TIDMLAND
RNS Number : 9118Y
Land Securities Group PLC
18 May 2021
Forward-looking statements
These preliminary 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 preliminary
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 preliminary 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.
Annual results for the year ended 31 March 2021
18 May 2021
Poised for recovery with a strategy that positions Landsec for
long-term growth
Chief Executive Mark Allan said:
"Our results for the year to March 2021 clearly reflect the
challenges caused by both the pandemic and the associated
restrictions. However, from the very outset of the first lockdown
we have been focused on supporting our customers and ensuring that
the business emerges from the pandemic in as strong a position as
possible. The positive effects of this decisive action will become
clearer in the years ahead.
"We are now entering the recovery phase. Government action to
support the economy was swift and the speed of the ongoing
vaccination programme impressive. As a result, there is the real
prospect of a strong consumption led recovery across the remainder
of 2021 and 2022. Like many people, I was encouraged to see the
relish with which people returned to experience in-person shopping
as the easing of lockdown measures began in April, and early
indicators are that this excitement is driving a strong return to
our retail assets. With this week marking the next milestone in the
Government's roadmap out of lockdown we expect to see even
more.
"As a result of our proactive approach to the challenges posed
by the pandemic, Landsec is poised for the recovery with a strategy
that positions the business for long-term growth."
Financial results
3/4 Revenue profit(1)(2) down 39.4% to GBP251m
3/4 Loss before tax for the year of GBP1,393m (2020: loss of GBP837m)
3/4 Adjusted diluted earnings per share(1)(2) down 39.4% to 33.9p
3/4 Full year dividend of 27.0p per share (2020: 23.2p)
3/4 Combined Portfolio(1)(2) valued at GBP10.8bn, with a
valuation deficit(1)(2) of GBP1,646m or 13.7%(3)
3/4 EPRA net tangible assets per share(1) down 17.4% to 985p
3/4 Ungeared total property return(4) of -9.6%
3/4 Total business return(1) of -15.9%
3/4 Like-for-like net rental income, down GBP165m or 30.4%
We remain in a strong financial position
3/4 Resilient Central London portfolio consisting of high-quality assets with good liquidity
3/4 Low leverage with a Group LTV ratio(1)(2) at 32.2% (31 March 2020: 30.7%)
3/4 Adjusted net debt(1)(2) of GBP3.5bn (31 March 2020: GBP3.9bn)
3/4 Weighted average cost of debt at 2.2% (31 March 2020: 1.8%)
3/4 Weighted average maturity of debt at 11.5 years (31 March 2020: 9.6 years)
3/4 Cash and available facilities(2) of GBP1.6bn
Landsec is poised for recovery with a strategy that positions
the business for long-term growth
3/4 We have a clear strategy focused on four priorities, to
reshape the portfolio and reposition Landsec for growth
3/4 The four priorities are:
3/4 Optimise our Central London portfolio
3/4 Reimagine retail by redefining how we do retail in a
multi-channel world, driving successful outcomes for all
3/4 Grow through Urban opportunities applying our proven
skillset to deliver multi-phased, urban mixed-use schemes
3/4 Realise capital from Subscale sectors
3/4 Our strategy is grounded in an authentic purpose; built on
sustainable competitive advantage; and supported by long-term macro
trends
3/4 Culture is as important as strategy; the launch of our first
culture report in June will provide the business with a benchmark
on which to build
3/4 Alongside our annual Gender Pay Gap reporting, we have also
published our first Ethnic Pay Gap. We've done this ahead of any
statutory requirement because we are committed to building a
diverse and inclusive culture, one which will help us live up to
our purpose
Ensuring the business emerges from the pandemic in as strong a
position as possible
3/4 Supported our customers: GBP80m support fund for retail,
leisure and hospitality customers impacted by the pandemic,
alongside developing a practical solution to withdraw the
moratorium on enforcement action and accrued arrears
3/4 Supported our charity partners: GBP500,000 additional
financial assistance to existing charity partners
3/4 Supported our people: focused activity to support the mental
health and wellbeing of our people during a period of uncertainty
and significant change due to the pandemic
3/4 Responded quickly: operational changes delivered quickly and
efficiently to keep staff, customers and consumers safe across the
portfolio, strengthening relationships with customers through
collaboration
3/4 Maintained optionality on our development activity: measured
approach to existing development pipeline, progressing schemes with
the best risk adjusted returns. During the year, we fully committed
to Lucent, W1 and The Forge, SE1, in September 2020, and n2, SW1 in
March 2021
London office market remains resilient and competitive - we
continue to make disposals and invest
3/4 Investor interest in the London office market remains high,
offering opportunities to recycle capital, as evidenced by the sale
of 7 Soho Square, W1 in September 2020, and 1 & 2 New Ludgate,
EC4 in December, both ahead of the March 2020 valuation
3/4 Bifurcation of demand as quality of space, wellbeing and
sustainability credentials become significant factors for
customers, driving interest in Landsec's core office product and
meaning secondary, outdated stock in the market will be ripe for
redevelopment
3/4 Myo, our flexible office brand, launches its second location
on 19 May at Dashwood, EC2 the newly refurbished boutique tower
close to Liverpool Street station and the new Crossrail
entrance
Potential for a strong consumer-led recovery
3/4 Strong performance in England since restrictions on
non-essential retail began to lift on 12 April. Shopping centre
sales, excluding F&B, up 5% versus 2019, and outlets up 14%
versus 2019
3/4 Over 50 retail brands have agreed new leases or opened new
stores during the year, demonstrating physical stores in the right
locations remain a key element to brand partner strategies
3/4 Innovative new concepts also forming part of the mix, with
new leisure attractions opening in the coming months including
Gravity at Southside, Wandsworth and Hangloose at Bluewater
We are committed to being a purpose-led, sustainable
business
3/4 Committed to become a net zero carbon business by 2030, with
first net zero carbon building under way at The Forge, SE1
3/4 Delivered a 55% reduction in carbon emissions compared with
2013/14 baseline, keeping us on track to achieve our science-based
target aligned with a 1.5(o) C scenario to reduce emissions by 70%
by 2030
3/4 Delivered GBP11m of social value in our local communities
since 2019 through our community and charitable activity focusing
on education and employment
3/4 Introduction of new employee performance related pay which
includes a key measure of success against our ESG performance
3/4 Our ESG leadership is also demonstrated through our performance in key ESG benchmarks:
3/4 GRESB: Regional Listed Sector Leader for Europe within
Diversified - Office/Retail for standing investments; Global Listed
Development Sector Leader for Office developments
3/4 CDP: A-list for the fourth consecutive year
Results summary
Year ended Year ended
31 March 2021 31 March 2020 Change
Revenue profit(1)(2) GBP251m GBP414m Down 39.4%
=============== =============== ==============
Valuation deficit(1)(2) GBP(1,646)m GBP(1,179)m Down 13.7%(3)
=============== =============== ==============
Loss before tax GBP(1,393)m GBP(837)m
=============== =============== ==============
Basic loss per share (188.2)p (112.4)p
=============== =============== ==============
Adjusted diluted earnings
per share(1)(2) 33.9p 55.9p Down 39.4%
=============== =============== ==============
Dividend per share 27.0p 23.2p Up 16.4%
=============== =============== ==============
Total business return -15.9% -8.2%
=============== =============== ==============
Net assets per share 975p 1,182p Down 17.5%
=============== =============== ==============
EPRA net tangible assets
per share(1) 985p 1,192p Down 17.4%
=============== =============== ==============
Group LTV ratio(1)(2) 32.2% 30.7%
=============== =============== ==============
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 deficit represents the fall in
value of the Combined Portfolio over the year, adjusted for net
investment.
