Glossary, after deducting expected rent payable.
4. Comprises the development pipeline - refer to Glossary for
definition.
5. Net initial yield - refer to Glossary for definition. This
calculation includes all properties including those sites with no income.
6. Equivalent yield - refer to Glossary for definition. Future
developments are excluded from the calculation of equivalent yield on the
Combined Portfolio.
7. The like-for-like portfolio - refer to Glossary for definition.
Table 23: Floor Areas
30 September 2024
Million sq ft
Central London
West End offices 2.7
City offices 1.6
Retail and other 1.1
Total Central London 5.4
Major retail
Shopping centres 6.7
Outlets 1.0
Total Major retail 7.7
Mixed-use urban
London 0.8
Other cities 2.0
Total Mixed-use urban 2.8
Subscale sectors
Leisure 3.3
Retail parks 1.5
Total Subscale sectors 4.8
Total 20.7
Table 24: Reconciliation of segmental information note to interim reporting
for the six months ended 30 September 2023
Group income statement Joint Adjustment for non-wholly owned subsidiaries(2) Total EPRA Capital and other items
£m ventures(1) £m £m earnings £m
£m £m
Rental income 312 20 (4) 328 328 -
Finance lease interest - - - - - -
Gross rental income (before rents payable) 312 20 (4) 328 328 -
Rents payable (5) - - (5) (5) -
Gross rental income (after rents payable) 307 20 (4) 323 323 -
Service charge income 59 4 (1) 62 62 -
Service charge expense (68) (5) 1 (72) (72) -
Net service charge expense (9) (1) - (10) (10) -
Other property related income 17 - - 17 17 -
Direct property expenditure (52) (2) 1 (53) (53) -
Movement in bad and doubtful debt provision 5 - - 5 5 -
Segment net rental income 268 17 (3) 282 282 -
Other income 2 - - 2 2 -
Administrative expenses (37) (1) - (38) (38) -
Depreciation (2) - - (2) (2) -
EPRA earnings before interest 231 16 (3) 244 244 -
Share of post-tax loss from joint ventures (7) 7 - - - -
Loss on disposal of trading properties (1) - - (1) - (1)
Loss on disposal of investment properties(3) (3) - - (3) - (3)
Net deficit on revaluation of investment properties (371) (17) 13 (375) - (375)
Net development contract income 3 - - 3 - 3
Impairment of trading properties (4) - - (4) - (4)
Depreciation (1) - - (1) - (1)
Operating (loss)/profit (153) 6 10 (137) 244 (381)
Finance income 7 - 2 9 6 3
Finance expense (47) (6) - (53) (52) (1)
(Loss)/Profit before tax (193) - 12 (181) 198 (379)
Taxation - - - -
(Loss)/Profit for the period (193) - 12 (181)
1. Reallocation of the share of post-tax loss from joint ventures reported in
the Group income statement to the individual line items reported in the
segmental information note.
2. Removal of the non-wholly owned share of results of the Group's
subsidiaries. The non-wholly owned subsidiaries are consolidated at 100% in
the Group's income statement, but only the Group's share is included in EPRA
earnings reported in the segmental information note. The non-owned element of
the Group's subsidiaries are included in the 'Capital and other items' column
presented in the Group's income statement, together with items not directly
related to the underlying rental business such as investment properties
valuation changes, profits or losses on the disposal of investment properties,
the proceeds from, and costs of, the sale of trading properties, income from
and costs associated with development contracts, amortisation and impairment
of intangibles, and other attributable costs, arising on business
combinations.
Table 25: Lease lengths
Weighted average unexpired lease term at 30 September 2024
Like-for-like portfolio Like-for-like portfolio, completed developments and acquisitions
Mean(1) Mean(1)
Years Years
Central London
West End Offices 6.4 6.4
City offices 7.8 7.4
Retail and other 5.8 5.4
Total Central London 6.7 6.5
Major retail
Shopping centres 4.3 4.3
Outlets 2.9 2.9
Total Major retail 3.9 3.9
Mixed-use urban
London n/a 7.5
Major regional cities 7.9 6.9
Total Mixed-use urban 7.9 7.0
Subscale sectors
Leisure 10.6 10.5
Retail parks 5.6 5.6
Total Subscale sectors 8.6 8.6
Combined Portfolio 6.1 6.1
1. Mean is the rent weighted average of the unexpired lease term across all
leases (excluding short-term leases). Term is defined as the earlier of tenant
break or expiry.
Investor information
1. Company website: landsec.com (http://www.landsec.com)
The Group's half-yearly and annual reports to shareholders, results
announcements and presentations, are available to view and download from the
Company's website. The website also provides details of the Company's current
share price, the latest news about the Group, its properties and operations,
and details of future events and how to obtain further information.
