REG - Land Sec. Group PLC - Landsec half year results
16/11/2021 07:05
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20211116:nRSP4513Sa&default-theme=true
RNS Number : 4513S Land Securities Group PLC 16 November 2021
Forward-looking statements
These half 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 half 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 half 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.
Half year results for the six months ended 30 September 2021
16 November 2021
Positive business performance. Building strategic momentum
Chief Executive Mark Allan said:
"We have used the last six months to drive our business forward, disposing of
£250m of assets and progressing £616m of acquisitions that will accelerate
our strategy and provide greater opportunities for growth.
"In focusing our strategy on shaping three distinct places - central London
offices; major retail destinations; and mixed-use urban neighbourhoods - we
are bringing renewed vigour to the business and creating value for all our
stakeholders.
"One of the ways that we create value is by taking leadership positions on the
issues that matter. Today, we are proud to set out a fully costed investment
plan to transition our business towards net zero, ensuring that we deliver on
our science-based target to reduce our carbon emissions by 70% by 2030.
"Our actions over the last six months and throughout the pandemic have enabled
us to significantly increase operational activity and we remain in a strong
financial position. We look forward to demonstrating further progress over the
coming months."
Financial results
¾ EPRA earnings (1)(2) up 56.5% to £180m
¾ Gross rental income(1)(2) down 3.8% to £282m
¾ Profit before tax for the period of £275m (2020: loss of £835m)
¾ EPRA earnings per share(1)(2) up 56.8% to 24.3p
¾ Dividend in the period of 15.5p per share (2020: 12.0p)
¾ Combined Portfolio(1)(2) valued at £11.0bn, with a valuation
surplus(1)(2) of £81m or 0.8%(3)
¾ EPRA Net Tangible Assets per share(1) up 2.7% to 1,012p
¾ Total business return(1) of 3.7%
Strong financial position
¾ Low leverage with a Group LTV ratio(1)(2) at 31.8% (31 March 2021:
32.2%)
¾ Adjusted net debt(1)(2) of £3.5bn (31 March 2021: £3.5bn)
¾ Weighted average cost of debt in the period of 2.3% (30 September
2020: 2.2%)
¾ Weighted average maturity of debt at 10.9 years (31 March 2021: 11.5
years)
¾ Cash and available facilities(2) of £1.6bn
Building strategic momentum
¾ Announced £250m of disposals; progressed strategic acquisitions
totalling £616m.
¾ We are on-site with one million sq ft of committed development, and
with recent and planned acquisitions we have a near-term pipeline of 2.5
million sq ft of potential development opportunity.
¾ Since our full year results, we have built a greater depth of
understanding of how our strategy will evolve over the coming years as we
focus on three things:
¾ Central London offices where we develop, own and manage offices that
offer a variety of propositions to meet the evolving needs of office customers
ranging from global corporates to small, fast growing businesses.
¾ Major retail destinations where we focus on owning and actively
managing high quality assets that we believe will remain relevant to brands
and guests alike in an ever-changing world.
¾ Mixed-use urban neighbourhoods which recognise that the lines between
where we live, where we work and where we spend our leisure time are
increasingly blurred.
¾ What binds these three types of development together is the
importance of a sense of place to their enduring success and to that of their
surrounding areas.
¾ Our strategy remains grounded in an authentic purpose; built on
sustainable competitive advantage and supported by long-term macro trends.
¾ In executing our strategy we are guided by three things: delivering
sustainably, delivering for our customers and being disciplined with our
capital.
Central London offices benefitting from resilient rents and investor demand
¾ Rents for prime, grade A London offices remained resilient and the
central London office market saw a recovery in investment and operational
activity during 2021.
¾ In August, we conditionally exchanged contracts to forward purchase
Oval Works, a standalone office space that will form part of Berkeley's Oval
Village. This purchase is in line with our strategy to offer a broader range
of propositions for office customers.
¾ The disposal of 6-9 Harbour Exchange, E14, in November to Blackstone
European Property Income Fund (BEPIF) for £197m, underlines strong investor
demand for high quality income in central London. The sale price reflects a
net initial yield of 3.99%.
¾ As identified in our full year results, a customer focus on
environmental and wellbeing is becoming increasingly important in driving
strong demand for Grade A office space.
¾ We completed 8 lettings or renewals totalling £15m, in line with
ERV, and have a further £10m in solicitors' hands.
¾ We continue to maintain flexibility on our office development
pipeline. We are ready to progress Timber Square and Portland House at the
appropriate time and planning is due to be submitted on Red Lion Court by the
end of this financial year. 21 Moorfields and The Forge are on track to
complete in 2022, with Lucent and n2 the year after.
Catchment dominant retail destinations set to be long-term winners as retail
rents and values stabilise
¾ The retail trends described in our annual results continue to play
out, strengthening the position of higher quality retail destinations.
¾ The last six months have provided further evidence of prime retail
rents stabilising with a significant increase in leasing activity: 181
lettings were completed or are in solicitors' hands, with rents 3.3% ahead
of ERV.
¾ Key leasing deals within the period include Amazon 4-star, its first
store of this type in the UK, Zara and Nespresso opening new global concepts
as well as the bricks and mortar debuts of Crep Collection Club and Vanilla.
Other notable brands include Kids Around at Braintree Village and Luke 1977 at
Gunwharf Quays, while Whittards of Chelsea took space at Clarks Village.
¾ Leisure and food and beverage are becoming increasingly important
elements of a compelling retail offer. Performance at Gravity has been ahead
of expectations since it opened at Southside in autumn 2021, with the centre
seeing an increase in footfall and sales as well as a positive impact on
leasing activity.
Strong momentum in strategic execution through thoughtful mixed-use urban
neighbourhoods
¾ Our focus on developing and investing in mixed-use urban
neighbourhoods recognises that the lines between where we live, where we work
and where we spend our leisure time are becoming increasingly blurred. We are
using our scale, expertise and track record to help adapt the built
environment to meet people's changing needs.
¾ Our acquisition of a 75% stake in MediaCity - Europe's leading,
digital, media and tech hub - in November demonstrates an acceleration in this
pillar of our strategy and evidences our ability to bring forward investment
opportunities in the near term in places where we believe we can achieve
attractive and sustainable returns.
¾ In November, we also announced a recommended all cash offer to
acquire the mixed-use regeneration specialist U and I Group PLC (U+I). This
acquisition would add core regeneration assets to our pipeline and complement
and enhance our existing development capabilities and placemaking skills.
¾ At O2 Finchley Road we have launched the final stage of consultation
on our proposals for a mixed- use, residential-led neighbourhood, with the
formal planning application on track for submission by the end of the
financial year.
¾ Public consultation begins this month on our Lewisham shopping centre
scheme. We expect to submit our planning application in the second half of
2022.
Leading the way to net zero. Fully costed net zero transition investment plan
now in place
¾ In 2016, we were the first commercial real estate company in the
world to set a science based target to reduce our carbon emissions.
¾ Today - two years ahead of Government requirements - we are setting
out a fully costed £135m net zero transition investment plan to ensure we
meet our science-based target to reduce our carbon emissions by 70% by 2030
from a 2013/14 baseline.
¾ This will ensure that we stay ahead of the Minimum Energy Efficiency
Standards Regulations (MEES) which require a minimum EPC 'B' certification by
2030, as well as other regulatory requirements.
¾ This investment will focus on areas such as enhancements to building
management systems through the use of artificial intelligence; the replacement
of gas-fired boilers with electric alternatives such as air source heat pumps;
and increasing onsite renewable capacity.
Results summary
Six months ended 30 September 2021 Six months ended 30 September 2020 Change
EPRA earnings(1)(2) £180m £115m Up 56.5%
Valuation surplus/(deficit)(1)(2) £81m £(945)m Up 0.8%(3)
Profit/(loss) before tax £275m £(835)m
Basic earnings/(loss) per share 37.2p (112.8)p
EPRA earnings per share(1)(2) 24.3p 15.5p Up 56.8%
Dividend per share 15.5p 12.0p Up 29.2%
Total business return 3.7% -9.5%
30 September 2021 31 March 2021
Net assets per share 1,003p 975p Up 2.9%
EPRA Net Tangible Assets per share(1) 1,012p 985p Up 2.7%
Group LTV ratio(1)(2) 31.8% 32.2%
1. 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 15 in the Business
analysis section.
2. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Financial review.
3. The % change for the valuation surplus represents the change in value of
the Combined Portfolio over the period, adjusted for net investment.
Chief Executive's statement
Positive business performance. Building strategic momentum
The mid-point of our 2021-22 financial year affords a good opportunity to
reflect not only on year to date performance as we emerge from the pandemic,
but also progress against our new strategy a little over a year after we
launched it. In both cases the picture is encouraging; the economic recovery
following the pandemic has generally been at the stronger and more sustained
end of our expectations range and our strategic clarity is allowing us to be
more decisive in our capital allocation.
Our total return for the six months was 36 pence per share, equating to a 3.7%
total business return. EPRA earnings were 24.3 pence per share while portfolio
valuation movements contributed 10.9 pence meaning that, after dividends, EPRA
NTA per share increased 27 pence to 1,012 pence at 30 September. We are
proposing a second interim dividend of 8.5 pence, which together with the
first interim dividend of 7 pence equates to a total of 15.5 pence per share
for the first six months of the financial year.
When we launched our strategy in October 2020 we were clear in our intent to
focus on three key areas - central London offices, major retail destinations
and mixed-use urban neighbourhoods; areas where we believe we have a
sustainable or attainable competitive advantage that will help us create
long-term value for all our stakeholders. We were also clear that this would
require meaningful asset recycling, with around £4bn of asset sales planned
over the short to medium-term in order to fund investment into these key focus
areas.
Initially, and in the midst of the pandemic, our priority was disposals and we
made good progress in the last financial year. However, with the economy
recovering strongly during 2021, we have been able to balance that with more
focus on capital reinvestment. We now have a healthy pipeline of potential
opportunities across each area of our business and this is affording us
excellent visibility of the potential returns achievable in each area together
with the associated risks. Adding this perspective to opportunities across our
own portfolio means that we can be more decisive in our capital allocation,
confident that we are enhancing prospective returns through the decisions we
make.
Our recent £426m investment in MediaCity and our £190m recommended all cash
offer for U and I Group PLC are clear evidence of the steps we are taking in
this regard. In both cases, progress against our strategy is accelerated
materially. The first phase of MediaCity is an established, high quality
mixed-use location that offers attractive income-based returns while the
acquisition also gives us the option of investing over £500m into the next
phases of development with effect from early 2023. The proposed acquisition of
U+I gives us the option of investing a further £600-800m into a significant,
high quality pipeline of projects over the short to medium-term, starting in
2022. Anticipated returns from the investments are in line with or ahead of
our target levels and, importantly, the projects offer development optionality
rather than obligation, meaning that we preserve balance sheet flexibility.
Our positive business performance and delivery against strategic objectives
reflects the capability and commitment of our teams, despite the challenging
environment that everyone has been operating in. It also demonstrates the
progress we are making with the cultural changes we are seeking to effect and
which are critical to the successful delivery of our strategy in the
long-term. While there is plenty more to be done, Landsec is now a more agile
business, closer to its customers and better able to assess and respond to
changing market conditions in a considered and effective way.
Prime London rents proving resilient. Investor demand driving prime yields
down. Landsec portfolio well placed to benefit
At the time of our full year results announcement in May 2021 we said that we
expected rents for prime, grade A London offices to be resilient, reflective
of trends in occupier demand, while there was also the prospect of yields
tightening as a result of the weight of capital looking to invest in London
given its value relative to other global cities.
So far, this has proven to be the case with ERVs across our central London
offices up 1.2% and average yields tightening by c.2bps. Values for central
London retail are weaker, reflecting the slow return to cities over the period
but, taken together with the uplift in value for our central London
development portfolio, values for this part of the portfolio were up 0.8% over
the six months.
We expect customer demand to remain resilient for the remainder of the
financial year. Office utilisation has increased markedly over the past couple
of months as confidence in the safety of workplaces and public transport has
improved and government guidance has become clearer. Utilisation is now
approximately 55% of pre-Covid levels and leasing activity, both with existing
and new occupiers, continues to improve. During the period 26 lease events
covering £27m of rent were either completed or agreed at levels supportive of
ERV. Sustainability and flexibility are the key demands of customers and, in
both cases, Landsec is well placed to respond.
The weight of investor demand for prime London office assets shows no signs of
abating and yields could compress further from current levels as a result.
There is also increasing evidence of investors pursuing a 'build to core'
strategy, meaning that more capital is targeting prime development projects
with the potential to push down development margins on new opportunities.
Against this backdrop, we expect to continue targeting disposals of high
quality core assets with little further value add potential and to remain
disciplined in deploying capital into new development opportunities only where
we have a clear competitive edge. In the medium-term the proportion of our
portfolio invested in central London is likely to fall from the current level
of approximately 70% as disposal proceeds exceed the amount reinvested in
central London acquisition and development activity. It will, however,
continue to represent the significant majority of our portfolio.
Prime retail rents and values stabilising. Catchment dominant destinations set
to be long-term winners
The pandemic materially accelerated structural changes that were already
underway in the retail sector, most notably the shift to online retail. Prime
retail rents are currently close to 40% lower than their peak and values are
down by approximately 65%. While the financial impact of this has
unquestionably been painful, it does mean that the opportunity for a reset has
also accelerated. As a result we have an increasingly positive view of the
prospects for prime retail destinations.
At the time of our full year results announcement in May we said that prime
retail rents appeared to be approaching sustainable levels and our experience
over the past six months supports this view. Across all regional retail
elements of our portfolio we have completed or agreed terms on 181 lettings,
with rents agreed on average 3.3% above ERV, and portfolio vacancy has fallen
from 8.8% to 7.5% over the same period. Lease terms are generally shorter and
turnover-linked provisions are more common but incentives are also generally
lower meaning that the impact on yields is not particularly pronounced.
We continue to expect prime retail destinations to be long-term beneficiaries
of structural shifts in retail, provided that they offer experiences that
cannot easily be replicated online. We estimate that approximately 17% of all
retail floorspace in the UK is currently surplus to requirements, which we
expect to rise to 25% by 2025. However, with rents for the prime locations
most popular with shoppers now at affordable levels for retailers, vacancy is
increasingly likely to be concentrated in secondary locations. In the past six
months we have seen established retailers relocate into our centres from other
nearby locations, others take the opportunity to upsize their existing space
and digital native brands take physical space to complement their online
offer.
It will, of course, take time for these trends to take hold across the market
in a meaningful way but the outlook is increasingly encouraging. Our outlets
portfolio saw like-for-like sales increase 7.9% versus 2019 for the 25 weeks
after 12 April with values up 1.0% over the six months as a result. Shopping
centre sales also benefited from the strong post pandemic recovery with brand
partner sales now within approximately 3% of 2019 levels for this same period.
Equivalent yields across our shopping centres and outlets range from 6.8% to
7.5%, averaging 7.2%. With leasing evidence providing support for rent levels
and investor demand beginning to return, these yields appear increasingly
attractive on a relative basis and we expect to see interesting prime retail
investment opportunities emerge. With our retail parks planned for sale in the
short to medium-term, the overall proportion of our portfolio invested in core
retail is likely to remain broadly flat at around 20%, but with greater focus
on major retail destinations.
Thoughtful mixed-use development an increasingly critical ingredient in the
fabric of cities. Momentum building in the Landsec portfolio
The lines between where people live, where they work and where they spend
their leisure time are becoming increasingly blurred. With many parts of
today's built environment already in need of remodelling and sustainability
such an important focus for everyone, there is a clear opportunity to reshape
neighbourhoods and cities in a thoughtful way over time to meet these changing
needs in a sustainable way.
At the start of the year we had a number of projects within our portfolio,
mainly suburban London shopping centres, that had significant mixed-use
development potential. Since then, we have added a further major project
through our £426m acquisition of a 75% stake in MediaCity and have made
continued progress with planning applications at O2 Finchley Road and
Lewisham. With the next phase of MediaCity already benefitting from planning
consent and giving us the option to invest over £500m into the next phases of
development from 2023, a planning application at O2 Finchley Road on track for
submission this financial year and an application at Lewisham targeted for
late 2022, we are building momentum in this part of our business.
Our recommended all cash offer to acquire U+I, if completed, would add to this
momentum. Not only would it bring in highly regarded, complementary mixed-use
development skills, it also offers access to a significant pipeline of high
quality urban regeneration projects that give us the option to invest between
£600m and £800m in the short to medium-term.
The returns available from mixed-use development assets are attractive -
development phases offer low double digit ungeared IRRs and investment phases
mid-single digit yields - with rental growth prospects supported by successful
placemaking. Furthermore, the phased nature of the projects allows us to
manage capital commitments carefully and to adapt our strategy as we progress.