4. For further details, see the Business analysis section.
Chief Executive's statement
Overview
I joined Landsec as Chief Executive in April 2020, in the early
days of the Covid-19 pandemic, and our results for the year to
March 2021 clearly reflect the challenges of both the pandemic and
the government's policy response. However, from the very outset of
the first lockdown we have been focused on ensuring that the
business emerges from the pandemic in as strong a position as
possible. The positive effects of this decisive action will become
clearer in the years ahead.
Lockdowns meant that the vast majority of our portfolio was
either closed or substantially unoccupied for over half of the
year. Social distancing and other restrictions meant that, even
when open, capacity and utilisation across all assets was still
heavily impacted. Our key priorities throughout were (i) ensuring
the safety of our employees and visitors to our properties; (ii)
working collaboratively with our customers to support their
businesses as effectively as possible; and (iii) maintaining our
financial strength and flexibility. Our success and progress
against each of these objectives, in the face of heightened
uncertainty and persistent challenges, has gone some way to offset
the significant negative financial impact of the pandemic. We did
not benefit from any Government sponsored financial assistance.
We are now entering the recovery phase. Government action to
support the economy was swift and the speed of the ongoing
vaccination programme impressive. As a result, there is the real
prospect of a strong consumption led recovery across the remainder
of 2021 and 2022, although this is not without risk. Businesses
will fail, jobs will be lost and management of the public finances
will require a deft hand. However, as a result of our proactive
approach to the challenges posed by the pandemic, Landsec is poised
for the recovery with a strategy that positions the business for
long-term growth.
Results and dividend
EPRA NTA was 985p at 31 March, a fall of 17.4% over the year
attributable primarily to the effect of the global Covid-19
pandemic on our property values. Adjusted net debt fell GBP437m to
GBP3,489m as a result of proactive asset disposals more than
offsetting capex on our development programme. As a result, despite
the valuation weakness, our Group LTV only increased marginally to
32.2%. Our balance sheet remains in a strong position.
Revenue profit for the year was GBP251m, down 39.4% relative to
the prior year. The decline was almost entirely attributable to
Covid-19, either as a result of lower operating income (such as
rent on turnover leases) or as a result of rent concessions granted
and bad debt provisioning.
We are proposing a final dividend for the year of 9.0p per share
which, together with interim dividends already paid, makes for
total dividends of 27.0p per share for the full year.
Strategy, culture and people
We launched our new strategy in October 2020, confirming our
intention to focus on creating long-term value for shareholders, as
measured by total business return. We will achieve this by
concentrating our activities and our capital on those sectors and
opportunities where we believe we have sustainable or attainable
competitive advantage. Importantly, it is a strategy grounded in a
clear purpose - Sustainable Places. Connecting Communities.
Realising Potential - which aims to create sustainable value for
all our stakeholders.
This strategy is captured in four strategic priorities, set out
below, and each is covered in more detail later in the Operating
and portfolio review, together with a clear update on progress made
to date and more detail on near-term objectives.
3/4 Optimise Central London
3/4 Reimagine retail
3/4 Grow through Urban opportunities
3/4 Realise capital from Subscale sectors
In line with our strategy, we intend to increase portfolio
recycling in the near term to effect our desired reallocation of
capital and are prepared to take, in a considered way, more
operational risk to create value and drive returns, with financial
leverage managed accordingly. We have earmarked approximately
GBP4bn of assets for disposal over the next few years, focused
initially on high quality but defensive prime central London assets
and, in due course, assets in Subscale sectors where we have little
or no competitive advantage (hotels, leisure and retail parks).
When reinvesting capital from this portfolio recycling
programme, we have identified two main areas of focus - value add
opportunities in central London and urban mixed-use regeneration
projects. We also believe that opportunities could begin to emerge
in the retail sector in the short to medium term following the very
substantial downward correction in asset values in that sector over
the past few years.
Culture is as important as strategy. Successful execution of our
strategy will be built on a reinvigorated culture at Landsec to
ensure that we make the most of the considerable capability and
expertise of our people and look to augment it in a targeted way.
Clarity of strategic direction, coupled with a properly aligned
organisational design, will allow us to foster a culture of greater
empowerment and accountability. As a result, we will be better
placed to assess and manage risk, make decisions more quickly and
drive better returns. Where we judge that new or additional skills
are required, for example in elements of our retail business or in
regeneration and placemaking, we are moving quickly to address
those needs.