2. Registrar: Equiniti Group PLC
Enquiries concerning shareholdings, dividends and changes in personal details
should be referred to the Company's registrar, Equiniti Limited (Equiniti), in
the first instance. They can be contacted using the details below:
Telephone:
- 0371 384 2128 (from the UK)
- +44 371 384 2128 (from outside the UK)
- Lines are ordinarily open from 08:30 to 17:30, Monday to Friday,
excluding UK public holidays.
Correspondence address:
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Information on how to manage your shareholding can be found at
https://help.shareview.co.uk (https://help.shareview.co.uk) . If you are not
able to find the answer to your question within the general Help information
page, a personal enquiry can be sent directly through Equiniti's secure e-form
on their website. Please note that you will be asked to provide your name,
address, shareholder reference number and a valid e-mail address.
Alternatively, shareholders can view and manage their shareholding through the
Landsec share portal which is hosted by Equiniti - simply visit
https://portfolio.shareview.co.uk (https://portfolio.shareview.co.uk) and
follow the registration instructions.
3. Shareholder enquiries
If you have an enquiry about the Company's business or about something
affecting you as a shareholder (other than queries which are dealt with by the
Registrar), please email Investor Relations (see details in 8. below).
4. Share dealing services: https://shareview.co.uk
(http://www.shareview.co.uk)
The Company's shares can be traded through most banks, building societies and
stockbrokers. They can also be traded through Equiniti. To use their service,
shareholders should contact Equiniti: 0345 603 7037 from the UK. Lines are
ordinarily open Monday to Friday 08:00 to 16:30 for dealing and until 18:00
for enquiries, excluding UK public holidays.
5. Dividends
The Board has declared a second quarterly dividend for the year ending 31
March 2025 of 9.4p per ordinary share which will be paid on 8 January 2025 to
shareholders registered at the close of business on 29 November 2024. This
will be paid wholly as an ordinary dividend. Together with the first quarterly
dividend of 9.2p already paid on 4 October 2024 wholly as a Property Income
Distribution (PID), the first half dividend will be 18.6p per ordinary share
(six months ended 30 September 2023: 18.2p).
6. Dividend related services
Dividend payments to UK shareholders - Dividend mandates
Dividends are no longer paid by cheque. Shareholders whose dividends have
previously been paid by cheque will need to have their dividends paid directly
into their personal bank or building society account or alternatively
participate in our Dividend Reinvestment Plan (see below) to receive dividends
in the form of additional shares. To facilitate this, please contact Equiniti
or complete a mandate instruction available on our website: landsec.com
(http://www.landsec.com) /investors and return it to Equiniti.
Dividend payments to overseas shareholders - Overseas Payment Service (OPS)
Dividends are no longer paid by cheque. Shareholders need to request that
their dividends be paid directly to a personal bank account overseas. For more
information, please contact Equiniti or download an application form online at
https://shareview.co.uk (http://www.shareview.co.uk) .
Dividend Reinvestment Plan (DRIP)
A DRIP is available from Equiniti. This facility provides an opportunity by
which shareholders can conveniently and easily increase their holding in the
Company by using their cash dividends to buy more shares. Participation in the
DRIP will mean that your dividend payments will be reinvested in the Company's
shares and these will be purchased on your behalf in the market on, or as soon
as practical after, the dividend payment date.
You may only participate in the DRIP if you are resident in the UK.
For further information (including terms and conditions) and to register for
any of these dividend-related services, simply visit www.shareview.co.uk
(http://www.shareview.co.uk) .
7. Investor relations enquiries
For investor relations enquiries, please contact Edward Thacker, Head of
Investor Relations at Landsec, by telephone on +44 (0)20 7413 9000 or by email
at enquiries@landsec.com.
Glossary
Adjusted net cash inflow from operating activities
Net cash inflow from operating activities including the Group's share of our
joint ventures' net cash inflow from operating activities.
Adjusted net debt
Net debt excluding cumulative fair value movements on interest-rate swaps and
amounts payable under head leases. It generally includes the net debt of
subsidiaries and joint ventures on a proportionate basis.
Book value
The amount at which assets and liabilities are reported in the financial
statements.
Combined Portfolio
The Combined Portfolio comprises the investment properties of the Group's
subsidiaries, on a proportionately consolidated basis when not wholly owned,
together with our share of investment properties held in our joint ventures.
Developments/development pipeline
Development pipeline consists of future developments, committed developments,
projects under construction and developments which have reached practical
completion within the last two years but are not yet 95% let.