Over the next few years we plan to increase the proportion of our portfolio
invested in mixed-use assets to between 20% and 25%. The progress we have made
with our existing projects, together with our recently completed or planned
new investments, means that we now have real clarity on how this can be
achieved.
A continued focus on capital discipline is crucial
Although there has been a strong and sustained recovery over the past few
months, uncertainty remains elevated. It is still difficult to distinguish
between short-term factors in the recovery and longer-term trends, making
accurate forecasting of demand difficult, while supply chain challenges, both
global and localised, risk slowing the recovery from here and driving
inflation.
Capital discipline is at the heart of our new strategy in three clear ways:
¾ At the time we announced our strategy in October 2020 we reduced our
financial leverage tolerance levels to between 25% and 40% LTV. We continue to
operate firmly within this range despite significant valuation declines in the
year to March 2021, and our clear asset recycling plans mean that new
investment will generally be funded through asset disposals.
¾ We have been clear that capital investment will be focused only on
areas where we have a sustainable or attainable competitive advantage, which
informed our decision to exit £1.3bn invested in subscale sectors (retail
parks, leisure and hotels) over time. We are on track, with £52m of proceeds
from retail park disposals in the period and, with investor demand
strengthening across all three subscale sectors, we could choose to accelerate
this as reinvestment options become clearer.
¾ We are focused on increasing optionality in our development
programme, meaning that we can respond more quickly to market conditions,
adapt accordingly and become a more agile business as a result. We have
preserved optionality over two consented London developments - Timber Square
and Portland House - as we progress our committed projects first; and our
MediaCity investment boosts this further with future development phases
capable of commencing on site from early 2023.
Sustainability is more important than ever. Our 2030 science-based carbon
reduction pledge is now supported by a fully costed net zero transition plan
In 2016 we became the first commercial real estate business in the world to
set a science-based carbon reduction target and in 2019 we increased our
ambition to align with a 1.5 degree global warming scenario.
We have today announced a new net zero transition investment plan across our
entire estate which will ensure that we remain at the forefront of everything
that the property sector is doing to tackle the climate crisis.
This is a really important step to ensure we achieve the climate commitments
we have made to reduce our carbon emissions by 70% by 2030 (versus a 2013/14
baseline) and to ensure that we stay ahead of the Minimum Energy Efficiency
Standards Regulations (MEES), which require an EPC 'B' certification by 2030,
as well as other regulatory requirements.
We have already reduced our carbon emissions by 55%. Over the next nine years
we will invest approximately £135m across the portfolio to deliver further
reductions. The investment programme will reduce operational energy use by
optimising our building management systems through the use of AI; decarbonise
our heating by replacing gas-fired boilers with electric alternatives such as
air source heat pumps; and increase our onsite renewable capacity. We will
also continue to engage and partner with customers to work collaboratively to
drive down energy consumption.
Alongside this, we remain committed to designing and building net zero
buildings with The Forge, our first net zero building, on track to complete in
October 2022 having achieved a 25% reduction to date in embodied carbon from
the initial design stage.
This investment equates to approximately 1% of portfolio value and, with
increasingly clear evidence of stronger sustainability credentials
underpinning stronger operational performance, is not only essential from an
environmental perspective but an economic one too.
Outlook
As a result of the success of its vaccination programme, the UK appears
reasonably well placed to navigate autumn and winter without needing to revert
to lockdowns or other excessively restrictive measures. However, it is by no
means certain that this will be the case. In addition, people's behaviour
patterns are still difficult to predict; it is challenging to discern
short-term 'pent up' demand driven factors from long-term trends; and supply
chain disruption is likely to remain an issue for a number of months, raising
inflation concerns.
We remain alert to all these risks but, overall, our outlook is one of
cautious optimism. We are providing high quality, sustainable office space
that is very well aligned to today's customer demands; in our retail portfolio
we are generally seeing leasing activity supportive of ERVs for the first time
in quite a while and increasing evidence of a 'flight to prime' for which our
portfolio is well placed; and we are building real momentum with our mixed-use
development activity. With a strong balance sheet, a portfolio suited to
changing customer needs and a clear strategy that positions the business for
long-term growth, Landsec is well placed for the future.
Mark Allan
Chief Executive
Financial review
Overview
We began the financial year with the Covid-19 restrictions beginning to ease
across the country which has allowed us to drive a strong recovery. The six
months to 30 September 2021 saw EPRA earnings of £180m, up 57% on the same
period last year. This is primarily as a result of a reduction in the level of
provisions for bad debts, which reflects the improvement in the period in our
ability to collect both current and historical arrears. We have now collected
91% of the September quarter rent.
The strength of our balance sheet has enabled us both to support our customers
and progress with the implementation of our strategy despite the financial
impact of the pandemic. We have continued to progress our asset recycling
plans and our existing development pipeline while still maintaining our
adjusted net debt at £3.5bn, in line with 31 March 2021, and £1.6bn of cash
and available facilities.
EPRA Net Tangible Assets (NTA) per share increased by 27 pence, or 2.7%,
reflecting the higher EPRA earnings and an increase in the value of our
assets, with a valuation surplus in the period of £81m, or 0.8%. The increase
in EPRA NTA, along with dividends paid in the period, translates to a total
business return in the six months of 36p per share, or 3.7%. The higher gross
asset value, along with stable adjusted net debt levels, reduced our LTV to
31.8% from 32.2% at 31 March 2021.
We made a number of strategic transactions since the balance sheet date,
including our acquisition of MediaCity, and the disposal of 6-9 Harbour
Exchange, E14. In addition, we announced our recommended all cash offer for U
and I Group PLC on 1 November 2021. In line with our strategy, we will
continue with our asset recycling plan in the second half of the financial
year.
Our strong recovery in the first six months of the financial year means we are
able to pay a second quarterly dividend of 8.5p per share, bringing our total
dividend for the first six months to 15.5p. While the dividend cover is higher
than our policy at this stage in the year, we expect the full year dividend to
be consistent with this policy, where dividends are covered 1.2 to 1.3 times
by EPRA earnings.
Table 1: Highlights
Six months ended Six months ended
30 September 2021 30 September 2020
EPRA earnings (1) £180m £115m
Valuation surplus/(deficit)(1) £81m £(945)m
Profit/(loss) before tax £275m £(835)m
Basic earnings/(loss) per share 37.2p (112.8)p
EPRA earnings per share(1) 24.3p 15.5p
Dividend per share 15.5p 12.0p
30 September 2021 31 March 2021
Combined Portfolio(1) £11.0bn £10.8bn
EPRA Net Tangible Assets £7,510m £7,300m
Net assets per share 1,003p 975p
EPRA Net Tangible Assets per share 1,012p 985p
Adjusted net debt(1) £3.5bn £3.5bn
Group LTV ratio(1) 31.8% 32.2%
1. Including our proportionate share of subsidiaries and joint ventures,
as explained in the Presentation of financial information below.
Presentation of financial information
The condensed consolidated interim financial information is prepared under
IFRS 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 results of the Group on a basis
that adjusts for these forms of ownership to present a proportionate share.
The Combined Portfolio, with assets totalling £11.0bn, is an example of this
approach, reflecting the economic interest we have in our properties
regardless of our ownership structure.
During the period, the Group changed its key measure of underlying earnings
performance from revenue profit to EPRA earnings to align our primary
alternative performance measure with industry standard. There are no
differences between the two metrics in any of the periods reported.
EPRA earnings 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 15 in the
Business analysis section.
Income statement
EPRA earnings
EPRA earnings increased by £65m to £180m for the six months ended 30
September 2021 (2020: £115m) as set out in the table below. The increase in
EPRA earnings results in an 8.8p increase in EPRA earnings per share from
15.5p to 24.3p in the six months ended 30 September 2021.
Table 2: EPRA earnings(1)
Six months ended Six months ended
30 September 2021
30 September 2020
Central London Regional retail Urban opps Subscale sectors Total Central London Regional retail Urban opps Subscale sectors Total Change
Table £m £m £m £m £m £m £m £m £m £m £m
Gross rental income(2) 148 74 17 43 282 156 82 13 42 293 (11)
Net service charge expense - (3) (1) (2) (6) - (2) - - (2) (4)
Net direct property expenditure (9) (9) (3) (4) (25) (1) (7) (2) (3) (13) (12)
Movement in bad and doubtful debts provisions (2) 5 1 (1) 3 (8) (44) (6) (29) (87) 90
Segment net rental income 3 137 67 14 36 254 147 29 5 10 191 63
Net administrative expenses (41) (37) (4)
EPRA earnings before interest 213 154 59
Net finance expense (33) (39) 6
EPRA earnings 180 115 65
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
Net rental income in the six months has increased by £63m compared with the
same period in the prior year, primarily as a result of a £90m reduction in
bad and doubtful debts charges following the strong recovery, and net
investment activity. Assets we sold in the current and prior years have
resulted in a £12m reduction in net rental income in the six months, with 55
Old Broad Street, EC2, acquired in the previous financial year, contributing
£2m. More details on the movements in the period are shown in the table
below.
Table 3: Net rental income(1)
£m
Net rental income for the six months ended 30 September 2020 191
Gross rental income like-for-like movement in the period:
Increase in turnover-based rents 20
Surrender premiums received 7
Impact of CVAs and administrations (15)
Increase in voids (8)
Other movements (5)
Total like-for-like gross rental income (1)
Like-for-like net direct property expenditure (16)
Movement in bad and doubtful debts provisions 90
Acquisitions since 1 April 2020 2
Disposals since 1 April 2020 (12)
63
Net rental income for the six months ended 30 September 2021 254
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Within the like-for-like portfolio, turnover-related income recovered well in
the period, increasing by £20m, including £4m from our hotel portfolio and
£3m from Piccadilly Lights, W1, both of which recovered strongly following
the removal of Covid-19 related restrictions. We also received surrender
premiums totalling £7m. While insolvency events in the current period have
been very limited, reductions in rents from those which occurred in the
previous financial year reduced our gross rental income by £15m in the six
months ended 30 September 2021. Higher average vacancy rates across the
portfolio, primarily due to vacancies arising in the previous financial year,
reduced gross rental income by a further £8m.
Net direct property expenditure in the like-for-like portfolio increased by
£16m in the period, with £4m due to letting and operational activity in the
period, increasing from very low levels during the same period in the prior
year and void-related costs contributing £3m. The one-off release of a
provision in the prior year following an agreement which ended our obligations
under one of our last remaining Landflex leases resulted in a £4m increase in
net direct property expenditure when compared with the same period last year.
Recent rent collection and related provisions
Table 4: Rent collections
29 September 2021 quarter(1)(2)
Gross amounts due 29 September Monthly payment terms agreed Net amounts due 29 September Amounts received Amounts received Amounts received
£m £m £m to date to date September 20
£m % %
Offices 57 (1) 56 56 100% 96%
Rest of central London 6 - 6 5 83% 50%
Regional retail 14 (1) 13 12 92% 50%
Urban opportunities 5 - 5 3 60% 60%
Subscale sectors 14 (1) 13 9 69% 47%
96 (3) 93 85 91% 78%
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
2. All amounts are shown gross of VAT. Where an amount billed remains
uncollected and is subsequently written off, the VAT component will be
recovered by the Group.
We have now collected 91% of the rent due on the September quarter day,
compared with 78% in the same period last year. The majority of our customers
have resumed payment following the release of trading restrictions and the
finalisation of concessions granted from our £80m customer support fund, of
which we have now allocated £53m to our customers.
We have also made good progress collecting our arrears, with 62% of unprovided
balances that were outstanding at 31 March 2021 now collected - leaving £33m
of the £87m outstanding at 31 October 2021. More detail on the remaining
outstanding balances is included in the table below.
Table 5: Trade debtors and provisions for doubtful debts(1)
Outstanding at Change in Outstanding at
31 March 2021 the period 31 October 2021
Arising before 31 March 2021
Trade and other receivables 214 (90) 124
Provision for doubtful debts (127) 36 (91)
Net trade and other receivables 87 (54) 33
Arising between 1 April 2021 and 31 October 2021
Trade and other receivables - 33 33
Provision for doubtful debts - (9) (9)
Net trade and other receivables - 24 24
Total net trade and other receivables at 31 October 2021 87 (30) 57
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Net administrative expenses
Net administrative expenses represent the administrative costs of the Group
including joint ventures which increased by £4m to £41m at 30 September 2021
(2020: £37m) due to costs incurred to support business change activity. We
are focused on cost discipline and expect to reduce our EPRA cost ratio, which
was 23.7% at 30 September 2021, down towards 20% in the next couple of years.
Net finance expense (included in EPRA earnings)
Our net finance expense decreased by £6m to £33m primarily due to lower
levels of average net debt in the period given the strength of our operational
cash flow performance.
The weighted average cost of our debt, which is now calculated based on
historical average rates for the period, rather than the rates at the end of
the period, was 2.3% for the period ended 30 September 2021 (30 September
2020: 2.2%).
IFRS profit after tax
Our income statement has two key components, as shown in the table below. The
first component is the income we generate from leasing our investment
properties net of associated costs (including finance expense), which we refer
to as 'EPRA earnings'. The second is items not directly related to the
underlying rental business, principally valuation changes, profits or losses
on the disposal of properties and finance charges related to derivative
financial instruments, which we call 'Capital and other items'.
Table 6: Income statement
Six months ended Six months ended
30 September 2021 30 September 2020
Table £m £m
EPRA earnings 2 180 115
Capital and other items 7 95 (950)
Profit/(loss) before tax 275 (835)
Taxation - -
Profit/(loss) attributable to shareholders 275 (835)
Basic earnings/(loss) per share 37.2p (112.8)p
EPRA earnings per share 24.3p 15.5p
Profit before tax was £275m, compared with a loss of £835m for the same
period in the prior year, due to an increase in the value of our assets (up
£81m, compared with a £945m reduction last year) as well as a £65m increase
in EPRA earnings.
The reasons behind the movements in Capital and other items are discussed in
more detail below.
Table 7: Capital and other items(1)
Six months ended Six months ended
30 September 2021
30 September 2020
Table £m £m
Valuation and profit on disposals
Valuation surplus/(deficit) 8 81 (945)
Gain on modification of finance leases 6 -
Profit/(loss) on disposals 6 (1)
Fair value movement on interest rate swaps 2 (5)
Other net finance income - 1
Capital and other items 95 (950)
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information above.
An explanation of the main Capital and other items is given below.
Valuation of investment properties
The Combined Portfolio increased in value by 0.8% or £81m over the six months
compared with a decrease in the prior period of £945m. We have also
recognised a gain of £6m following the re-gear of two long leases at some of
our leisure assets which are treated as tenant finance leases in the financial
statements.
Table 8: Valuation analysis
Market value 30 September 2021 Valuation movement Rental value change(1) Net initial Equivalent Movement in equivalent yield
yield
yield
£m % % % % bps
Offices 5,222 0.5% 1.2% 4.1% 4.6% (2)
London retail 584 -6.9% -5.3% 4.4% 4.6% 6
Other central London 426 0.5% -0.1% 3.2% 4.4% -
Total Central London 6,232 -0.3% 0.5% 4.0% 4.6% (1)
Regional shopping centres 979 -4.1% -1.8% 7.6% 7.5% 16
Outlets 737 1.0% -0.5% 6.0% 6.8% (6)
Total Regional retail 1,716 -2.0% -1.3% 6.9% 7.2% 6
Total Urban opportunities 391 -3.4% - 6.7% 6.6% 8
Leisure 532 4.2% 0.4% 6.4% 7.5% (14)
Hotels 407 -0.1% - 3.3% 5.5% -
Retail parks 405 15.6% -1.3% 6.3% 6.5% (104)
Total Subscale sectors 1,344 5.9% -0.2% 5.4% 6.6% (33)
Total like-for-like portfolio 9,683 0.1% -0.1% 4.8% 5.4% (3)
Proposed developments 288 -5.5% n/a - n/a n/a
Development programme 904 11.0% n/a - 4.1% n/a
Acquisitions 121 -1.5% n/a 2.6% 4.9% n/a
Total Combined Portfolio 10,996 0.8% -0.1% 4.3% 5.3% (3)
1. Rental value change excludes units materially altered during the period.
The component parts of the overall 0.8% (£81m) increase in the value of our
Combined Portfolio reflect differences in the rate at which the underlying
asset classes are recovering from the impact of Covid-19. The majority of the
Covid-19 related allowances, which were introduced during 2020, have been
reversed in the period, contributing 0.4% (£40m) to the overall valuation
surplus. A total of £11m of Covid-19 allowances remained at the end of the
period, primarily in the valuation of our central London retail and leisure
assets.
Within the like-for-like portfolio, our office assets increased in value by
0.5% reflecting the resilience of the London office market, with our portfolio
also benefitting from the increasing demand for high-quality space as rental
values increased by 1.2% and yields compressed slightly. This was partly
offset by a decline in value at 3 New Street Square, EC4, where we are taking
vacant possession ahead of development and the associated surrender premium is
expected to be recognised in the second half of financial year.