Bridging both strategy and culture for Landsec are five key
performance drivers that will underpin our competitive advantage
for the long term: customer centricity; data-driven decisions; ESG
leadership; capital discipline and development expertise. Our level
of existing capability in each area is varied - development
expertise and ESG leadership are already key strengths on which we
can build further. Our capital discipline - both in the sourcing
and allocation of capital - can be sharper and customer centricity
and data-driven decisions are both areas where significant progress
is needed. But these are areas where the wider real estate sector
itself is not particularly strong and so both still represent
opportunities to establish competitive advantage if we move
quickly.
The past twelve months have been challenging for everyone.
Across Landsec, as with many organisations, our teams have had to
adapt quickly to ever changing conditions and have had to work
harder than ever to balance the pressures of their roles with other
priorities. It is testament, therefore, to their skill and
dedication that so much has been achieved, and so much value
protected, despite these persistent challenges. I have been deeply
impressed by both the performance and potential of my new
colleagues.
Strategic priority - Optimise Central London
Our Central London business represents 68% of our portfolio by
value and is characterised by the quality, resilience and liquidity
of our London office assets. These assets are a clear example of
the value creation capabilities inherent in the Landsec business,
given that the majority have been developed or refurbished and
leased by us in the past 15 years. However, a number of the assets
now have limited further value creation potential and so we intend
to increase asset disposals over the next few years and recycle our
investment out of these high quality, more defensive assets and
increase our exposure to assets that offer greater upside, for
example either through redevelopment or repositioning. This
strategy better aligns our capital and capability, leading to
greater value creation opportunities in the medium to longer term.
Our sale of 1 & 2 New Ludgate for GBP552m in December and the
subsequent acquisition of 55 Old Broad Street for GBP87m
demonstrate the progress we are already making.
Central London has been one of the areas hardest hit by the
effects of the pandemic and social distancing restrictions, with
physical office occupancy for the portfolio as a whole ranging from
1% to 21% at different times across the year and footfall across
our Central London portfolio down by around 82%. We expect physical
office occupancy to recover substantially across the second and
third quarters of 2021. However, with tourism likely to be
constrained, future office working patterns still unclear and
residual concern about the safety of public transport likely to
persist for a while yet, it will take longer for central London
footfall to recover fully.
Given the pandemic related challenges, our Central London
performance was remarkably resilient in valuation terms, falling
only 6.5% to GBP7.3bn and reflecting a like-for-like equivalent
yield of 4.6%. Investor demand for long let, prime London assets
was strong and we expect it to remain so, reflecting both
investors' willingness to look through near-term uncertainty and
the relative value of London compared with other major cities
around the world. Yields for prime assets appear well supported at
current levels and we could even see some compression in the year
ahead.
The nearer term prospects for office occupier markets are more
difficult to judge. Vacancy rates are high but concentrated in
second hand space. Hybrid working models are here to stay but the
effect on occupiers' space requirements is far from clear and will
not be uniform. And demand seems likely to be strongest for prime
space, the recent and speculative supply of which has been muted.
Overall we expect some weakness in rent levels but for this to be
most significant for secondary space, of which we have very
little.
Against this backdrop, there will be a clear opportunity for
owners and occupiers to work together collaboratively to determine
and deliver tailored requirements and this will offer potential for
investors, developers and occupiers alike. Landsec's long track
record and deep, strategic relationships with its customers should
translate into clear competitive advantage. Besides our high
quality development programme, it is also a particularly
interesting time for us to be broadening the range of propositions
we can offer to occupiers - our Myo, Customised and Blank Canvas
offerings. Flexibility, adaptability and strong customer
relationships are going to be critical attributes going
forward.
From a development perspective, we worked hard during the year
to preserve optionality on our speculative projects for as long as
possible, allowing us time to assess and better understand the
outlook for the occupier market. Taking all of our analysis into
account, and having stress tested prospective returns, we have now
committed to three of our five near-term office development
opportunities and will be delivering them during 2022 and 2023.
These three projects total 0.5 million sq ft and, including pre-let
or pre-sold projects, take our total committed development
programme to 1.1 million sq ft, of which 57% is either pre-let or
pre-sold.
Strategic priority - Reimagine retail
The pandemic has materially accelerated structural trends that
were already underway in retail and, for most of the retail sector,
it is clear that online is now the primary growth channel and will
remain so. This does not, however, signal the end for retail
property. Instead, it means that its role must change in an
omnichannel world to offer something sufficiently compelling -
either to be complementary to online or to offer something that
cannot be easily replicated online. It is this reality that
underpins our 'Reimagine retail' vision and we are confident that,
with effective execution, we have a retail business that can thrive
longer term.
Our outlets portfolio (GBP0.7bn value) serves a real purpose,
offering visitors the opportunity to enjoy a day out shopping a
variety of brands, with a great value offer and experience that
isn't easily replicated online. The outlet model is fundamentally
based on collaborative partnerships with our brand partners, most
obviously through turnover based leases. During the year, our
outlets have been relatively resilient, but values fell 18.5% and
like-for-like equivalent yields moved out to 6.8%. However, based
on their strong relative performance after each lockdown, we expect
outlets to perform strongly in the recovery.
The picture for shopping centres remains more complex. Over the
year, the value of our regional shopping centres fell on average
38.2% to GBP1.0bn, taking the decline from the peak to
approximately 60%. The realities remain that going forward there
will be fewer physical retail stores, rents will be lower and, in
order to remain relevant, shopping centres will need to offer a
combination of attributes that are either complementary to online
or not easily replicated online.
Much more of this is now reflected in valuations than was the
case a year ago, largely as a result of the accelerating effect of
the pandemic. The vast majority of our forecast 40% decline in
rents from peak to achieve a sustainable level has now been
recognised. It is of course currently difficult to assess rental
values given the effects of the pandemic and the increasing
prevalence of turnover components to leases, and it is possible
that the downward correction in rents overshoots in the short term.