Development gross yield on total development cost
Gross ERV, before adjustment for lease incentives, divided by total
development cost. Gross ERV reflects Landsec's or the valuer's view of
expected ERV at completion of the scheme.
EPRA earnings
Profit before tax, excluding profits on the sale of non-current assets and
trading properties, profits on development contracts, valuation movements,
fair value movements on interest-rate swaps and similar instruments used for
hedging purposes, debt restructuring charges, and any other items of an
exceptional nature.
EPRA loan-to- value (LTV)
Ratio of adjusted net debt, including net payables, to the sum of the net
assets, including net receivables, of the Group, its subsidiaries and joint
ventures, all on a proportionate basis, expressed as a percentage. The
calculation includes trading properties at fair value and debt at nominal
value.
EPRA net disposal value (NDV) per share
Diluted net assets per share adjusted to remove the impact of goodwill arising
as a result of deferred tax, and to include the difference between the fair
value and the book value of the net investment in tenant finance leases and
fixed interest rate debt.
EPRA net initial yield
EPRA net initial yield is defined within EPRA's Best Practice Recommendations
as the annualised rental income based on the cash rents passing at the balance
sheet date, less non-recoverable property operating expenses, divided by the
gross market value of the property. It is consistent with the net initial
yield calculated by the Group's external valuer.
EPRA Net Reinstatement Value (NRV) per share
Diluted net assets per share adjusted to remove the cumulative fair value
movements on interest-rate swaps and similar instruments, the carrying value
of deferred tax on intangible assets and to include the difference between the
fair value and the book value of the net investment in tenant finance leases
and add back purchasers' costs.
EPRA Net Tangible Assets (NTA) per share
Diluted net assets per share adjusted to remove the cumulative fair value
movements on interest-rate swaps and similar instruments, the carrying value
of goodwill arising as a result of deferred tax and other intangible assets,
deferred tax on intangible assets and to include the difference between the
fair value and the book value of the net investment in tenant finance leases.
Equivalent yield
Calculated by the Group's external valuer, equivalent yield is the internal
rate of return from an investment property, based on the gross outlays for the
purchase of a property (including purchase costs), reflecting reversions to
current market rent and such items as voids and non-recoverable expenditure
but ignoring future changes in capital value. The calculation assumes rent is
received annually in arrears.
ERV - Gross estimated rental value
The estimated market rental value of lettable space as determined biannually
by the Group's external valuer. For investment properties in the development
programme, which have not yet reached practical completion, the ERV represents
management's view of market rents.
Gearing
Total borrowings, including bank overdrafts, less short-term deposits,
corporate bonds and cash, at book value, plus cumulative fair value movements
on financial derivatives as a percentage of total equity. For adjusted
gearing, see note 13.
Gross market value
Market value plus assumed usual purchaser's costs at the reporting date.
Interest Cover Ratio (ICR)
A calculation of a company's ability to meet its interest payments on
outstanding debt. It is calculated using EPRA earnings before interest,
divided by net interest (excluding the mark-to-market movement on
interest-rate swaps, foreign exchange swaps, capitalised interest and interest
on the pension scheme assets and liabilities).
Investment portfolio
The investment portfolio comprises the investment properties of the Group's
subsidiaries on a proportionately consolidated basis where not wholly owned.
Lease incentives
Any incentive offered to occupiers to enter into a lease. Typically, the
incentive will be an initial rent-free period, or a cash contribution to
fit-out or similar costs. For accounting purposes, the value of the incentive
is spread over the non-cancellable life of the lease.
Like-for-like portfolio
The like-for-like portfolio includes all properties which have been in the
portfolio since 1 April 2021 but excluding those which are acquired or sold
since that date. Properties in the development pipeline and completed
developments are also excluded.
Loan-to-value (LTV)
Group LTV is the ratio of adjusted net debt, including subsidiaries and joint
ventures, to the sum of the market value of investment properties and the book
value of trading properties of the Group, its subsidiaries and joint ventures,
all on a proportionate basis, expressed as a percentage. For the Security
Group, LTV is the ratio of net debt lent to the Security Group divided by the
value of secured assets.
Market value
Market value is determined by the Group's external valuer, in accordance with
the RICS Valuation Standards, as an opinion of the estimated amount for which
a property should exchange on the date of valuation between a willing buyer
and a willing seller in an arm's-length transaction after proper marketing.
Net initial yield
Net initial yield is a calculation by the Group's external valuer of the yield
that would be received by a purchaser, based on the Estimated Net Rental
Income expressed as a percentage of the acquisition cost, being the market
value plus assumed usual purchasers' costs at the reporting date. The
calculation is in line with EPRA guidance. Estimated Net Rental Income is
determined by the valuer and is based on the passing cash rent less rent
payable at the balance sheet date, estimated non-recoverable outgoings and
void costs including service charges, insurance costs and void rates.