Central London retail has continued to decline in value, by 6.9% in the
period, due to the combined effect of the slow return of office workers and
international tourism. We also agreed lease surrenders on two of the retail
spaces under Piccadilly Lights, resulting in a further decline in the
valuation, while the related surrender premiums have been recognised directly
in gross rental income, as outlined above. This has been partly offset by some
stabilisation in recent months reflecting letting momentum as we start to
repurpose our assets.
The value of our 'other central London' assets, primarily Piccadilly Lights,
have increased in value by 0.5% in the period due the strong rate of recovery
in the income from short term lettings on the screen.
The declines in value at our regional shopping centres were weighted towards
the first quarter with the second quarter benefitting from strong operational
activity. These assets also benefitted from the release of £12m of Covid-19
allowances. Occupancy levels at our outlets have seen a faster recovery and
experienced a strong sales performance, which is reflected in the 1.0%
valuation surplus. Due to the structure of most outlet leases, there will be a
time lag between recovery in sales performance and receipt of turnover rents.
Assets within our urban opportunities portfolio have an existing retail use
and valuation movements in the period therefore reflect retail valuation
sentiment rather than redevelopment potential. These assets have declined in
value by 3.4% in the period.
Our leisure assets have also stabilised over the first half of this year and
increased in value by 4.2%, with rental values increasing by 0.4%, consistent
with our recent letting experience including two significant re-gears with
SnoZone, and a contraction in yields.
Our retail parks increased in value by 15.6%, reflecting the rapid recovery of
the investment market in this sector, with yields moving in significantly, by
104bps.
In addition to the like-for-like portfolio, our development programme
increased in value by 11.0% as we approach the practical completion date for
21 Moorfields, EC2, for which we released £33m of development profit during
the period. Our proposed developments declined in value by 5.5% as a result of
updated cost budgets reflective of Covid-19 related impacts and the current
construction cost environment.
Profit/(loss) on disposals
We realised a total of £6m in net profits from the disposal of £42m of
assets from subscale sectors, with the sale of Blackpool Retail Park in May
2021 and Derwent Howe Retail Park, Workington in September 2021 (2020: £1m
net loss on disposals).
Balance sheet
The strength of our balance sheet and liquidity position has provided
resilience during the pandemic and enables progress with our strategic
transition. A continued focus on capital discipline is crucial to maintain our
position of strength and manage our financial risk through a conservative
level of gearing, aligning the timing and quantum of asset acquisitions and
disposals, and an appropriate exposure to development activity.
Our net assets principally comprise the Combined Portfolio less net debt. Both
IFRS net assets and EPRA Net Tangible Assets increased over the six months
ended 30 September 2021 primarily due to the increase in the value of our
investment properties and retained operational earnings. We have made good
progress recovering historical and current rental debts, and adjusted net debt
is broadly consistent with March 2021 levels. Our Group LTV at 30 September
reduced to 31.8% from 32.2% at 31 March 2021 and with cash and available
facilities of £1.6bn, we remain positioned to support the execution of our
strategy.
Table 9: Balance sheet
30 September 2021 31 March 2021
£m £m
Combined Portfolio 10,996 10,791
Adjusted net debt (3,505) (3,489)
Other net assets/(liabilities) 19 (2)
EPRA Net Tangible Assets 7,510 7,300
Excess of fair value over net investment in finance leases book value (99) (93)
Other intangible asset 2 2
Fair value of interest-rate swaps 6 3
Net assets 7,419 7,212
Net assets per share 1,003p 975p
EPRA Net Tangible Assets per share(1) 1,012p 985p
Group LTV(2) 31.8% 32.2%
Security Group LTV 32.4% 32.7%
1. EPRA Net Tangible Assets per share is a diluted measure.
2. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Table 10: Movement in EPRA Net Tangible Assets(1)
Diluted per share
£m pence
EPRA Net Tangible Assets at 31 March 2021 7,300 985
EPRA earnings 180 24
Valuation surplus 81 11
Dividends (66) (9)
Other 15 1
EPRA Net Tangible Assets at 30 September 2021 7,510 1,012
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Development pipeline
We have continued to make good progress with our existing development pipeline
in the six months to 30 September 2021, despite the supply chain challenges
being experienced across the market. For those developments already on site,
we have limited our exposure to significant increases in total development
cost through the construction contracts already in place. However, these
pressures have negatively impacted the valuation of our proposed developments,
which declined in value by 5.5%, or £17m, in the period.
Table 11: Development pipeline
Property Sector Size Estimated completion Net income/ ERV Market value Capital expenditure to complete Market value + outstanding TDC
date
£m
sq ft £m £m £m Gross yield on market value + outstanding TDC
'000 %
Developments approved or in progress
21 Moorfields, EC2 Office 564 Sep 2022 38 675 192(1) 877(1) 4.3
The Forge, SE1 Office 140 Oct 2022 10 75 66 143 6.6
Lucent, W1 Mixed-use 144 Mar 2023 13 125 81 211 6.2
n2, SW1 Office 167 Jun 2023 13 56 128 189 6.8
Total 1,015 74 931 467 1,420
Property Sector Proposed Indicative capital expenditure to complete Estimated completion
date
sq ft £m Planning/development status
'000
Proposed developments
Timber Square, SE1 Office 380 260-280 2024 Planning granted. Demolition ongoing.
Portland House, SW1 Office 295 180-200 2025 Planning granted. Refurbishment options being refined.
Central London potential
scheme
Red Lion Court, SE1 Office 235 210-230 2026 Progressing design through to planning submission
in the first half of 2022.
Total 910 650+
1. Includes estimated overage payable of £36m as at 30 September 2021.
Capital expenditure
We have continued to invest in our investment portfolio, with £40m of capital
expenditure on the Combined Portfolio in the period, preparing our assets for
development, refurbishing our properties ahead of letting and meeting our
obligations under fire safety regulations. A significant proportion of the
capital investment in our portfolio will shift towards achieving our key
carbon reduction targets in coming years.
We have now performed a detailed assessment of the capital expenditure needed
on our portfolio to enable us to reach our carbon reduction targets. We have a
fully costed net zero carbon transition investment plan of £135m across our
Combined Portfolio to enable us to achieve our science-based target and meet
minimum energy efficiency standards (MEES) of 'EPC B' by 2030. Our plan also
aligns our portfolio with the Carbon Risk Real Estate Monitor (CRREM) energy
intensity pathway for commercial buildings under a 1.5 degree global warming
scenario. Our transition plan will enable us to capture incremental rental
value over time as our customers increasingly demand sustainable space.
Net debt and gearing
We have maintained our conservative gearing and strong liquidity position at
30 September 2021, remaining broadly net debt neutral in the period. Group
LTV, presented on a proportionate basis, decreased from 32.2% at 31 March
2021 to 31.8% at 30 September 2021, due to the increase in the value of our
assets and strong operating cash inflows.
Our asset recycling plans mean acquisitions will be funded through disposals,
and we intend to maintain a low LTV, within our current target range of 25% to
40% and generally below the mid 30's for the foreseeable future.
Net debt and adjusted net debt remained broadly stable, increasing by only
£21m and £16m respectively, in the period. The main elements behind the
increase in net debt are set out in our statement of cash flows and note 14 to
the financial statements. The main movements in adjusted net debt are outlined
in table 13 below. For a reconciliation of net debt to adjusted net debt, see
note 13 to the financial statements.
Table 12: Net debt and gearing
30 September 2021 31 March 2021
Net debt £3,530m £3,509m
Adjusted net debt(1) £3,505m £3,489m
Group LTV(1) 31.8% 32.2%
Security Group LTV 32.4% 32.7%
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Table 13: Movement in adjusted net debt(1)
£m
Adjusted net debt at 31 March 2021 3,489
Adjusted net cash inflow from operating activities (172)
Dividends paid 75
Capital expenditure 164
Disposals (52)
Other 1
Adjusted net debt at 30 September 2021 3,505
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Adjusted net cash inflow from operating activities was £172m and we paid
dividends of £75m in the period. Our third quarterly dividend relating to the
year ended 31 March 2021 was paid early, on 30 March 2021, to ensure we
remained compliant with the Property Income Distribution (PID) requirements of
the REIT regime.
Capital expenditure on investment properties was £164m, with £127m related
to our development programme. Net cash flow from disposals totalled £52m,
with £23m received from the sale of Blackpool Retail Park and £29m from the
sale of Derwent Howe Retail Park, Workington. Our asset recycling plans are on
track and we expect our disposals this year to be weighted towards the second
half of the year.
Financing
Our approach to capital discipline is to broadly align acquisitions with
disposals proceeds of equal quantum and timing - investment 'waves' - to
maintain stable levels of net debt over time. We use the operational
flexibility provided by our committed revolving facilities to provide
shorter-term financing to bridge any gaps between the timing of acquisitions
and disposals within these 'waves'. This approach to capital discipline and
our balance sheet capacity have enabled us to make our recommended all cash
offer for U and I Group PLC on 1 November 2021 as well as complete the
acquisition of MediaCity on 2 November 2021. At 30 September 2021 our cash and
available undrawn facilities were £1.6bn, the components of which are shown
in the table below.
At 30 September 2021, our committed revolving facilities totalled £2,715m (31
March 2021: £2,715m). The pricing of our facilities which fall due in more
than one year range from SONIA + credit adjustment spread (CAS) +65 basis
points to SONIA + CAS +75 basis points. Borrowings under our commercial paper
programme typically have a maturity of up to three months, currently carry a
weighted average interest rate of LIBOR +10 basis points and are unsecured.
Table 14: Available undrawn facilities
30 September 2021 31 March 2021
£m £m
Committed revolving credit facilities 2,715 2,715
Drawn bank debt (401) (209)
Outstanding commercial paper (779) (906)
Cash and cash equivalents(1) 65 31
Available undrawn facilities(1) 1,600 1,631
Weighted average maturity of debt 10.9 years 11.5 years
Weighted average cost of debt(1)(2) 2.3% 2.2%
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
2. The weighted average cost of debt relate to the periods ended 30 September
2020 and 2021.
Dividend
We will be paying a higher second quarterly dividend of 8.5p per share on 4
January 2022 to shareholders registered at the close of business on 26
November 2021. This will be paid wholly as a Property Income Distribution.
Taken together with the first quarterly dividend of 7.0p per share, paid
wholly as a Property Income Distribution on 8 October 2021, our first half
dividend will be 15.5p per share (six months ended 30 September 2020: 12.0p
per share). The increase in our quarterly dividend reflects our strong
performance in the six months ended 30 September 2021 and our confidence in
our continued recovery from the pandemic.
It is our policy that dividend payments annually are covered 1.2 to 1.3 times
by EPRA earnings. While the dividend cover is higher than our policy at this
stage in the year, we expect the full year dividend to fall within this range.
Vanessa Simms
Chief Financial Officer
Operating and portfolio review
At a glance
¾ Valuation surplus of 0.8%(1)
¾ £30m of investment lettings, with a further £28m in solicitors'
hands
¾ Like-for-like vacancy: 5.2% (31 March 2021: 4.9%) and units in
administration: 1.0% (31 March 2021: 2.2%)
¾ 1.0 million sq ft of developments on site
Central London
¾ Valuation surplus of 0.8%(1)
¾ £15m of investment lettings, with a further £12m in solicitors'
hands
¾ Like-for-like vacancy: 4.8% (31 March 2021: 3.2%) and units in
administration: 0.1% (31 March 2021: 0.3%)
Regional retail
¾ Valuation deficit of 2.0%(1)
¾ £7m of investment lettings, with a further £9m in solicitors' hands
¾ Like-for-like vacancy: 7.5% (31 March 2021: 8.8%) and units in
administration: 2.8% (31 March 2021: 5.4%)
¾ Footfall down 28.2% (Springboard national benchmark down 28.7%)
¾ Like-for-like same store sales up 0.5%, compared with the same period
in 2019
Urban opportunities
¾ Valuation deficit of 3.4%(1)
¾ £3m of investment lettings in solicitors' hands
¾ Like-for-like vacancy: 3.8% (31 March 2021: 3.9%) and units in
administration: 2.4% (31 March 2021: 3.5%)
Subscale sectors
¾ Valuation surplus of 5.9%(1)
¾ £8m of investment lettings, with a further £4m in solicitors' hands
¾ Like-for-like vacancy: 3.4% (31 March 2021: 4.3%) and units in
administration: 0.9% (31 March 2021: 3.0%)
Our £11.0bn Combined Portfolio is comprised of office space in London, and
retail, leisure and hotel assets across the UK. As the economy has recovered
following the removal of lockdown restrictions, we have seen a strong recovery
in our markets and this is reflected in our performance over the six months.
We have seen high levels of letting activity, added materially to our pipeline
of opportunities, and have progressed our committed developments. Throughout
all of our activity our customers and sustainability have been our priorities
and are key to us achieving our purpose.
1. On a proportionate basis.
Central London portfolio
Our £7.5bn Central London portfolio comprises offices (86%), associated
ground level retail (8%) and other assets (6%), the most significant of which
is Piccadilly Lights, W1.
The central London office market saw a recovery in both investment and
occupational activity during the first half of the year. Investment volumes
across the market were £5.0bn, nearly three times the same period last year,
with the majority of investment demand continuing to come from overseas
investors. The ongoing weight of demand for prime office assets saw yields
tighten by 25bps in both the City and the West End during the period.
Central London office take-up totalled 4.3 million sq ft in the six months, up
92% compared with the same period last year. The market gained momentum
throughout the period; and in the three months to September take up was 2.7
million sq ft, 59% ahead of the previous quarter and the third consecutive
rising quarter. Occupiers have choice in the market, with availability at 25.7
million sq ft, 10.4 million sq ft above the long-term average. However, nearly
80% of availability is second-hand space, which doesn't necessarily meet the
requirements of occupiers, many of whom are becoming more demanding in their
expectations.
Environmental and wellbeing factors are now amongst the top requirements for
those seeking new space and, despite the amount of space available across the
market, 30% of the take-up in the six months was of new, or significantly
refurbished, grade A space. We expect this to be a trend that continues to
play out. It is still too early to draw firm conclusions about the long-term
impact of working from home on office usage, but as occupiers return in
greater numbers their views on how much space they need, and how they will use
it, will become clearer. The continued demand for grade A space, both during
the lockdowns and in the aftermath, underlines our longer-term confidence in
the London office market and our own portfolio.
Office occupancy levels have remained well below pre-Covid levels throughout
the six months. This, combined with the lack of international tourism, has
particularly impacted central London retail, where the bounce back in sales
and footfall has been more muted than the wider retail market. However, with
steadily rising office utilisation and travel restrictions easing, the outlook
is improving.
Leasing and operational activity
Physical occupancy in our office portfolio averaged 25.3% of total occupancy
during the last six months. We saw a steady increase in occupancy from April
to the end of August, and a marked increase in September, coinciding with the
end of the summer holidays. Since September, average occupancy reached 55% of
pre-Covid levels, peaking at 66%.
It has been an active period for leasing activity. We completed 14 lettings or
renewals totalling £15m and have a further £12m relating to 12 lettings or
renewals in solicitors' hands, at rental levels supportive of ERVs. Of the
300,000 sq ft of space we had in discussions in Victoria in May, 130,000 sq ft
has transacted and a further 100,000 sq ft is in solicitors' hands. We are
currently in discussions with 15 customers across 830,000 sq ft of space
within the London office portfolio. These discussions include upsizes,
downsizes and regears and we are encouraged by the level of proactive
engagement. Increased flexibility is a theme with some customers seeking to
reduce their space, but overall this is offset by others looking to expand
their office footprint.
At Myo in 123 Victoria Street, SW1, current occupancy is 67%. The flexible
nature of this product means some customers didn't renew their leases at
expiry during lockdown and occupancy fell below the 85% run-rate we target for
this business. Again, interest in this offer has improved markedly since late
summer and with the pipeline of current interest we expect to be in excess of
85% occupancy before the end of the financial year.
At Dashwood, EC2, we have completed the refurbishment works which have
delivered our three office products - Blank Canvas, Customised and Myo -
totalling 120,000 sq ft of space across 14 floors. Letting progress at Myo,
which occupies four floors, was slow initially but we have seen good levels of
interest since the summer and expect occupancy to increase to at least 50% in
the second half of the year. We also now have leases on two of the Blank
Canvas floors agreed. At the adjacent 55 Old Broad Street, EC2, we retain
development optionality for the end of 2024.
The current vacancy rate in the office portfolio is 4.4%, compared with 3.1%
at March. The increase primarily relates to vacant space at Dashwood, and is
in line with our expectations. We anticipate the vacancy rate will fall by
March as we begin to let the space available.