However, we remain confident in our sustainable rent forecasts
overall.
All of this means that retail property will continue to become
more operational in nature and our priorities reflect this. To be
successful in the long term we need to be able to combine strong,
strategic relationships with brand partners, effectively tailored
guest experiences and deep asset management expertise. Landsec has
always had strong asset management credentials but brand partner
management and more tailored guest experiences are areas where we
are targeting rapid enhancements. We have made good early progress
and our appointment in December last year of Bruce Findlay as
Managing Director - Retail, bringing considerable international
retail experience from a range of global brands, is an important
example of how we are enhancing the 'retailer perspective' in our
approach.
The near-term outlook for retail remains challenging,
particularly for shopping centres. We are likely to see a sharp
increase in insolvency processes (such as CVAs, business
restructurings or administrations) amongst occupiers as the
Government's pandemic related support tapers off and businesses
that were struggling before the pandemic continue to do so
afterwards. As this happens, it will accelerate the fall in passing
rents towards our forecast sustainable rent levels, increasingly
reflected in valuations already. It will also open up opportunities
for new brands and different propositions, including digitally
native ones, to take space instead and help improve longer-term
prospects.
Our longer-term view of retail is more positive. With the
downward correction in rents and values now happening much more
quickly than would have been the case before Covid-19, it
represents an opportunity for the sector to recalibrate. Landsec's
combination of a strong retail platform, deep asset management and
development expertise and a strong balance sheet marks us out as
increasingly unique in the sector and well positioned to take
advantage of any appropriate opportunities should they emerge.
Strategic priority - Grow through Urban opportunities
Our Urban opportunities portfolio currently consists of five
suburban London shopping centres with significant repurposing
potential in the medium to longer term. These assets offer the raw
material for mixed-use, multi-phase developments that can offer a
compelling blend of income, development and rental growth driven
returns throughout their life. Well designed, mixed-use spaces can
also cater for the increasing focus on the need for balanced
communities and spaces that contribute positively to quality of
life, both of which have been brought into sharper relief by the
pandemic. With our existing development and asset management
capabilities, we believe that Landsec is well placed to become a
leading player in this sector, both through the realisation of
existing opportunities within our own portfolio but also through
targeted acquisitions.
The longer-term redevelopment potential of our Urban
opportunities portfolio helped to support values during the year to
some extent but they still saw a meaningful decline of 23.3% to
GBP0.4bn as a result of their predominantly existing retail nature.
Our focus in the year ahead is on progressing our redevelopment
plans, with the submission of a planning application on our first
project a key target. We are also actively evaluating potential new
investment opportunities that can offer the right blend of income,
development and rental growth driven returns, ideally in a way that
can accelerate the return profile of this segment of the
business.
Strategic priority - Realise capital from Subscale sectors
Subscale sectors describes those parts of the portfolio where we
have relatively little capital invested and judge ourselves to have
little or no competitive advantage - hotels, leisure assets and
retail parks. Our objective remains to realise capital from these
assets over time and to reinvest that capital into new value
creation opportunities.
Of course, these types of assets have been amongst the hardest
hit by the pandemic, particularly hotels and leisure, and over the
past 12 months the aggregate value of our investment in Subscale
sectors fell 16.4% to GBP1.3bn. We do, however, expect these assets
to be well placed beneficiaries of a strong consumption led
recovery in the months and years ahead and for values to grow
meaningfully as a result. Our anticipated timescale for disposals
reflects this, with hotels and leisure assets unlikely to be sold
for at least a couple of years so that we can capture a sensible
proportion of the expected valuation upside ahead. Retail parks,
which were more resilient in the pandemic and where investment
markets have staged a recovery, may offer sale opportunities
sooner. In all cases, we will be working hard to maximise value
creation opportunities across the portfolio in the meantime.
The year ahead
Performance in the coming year will be determined by the shape
of economic recovery from Covid-19 and the early signs are
positive. The 12 April re-opening of non-essential retail saw some
very strong trading for retailers across our portfolio and
highlighted the potential for a strong consumer-led recovery over
the remainder of 2021 and 2022. Our retail, leisure and hotel
assets are well placed to benefit from such a recovery and, after a
period of material downward movements in retail valuations in
particular, the outlook for this part of our portfolio now appears
under significantly less pressure.
We expect activity in central London to recover more slowly,
with office occupational markets remaining more subdued for the
time being, which could translate into some rental weakness. The
London investment market, conversely, seems likely to display
continued resilience with a significant amount of capital seeking
prime investment opportunities and this could go some way to
offsetting any rental weakness from a valuation perspective.
Against this backdrop, we expect to make good progress in
executing our strategy. We took advantage of strong investor demand
for prime London office assets to make two disposals in the year,
with combined proceeds of GBP0.6bn, and more disposals are likely
over the course of the next financial year. With improving economic
prospects, we can now pursue opportunities to reinvest this capital
with confidence.
Our reinvestment agenda includes our committed Central London
development programme, but we also have capacity to pursue new
acquisition opportunities in a targeted way. Our main target areas
for investment are value add opportunities in central London and
mixed-use, multi-phase urban regeneration projects, both of which
offer the potential for above average total returns for
shareholders. In addition, we are carefully monitoring the retail
sector to determine whether this could provide interesting
opportunities at potentially compelling returns.
Of course, our strategy is about more than capital allocation.
We also intend to continue the reinvigoration of our culture in
line with the principles of empowerment and accountability and to
enhance some of the more operational and customer-oriented
foundations that we believe will be critical to our long-term
success. These include the continued roll out of a wider range of
propositions for our Central London office customers, further
investment in strategic brand partnerships and guest experience
capability in retail and proving our placemaking credentials in
Urban opportunities.
The Landsec business is poised for recovery with a strategy that
positions the business for long-term growth.
Mark Allan
Chief Executive
Financial review
Overview
We began and ended the financial year with the country in
lockdown, many retail and leisure destinations closed and our
offices, while open, largely deserted as most people followed
Government guidance to work from home. While conditions are now
improving and we look forward to a full re-opening of the UK
economy, the effect of Covid-19 on our business and financial
performance has been significant.