Net rental income
Net rental income is the net operational income arising from properties, on an
accruals basis, including rental income, finance lease interest, rents
payable, service charge income and expense, other property related income,
direct property expenditure and bad debts. Net rental income is presented on a
proportionate basis.
Net zero carbon building
A building for which an overall balance has been achieved between carbon
emissions produced and those taken out of the atmosphere, including via offset
arrangements. This relates to operational emissions for all buildings while,
for a new building, it also includes supply-chain emissions associated with
its construction.
Passing rent
The estimated annual rent receivable as at the reporting date which includes
estimates of turnover rent and estimates of rent to be agreed in respect of
outstanding rent review or lease renewal negotiations. Passing rent may be
more or less than the ERV (see over-rented, reversionary and ERV). Passing
rent excludes annual rent receivable from units in administration save to the
extent that rents are expected to be received. Void units at the reporting
date are deemed to have no passing rent. Although temporary lets of less than
12 months are treated as void, income from temporary lets is included in
passing rents.
Property Income Distribution (PID)
A PID is a distribution by a REIT to its shareholders paid out of qualifying
profits. A REIT is required to distribute at least 90% of its qualifying
profits as a PID to its shareholders.
Rental income
Rental income is as reported in the income statement, on an accruals basis,
and adjusted for the spreading of lease incentives over the term certain of
the lease in accordance with IFRS 16 (previously, SIC-15). It is stated gross,
prior to the deduction of ground rents and without deduction for operational
outgoings on car park and commercialisation activities.
Reversionary or under-rented
Space where the passing rent is below the ERV.
Reversionary yield
The anticipated yield to which the initial yield will rise (or fall) once the
rent reaches the ERV.
Security Group
Security Group is the principal funding vehicle for the Group and properties
held in the Security Group are mortgaged for the benefit of lenders. It has
the flexibility to raise a variety of different forms of finance.
Topped-up net initial yield
Topped-up net initial yield is a calculation by the Group's external valuer.
It is calculated by making an adjustment to net initial yield in respect of
the annualised cash rent foregone through unexpired rent-free periods and
other lease incentives. The calculation is consistent with EPRA guidance.
Total return on equity
Dividend paid per share in the year plus the change in EPRA Net Tangible
Assets per share, divided by EPRA Net Tangible Assets per share at the
beginning of the year.
Total cost ratio
Total cost ratio represents all costs included within EPRA earnings, other
than rents payable, financing costs and provisions for bad and doubtful debts,
expressed as a percentage of gross rental income before rents payable adjusted
for costs recovered through rents but not separately invoiced.
Total development cost (TDC)
Total development cost refers to the book value of the site at the
commencement of the project, the estimated capital expenditure required to
develop the scheme from the start of the financial year in which the property
is added to our development programme, together with capitalised interest,
being the Group's borrowing costs associated with direct expenditure on the
property under development. Interest is also capitalised on the purchase cost
of land or property where it is acquired specifically for redevelopment. The
TDC for trading property development schemes excludes any estimated tax on
disposal.
Trading properties
Properties held for trading purposes and shown as current assets in the
balance sheet.
Vacancy rates
Vacancy rates are expressed as a percentage of ERV and represent all unlet
space, including vacant properties where refurbishment work is being carried
out and vacancy in respect of pre-development properties, unless the scale of
refurbishment is such that the property is not deemed lettable. The screen at
Piccadilly Lights, W1 is excluded from the vacancy rate calculation as it will
always carry advertising although the number and duration of our agreements
with advertisers will vary.
Valuation surplus/deficit
The valuation surplus/deficit represents the increase or decrease in the
market value of the Combined Portfolio, adjusted for net investment and the
effect of accounting for lease incentives under IFRS 16 (previously SIC-15).
The market value of the Combined Portfolio is determined by the Group's
external valuer.
Voids
Voids are expressed as a percentage of ERV and represent all unlet space,
including voids where refurbishment work is being carried out and voids in
respect of pre-development properties. Temporary lettings for a period of one
year or less are also treated as voids. The screen at Piccadilly Lights, W1 is
excluded from the void calculation as it will always carry advertising
although the number and duration of our agreements with advertisers will vary.
Commercialisation lettings are also excluded from the void calculation.
Weighted average unexpired lease term
The weighted average of the unexpired term of all leases other than short-term
lettings such as car parks and advertising hoardings, temporary lettings of
less than one year, residential leases and long ground leases.
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