We saw some increase in footfall across our central London retail assets over
the six months but it remained relatively low, down 54.1% in September
compared with 2019. Despite this, we are still seeing interest from a range of
occupiers in taking space. Zara opened at One New Change, EC4, and we have a
further four units in the centre under offer. In Victoria, we have seen good
demand from F&B and leisure operators where we are finalising four
lettings.
Vacancy in our central London retail assets was 11.9% at the end of September,
compared with 5.0% at March. Nearly all of the increase relates to the units
under the screen at Piccadilly Lights, where we agreed surrenders with two of
the three occupiers during the period. We are currently working on new
opportunities for this prime location, which will complement the new retail
space that will be created at the adjacent Lucent, W1, development.
On the screen at Piccadilly Lights, we have seen strong demand, with delayed
bookings from last year, as well as increased interest from a wide range of
new, high-end brands seeking to capitalise on the broad media coverage
advertising on the lights can bring. Year to date, over 60 brands have
committed to space on a short-term letting basis, demonstrating the appeal of
the Lights even in times of reduced footfall in Piccadilly Circus. If current
levels of activity continue in the second half, short term income from the
screen will be close to 2019 levels this financial year.
Cash collections from the office portfolio have continued to be strong, and
have improved significantly at our retail assets. September quarter
collections now stand at 100% for our office portfolio, and 83% for the
central London retail portfolio.
Investment activity
In August, we conditionally exchanged contracts to forward purchase Oval
Works, SE11, a standalone office space that will form part of Berkeley's Oval
Village, with completion due in autumn 2024. This purchase is in line with our
strategy to offer a broader range of propositions for office customers - rents
for prime conventional space in this area of London are expected to be
approximately 20-30% below prevailing levels in the City.
Development activity
We continue to make good progress on our committed development programme,
despite market-wide labour shortages and supply chain disruption. We are not
immune to the effects of these challenges, but we have limited overall cost
increases to 2% across our programme and project completion dates are all
within four months of our previously stated timings.
Work continues at the 100% pre-let 21 Moorfields, EC2, with practical
completion now scheduled for September 2022.
With take-up activity increasing we remain confident about the office market
we are delivering speculative space into. We expect pre-let interest in our
three speculative schemes -- Lucent, W1, the Forge, SE1 and n2, SW1 - to
increase as they enter the last year of construction. We are already seeing a
good level of interest in pre-lets at these schemes as these milestones
approach with 250,000 sq ft of active interest.
We continue to focus on preserving optionality in our development pipeline. At
Timber Square, demolition will complete in the new year and we maintain
flexibility on when to commit to the next phase, allowing us to manage our
exposure to speculative development. At Portland House, SW1, we are refining
our plans for the development with a view to being ready to proceed during
2022. We remain on track to submit planning at Red Lion Court, SE1, by the end
of this financial year.
Regional retail
Our £1.7bn Regional retail portfolio comprises seven regional shopping
centres and five outlets. Across the rest of the portfolio we also hold other
retail assets within our Central London portfolio (£0.6bn) and our Subscale
portfolio (£0.4bn), which are generally subject to the same market trends as
described below.
The trends in the retail market we described at our annual results in May
continue to play out. Retail vacancy rates in the UK market remain high at
14.5% and we expect this market vacancy to increase further as a significant
amount of retail space becomes obsolete. This should strengthen the position
of higher quality retail destinations which provide attractive brand
propositions to their guests and the right space and environment to support
brand partners' omni-channel strategies.
We have seen strong post lockdown recovery across the retail market and nearly
all retail formats have benefitted to some extent from pent-up demand and the
ability to be able to shop in physical stores again. The trends are
encouraging and our portfolio is well-placed to benefit. The best performing
shopping centres are those that offer the most compelling mix of places to
shop, eat and play. The outlet model is one of the strongest retail formats
and has demonstrated its appeal over the last six months with a strong
recovery in sales performance. Retail parks have shown their continued
popularity with shoppers, with those focused around home and leisure retail
performing the most strongly.
Leasing and operational activity
In line with the recovery in the retail market, there has been a significant
increase in leasing activity across all our retail assets over the last six
months. 181 lettings were completed or are in solicitors' hands with headline
rents 3.3% ahead of ERVs. Some of these leases are shorter than previous
deals, and a larger proportion of the leases have a turnover element, but this
activity provides support for the view that rents are approaching sustainable
levels. In light of the greater flexibility within these leases, incentives
are typically lower as a result.
Almost 60% of our retail leases now include a turnover element, although this
component still comprises less than 10% of our rental income from these assets
on a net basis after fixed elements are reflected. This supports our brand
partners but also provides us with access to trading data which can provide
valuable insights into how to evolve our space to best meet the needs of our
brand partners and guests.
Like-for-like vacancy at our shopping centres and outlets improved over the
period and is now 7.5%, down from 8.8% at 31 March 2021. Units in
administration stand at 2.8% (31 March 2021: 5.4%). Insolvency events were
extremely low in the period, with just two retailers entering into
CVA/restructuring plans. However, the lifting of the rent collection
moratorium in March 2022 may impact the market. A relatively small number of
retailers continue to withhold rental payments, with rent collection improving
quarter on quarter this year. We have now collected 92% of Regional retail
rents due on 29 September.
The footfall at our centres has increased since the easing of lockdown
measures but has not yet returned to pre-Covid levels. For the first six
months of the year, footfall at our shopping centres was 28.6% below 2019 and
in our outlets it was 26.2% below. In the month of September, footfall was
18.6% below 2019 at both our shopping centres and outlets. Our sales data
shows that when guests visit a centre, they are more likely to make a
purchase. Like-for-like sales in our shopping centres were 3.6% below 2019 for
the first six months of the year, and in outlets like-for-like sales were 7.5%
higher. Again, recent performance has been stronger - in September
like-for-like sales in our shopping centres were 0.9% above 2019 levels and in
outlets, like-for-like sales were 8.7% higher.
The bounce back in consumer activity has resulted in many occupiers having the
confidence to take new space, and there are some clear trends emerging in the
leasing market.
We continue to see strong appetite from the major retailers to make sure they
have the right space in the right locations. Over the last 18 months we have
successfully concluded deals with Zara in four locations, and their footprint
across our portfolio is now 210,000 sq ft. The success of these stores is
enabling us to have more in-depth conversations with Inditex about other
brands in their line-up and potential expansion across our portfolio. Other
examples of major retailers seeking to expand include Nike at Gunwharf Quays
and M&S at White Rose, Leeds, where they will open a new flagship store
for the north of England in the space vacated by Debenhams.
With mid-sized retailers, we see a desire to take space in the locations that
work for them, and with rent at the right level. In our shopping centres we
have let space to Space NK at Trinity Leeds, Pandora at White Rose, Leeds and
Nespresso have opened their first new global concept store at Bluewater. The
majority of these deals have been agreed broadly in line with March ERVs. We
have also seen good traction with mid-sized occupiers across our outlet
portfolio; where we relocate or introduce new brands into units that have
previously had weaker trading performance. We have secured lettings with Kids
Around at Braintree Village and Luke 1977 at Gunwharf Quays, while Whittards
of Chelsea opened their second store in the outlet portfolio at Clarks
Village. The majority of these deals have been agreed on terms ahead of ERV.
We also continue to see digitally-native retailers, big and small, seeking to
take space in our centres as they develop their strategies to include physical
retail. Amazon opened its first Amazon 4-star store in the UK at Bluewater in
October. The 3,500 sq ft store in Bluewater offers a curated range of products
rated 4 stars and above, or trending on Amazon.co.uk. Other digitally native
brands expanding in the period include the Crep Collection Club, the trend-led
sneaker specialists, and Vanilla, the accessible fashion concept brand, both
also taking space at Bluewater. The majority of these deals have been agreed
on terms in line with March ERVs.
Leisure and food and beverage continue to be essential elements of a
compelling offer in our centres. Gravity opened at Southside in August,
taking the space vacated by Debenhams, and has been trading ahead of
expectations. We have seen the knock-on effect of increased footfall and sales
at the centre since opening, as well as a positive impact on leasing activity,
with offers received from a range of occupiers for the surrounding units. At
Bluewater, we secured a letting with Big Easy, the barbeque and lobster
restaurant and bar brand, in what will be Big Easy's first location outside
London when it opens in November. As we develop our plans for each of our
shopping centres, we constantly evaluate the balance between retail and other
uses to ensure they offer the best experience for our guests and trading
environment for our brand partners.
Urban opportunities
Our Urban opportunities portfolio comprises £0.4bn of urban assets of 1.8
million sq ft, with redevelopment potential to extend to a gross internal area
of over 8.6 million sq ft of mixed-use space. The current assets are primarily
retail focused assets that are no longer fit for purpose and offer potential
for multi-phase mixed-use urban neighbourhoods that will transform the built
environment. These urban development projects can offer a compelling blend of
income, development upside and rental growth throughout their lives, and
development can be phased, enabling risk and capital investment to be spread
over the life of the projects.
At O2, Finchley Road, we launched the final stage of public consultation on
our proposals for the site. We remain on track to submit the formal planning
application by the end of the financial year. The current proposals are for
the creation of a new, pedestrianised, sustainable neighbourhood which will
include: around 1,860 new homes for sale and rent, with a target of 35%
affordable homes; public open space representing 50% of the site; new shops
and leisure spaces; and new community facilities such as a community centre
and a health centre.
At Lewisham shopping centre, public consultation begins this month. We expect
to submit our planning submission in the second half of 2022. Our plans entail
a mixed-use scheme including a significant quantum of new homes, together with
offices and retail spaces. We have made further progress on site assembly with
the purchase of a 46,000 sq ft site on the high street, adding to our nine
acre site ownership. With Lewisham selected as the London Borough of Culture
for 2022, we continue to work closely with the local council, activating the
existing shopping centre, while designing the master plan details for the
longer-term sustainable regeneration of the site.
The purchase of a 75% interest in MediaCity, Greater Manchester, for £426m
has accelerated our returns profile for our mixed-use urban neighbourhoods
strategy and is in line with our approach to invest in areas with long-term
growth potential. Phase one generates £31m of net operating income per annum
(100%) and over half the income has rent reviews linked to RPI, with floors
and caps guaranteeing future rental uplifts. Phase two comprises 15 acres with
outline planning consent for gross internal area of 1.6 million sq ft
including office and residential use, providing future development optionality
to invest further into the estate.
Subscale sectors
Our £1.3bn Subscale sectors portfolio comprises hotels, leisure parks and
retail parks, which we intend to divest over the medium-term.
Our £0.4bn of retail parks delivered a valuation surplus of 15.6% in the
first six months with yields tightening by 104 bps. In line with our strategy,
we took advantage of the strength of this market to dispose of two retail
parks for a headline price of £53m, 12% ahead of March book value. We have
eight parks remaining in our portfolio and will recycle our capital out of
these assets into value-creating opportunities over the next couple of years.
Our £0.5bn leisure assets delivered a valuation surplus of 4.2% and are
well-placed to benefit from the ongoing consumer-led recovery. With strong
customer demand for experience and leisure-based activity, we are seeing good
interest from a number of occupiers in renewing leases and extending terms. We
completed 40 lettings in our Leisure assets, 7.1% ahead of ERV including
renewals with SnoZone at Xscape Yorkshire for 20 years and Tenpin at Parrswood
for 15 years. The cinema sector has also seen a recovery in attendance with
the premiere of the new James Bond film in September.
All of our Accor hotels are now fully operational. Recovery in this market has
been stronger than we were anticipating with occupancy for September at 82.5%
of pre-Covid levels. This recovery reflects the increase in travel for both
business and leisure purposes over the last six months. The 22 hotels were
valued at £0.4bn at 30 September which was largely unchanged from 31 March
2021.
Principal risks and uncertainties
The principal risks of the business are set out on pages 71-77 of the 2021
Annual Report that was published in May. The Board has reviewed the principal
risks again and concluded that they have not changed since the year end
report, though the context for many has evolved as lockdown restrictions have
eased and the implications of Brexit have become clearer. Disruption in the
London office and retail and hospitality markets, accelerated by
Covid-19-related lockdowns, remain our highest rated risks. This positioning
reflects the continued uncertainty around demand for office and retail space.
The ongoing impact of the pandemic and supply chain challenges coupled with
staffing shortages in some sectors creates uncertainty in the short- to
medium-term. There is also uncertainty over infection rates going into the
autumn and winter seasons, which could lead to a partial reintroduction of
restrictions that adversely impact our business.
Our principal risks fall into eight categories: customer (London office);
customer (retail and hospitality); market cyclicality; people and skills;
major health, safety and security incident; information security and cyber
threat; public and Government response to climate change; and investment and
development strategy. A summary of our principal risks is as follows:
Customer: London Office - offices have performed relatively well in the past
six months. Our office space is generally a premium product, which has not
seen the same devaluations as experienced by 'secondary office' space offered
by other businesses. Our tenants continue to pay rents and our portfolio teams
have had positive customer conversations relating to the demand for this space
which is well regarded in the market. There is still uncertainty around the
demand for office space and the ongoing impact of the hybrid working model
adopted by many organisations.
Customer: Retail & Hospitality - retail markets remain challenging due to
the pandemic. Despite high levels of footfall and sales in retail locations
following the easing of lockdown restrictions and the reopening of centres,
there is uncertainty as we move into winter. The resurgence of Covid-19 cases
along with supply chain challenges and staffing shortages in some sectors
gives more uncertainty in the short- to medium-term.
Investment and Development Strategy - the hybrid working model adopted by most
organisations further contributes to the uncertainty in demand of existing and
future office space. This, coupled with supply chain and inflationary
pressures, may impact our investment and development activity in the short- to
medium-term.
Market cyclicality - this risk remains high due to the ongoing impact of the
pandemic, increases in inflation and the potential for higher interest rates
in the medium-term. However, economic growth has exceeded expectations since
the end of lockdown due to pent up demand and a rebound in the employment
market.
Public and Government response to climate change - this is an important risk
that has two key elements. The first is that changing customer attitudes to
climate change response impact demand for our assets. Secondly, there is an
increasing risk to Landsec assets from climate change related weather events,
such as winter storms and flooding. This is a long-term risk and development
of our mitigation plans is progressing well and closely monitored.
Our three principal operational risks (people and skills; health, safety and
security; and information security and cyber) have all remained stable in the
six months since year end.
Statement of Directors' Responsibilities
Each of the Directors, whose names and functions appear below, confirm to the
best of their knowledge that the 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 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 2021 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 2021 that have materially affected, and any changes in the
related party transactions described in the 2021 Annual Report that could
materially affect, the financial position or performance of the enterprise
during that period.
The Directors of Land Securities Group PLC as at the date of this announcement
are as set out below:
¾ Cressida Hogg, Chairman*
¾ Mark Allan, Chief Executive
¾ Vanessa Simms, Chief Financial Officer
¾ Colette O'Shea, Chief Operating Officer
¾ Edward Bonham Carter, Senior Independent Director*
¾ Nicholas Cadbury*
¾ Madeleine Cosgrave*
¾ Christophe Evain*
¾ Manjiry Tamhane*
*Non-executive Directors
A list of the current Directors is 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 year financial report for the six months ended 30
September 2021 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 1 to
17. We have read the other information contained in the half year 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 year
financial report for the six months ended 30 September 2021 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 and Ireland) 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board. 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 will be
prepared in accordance with UK-adopted international accounting standards. The
condensed set of financial statements included in this half year financial
report has been prepared in accordance with UK-adopted International
Accounting Standard 34, 'Interim Financial Reporting'.