In early April, we were quick to acknowledge the effect of
lockdown on our occupiers by setting up our GBP80m customer support
fund for those most in need. At about the same time, the Government
introduced a temporary rent collection moratorium which has
severely impacted our ability to enforce rent collection. With the
moratorium still in place, there has been little incentive for our
retail and leisure occupiers to make payments or even agree and
document rent concessions from our customer support fund when they
are able to withhold rent payments without consequences. While much
rent due from leisure and retail occupiers has been withheld, it
would be a mistake not to acknowledge those occupiers who have paid
their rent and service charge in full, despite being negatively
impacted by the pandemic. Hopefully, as retailers and leisure
operators can now see a way out of the pandemic towards full
re-opening, we will see a return to timely rent payments and
agreement on how outstanding amounts will be settled.
The impact on our results from unpaid rent and service charges
has been significant. During the year we have made bad debt
provisions of GBP127m on top of the GBP23m we provided in last
year's results against quarterly rent due on 25 March 2020. This is
an unprecedented level of provisions and is based on a cautious
assessment of the impact of concessions, CVAs and business failures
on how much rent we will collect. Time will tell whether we have
been too cautious or optimistic in our assessment of these factors
but it is our best estimate today based on our knowledge of each
individual occupier. In total, we have provided for approximately
38% of the retail and leisure rent for the year. Covid-19 and
lockdown has also led to a sharp decline in turnover related income
from our hotels, car parks and outlets. The impact of reduced
income and higher bad debt provisions is behind the decline in
revenue profit to GBP251m (2020: GBP414m).
The decline in asset values we saw in our retail and leisure
assets last year has continued while our London offices have been
more resilient with a relatively small reduction in values. While
our external valuer, CBRE, has removed the material uncertainty
clause that they included at 31 March 2020 (except for our hotel
portfolio), the valuation declines in regional shopping centres and
outlets remain more driven by sentiment than transactional
activity. This is not true of the London office investment market
which continues to demonstrate liquidity, with good investment
appetite and transactions completing.
Table 1: Highlights
Year ended Year ended
31 March 2021 31 March 2020
-------------- --------------
Revenue profit(1) GBP251m GBP414m
Valuation deficit(1) GBP(1,646)m GBP(1,179)m
Loss before tax GBP(1,393)m GBP(837)m
Basic loss per share (188.2)p (112.4)p
Adjusted diluted earnings per share(1) 33.9p 55.9p
Dividend per share 27.0p 23.2p
31 March 2021 31 March 2020
-------------- --------------
Combined Portfolio(1) GBP10.8bn GBP12.8bn
Net assets per share 975p 1,182p
EPRA net tangible assets per share 985p 1,192p
Adjusted net debt(1) GBP3.5bn GBP3.9bn
Group LTV ratio(1) 32.2% 30.7%
--------------------------------------- -------------- --------------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
below.
Revenue profit for the year to 31 March 2021 was GBP251m, down
39.4% from GBP414m as a result of the impact of Covid-19 across the
portfolio. Adjusted diluted earnings per share were also down 39.4%
at 33.9p due to the reduction in revenue profit. Over the year, our
assets declined in value by 13.7% or GBP1,646m (including our
proportionate share of subsidiaries and joint ventures) compared
with a GBP1,179m decline last year. This decline in the value of
our assets is behind our loss before tax of GBP1,393m (2020:
GBP837m loss) and the reduction in our EPRA net tangible assets per
share in the year, down 17.4% to 985p.
Presentation of financial information
Our property portfolio is a combination of properties that are
wholly owned by the Group, part owned through joint arrangements
and those owned by the Group but where a third party holds a
non-controlling interest. 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 GBP10.8bn, is an example of this approach,
reflecting the economic interest we have in our properties
regardless of our ownership structure. We consider 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.
The same approach is applied to many of the other measures we
discuss and, accordingly, a number of our financial measures
include the results of our joint ventures and subsidiaries on a
proportionate basis. Measures that are described as being presented
on a proportionate basis include the Group's share of joint
ventures on a line-by-line basis but exclude the non-owned elements
of our subsidiaries. This is in contrast to the Group's statutory
financial statements, where the Group's interest in joint ventures
is presented as one line on the income statement and balance sheet,
and all subsidiaries are consolidated 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.
Measures presented on a proportionate basis are alternative
performance measures as they are not defined under IFRS. Where
appropriate, the measures we use are based on best practice
reporting recommendations published by EPRA. For further details
see table 15 in the Business analysis section.
During the year, following the strategy review, we changed how
we report financial information to better reflect the way we manage
our assets. Assets have been reallocated by strategic priority into
one of four new segments: Central London, Regional retail, Urban
opportunities and Subscale sectors.
The sector breakdown within our Combined Portfolio Analysis
disclosure has been re-ordered to reflect the new segments and the
level of detail reported in the CPA for the office assets has been
reduced to reflect the fact that all the London office assets are
managed in a consistent manner irrespective of their location. The
prior year has been restated in the new format and a reconciliation
to the previous presentation has been provided on our website.
Income statement
Our income statement has two key components: the income we
generate from leasing our investment properties net of associated
costs (including finance expense), which we refer to as revenue
profit, and 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 bond
repurchases, which we call Capital and other items.
We present two measures of earnings per share: the IFRS measure
of basic earnings per share, which is derived from the total profit
or loss for the year attributable to shareholders, and adjusted
diluted earnings per share, which is based on tax-adjusted revenue
profit, referred to as adjusted earnings.