Responsibilities of the directors
The directors are responsible for preparing the half year financial report in
accordance with the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Auditor's Responsibilities for the review of the financial information
In reviewing the half year report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the half
year financial report. Our conclusion is 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 and
Ireland) 'Review of Interim Financial Information Performed by the Independent
Auditor of the Entity' issued by the Auditing Practices Board. 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
15 November 2021
Financial statements
Unaudited income statement Six months ended Six months ended
30 September 2021
30 September 2020
EPRA earnings Capital and other items Total EPRA earnings Capital and other items Total
Notes £m £m £m £m £m £m
Revenue 5 314 1 315 327 - 327
Costs - movement in bad and doubtful debts provisions 6 7 - 7 (77) - (77)
Costs - other 6 (124) (1) (125) (105) - (105)
197 - 197 145 - 145
Share of post-tax profit/(loss) from joint ventures 12 12 (13) (1) 1 (124) (123)
Profit on disposal of investment properties - 6 6 - 2 2
Net surplus/(deficit) on revaluation of investment properties 10 - 94 94 - (824) (824)
Gain on modification of finance leases - 6 6 - - -
Operating profit/(loss) 209 93 302 146 (946) (800)
Finance income 7 4 2 6 8 1 9
Finance expense 7 (33) - (33) (39) (5) (44)
Profit/(loss) before tax 180 95 275 115 (950) (835)
Taxation - - - - - -
Profit/(loss) attributable to shareholders 180 95 275 115 (950) (835)
Profit/(loss) per share attributable to shareholders:
Basic earnings/(loss) per share 4 37.2p (112.8)p
Diluted earnings/(loss) per share 4 37.1p (112.8)p
Unaudited statement of comprehensive income Six months ended Six months ended
30 September 2021
30 September 2020
Total Total
£m £m
Profit/(loss) attributable to shareholders 275 (835)
Items that will not be subsequently reclassified to the income statement:
Movement in the fair value of other investments (2) (1)
Net re-measurement gain/(loss) on defined benefit pension scheme 1 (11)
Deferred tax (charge)/credit on defined benefit pension scheme (1) 2
Other comprehensive loss attributable to shareholders (2) (10)
Total comprehensive income/(loss) attributable to shareholders 273 (845)
Unaudited balance sheet 30 September 31 March
2021 2021
Notes £m £m
Non-current assets
Investment properties 10 9,822 9,607
Intangible assets 7 8
Net investment in finance leases 160 152
Investments in joint ventures 12 634 625
Trade and other receivables 152 170
Other non-current assets 24 22
Total non-current assets 10,799 10,584
Current assets
Trading properties 11 42 36
Trade and other receivables 365 354
Monies held in restricted accounts and deposits 9 10
Cash and cash equivalents 26 -
Other current assets 14 6
Total current assets 456 406
Total assets 11,255 10,990
Current liabilities
Borrowings 14 (779) (906)
Trade and other payables (230) (252)
Other current liabilities (13) (7)
Total current liabilities (1,022) (1,165)
Non-current liabilities
Borrowings 14 (2,802) (2,610)
Trade and other payables (3) (1)
Other non-current liabilities (9) (2)
Total non-current liabilities (2,814) (2,613)
Total liabilities (3,836) (3,778)
Net assets 7,419 7,212
Equity
Capital and reserves attributable to shareholders
Ordinary shares 80 80
Share premium 317 317
Other reserves 6 28
Retained earnings 7,016 6,787
Total equity 7,419 7,212
The financial statements on pages 31 to 49 were approved by the Board of
Directors on 15 November 2021 and were signed on its behalf by:
M C Allan V K Simms
Directors
Unaudited statement of changes in equity Attributable to shareholders
Ordinary shares Share premium Other reserves Retained earnings Total
equity
£m £m £m £m £m
At 1 April 2020 80 317 27 8,326 8,750
Total comprehensive loss for the financial period - - - (845) (845)
Transactions with shareholders:
Share-based payments - - 2 - 2
Acquisition of own shares - - (3) - (3)
Total transactions with shareholders - - (1) - (1)
At 30 September 2020 80 317 26 7,481 7,904
Total comprehensive loss for the financial period - - - (561) (561)
Transactions with shareholders:
Share-based payments - - 2 - 2
Dividends paid to shareholders - - - (133) (133)
Total transactions with shareholders - - 2 (133) (131)
At 31 March 2021 80 317 28 6,787 7,212
Total comprehensive income for the financial period - - - 273 273
Transactions with shareholders:
Share-based payments - - (1) 1 -
Dividends paid to shareholders - - - (66) (66)
Transfer of treasury shares - - (21) 21 -
Total transactions with shareholders - - (22) (44) (66)
At 30 September 2021 80 317 6 7,016 7,419
Unaudited statement of cash flows Six months ended
30 September
2021 2020
Notes £m £m
Cash flows from operating activities
Net cash generated from operations 9 202 133
Interest paid (46) (47)
Interest received 7 -
Rents paid (4) (3)
Other operating cash flows (1) 1
Net cash inflow from operating activities 158 84
Cash flows from investing activities
Investment property development expenditure (127) (77)
Other investment property related expenditure (33) (20)
Acquisition of investment properties - (8)
Disposal of investment properties 52 -
Cash distributions from joint ventures 12 2 7
Other investing cash flows (1) (2)
Net cash outflow from investing activities (107) (100)
Cash flows from financing activities
Proceeds from new borrowings (net of finance fees) 14 192 102
Repayment of borrowings 14 (142) (1,468)
Net cash (outflow)/inflow from derivative financial instruments (1) 38
Dividends paid to shareholders 8 (75) -
Decrease in monies held in restricted accounts and deposits 1 -
Other financing cash flows - (3)
Net cash outflow from financing activities (25) (1,331)
Increase/(decrease) in cash and cash equivalents for the period 26 (1,347)
Cash and cash equivalents at the beginning of the period - 1,345
Cash and cash equivalents/(bank overdraft) at the end of the period 26 (2)
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 2021 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).
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 2021, prepared in
accordance with international accounting standards in conformity with the
Companies Act 2006 and in accordance with IFRSs and IFRICs adopted pursuant to
Regulation (EC) No 1606/2002 as it applied in the European Union, were
approved by the Board of Directors on 17 May 2021 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 annual financial statements for years ending after 31 March 2021 will be
prepared in accordance with UK-adopted international accounting standards. 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 2021.
This condensed consolidated interim financial information was approved for
issue by the Directors on 15 November 2021.
Going concern
While the impact of Covid-19 on the Group has reduced in the six months ended
30 September 2021, we are still in a period of recovery and therefore the
Directors have continued to place additional focus on the appropriateness of
adopting the going concern assumption in preparing the financial statements.
The Group's going concern assessment considers changes in the Group's
principal risks (see page 28) and is dependent on a number of factors,
including our financial performance and continued access to borrowing
facilities. Access to our borrowing facilities is 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 a cash flow model which considers the impact of pessimistic
assumptions on the Group's operating environment (the 'Viability scenario').
This model reflects unfavourable macro-economic conditions, a deterioration in
our ability to collect rent and service charge from our customers and removes
uncommitted acquisitions, disposals and developments. The acquisition of
MediaCity, on 2 November 2021, and the proposed all cash offer for U and I
Group PLC, announced on 1 November 2021, remain in the model as committed
acquisitions. We also assume that we are unable to raise any new finance over
this period.
The Group's key metrics from the Viability scenario as at the end of the going
concern assessment period, which covers the 13 months to 31 December 2022, are
shown below alongside the actual position at 30 September 2021.
Key metrics 30 September 2021 31 March 2021
Latest Viability scenario
Viability scenario
30 September 2021 31 December 2022 31 December 2022
Security Group LTV 32.4% 40.9% 37.1%
Adjusted net debt £3,505m £4,780m £3,435m
EPRA Net Tangible Assets £7,510m £7,230m £6,245m
Available financial headroom £1,600m £489m £1,653m
In our Viability 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 at least 13 months from the date of authorisation of
these financial statements. The value of our assets would need to fall from 30
September 2021 values by a further 36% for LTV to reach 65%. The Directors
consider the likelihood of this occurring over the going concern assessment
period to be remote.
The Security Group requires earnings of at least £81m in the full year ending
30 September 2022 for interest cover to remain above 1.45x in the Viability
scenario, which would ensure compliance with the Group's covenant through to
the end of the going concern assessment period. Security Group earnings in the
six months to 30 September 2021 are already above the level required to meet
the interest cover covenant for the year ending 31 March 2022. Therefore, the
Directors do not anticipate a reduction in Security Group earnings over the
period ending 31 December 2022 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, 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 these
financial statements for the period ended 30 September 2021.
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, 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.
EPRA earnings is the Group's measure of the underlying pre-tax profit of the
property rental business. EPRA earnings has replaced revenue profit as the
Group's primary measure of underlying performance in the period ended 30
September 2021 to align with industry standard. Adjusted earnings is also no
longer reported. There were no differences between these three measures at 30
September 2020 and 2021. It excludes all items of a capital nature, such as
valuation movements and profits and losses on the disposal of investment
properties, as well as exceptional items. The Group believes that EPRA
earnings provides additional understanding of the Group's operational
performance to shareholders and other stakeholder groups. A full definition of
EPRA earnings is given in the Glossary. The components of EPRA earnings are
presented on a proportionate basis in note 3. EPRA earnings is an alternative
performance measure.
2. Significant accounting policies
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 2021, 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.
Significant accounting estimate - Impairment of trade receivables
As set out in the Group's annual financial statements for the year ended 31
March 2021, the Group's assessment of expected credit losses is inherently
subjective due to the forward-looking nature of the assessments. At 30
September 2021, trade receivable balances have decreased as the Group's
customers have begun to recover from the impact of Covid-19 and resumed paying
their rent and service charge. However, the Government's ongoing rent
collections moratorium means higher balances than usual remain outstanding at
the end of the period. Provisions for expected credit losses have decreased,
with a release of £7m recognised in the income statement in the period.
The Group's approach to determining expected credit losses remains consistent
with that described in the annual financial statements for the year ended 31
March 2021 and assessments continue to be made on a customer by customer
basis. As such, any changes in individual customer credit ratings, payment
behaviours, actual or expected insolvency filings or company voluntary
arrangements, as well as any agreements reached in allocating our customer
support fund, could result in a change in the appropriate level of
provisioning. A 10% increase/decrease in the provisions against amounts
receivable by the Group and its joint ventures in the period would result in a
decrease/increase in EPRA earnings of £10m and an equivalent
reduction/increase in the Group's profit after tax.
3. Segmental information
The Group's operations are managed across four operating segments, being
Central London, Regional retail, Urban opportunities and Subscale sectors.
The Central London segment includes all assets geographically located within
central London. Regional retail includes all regional shopping centres and
shops outside London and our outlets. The Urban opportunities 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 after 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, 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, on a pooled basis. Individual joint ventures 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. A reconciliation from the Group income statement to the information
presented in the segmental information note is included in table 25.
Six months ended Six months ended
30 September 2021
30 September 2020
EPRA earnings Central London Regional retail Urban opps Subscale sectors Total Central London Regional retail Urban Subscale sectors Total
opps
£m £m £m £m £m £m £m £m £m £m
Rental income 146 77 17 42 282 154 84 13 42 293
Finance lease interest 4 - - 1 5 4 - - - 4
Gross rental income (before rents payable) 150 77 17 43 287 158 84 13 42 297
Rents payable(1) (2) (3) - - (5) (2) (2) - - (4)
Gross rental income (after rents payable) 148 74 17 43 282 156 82 13 42 293
Service charge income 20 19 2 - 41 20 18 3 - 41
Service charge expense (20) (22) (3) (2) (47) (20) (20) (3) - (43)
Net service charge expense - (3) (1) (2) (6) - (2) - - (2)
Other property related income 6 6 1 1 14 10 5 1 1 17
Direct property expenditure (15) (15) (4) (5) (39) (11) (12) (3) (4) (30)
Movement in bad and doubtful debts provisions (2) 5 1 (1) 3 (8) (44) (6) (29) (87)
Segment net rental income 137 67 14 36 254 147 29 5 10 191
Other income 3 1
Administrative expense (41) (35)
Depreciation (3) (3)
EPRA earnings before interest 213 154
Finance income 4 8
Finance expense (33) (39)
Joint venture net finance expense (4) (8)
EPRA earnings 180 115
1. Included within rents payable is lease interest payable of £2m (2020:
£2m) for the Central London segment.
Reconciliation of EPRA earnings to profit/(loss) before tax Six months ended Six months ended
30 September 2021
30 September 2020
Total Total
£m £m
EPRA earnings 180 115
Capital and other items
Valuation and profit on disposals
Net surplus/(deficit) on revaluation of investment properties 81 (945)
Gain on modification of finance leases 6 -
Profit on disposal of investment properties 6 -
Loss on disposal of trading properties - (1)
93 (946)
Net finance income/(expense) (excluded from EPRA earnings)
Fair value movement on interest-rate swaps 2 (5)
Other net finance income - 1
2 (4)
Profit/(loss) before tax 275 (835)
4. Performance measures
In the tables below, we present earnings per share and net assets per share
calculated in accordance with IFRS, 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 business return.
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 2021
30 September 2020
Profit for the year EPRA earnings Loss for the year EPRA earnings
£m £m £m £m
Profit/(loss) attributable to shareholders 275 275 (835) (835)
Valuation and profit on disposals - (93) - 946
Net finance (income)/expense (excluded from EPRA earnings) - (2) - 4
Profit/(loss) used in per share calculation 275 180 (835) 115
IFRS EPRA IFRS EPRA
Basic earnings/(loss) per share 37.2p 24.3p (112.8)p 15.5p
Diluted earnings/(loss) per share(1) 37.1p 24.3p (112.8)p 15.5p
1. In the period ended 30 September 2020, share options are excluded from the
weighted average diluted number of shares when calculating IFRS diluted loss
per share because they are not dilutive.
Net assets per share 30 September 2021 31 March 2021
Net assets EPRA NDV EPRA NTA Net assets EPRA NDV EPRA NTA
£m £m £m £m £m £m
Net assets attributable to shareholders 7,419 7,419 7,419 7,212 7,212 7,212
Excess of fair value over net investment in finance leases book value - 99 99 - 93 93
Deferred tax liability on intangible asset - - 1 - - 1
Goodwill on deferred tax liability - (1) (1) - (1) (1)
Other intangible asset - - (2) - - (2)
Fair value of interest-rate swaps - - (6) - - (3)
Excess of fair value of debt over book value (note 14) - (266) - - (244) -
Net assets used in per share calculation 7,419 7,251 7,510 7,212 7,060 7,300
IFRS EPRA NDV EPRA NTA IFRS EPRA NDV EPRA NTA
Net assets per share 1,003p n/a n/a 975p n/a n/a
Diluted net assets per share 1,000p 977p 1,012p 973p 953p 985p
Number of shares Six months ended 30 September 2021 Six months ended 31 March 2021
30 September 2021
30 September 2020
Weighted average
Weighted average
million million million million
Ordinary shares 751 751 751 751
Treasury shares (7) (7) (10) (10)
Own shares (4) (4) (1) (1)
Number of shares - basic 740 740 740 740
Dilutive effect of share options 1 2 1 1
Number of shares - diluted 741 742 741 741
Total business return 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 business return based on EPRA NTA Six months ended Six months ended
30 September 2021
30 September 2020
pence pence
Increase/(decrease) in EPRA NTA per share 27 (113)
Dividend paid per share in the period (note 8) 9 -
Total return (a) 36 (113)
EPRA NTA per share at the beginning of the period (b) 985 1,192
Total business return (a/b) 3.7% -9.5%
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
and income from long-term development contracts which are presented in the
'Capital and other items' column.
Six months ended Six months ended
30 September 2021
30 September 2020
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) 269 - 269 284 - 284
Adjustment for lease incentives (11) - (11) (16) - (16)
Rental income 258 - 258 268 - 268
Service charge income 36 - 36 38 - 38
Other property related income 12 - 12 16 - 16
Finance lease interest 5 - 5 4 - 4
Long-term development contract income - 1 1 - - -
Other income 3 - 3 1 - 1
Revenue per the income statement 314 1 315 327 - 327
The following table reconciles revenue per the income statement to the
individual components of revenue presented in note 3.
Six months ended Six months ended
30 September 2021
30 September 2020
Group Joint ventures Total Group Joint Total
ventures
£m £m £m £m £m £m
Rental income 258 24 282 268 25 293
Service charge income 36 5 41 38 3 41
Other property related income 12 2 14 16 1 17
Trading property sales proceeds - - - - 4 4
Finance lease interest 5 - 5 4 - 4
Long-term development contract income 1 - 1 - 1 1
Other income 3 - 3 1 - 1
Revenue in the segmental information note 315 31 346 327 34 361
6. Costs
All costs are classified within the 'EPRA earnings' column of the income
statement, with the exception of the cost of sale of trading properties, costs
arising on long-term development contracts and amortisation and impairments of
intangible assets arising on business combinations which are presented in the
'Capital and other items' column.
Six months ended Six months ended
30 September 2021
30 September 2020
EPRA earnings Capital and other items Total EPRA earnings Capital and other items Total
£m £m £m £m £m £m
Rents payable 4 - 4 3 - 3
Service charge expense 42 - 42 39 - 39
Direct property expenditure 34 - 34 25 - 25
Administrative expenses 41 - 41 35 - 35
Depreciation 3 - 3 3 - 3
Long-term development contract expenditure - 1 1 - - -
Costs - other per the income statement 124 1 125 105 - 105
Movement in bad and doubtful debts provisions - rent (3) - (3) 67 - 67
Movement in bad and doubtful debts provisions - service charge (4) - (4) 10 - 10
Total costs per the income statement 117 1 118 182 - 182
The following table reconciles costs per the income statement to the
individual components of costs presented in note 3.
2021 2020
Group Joint ventures Total Group Joint Total
ventures
£m £m £m £m £m £m
Rents payable 4 1 5 3 1 4
Service charge expense 42 5 47 39 4 43
Direct property expenditure 34 5 39 25 5 30
Administrative expenses 41 - 41 35 - 35
Depreciation 3 - 3 3 - 3
Cost of trading property disposals - - - - 5 5
Long-term development contract expenditure 1 - 1 - 1 1
Movement in bad and doubtful debts provisions - rent (3) 4 1 67 8 75
Movement in bad and doubtful debts provisions - service charge (4) - (4) 10 2 12
Costs in the segmental information note 118 15 133 182 26 208
The Group's costs include employee costs for the period of £33m (2020:
£30m), of which £3m (2020: £2m) is within service charge expense and £30m
(2020: £28m) is within administrative expenses.
7. Net finance expense
Six months ended Six months ended
30 September 2021
30 September 2020
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 4 - 4 8 - 8
Fair value movement on interest-rate swaps - 2 2 - - -
Fair value movement on other derivatives - - - - 1 1
4 2 6 8 1 9
Finance expense
Bond and debenture debt (33) - (33) (33) - (33)
Bank and other short-term borrowings (7) - (7) (11) - (11)
Fair value movement on interest-rate swaps - - - - (5) (5)
(40) - (40) (44) (5) (49)
Interest capitalised in relation to properties under development 7 - 7 5 - 5
(33) - (33) (39) (5) (44)
Net finance expense (29) 2 (27) (31) (4) (35)
Joint venture net finance expense (4) (8)
Net finance expense included in EPRA earnings (33) (39)
Lease interest payable of £2m (2020: £2m) is included within rents payable
as detailed in note 3.
8. Dividends
Dividends paid Six months ended 30 September
Pence per share 2021 2020
Payment date PID Non-PID Total £m £m
For the year ended 31 March 2020:
Third interim - - - - -
Final - - - - -
For the year ended 31 March 2021:
Final 23 July 2021 9.00 - 9.00 66
Gross dividends 66 -
Dividends in the statement of changes in equity 66 -
Timing difference on payment of withholding tax 9 -
Dividends in the statement of cash flows 75 -
The third interim dividend for the year ended 31 March 2021 was paid earlier
than usual, on 30 March 2021. Therefore, only the 2021 final dividend was paid
during the six months ended 30 September 2021. On 8 October 2021, the Company
paid a first interim dividend in respect of the current financial year of 7.0p
per ordinary share, wholly as a Property Income Distribution (PID),
representing £52m in total (2020: £nil).
The Board has declared a second interim dividend of 8.5p per ordinary share to
be payable wholly as a PID (2020: 12.0p which represented a dividend for the
first two quarters of the financial year to 31 March 2021) on 4 January 2022
to shareholders registered at the close of business on 26 November 2021.
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 9 December 2021.
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 2021
30 September 2020
£m £m
Operating profit/(loss) 302 (800)
Adjustments for:
Net (surplus)/deficit on revaluation of investment properties (94) 824
Gain on modification of finance leases (6) -
Profit on disposal of investment properties (6) (2)
Share of loss from joint ventures 1 123
Share-based payment charge 1 2
Rents payable 4 3
Depreciation 3 3
Other 1 1
206 154
Changes in working capital:
Increase in receivables (11) (24)
Increase in payables and provisions 7 3
Net cash generated from operations 202 133
Reconciliation to adjusted net cash inflow from operating activities Six months ended Six months ended
30 September 2021
30 September 2020
£m £m
Net cash inflow from operating activities 158 84
Joint ventures net cash inflow from operating activities 14 6
Trading property disposals - (4)
Other - 1
Adjusted net cash inflow from operating activities 172 87
10. Investment properties
Six months ended Six months ended Six months ended
30 September 2021
31 March 2021
30 September 2020
£m £m £m
Net book value at the beginning of the period 9,607 10,525 11,297
Acquisitions - 88 27
Net movement in head leases capitalised(1) (1) 1 -
Capital expenditure 163 116 105
Capitalised interest 7 6 5
Disposals (42) (505) (74)
Net surplus/(deficit) on revaluation of investment properties 94 (624) (824)
Transfers to trading properties (6) - (11)
Net book value at the end of the period 9,822 9,607 10,525
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.
The fair value of investment properties at 30 September 2021 was determined by
the Group's external valuer, CBRE. The valuations are in line with RICS
standards and were arrived at by reference to market evidence of transactions
for similar properties. The valuations performed by the independent valuer are
reviewed internally by senior management and relevant people within the
business. This includes discussions of the assumptions used by the external
valuer, as well as a review of the resulting valuations. Discussions about the
valuation process and results are held between senior management, the Audit
Committee and the external valuer on a half-yearly basis.
The market value of the Group's investment properties, as determined by the
Group's external valuer, 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 2021 31 March 2021
Group Joint Combined Portfolio Group Joint Combined
(excl. joint ventures)
(excl. joint ventures)
ventures(1)
ventures(1) Portfolio
£m £m £m £m £m £m
Market value 10,243 753 10,996 10,025 766 10,791
Less: properties treated as finance leases (261) - (261) (249) - (249)
Plus: head leases capitalised 60 9 69 61 9 70
Less: tenant lease incentives (220) (36) (256) (230) (40) (270)
Net book value 9,822 726 10,548 9,607 735 10,342
Net surplus/(deficit) on revaluation of investment properties 94 (13) 81 (1,448) (198) (1,646)
1. Refer to note 12 for a breakdown of this amount by entity.
11. Trading properties
Development land and infrastructure Residential Total
£m £m £m
At 1 April 2020 24 - 24
Transfers from investment properties - 11 11
At 30 September 2020 24 11 35
Capital expenditure - 1 1
At 31 March 2021 24 12 36
Transfer from investment properties - 6 6
At 30 September 2021 24 18 42
There were no cumulative impairment provisions in respect of either
Development land and infrastructure or Residential at 30 September 2021 and 31
March 2021.
12. Joint arrangements
The Group's principal joint arrangements are described below:
Joint ventures Percentage owned & voting rights Business Year end date(1) Joint venture partner
segment
Held at 30 September 2021
Nova, Victoria(2) 50% Central London 31 March Suntec Real Estate Investment Trust
Southside Limited Partnership 50% Regional retail 31 March Invesco Real Estate European Fund
St. David's Limited Partnership 50% Regional retail 31 March(3) Intu Properties plc(4)
Westgate Oxford Alliance Limited Partnership 50% Regional retail, Subscale sectors 31 March The Crown Estate Commissioners
Harvest(5)(6) 50% Subscale sectors 31 March J Sainsbury plc
The Ebbsfleet Limited Partnership(6) 50% Subscale sectors 31 March Ebbsfleet Property Limited
West India Quay Unit Trust(6) 50% Subscale sectors 31 March Schroder UK Real Estate Fund
Joint operation Ownership interest Business Year end date(1) Joint operation partners
segment
Held at 30 September 2021
Bluewater, Kent 30% Regional retail 31 March M&G Real Estate and GIC
Lendlease Retail LP
Royal London Asset Management
Aberdeen Standard Investments
1. 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 period and reporting date.
2. 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.
On 19 June 2020, the Group acquired Nova's interests in n2 and Nova Place from
the joint venture. On 18 December 2020, the Canada Pension Plan Investment
Fund sold their interest in Nova, Victoria to Suntec Real Estate Investment
Trust, but retained an interest in Victoria Circle Developer Limited which is
included in Other in subsequent tables from that date.
3. On 22 September 2021, the year end date for St. David's Limited Partnership
was changed from 31 December to 31 March.
4. Intu Properties plc went into administration in June 2020 and its
subsidiary, our joint venture partner Intu the Hayes Limited, was subsequently
placed in receivership by its secured creditors in November 2020.
5. Harvest includes Harvest 2 Limited Partnership, Harvest Development
Management Limited, Harvest 2 Selly Oak Limited, Harvest 2 GP Limited and
Harvest GP Limited.
6. Included within Other in subsequent tables.
All of the Group's joint arrangements have their principal place of business
in the United Kingdom. All of the Group's joint arrangements own and operate
investment property, with the exception of The Ebbsfleet Limited Partnership
which is a holding company and Harvest which is engaged in long-term
development contracts. The activities of all the Group's joint arrangements
are therefore strategically important to the business activities of the Group.
All joint ventures 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 Six months ended 30 September 2021
Nova, Southside Limited Partnership St. David's Limited Partnership Westgate Oxford Alliance Partnership Other Total Total
Victoria
Comprehensive income statement 100% 100% 100% 100% 100% 100% Group share
£m £m £m £m £m £m £m
Revenue(1) 23 5 14 19 2 63 31
Gross rental income (after rents payable) 17 5 11 12 2 47 23
Net rental income 9 6 6 10 2 33 16
EPRA earnings before interest 8 6 5 10 2 31 16
Finance expense (4) (3) - - - (7) (4)
Net finance expense (4) (3) - - - (7) (4)
EPRA earnings 4 3 5 10 2 24 12
Capital and other items
Net (deficit)/surplus on revaluation of investment properties (4) (3) (14) (7) 1 (27) (13)
(Loss)/profit before tax - - (9) 3 3 (3) (1)
Post-tax (loss)/profit - - (9) 3 3 (3) (1)
Total comprehensive (loss)/income - - (9) 3 3 (3) (1)
50% 50% 50% 50% 50% 50%
Group share of (loss)/profit before tax - - (4) 1 2 (1)
Group share of post-tax (loss)/profit - - (4) 1 2 (1)
Group share of total comprehensive (loss)/income - - (4) 1 2 (1)
1. Revenue includes gross rental income (before rents payable), service charge
income, other property related income, trading properties disposal proceeds
and income from long-term development contracts.
Joint ventures Six months ended 30 September 2020
Nova, Southside Limited Partnership St. David's Limited Partnership Westgate Other Total Total
Victoria
Oxford
Alliance Partnership
Comprehensive income statement 100% 100% 100% 100% 100% 100% Group share
£m £m £m £m £m £m £m
Revenue(1) 29 5 16 16 3 69 34
Gross rental income (after rents payable) 18 5 12 11 2 48 24
Net rental income 16 1 1 1 - 19 9
EPRA earnings before interest 16 - - 1 - 17 9
Finance expense (13) (3) - - - (16) (8)
Net finance expense (13) (3) - - - (16) (8)
EPRA earnings 3 (3) - 1 - 1 1
Capital and other items
Net deficit on revaluation of investment properties (22) (38) (107) (67) (8) (242) (121)
Loss on disposal of investment properties (4) - - - - (4) (2)
Loss on disposal of trading properties (1) - - - - (1) (1)
Loss before tax (24) (41) (107) (66) (8) (246) (123)
Post-tax loss (24) (41) (107) (66) (8) (246) (123)
Total comprehensive loss (24) (41) (107) (66) (8) (246) (123)
50% 50% 50% 50% 50% 50%
Group share of loss before tax (12) (21) (53) (33) (4) (123)
Group share of post-tax loss (12) (21) (53) (33) (4) (123)
Group share of total comprehensive loss (12) (21) (53) (33) (4) (123)
1. Revenue includes gross rental income (before rents payable), service charge
income, other property related income, trading properties disposal proceeds
and income from long-term development contracts.
Joint ventures 30 September 2021
Nova, Victoria Southside Limited Partnership St. David's Limited Partnership Westgate Oxford Other Total Total
Alliance Partnership
Balance sheet 100% 100% 100% 100% 100% 100% Group share
£m £m £m £m £m £m £m
Investment properties(1) 796 131 241 228 57 1,453 726
Non-current assets 796 131 241 228 57 1,453 726
Cash and cash equivalents 33 4 18 19 4 78 39
Other current assets 61 9 13 15 8 106 53
Current assets 94 13 31 34 12 184 92
Total assets 890 144 272 262 69 1,637 818
Trade and other payables and provisions (23) (14) (10) (10) (4) (61) (31)
Current liabilities (23) (14) (10) (10) (4) (61) (31)
Non-current liabilities (154) (144) (23) - - (321) (160)
Non-current liabilities (154) (144) (23) - - (321) (160)
Total liabilities (177) (158) (33) (10) (4) (382) (191)
Net assets 713 (14) 239 252 65 1,255 627
Market value of investment properties(1) 848 132 231 238 58 1,507 753
Net cash 33 3 2 19 4 61 31
Joint ventures 31 March 2021
Nova, Victoria Southside Limited Partnership St. David's Limited Partnership Westgate Other Total Total
Oxford
Alliance Partnership
Balance sheet 100% 100% 100% 100% 100% 100% Group share
£m £m £m £m £m £m £m
Investment properties(1) 799 132 248 235 56 1,470 735
Non-current assets 799 132 248 235 56 1,470 735
Cash and cash equivalents 34 2 13 8 5 62 31
Other current assets 67 6 14 17 7 111 55
Current assets 101 8 27 25 12 173 86
Total assets 900 140 275 260 68 1,643 821
Trade and other payables and provisions (21) (10) (11) (10) (4) (56) (28)
Current liabilities (21) (10) (11) (10) (4) (56) (28)
Non-current liabilities (177) (144) (16) - - (337) (168)
Non-current liabilities (177) (144) (16) - - (337) (168)
Total liabilities (198) (154) (27) (10) (4) (393) (196)
Net assets 702 (14) 248 250 64 1,250 625
Market value of investment properties(1) 859 132 238 245 57 1,531 766
Net cash/(debt) 34 2 (3) 8 5 46 23
1. The difference between the book value and the market value of investment
properties is the amount recognised in respect of lease incentives, head
leases capitalised and properties treated as finance leases, where applicable.
Joint ventures Nova, Southside St. David's Limited Partnership Westgate Other Total
Limited Partnership
Victoria Oxford
Alliance Partnership
Net investment 50% 50% 50% 50% 50% Group share
£m £m £m £m £m £m
At 1 April 2020 365 25 211 187 36 824
Total comprehensive loss (12) (21) (53) (33) (4) (123)
Non-cash contributions 8 - - - - 8
Cash distributions (7) - - - - (7)
At 30 September 2020 354 4 158 154 32 702
Total comprehensive (loss)/profit - (11) (34) (25) 1 (69)
Non-cash contributions 1 - - - - 1
Cash distributions (4) - - (4) (1) (9)
At 31 March 2021 351 (7) 124 125 32 625
Total comprehensive (loss)/profit - - (4) 1 2 (1)
Non-cash contributions 5 - - - - 5
Cash distributions - - - - (2) (2)
At 30 September 2021 356 (7) 120 126 32 627
Comprised of:
Non-current assets 356 - 120 126 32 634
Non-current liabilities - (7) - - - (7)
13. Capital structure
30 September 2021 31 March 2021
Group Joint ventures Combined Group Joint Combined
ventures
£m £m £m £m £m £m
Property portfolio
Market value of investment properties 10,243 753 10,996 10,025 766 10,791
Trading properties and long-term contracts 42 - 42 36 - 36
Total property portfolio (a) 10,285 753 11,038 10,061 766 10,827
Net debt
Borrowings 3,581 8 3,589 3,516 8 3,524
Monies held in restricted accounts and deposits (9) - (9) (10) - (10)
Cash and cash equivalents (26) (39) (65) - (31) (31)
Fair value of interest-rate swaps (6) - (6) (3) - (3)
Fair value of foreign exchange swaps and forwards (10) - (10) 6 - 6
Net debt (b) 3,530 (31) 3,499 3,509 (23) 3,486
Less: Fair value of interest-rate swaps 6 - 6 3 - 3
Adjusted net debt (c) 3,536 (31) 3,505 3,512 (23) 3,489
Adjusted total equity
Total equity (d) 7,419 - 7,419 7,212 - 7,212
Fair value of interest-rate swaps (6) - (6) (3) - (3)
Adjusted total equity (e) 7,413 - 7,413 7,209 - 7,209
Gearing (b/d) 47.6% 47.2% 48.7% 48.3%
Adjusted gearing (c/e) 47.7% 47.3% 48.7% 48.4%
Group LTV (c/a) 34.4% 31.8% 34.9% 32.2%
Security Group LTV 32.4% 32.7%
Weighted average cost of debt(1) 2.1% 2.3% 1.9% 2.3%
1. The weighted average cost of debt is now calculated based on
historical average rates for the period, rather than the spot rates. The
weighted average cost of debt for 31 March 2021 has been restated to reflect
this change in methodology.