Table 2: Income statement
Year ended Year ended
31 March 2021 31 March 2020
Table GBPm GBPm
---------------------------------- ----- -------------- --------------
Revenue profit 3 251 414
Capital and other items 8 (1,644) (1,251)
-------------- --------------
Loss before tax (1,393) (837)
Taxation - 5
---------------------------------- ----- -------------- --------------
Loss attributable to shareholders (1,393) (832)
Basic loss per share (188.2)p (112.4)p
Adjusted diluted earnings per
share 33.9p 55.9p
---------------------------------- ----- -------------- --------------
Our loss before tax was GBP1,393m, compared with a loss of
GBP837m in the prior year, due to a greater fall in the value of
our assets this year (down GBP1,646m, compared with GBP1,179m last
year) as well as a GBP163m reduction in revenue profit. The loss
per share this year was 188.2p, compared with a loss per share of
112.4p in the prior year. Adjusted diluted earnings per share
decreased by 39.4%, from 55.9p to 33.9p this year, as a result of
the decrease in revenue profit from GBP414m to GBP251m. There is no
difference between our adjusted diluted earnings per share and the
EPRA measure.
The reasons behind the movements in revenue profit and Capital
and other items are discussed in more detail below.
Revenue profit
Revenue profit is our measure of underlying pre-tax profit,
presented on a proportionate basis. A full definition of revenue
profit is given in the Glossary. Revenue profit decreased by
GBP163m to GBP251m for the year ended 31 March 2021 (2020: GBP414m)
as set out in the table below.
Table 3: Revenue profit
Year ended Year ended
31 March 2021 31 March 2020
Central Regional Urban Subscale Central Regional Urban Subscale
London retail opps sectors Total London retail opps sectors Total Change
Table GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ----- ------- -------- ----- -------- ----- ------- -------- ----- -------- ----- ------
Gross rental
income(1) 306 157 26 80 569 327 193 29 114 663 (94)
Net service
charge expense - (3) - (2) (5) 1 (3) - (2) (4) (1)
Net direct
property
expenditure (9) (13) (4) (6) (32) (13) (19) (4) (7) (43) 11
Bad and
doubtful
debts expense (17) (69) (10) (31) (127) (5) (18) (3) (7) (33) (94)
Segment net
rental income 4 280 72 12 41 405 310 153 22 98 583 (178)
------- -------- ----- -------- ------- -------- ----- --------
Net indirect
expenses (80) (74) (6)
Revenue profit
before
interest 325 509 (184)
Net finance
expense 5 (74) (95) 21
Revenue profit 251 414 (163)
--------------- ----- ------- -------- ----- -------- ----- ------- -------- ----- -------- ----- ------
1. Includes finance lease interest, after rents payable.
The main driver behind the reduction in revenue profit was a
GBP178m decrease in net rental income. This reduction and other
changes compared with last year are explained in more detail
below.
Net rental income
Table 4: Net rental income(1)
GBPm
----------------------------------------------------------- -----
Net rental income for the year ended 31 March 2020 583
Net rental income movement in the year:
-----
Like-for-like investment properties (71)
Like-for-like investment properties - bad and doubtful
debts expense (94)
Proposed developments (9)
Development programme 1
Completed developments -
Acquisitions since 1 April 2019 2
Disposals since 1 April 2019 (9)
Non-property related income 2
-----
(178)
----------------------------------------------------------- -----
Net rental income for the year ended 31 March 2021 405
------------------------------------------------------------ -----
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Like-for-like net rental income was down GBP165m, with increased
bad and doubtful debts accounting for GBP94m of the decline.
Further information on our rent collections and bad debt provisions
is set out below. Like-for-like net rental income before bad debt
provisions was down GBP71m largely due to a reduction in short-term
and turnover related income of GBP56m and CVAs and administrations
of GBP22m, partly offset by an GBP11m reduction in direct property
expenditure. Income from our Accor hotel portfolio, which is all
linked to turnover, was down GBP24m, while car park income reduced
by GBP15m. Turnover related top-ups, principally in our outlet
portfolio, declined by GBP11m and Piccadilly Lights, W1 saw a GBP6m
reduction from short-term advertising campaigns.
Outside the like-for-like portfolio, there was a GBP9m reduction
in net rental income from proposed developments, driven by Portland
House, SW1, which reached vacant possession of the office space in
March 2020. There was also a GBP9m reduction in net rental income
following the disposal of 1 & 2 New Ludgate, EC4 and 7 Soho
Square, W1 in the current year and Poole retail park in the prior
year. The GBP2m increase in non-property related income largely
reflects the release of a provision following an agreement which
ended our obligations under one of our last remaining Landflex
leases.
Net indirect expenses
Net indirect expenses represent the indirect costs of the Group
including joint ventures. In total, net indirect expenses were
GBP80m (2020: GBP74m). The GBP6m increase is partly due to higher
uncapitalised development-related expenditure and professional and
consultancy fees.
Net finance expense (included in revenue profit)
Table 5: Net finance expense(1)
GBPm
----------------------------------------------------- ----
Net finance expense for the year ended 31 March 2020 95
Impact of:
Interest costs (17)
Capitalised interest (4)
Net finance expense for the year ended 31 March 2021 74
----------------------------------------------------- ----
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Our net finance expense has decreased by GBP21m to GBP74m due to
reductions in interest payable following debt management exercises
carried out last year, lower base rates and an increase in interest
capitalised on our developments in the year.
Recent rent collection and related provisions
In early April, soon after the start of the first national
lockdown, we established a customer support fund of GBP80m for
occupiers most in need of our assistance with a focus on our retail
and leisure portfolios. During the year, we have worked with our
occupiers to agree rent concessions out of the fund and the payment
of any outstanding balances. We also agreed with some occupiers for
rents to be paid on a monthly basis, or to be deferred to later
quarters to assist with cash flow management.
GBP110m of rent was due on the 25 March 2021 quarter day,
including the Group's share of joint venture debtors. While this
rent almost entirely relates to the 2021/22 financial year, we are
still required to assess its recoverability at 31 March 2021. The
table below shows the amount and percentage of this rent collected
to date after adjusting for the impact of customers having entered
CVAs and administrations, concessions agreed out of the fund and
agreed monthly and deferred payment terms. A similar analysis is
shown for the rents which were due between 25 March 2020 and 24
March 2021.