14. Borrowings
30 September 2021 31 March 2021
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 LIBOR + margin 100 100 100 84 84 84
Euro Unsecured Floating LIBOR + margin 534 534 534 640 640 640
US Dollar Unsecured Floating LIBOR + margin 145 145 145 182 182 182
Total current borrowings 779 779 779 906 906 906
Non-current borrowings
Medium term notes (MTN)
A10 4.875% MTN due 2025 Secured Fixed 5.0 10 11 10 10 11 10
A12 1.974% MTN due 2026 Secured Fixed 2.0 400 409 400 400 410 399
A4 5.391% MTN due 2026 Secured Fixed 5.4 17 19 17 17 19 17
A5 5.391% MTN due 2027 Secured Fixed 5.4 87 98 86 87 100 86
A6 5.376% MTN due 2029 Secured Fixed 5.4 65 78 65 65 80 65
A16 2.375% MTN due 2029 Secured Fixed 2.5 350 367 348 350 367 348
A13 2.399% MTN due 2031 Secured Fixed 2.4 300 315 299 300 314 299
A7 5.396% MTN due 2032 Secured Fixed 5.4 77 107 77 77 107 77
A11 5.125% MTN due 2036 Secured Fixed 5.1 50 68 50 50 68 50
A14 2.625% MTN due 2039 Secured Fixed 2.6 500 534 494 500 524 494
A15 2.750% MTN due 2059 Secured Fixed 2.7 500 560 495 500 540 495
2,356 2,566 2,341 2,356 2,540 2,340
Syndicated and bilateral bank debt Secured Floating SONIA + margin(1) 401 401 401 209 209 209
Amounts payable under head leases Unsecured Fixed 4.6 60 101 60 61 105 61
Total non-current borrowings 2,817 3,068 2,802 2,626 2,854 2,610
Total borrowings 3,596 3,847 3,581 3,532 3,760 3,516
1. During the six month period ended 30 September 2021, the reference
rate on syndicated and bilateral bank debt transitioned from LIBOR to an
equivalent SONIA + credit adjustment spread.
Reconciliation of the movement in borrowings Six months ended Year ended
30 September 2021
31 March 2021
£m £m
At the beginning of the period 3,516 5,332
Proceeds from new borrowings 192 -
Repayment of borrowings (142) (1,755)
Redemption of MTNs - (12)
Foreign exchange movement on non-Sterling borrowings 15 (51)
Other - 2
At the end of the period 3,581 3,516
Reconciliation of movements in liabilities arising from financing activities Six months ended 30 September 2021
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 3,516 50 15 - - 3,581
Derivative financial instruments 3 (1) (15) (3) - (16)
3,519 49 - (3) - 3,565
Year ended 31 March 2021
Borrowings 5,332 (1,767) (51) - 2 3,516
Derivative financial instruments (36) (12) 51 - - 3
5,296 (1,779) - - 2 3,519
Medium term notes
The MTNs are secured on the fixed and floating pool of assets of the Security
Group. The Security Group includes investment properties, development
properties, the X-Leisure fund, and the Group's investment in Westgate Oxford
Alliance Limited Partnership, Nova, Victoria, St. David's Limited Partnership
and Southside Limited Partnership, in total valued at £10.9bn at 30 September
2021 (31 March 2021: £10.6bn). 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 LIBOR
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. The MTNs are listed on the Irish Stock Exchange
and their fair values are based on their respective market prices.
During the period, the Group did not purchase any MTNs (31 March 2021: £12m
of MTNs for a total premium of £3m).
Syndicated and bilateral bank debt Authorised Drawn Undrawn
Maturity as at 30 September 2021 30 Sept 31 March 2021 30 Sept 31 March 2021 30 Sept 31 March 2021
2021
2021
2021
£m £m £m £m £m £m
Syndicated debt 2026 2,490 2,490 401 209 2,089 2,281
Bilateral debt 2025-26 225 225 - - 225 225
2,715 2,715 401 209 2,314 2,506
All syndicated and bilateral facilities are committed and secured on the
assets of the Security Group. During the period ended 30 September 2021, the
amounts drawn under the Group's facilities increased by £192m.
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 at 30 September 2021 was £1,561m (31 March
2020: £1,600m).
Fair values
The fair value of the amounts payable under the Group's lease obligations,
using a discount rate of 2.3% (31 March 2021: 2.2%), is £101m (31 March 2021:
£105m). The fair value of the Group's net investment in tenant finance
leases, calculated by the Group's external valuer by applying a weighted
average equivalent yield of 4.6% (31 March 2021: 4.6%), is £261m (31 March
2021: £249m).
The fair values of any floating rate financial liabilities are assumed to be
equal to their nominal 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.
The fair value of the other investments is calculated by reference to the net
assets of the underlying entity. The valuation is not based on observable
market data and therefore the other investments are considered to fall within
Level 3.
15. Contingencies
The Group has contingent liabilities in respect of legal claims, tax queries,
guarantees and warranties arising in the ordinary course of business. It is
not anticipated that any material liabilities will arise from the contingent
liabilities.
16. 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.
17. Events after the reporting period
On 1 November 2021, the Group announced a recommended all cash offer for the
purchase of the entire ordinary share capital of U and I Group PLC for £190m.
On 2 November 2021, the Group acquired a 75% interest in MediaCity for a
headline price of £426m via the purchase of share capital in the holding
company, Peel Holdings (Media) Limited.
On 11 November 2021, contracts were exchanged to sell the Group's interests in
a wholly owned subsidiary, LS Harbour Exchange Limited for a headline price of
£197m.
Alternative performance measures
Table 15: 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, where the
definitions and reconciliations of these measures can be found and where
further discussion is included. The definitions of all APMs are included in
the Glossary and further discussion of these measures can be found in the
Financial review.
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 business return 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 disclosures
Table 16: EPRA net asset measures
EPRA net asset measures 30 September 2021
EPRA NRV EPRA NTA EPRA NDV
£m £m £m
Net assets attributable to shareholders 7,419 7,419 7,419
Excess of fair value over net investment in finance lease book value 99 99 99
Deferred tax liability on intangible asset 1 1 -
Goodwill on deferred tax liability (1) (1) (1)
Other intangible asset - (2) -
Fair value of interest-rate swaps (6) (6) -
Excess of fair value of debt over book value (note 14) - - (266)
Purchasers' costs(1) 722 - -
Net assets used in per share calculation 8,234 7,510 7,251
EPRA NRV EPRA NTA EPRA NDV
Diluted net assets per share 1,110p 1,012p 977p
31 March 2021
EPRA NRV EPRA NTA EPRA NDV
£m £m £m
Net assets attributable to shareholders 7,212 7,212 7,212
Excess of fair value over net investment in finance lease book value 93 93 93
Deferred tax liability on intangible asset 1 1 -
Goodwill on deferred tax liability (1) (1) (1)
Other intangible asset - (2) -
Fair value of interest-rate swaps (3) (3) -
Excess of fair value of debt over book value (note 14) - - (244)
Purchasers' costs(1) 628 - -
Net assets used in per share calculation 7,930 7,300 7,060
EPRA NRV EPRA NTA EPRA NDV
Diluted net assets per share 1,070p 985p 953p
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 17: EPRA performance measures
30 September 2021
Measure Notes Landsec EPRA
Definition for EPRA measure measure measure
EPRA earnings Recurring earnings from core operational activity 4 £180m £180m
EPRA earnings per share EPRA earnings per weighted number of ordinary shares 4 24.3p 24.3p
EPRA diluted earnings per share EPRA diluted earnings per weighted number of ordinary 4 24.3p 24.3p
shares
EPRA Net Tangible Assets (NTA) Net assets adjusted to exclude the fair value of interest-rate swaps, 4 £7,510m £7,510m
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 1,012p 1,012p
EPRA net disposal value (NDV) Net assets adjusted to exclude the fair value of debt and goodwill on deferred 4 £7,251m £7,251m
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 977p 977p
Table
Voids/vacancy rate ERV of vacant space as a % of ERV of Combined Portfolio excluding the 18 6.4% 6.4%
development programme(1)
Net initial yield (NIY) Annualised rental income less non-recoverable costs as a % of market value 4.8% 5.0%
plus assumed purchasers' costs(2)
Topped-up NIY NIY adjusted for rent free periods(2) 5.1% 5.2%
Cost ratio(3) Total costs as a percentage of gross rental income (including direct vacancy 24.2% 23.7%
costs)(3)
Total costs as a percentage of gross rental income (excluding direct vacancy n/a 19.7%
costs)(3)
1. Our measure reflects voids in our like-for-like portfolio only. The EPRA
measure reflects voids in the Combined Portfolio excluding only properties
under development.
2. Our NIY and Topped-up NIY relate to the Combined Portfolio, excluding
properties in the development programme that have not yet reached practical
completion, and are calculated by our external valuer. EPRA NIY and EPRA
Topped-up NIY calculations are consistent with ours but exclude only
properties currently under development. Topped-up NIY reflects adjustments of
£28m and £28m for rent free periods and other incentives for the Landsec
measure and EPRA measure, respectively.
3. The EPRA cost ratio is calculated based on gross rental income after rents
payable and excluding costs recovered through rents but not separately
invoiced of £3m, whereas our measure is based on gross rental income before
rents payable and costs recovered through rents but not separately invoiced.
We do not calculate a cost ratio excluding direct vacancy costs as we do not
consider this to be helpful. Provisions for bad and doubtful debts have been
excluded from our cost ratio.
Table 18: 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 2021
£m
ERV of vacant properties 40
ERV of Combined Portfolio excluding properties under development 620
EPRA vacancy rate (%) 6.4%
Table 19: Change in net rental income from the like-for-like portfolio (before
movement in bad and doubtful debt provisions)
30 September 30 September
2021 2020
Change
£m £m £m %
Central London 136 138 (2) -1.4
Regional retail 60 71 (11) -15.5
Urban opportunities 13 11 2 18.2
Subscale sectors 36 37 (1) -2.7
245 257 (12) -4.7
Table 20: Acquisitions, disposals and capital expenditure
Six months ended 30 September 2021 Six months ended 30 September 2020
Investment properties Group (excl. joint ventures) Joint ventures
£m £m Combined Portfolio Combined Portfolio
£m £m
Net book value at the beginning of the period 9,607 735 10,342 12,243
Acquisitions - - - 27
Net movement in head leases capitalised (1) - (1) -
Capital expenditure 163 4 167 106
Capitalised interest 7 - 7 5
Disposals (42) - (42) (89)
Net surplus/(deficit) on revaluation of investment properties 94 (13) 81 (945)
Transfers to trading properties (6) - (6) (11)
Net book value at the end of the period 9,822 726 10,548 11,336
Profit on disposal of investment properties 6 - 6 -
Trading properties £m £m £m £m
Net book value at the beginning of the period 36 - 36 27
Transfers from investment properties 6 - 6 11
Disposals - - - (3)
Net book value at the end of the period 42 - 42 35
Loss on disposal of trading properties - - - (1)
Acquisitions, development and other capital expenditure Investment Trading Combined Combined
properties(1) properties Portfolio Portfolio
£m £m £m £m
Acquisitions(2) - - - 27
Development capital expenditure(3) 127 - 127 85
Other capital expenditure 40 - 40 21
Capitalised interest 7 - 7 5
Acquisitions, development and other capital expenditure 174 - 174 138
Disposals £m £m
Net book value - investment property disposals 42 89
Net book value - trading property disposals - 3
Net book value - other net assets of investment property disposals 4 -
Profit on disposal - investment properties 6 -
Loss on disposal - trading properties - (1)
Total disposal proceeds 52 91
1. See EPRA analysis of capital expenditure table 21 for further
details.
2. Properties acquired in the period.
3. Development capital expenditure for investment properties comprises
expenditure on the development pipeline and completed developments.
Table 21: EPRA analysis of capital expenditure
Six months ended 30 September 2021
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 -
£m £m £m £m £m £m £m £m (Group share) Group
£m
£m
Central London
Offices - 127 2 9 - 11 7 145 - 145
London retail - - - 3 - 3 - 3 - 3
Other central London - - - 4 - 4 - 4 - 4
Total Central London - 127 2 16 - 18 7 152 - 152
Regional retail
Regional shopping centres - - - 7 1 8 - 8 4 4
Outlets - - - 7 - 7 - 7 - 7
Total Regional retail - - - 14 1 15 - 15 4 11
Urban opportunities - - - 4 - 4 - 4 - 4
Subscale sectors
Leisure - - - 1 - 1 - 1 - 1
Hotels - - - 1 - 1 - 1 - 1
Retail parks - - - 1 - 1 - 1 - 1
Total Subscale sectors - - - 3 - 3 - 3 - 3
Total capital expenditure - 127 2 37 1 40 7 174 4 170
Conversion from accrual to cash basis (3) - (3)
Total capital expenditure on a cash basis(4) 171 4 167
1. Investment properties acquired in the period.
2. Expenditure on the development pipeline and completed developments.
3. Capital expenditure where the lettable area increases by at least
10%.
4. Includes interest paid of £7m.
Other business analysis
Table 22: Top 12 occupiers at 30 September 2021
% of Group rent(1)
Central Government 6.2
Deloitte 6.1
Accor 2.6
Cineworld 2.1
Boots 1.8
Equinix 1.5
Taylor Wessing 1.5
Sainsbury's 1.4
M&S 1.2
H&M 1.1
Vue 1.1
Samsung 1.0
27.6
1. On a proportionate basis.
Table 23: Development pipeline and trading property development schemes at 30
September 2021
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
Developments approved or in progress
21 Moorfields, EC2 Office 100 564,000 100 675 38 Sep 2022 416 619(1)
The Forge, SE1 Office 100 139,000 - 75 10 Oct 2022 80 148
Retail 1,000
Lucent, W1 Office 100 111,000 - 125 13 Mar 2023 158 245
Retail 30,000
Residential 3,000
n2, SW1 Office 100 167,000 - 56 13 Jun 2023 73 207
Proposed developments
Timber Square, SE1 Office 100 365,000 n/a n/a n/a Mar 2024 n/a n/a
Retail 15,000
Portland House, SW1 Office 100 280,000 n/a n/a n/a Aug 2025 n/a n/a
Retail 15,000
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
Wardour Street, W1(2) Residential 100 5,000 8 100 Jun 2022 8 11
Castle Lane, SW1 Residential 100 52,000 89 99 Jan 2024 12 46
1. Includes estimated overage payable of £36m as at 30 September 2021.
2. Affordable housing component of the Lucent development.
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 2021. Trading property development schemes are excluded from the
development pipeline.
Total development cost
Refer to the Glossary for definition. Of the properties in the development
pipeline at 30 September 2021, the only property on which interest was
capitalised on the land cost was 21 Moorfields, EC2.
Net income/ERV
Net income/ERV represents headline annual rent on let units plus ERV at 30
September 2021 on unlet units, both after rents payable.