Table 6: Rent collections
25 March 2021 quarter(1)(2)
Agreed changes
in payment terms
Gross
amounts Impact Monthly Net amounts Amounts Amounts
due 25 of CVAs payment Deferred due 25 received received
March and admins Concessions terms payments March to date to date
GBPm GBPm GBPm GBPm GBPm GBPm GBPm %
-------------------- -------- ----------- ----------- -------- --------- ------------ --------- ---------
Offices 63 - - (1) - 62 61 98
Rest of Central
London 9 - (1) - - 8 5 63
Regional retail 16 - (3) (1) - 12 7 58
Urban opportunities 5 - - - - 5 2 40
Subscale sectors 17 (1) (1) (1) - 14 7 50
110 (1) (5) (3) - 101 82 81
-------------------- -------- ----------- ----------- -------- --------- ------------ --------- ---------
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.
For the year ended 24 March 2021(1)(2)
Agreed changes
in payment terms
Gross
amounts Impact Net amounts Amounts Amounts
due for of CVAs Deferred due for received received
the year(3) and admins Concessions payments the year(3) to date to date
GBPm GBPm GBPm GBPm GBPm GBPm %
-------------------- ------------ ----------- ----------- --------- ------------ --------- ---------
Offices 328 - (1) (1) 326 326 100
Rest of Central
London 58 (2) (5) (1) 50 40 80
Regional retail 191 (12) (21) (1) 157 112 71
Urban opportunities 30 (1) (2) (1) 26 16 62
Subscale sectors 101 (6) (8) (3) 84 60 71
Total 708 (21) (37) (7) 643 554 86
-------------------- ------------ ----------- ----------- --------- ------------ --------- ---------
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.
3. Due dates from 25 March 2020 to 24 March 2021. Does not
include 25 March 2021 quarter day rents.
Of the GBP101m of net rent billed for the 25 March 2021 quarter,
GBP19m remains outstanding with GBP89m outstanding from rents due
between 25 March 2020 and 24 March 2021. Following legislation
introduced as a result of the pandemic, the options available to
landlords to recover outstanding amounts have been significantly
reduced. As a result, there is limited incentive for those who can
afford to pay rent to do so and for those who are in difficulty to
agree and document concessions.
Given this situation, we have assessed the outstanding debtors
for recoverability and provided GBP127m for bad debts in the year.
The provision includes GBP42m for occupiers where we have agreed
concessions out of our customer support fund and GBP13m against
tenant lease incentive balances. More detail on the amounts
provided, including the impact on revenue profit for the year, is
included in the table below.
Table 7: Provisions for bad and doubtful debts(1)
Joint
Group ventures Total
GBPm GBPm GBPm
-------------------------------------------- ----- --------- -----
Provisions related to customer support fund
concessions 37 5 42
Other provisions for rents receivable 50 8 58
Provisions for service charge receivables 12 2 14
Tenant lease incentive provisions 11 2 13
Bad debt expense charged to revenue profit
in the year 110 17 127
-------------------------------------------- ----- --------- -----
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
As we work to agree and document rent concessions with
individual retail and leisure occupiers, we expect this to result
in the payment of the balance of their outstanding amounts.
Nevertheless, we have taken what we believe to be a cautious view
on provisions as we recognise the challenge of a gradual exit from
lockdown, ongoing social distancing and the risk of further CVAs
and administrations. Of the total amount of rent outstanding at 31
March 2021, around 60% was covered by a doubtful debt
provision.
Capital and other items
Table 8: Capital and other items(1)
Year ended Year ended
31 March 2021 31 March 2020
Table GBPm GBPm
-------------------------------------- ----- -------------- --------------
Valuation and profit on disposals
Valuation deficit 14 (1,646) (1,179)
Profit/(loss) on disposal of
investment properties 5 (6)
(Loss)/profit on disposal of
trading properties (1) 7
Net finance expense 9 (3) (68)
Other items
Profit from long-term development
contracts - 3
Gain on settlement of liability 4 -
Other 1 (3)
Exceptional items (4) (5)
Capital and other items (1,644) (1,251)
-------------------------------------- ----- -------------- --------------
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
Our Combined Portfolio declined in value by 13.7% or GBP1,646m
over the year compared with a decrease in the prior year of
GBP1,179m. A description of market conditions and a breakdown of
valuation movements by category are set out in the Operational and
portfolio review (table 14).
Profit/(loss) on disposals
The net profit on disposals of GBP4m in the year (2020: GBP1m)
relates to the sale of both investment and trading properties. We
recognised a GBP2m profit on the disposal of 7 Soho Square, W1, in
September 2020 and a GBP5m profit on the disposal of 1 & 2 New
Ludgate, EC4 in December 2020. Partly offsetting this was our GBP2m
share of the Nova joint venture's loss on disposal of Nova Place,
SW1 and n2, SW1, which were acquired by the Group in the year, and
a GBP1m loss on trading properties.
Net finance expense (included in Capital and other items)
In the year ended 31 March 2021, we incurred GBP3m of net
finance expense that is excluded from revenue profit principally
due to premiums paid on the redemption of medium term notes.
Table 9: Net finance expense(1)
Year ended Year ended
31 March 2021 31 March 2020
GBPm GBPm
------------------------------------------- -------------- --------------
Premium on redemption of medium term notes
(MTNs) 3 59
Fair value movement on interest-rate swaps 1 9
Other net finance income (1) -
Total 3 68
------------------------------------------- -------------- --------------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Gain on settlement of liability
We recognised a GBP4m gain this year after settling the s106
liability at Nova, SW1 at a lower value than the previously
anticipated cost of fulfilling the obligations.
Exceptional items
We incurred GBP4m (2020: GBP5m) of impairment charges during the
year which have been classified as exceptional. As a result of a
decline in the value of Bluewater, Kent, an impairment test of the
intangible asset related to the management rights for the centre
was carried out. This resulted in impairment charges of GBP4m in
the year (2020: GBP4m) against the intangible asset we hold in the
balance sheet and GBPnil (2020: GBP1m) against the related
goodwill. At the year end, our intangible asset was GBP2m and the
related goodwill was GBP1m.