Table 24: Combined Portfolio analysis
Like-for-like segmental analysis
Market value(1) Valuation Rental income(1) Annualised rental income(2) Net estimated rental value(3)
movement(1)
30 September 2021 31 March 2021 Surplus/ (deficit) Surplus/ (deficit) 30 September 2021 30 September 2020 30 September 2021 31 March 2021 30 September 2021 31 March 2021
£m £m £m % £m £m £m £m £m £m
Central London
Offices 5,222 5,194 24 0.5% 116 120 227 234 270 266
London retail 584 623 (43) -6.9% 21 19 30 34 28 30
Other central London 426 420 2 0.5% 11 7 14 13 21 21
Total Central London 6,232 6,237 (17) -0.3% 148 146 271 281 319 317
Regional retail
Regional shopping centres 979 1,012 (42) -4.1% 51 61 94 92 88 90
Outlets 737 722 8 1.0% 26 23 57 39 60 61
Total Regional retail 1,716 1,734 (34) -2.0% 77 84 151 131 148 151
Urban opportunities 391 400 (14) -3.4% 17 13 31 30 32 32
Subscale sectors
Leisure 532 506 20 4.2% 22 22 42 42 42 42
Hotels 407 406 - -0.1% 6 2 14 4 25 25
Retail parks 405 351 54 15.6% 14 16 29 29 28 28
Total Subscale sectors 1,344 1,263 74 5.9% 42 40 85 75 95 95
Like-for-like portfolio(6) 9,683 9,634 9 0.1% 284 283 538 517 594 595
Proposed developments(1) 288 286 (17) -5.5% - - - 1 - -
Development programme(7) 904 713 91 11.0% - - - - 67 67
Acquisitions(8) 121 112 (2) -1.5% 2 - 5 4 13 13
Sales(9) - 46 - - 1 14 - 4 - 4
Combined Portfolio 10,996 10,791 81 0.8% 287 297 543 526 674 679
Properties treated as finance leases - - - - (5) (4)
Combined Portfolio 10,996 10,791 81 0.8% 282 293
Total portfolio analysis
Market value(1) Valuation Rental income(1) Annualised rental income(2) Net estimated rental value(3)
movement(1)
30 September 2021 31 March 2021 Surplus/ (deficit) Surplus/ (deficit) 30 September 2021 30 September 2020 30 September 2021 31 March 2021 30 September 2021 31 March 2021
£m £m £m % £m £m £m £m £m £m
Central London
Offices 6,500 6,268 97 1.6% 117 131 231 237 348 345
London retail 619 659 (44) -6.7% 22 20 31 36 30 31
Other central London 426 420 2 0.5% 11 7 14 13 21 21
Total Central London 7,545 7,347 55 0.8% 150 158 276 286 399 397
Regional retail
Regional shopping centres 979 1,041 (42) -4.1% 51 61 94 98 88 95
Outlets 737 722 8 1.0% 26 23 57 39 60 61
Total Regional retail 1,716 1,763 (34) -2.0% 77 84 151 137 148 156
Urban opportunities 391 372 (14) -3.4% 17 13 31 25 32 27
Subscale sectors
Leisure 532 506 20 4.2% 22 22 42 41 42 42
Hotels 407 406 - -0.1% 6 2 14 4 25 25
Retail parks 405 397 54 15.6% 15 18 29 33 28 32
Total Subscale sectors 1,344 1,309 74 5.9% 43 42 85 78 95 99
Combined Portfolio 10,996 10,791 81 0.8% 287 297 543 526 674 679
Properties treated as finance leases - - - - (5) (4)
Combined Portfolio 10,996 10,791 81 0.8% 282 293
Represented by:
Investment portfolio 10,243 10,025 94 1.0% 258 268 495 481 624 629
Share of joint ventures 753 766 (13) -1.8% 24 25 48 45 50 50
Combined Portfolio 10,996 10,791 81 0.8% 282 293 543 526 674 679
Analysis by asset use:
Offices 6,511 6,279 97 1.6% 119 131 231 238 352 349
Retail 3,076 3,136 (32) -1.0% 128 133 239 227 233 241
Leisure, hotels and other 1,409 1,376 16 1.2% 40 33 73 61 89 89
Combined Portfolio 10,996 10,791 81 0.8% 287 297 543 526 674 679
Table 24: Combined Portfolio analysis continued
Like-for-like segmental analysis
Net initial yield(4) Equivalent yield(5)
30 September 2021 31 March 2021 30 September 2021 31 March 2021
% % % %
Central London
Offices 4.1% 4.4% 4.6% 4.6%
London retail 4.4% 4.4% 4.6% 4.5%
Other central London 3.2% 2.6% 4.4% 4.4%
Total Central London 4.0% 4.3% 4.6% 4.6%
Regional retail
Regional shopping centres 7.6% 7.4% 7.5% 7.4%
Outlets 6.0% 5.3% 6.8% 6.8%
Total Regional retail 6.9% 6.5% 7.2% 7.3%
Urban opportunities 6.7% 7.0% 6.6% 6.5%
Subscale sectors
Leisure 6.4% 6.9% 7.5% 7.6%
Hotels 3.3% 3.3% 5.5% 5.5%
Retail parks 6.3% 7.4% 6.5% 7.5%
Total Subscale sectors 5.4% 5.9% 6.6% 6.9%
Like-for-like portfolio(6) 4.8% 5.0% 5.4% 5.5%
Proposed developments(1) - - n/a n/a
Development programme(7) - - 4.1% 4.3%
Acquisitions(8) 2.6% 2.4% 4.9% 5.0%
Sales(9) - 7.3% n/a n/a
Combined Portfolio 4.3% 4.5% 5.3% 5.4%
Total portfolio
analysis
Notes:
Net initial yield(4) 1. Refer to Glossary for definition.
30 September 2021 31 March 2021
% % 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
Offices 3.3% 3.7% commercialisation income are included on a net basis (after deduction for
London retail 4.2% 4.3% operational outgoings). Annualised rental income includes temporary lettings.
Other central London 3.2% 2.6%
Total Central London 3.4% 3.7% 3. Net estimated rental value is gross estimated rental value, as
Regional retail defined in the Glossary, after deducting expected rent payable.
Regional shopping centres 7.6% 7.9%
Outlets 6.0% 5.3% 4. Net initial yield - refer to Glossary for definition. This
Total Regional retail 6.9% 6.8% calculation includes all properties including those sites with no income.
Urban opportunities 6.7% 5.6%
Subscale sectors 5. Equivalent yield - refer to Glossary for definition. Proposed
Leisure 6.4% 6.9% developments are excluded from the calculation of equivalent yield on the
Hotels 3.3% 3.3% Combined Portfolio.
Retail parks 6.3% 7.4%
Total Subscale sectors 5.4% 5.9% 6. The like-for-like portfolio - refer to Glossary for definition.
Combined Portfolio 4.3% 4.5% Capital expenditure on refurbishments, acquisitions of head leases and similar
capital expenditure has been allocated to the like-for-like portfolio in
preparing this table.
Represented by: 7. The development programme - refer to Glossary for definition. Net
Investment portfolio 4.2% 4.5% initial yield figures are only calculated for properties in the development
Share of joint ventures 5.2% 5.3% programme that have reached practical completion.
Combined Portfolio 4.3% 4.5%
8. Includes all properties acquired since 1 April 2020.
Analysis by use type:
Offices 3.3% 3.7% 9. Includes all properties sold since 1 April 2020.
Retail 6.3% 6.1%
Leisure, hotels and other 4.5% 5.1%
Combined Portfolio 4.3% 4.5%
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. Net initial yield - refer to Glossary for definition. This
calculation includes all properties including those sites with no income.
5. Equivalent yield - refer to Glossary for definition. Proposed
developments are excluded from the calculation of equivalent yield on the
Combined Portfolio.
6. The like-for-like portfolio - refer to Glossary for definition.
Capital expenditure on refurbishments, acquisitions of head leases and similar
capital expenditure has been allocated to the like-for-like portfolio in
preparing this table.
7. The development programme - refer to Glossary for definition. Net
initial yield figures are only calculated for properties in the development
programme that have reached practical completion.
8. Includes all properties acquired since 1 April 2020.
9. Includes all properties sold since 1 April 2020.
Table 25: Reconciliation of segmental information note to statutory reporting
The table below reconciles the Group's income statement to the segmental
information note (note 3 to the financial statements).
Six months ended 30 September 2021
Group income statement Joint Total EPRA earnings Capital and other items
£m ventures(1) £m £m £m
£m
Rental income 258 24 282 282 -
Finance lease interest 5 - 5 5 -
Gross rental income (before rents payable) 263 24 287 287 -
Rents payable (4) (1) (5) (5) -
Gross rental income (after rents payable) 259 23 282 282 -
Service charge income 36 5 41 41 -
Service charge expense (42) (5) (47) (47) -
Net service charge expense (6) - (6) (6) -
Other property related income 12 2 14 14 -
Direct property expenditure (34) (5) (39) (39) -
Movement in bad and doubtful debts provisions 7 (4) 3 3 -
Segment net rental income 238 16 254 254 -
Other income 3 - 3 3 -
Administrative expenses (41) - (41) (41) -
Depreciation (3) - (3) (3) -
EPRA earnings before interest 197 16 213 213 -
Share of post-tax loss from joint ventures (1) 1 - - -
Profit on disposal of investment properties 6 - 6 - 6
Net surplus/(deficit) on revaluation of investment properties 94 (13) 81 - 81
Gain on modification of finance leases 6 - 6 - 6
Operating profit 302 4 306 213 93
Finance income 6 - 6 4 2
Finance expense (33) (4) (37) (37) -
Profit before tax 275 - 275 180 95
Taxation - - - - -
Profit attributable to shareholders 275 - 275 180 95
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.
Six months ended 30 September 2020
Group income statement Joint Total EPRA earnings Capital and other items
£m ventures(1) £m £m £m
£m
Rental income 268 25 293 293 -
Finance lease interest 4 - 4 4 -
Gross rental income (before rents payable) 272 25 297 297 -
Rents payable (3) (1) (4) (4) -
Gross rental income (after rents payable) 269 24 293 293 -
Service charge income 38 3 41 41 -
Service charge expense (39) (4) (43) (43) -
Net service charge expense (1) (1) (2) (2) -
Other property related income 16 1 17 17 -
Direct property expenditure (25) (5) (30) (30) -
Movement in bad and doubtful debts provision (77) (10) (87) (87) -
Segment net rental income 182 9 191 191 -
Other income 1 - 1 1 -
Administrative expenses (35) - (35) (35) -
Depreciation (3) - (3) (3) -
EPRA earnings before interest 145 9 154 154 -
Share of post-tax loss from joint ventures (123) 123 - - -
Profit/(loss) on disposal of investment properties 2 (2) - - -
Net deficit on revaluation of investment properties (824) (121) (945) - (945)
Loss on disposal of trading properties - (1) (1) - (1)
Operating (loss)/profit (800) 8 (792) 154 (946)
Finance income 9 - 9 8 1
Finance expense (44) (8) (52) (47) (5)
(Loss)/profit before tax (835) - (835) 115 (950)
Taxation - - - - -
Loss attributable to shareholders (835) - (835) 115 (950)
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.
Table 26: Lease lengths
Weighted average unexpired lease term at 30 September 2021
Like-for-like portfolio Like-for-like portfolio, completed developments and acquisitions
Mean(1) Mean(1)
Years Years
Central London
Offices 7.2 7.2
London retail 5.4 5.3
Other central London 53.0 53.0
Total Central London 7.3 7.2
Regional retail
Regional shopping centres 4.7 4.7
Outlets 2.9 2.9
Total Regional retail 4.1 4.1
Urban opportunities 5.6 5.6
Subscale sectors
Leisure 11.1 11.1
Hotels 10.0 10.0
Retail parks 4.6 4.6
Total Subscale sectors 8.2 8.2
Combined Portfolio 6.6 6.5
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 year 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 Group PLC (Equiniti),
in the first instance. They can be contacted using the details below:
Telephone:
- 0371 384 2128 (from the UK)
- +44 121 415 7049 (from outside the UK)
- Lines are ordinarily open from 08:30 to 17:30, Monday to Friday,
excluding UK public holidays.
Correspondence address:
Equiniti Group PLC
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Information on how to manage your shareholding can be found at
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
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: 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. 2021/22 second quarterly dividend
The Board has declared a second quarterly dividend for the year ending 31
March 2022 of 8.5p per ordinary share which will be paid on 4 January 2022 to
shareholders registered at the close of business on 26 November 2021. This
will be paid wholly as a Property Income Distribution (PID). Together with the
first quarterly dividend of 7.0p already paid on 8 October 2021 wholly as a
PID, the first half dividend will be 15.5p per ordinary share (six months
ended 30 September 2020: 12.0p).
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/investors (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
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. Financial reporting calendar 2022
Financial year end 31 March
Preliminary results announcement 17 May*
Half year results announcement 15 November*
* Provisional date only
8. 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.
BREEAM
Building Research Establishment's Environmental Assessment Method.
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.
Completed developments
Completed developments consist of those properties previously included in the
development programme, which have been transferred from the development
programme since 1 April 2020.
Development pipeline
The development programme together with proposed developments.
Development programme
The development programme consists of committed developments (Board approved
projects), projects under construction and developments which have reached
practical completion within the last two years but are not yet 95% let.
Diluted figures
Reported results adjusted to include the effects of potentially dilutive
shares issuable under employee share schemes.
Dividend Reinvestment Plan (DRIP)
The DRIP provides shareholders with the opportunity to use cash dividends
received to purchase additional ordinary shares in the Company immediately
after the relevant dividend payment date. Full details appear on the Company's
website.
Earnings per share
Profit after taxation attributable to owners divided by the weighted average
number of ordinary shares in issue during the period.
EPRA
European Public Real Estate Association.
EPRA earnings
Profit after tax, excluding profits on the sale of non-current assets and
trading properties, profits on long-term 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 earnings per share
Earnings per share based on EPRA earnings.
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.
Fair value movement
An accounting adjustment to change the book value of an asset or liability to
its market value (see also mark-to-market adjustment).
Finance lease
A lease that transfers substantially all the risks and rewards of ownership
from the Group as lessor to the lessee.
F&B
Food and beverage.
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.
Head lease
A lease under which the Group holds an investment property.
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). The calculation excludes joint
ventures.
Interest-rate swap
A financial instrument where two parties agree to exchange an interest rate
obligation for a predetermined amount of time. These are generally used by the
Group to convert floating-rate debt or investments to fixed rates.
Investment portfolio
The investment portfolio comprises the investment properties of the Group's
subsidiaries on a proportionately consolidated basis where not wholly owned.
Joint venture
An arrangement in which the Group holds an interest and which is jointly
controlled by the Group and one or more partners under a contractual
arrangement. Decisions on the activities of the joint venture that
significantly affect the joint venture's returns, including decisions on
financial and operating policies and the performance and financial position of
the operation, require the unanimous consent of the partners sharing control.
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.
LIBOR
The London Interbank Offered Rate, the interest rate charged by one bank to
another for lending money, often used as a reference rate in bank facilities.
Like-for-like portfolio
The like-for-like portfolio includes all properties which have been in the
portfolio since 1 April 2020 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.
Mark-to-market adjustment
An accounting adjustment to change the book value of an asset or liability to
its market value (see also fair value movement).
Net assets per share
Equity attributable to owners divided by the number of ordinary shares in
issue at the end of the period. Net assets per share is also commonly known as
net asset value per share (NAV per share).
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.
Over-rented
Space where the passing rent is above the ERV.
Passing cash rent
Passing cash rent is passing rent excluding units that are in a rent free
period at the reporting date.
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.
Planning permission
There are two common types of planning permission: full planning permission
and outline planning permission. A full planning permission results in a
decision on the detailed proposals on how the site can be developed. The grant
of a full planning permission will, subject to satisfaction of any conditions,
mean no further engagement with the local planning authority will be required
to build the consented development. An outline planning permission approves
general principles of how a site can be developed. Outline planning permission
is granted subject to conditions known as 'reserved matters'. Consent must be
sought and achieved for discharge of all reserved matters within a specified
time-limit, normally three years from the date outline planning permission was
granted, before building can begin. In both the case of full and outline
planning permission, the local planning authority will 'resolve to grant
permission'. At this stage, the planning permission is granted subject to
agreement of legal documents, in particular the s106 agreement. On execution
of the s106 agreement, the planning permission will be issued. Work can begin
on satisfaction of any 'pre-commencement' planning conditions.
Pre-development properties
Pre-development properties are those properties within the like-for-like
portfolio which are being managed to align vacant possession within a
three-year horizon with a view to redevelopment.
Pre-let
A lease signed with an occupier prior to completion of a development.
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.
Proposed developments
Proposed developments are properties which have not yet received Board
approval or are still subject to main planning conditions being satisfied, but
which are more likely to proceed than not.
Qualifying activities/Qualifying assets
The ownership (activity) of property (assets) which is held to earn rental
income and qualifies for tax-exempt treatment (income and capital gains) under
UK REIT legislation.
Real Estate Investment Trust (REIT)
A REIT must be a publicly quoted company with at least three-quarters of its
profits and assets derived from a qualifying property rental business. Income
and capital gains from the property rental business are exempt from tax but
the REIT is required to distribute at least 90% of those profits to
shareholders. Corporation tax is payable on non-qualifying activities in the
normal way.
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.
Rental value change
Increase or decrease in the current rental value, as determined by the Group's
external valuer, over the reporting year on a like-for-like basis.
Return on average capital employed
Group profit before net finance expense, plus joint venture profit before net
finance expense, divided by the average capital employed (defined as
shareholders' funds plus adjusted net debt).
Return on average equity
Group profit before tax plus joint venture tax divided by the average equity
shareholders' funds.
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.
SONIA
The Sterling Overnight Index Average reflects the average overnight interest
rate paid by banks for unsecured sterling transactions with a range of
institutional investors. It is calculated based on actual transactions and is
often used as a reference rate in bank facilities.
Temporary lettings
Lettings for a period of one year or less. These are included within voids,
but excluded from vacancy rates.
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 business return
Dividend paid per share in the period plus the change in EPRA Net Tangible
Assets per share, divided by EPRA Net Tangible Assets per share at the
beginning of the period.
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 period 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.
Total Shareholder Return (TSR)
The growth in value of a shareholding over a specified period, assuming that
dividends are reinvested to purchase additional units of the stock.
Trading properties
Properties held for trading purposes and shown as current assets in the
balance sheet.
Turnover rent
Rental income which is related to an occupier's turnover.
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. 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 cost of capital (WACC)
Weighted average cost of debt and notional cost of equity, used as a benchmark
to assess investment returns.
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.
Yield shift
A movement (negative or positive) in the equivalent yield of a property asset.
Zone A
A means of analysing and comparing the rental value of retail space by
dividing it into zones parallel with the main frontage. The most valuable
zone, Zone A, is at the front of the unit. Each successive zone is valued at
half the rate of the zone in front of it.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR VELFFFFLEFBKRecent news on Land Securities
See all newsREG - Land Sec. Group PLC - Total Voting Rights
AnnouncementREG - Land Sec. Group PLC - Director/PDMR Shareholding
AnnouncementREG - Land Sec. Group PLC - Total Voting Rights
AnnouncementREG - Land Sec. Group PLC - Block listing Interim Review
AnnouncementREG - Land Sec. Group PLC - Confirmation of Full Year Results Date
Announcement