Taxation
As a REIT, our income and capital gains from qualifying
activities are exempt from corporation tax. 90% of this income must
be distributed as a Property Income Distribution and is taxed at
the shareholder level to give a similar tax position to direct
property ownership. Non-qualifying activities, such as sales of
trading properties, are subject to corporation tax. This year,
there was no net tax charge (2020: credit of GBP5m).
The Group has met all the REIT requirements, including the
payment by 31 March 2021 of the minimum Property Income
Distribution (PID) for the year ended 31 March 2020. The forecast
minimum PID for the year ended 31 March 2021 is GBP143m, which must
be paid by 31 March 2022. The Group has already made PID dividends
relating to 31 March 2021 of GBP49m, leaving GBP94m to be paid in
the coming year.
Our latest tax strategy can be found on our corporate website.
In the year, the total taxes we incurred and collected were GBP69m
(2020: GBP171m), of which GBP25m (2020: GBP47m) was directly borne
by the Group including environmental taxes, business rates and
stamp duty land tax. The Group has a low tax risk rating from
HMRC.
Balance sheet
Table 10: Balance sheet
31 March 2021 31 March 2020
GBPm GBPm
----------------------------------------- ------------- -------------
Combined Portfolio 10,791 12,781
Adjusted net debt (3,489) (3,926)
Other net liabilities (2) (21)
----------------------------------------- ------------- -------------
EPRA net tangible assets 7,300 8,834
Excess of fair value over net investment
in finance leases book value (93) (90)
Other intangible asset 2 7
Fair value of interest-rate swaps 3 (1)
----------------------------------------- ------------- -------------
Net assets 7,212 8,750
----------------------------------------- ------------- -------------
Net assets per share 975p 1,182p
EPRA net tangible assets per share(1) 985p 1,192p
----------------------------------------- ------------- -------------
1. EPRA net tangible assets per share is a diluted measure.
Our net assets principally comprise the Combined Portfolio less
net debt. Both IFRS net assets and EPRA net tangible assets
declined over the year ended 31 March 2021 primarily due to the
reduction in the value of our investment properties.
At 31 March 2021, our net assets per share were 975p, a decrease
of 207p or 17.5% from 31 March 2020. EPRA net tangible assets per
share were 985p, a decrease of 207p or 17.4%.
Table 11 summarises the key components of the GBP1,534m decrease
in our EPRA net tangible assets over the year.
Table 11: Movement in EPRA net tangible assets(1)
Diluted per
share
GBPm pence
------------------------------------------ ----------- -----------
EPRA net tangible assets at 31 March 2020 8,834 1,192
Revenue profit 251 34
Valuation deficit (1,646) (222)
Dividends (133) (18)
Other (6) (1)
------------------------------------------ ----------- -----------
EPRA net tangible assets at 31 March 2021 7,300 985
------------------------------------------ ----------- -----------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Net debt and gearing
Table 12: Net debt and gearing
31 March 2021 31 March 2020
--------------------------------- ------------- -------------
Net debt GBP3,509m GBP3,942m
Adjusted net debt(1) GBP3,489m GBP3,926m
--------------------------------- ------------- -------------
Group LTV(1) 32.2% 30.7%
Security Group LTV 32.7% 32.5%
Weighted average cost of debt(1) 2.2% 1.8%
--------------------------------- ------------- -------------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Over the year, our net debt decreased by GBP433m to GBP3,509m.
The main elements behind this decrease are set out in our statement
of cash flows and note 14 to the financial statements.
Adjusted net debt was down GBP437m to GBP3,489m, with the main
movements outlined in table 13 below. For a reconciliation of net
debt to adjusted net debt, see note 13 to the financial
statements.
Table 13: Movement in adjusted net debt(1)
GBPm
--------------------------------------------------- -----
Adjusted net debt at 31 March 2020 3,926
Adjusted net cash inflow from operating activities (249)
Dividends paid 127
Capital expenditure 220
Acquisitions 95
Disposals (634)
Deferred consideration received (10)
Premium on redemption of MTNs 3
Other 11
--------------------------------------------------- -----
Adjusted net debt at 31 March 2021 3,489
--------------------------------------------------- -----
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Net cash inflow from operating activities was GBP249m. Capital
expenditure on investment properties was GBP220m, largely related
to our development programme, with a further GBP95m spent on
acquiring investment properties, principally 55 Old Broad Street,
EC2. Net cash flow from disposals totalled GBP634m, with GBP550m
received from the sale of 1 & 2 New Ludgate, EC4, GBP78m from
the sale of 7 Soho Square, W1 and GBP4m from trading
properties.
The most widely used gearing measure in our industry is
loan-to-value (LTV). We focus most on Group LTV, presented on a
proportionate basis, which increased from 30.7% at 31 March 2020 to
32.2% at 31 March 2021, due to the decline in the value of our
assets partly offset by the reduction in net debt. Our Security
Group LTV also increased, from 32.5% to 32.7%, but to a lesser
extent as we moved additional assets into the Security Group.
Financing
At 31 March 2021, our committed revolving facilities totalled
GBP2,715m (31 March 2020: GBP2,715m). The pricing of our facilities
which fall due in more than one year range from LIBOR +65 basis
points to LIBOR +75 basis points. Borrowings under our commercial
paper programme typically have a maturity of less than three
months, currently carry a weighted average interest rate of LIBOR
+11 basis points and are unsecured.
The total amount of drawn bank debt was GBP209m (31 March 2020:
GBP1,944m) with GBP906m of commercial paper in issue (31 March
2020: GBP977m). At 31 March 2021, we did not have any cash on hand
(31 March 2020: cash balances of GBP1,345m). During the year, the
sterling bond and commercial paper markets normalised, having been
effectively closed to new issuance at March 2020. As a result,
during the early part of the year, we repaid the cash balances we
were holding as a liquidity buffer at 31 March 2020. At 31 March
2021, we had GBP1.6bn of available undrawn facilities, net of our
outstanding commercial paper.
The weighted average maturity of our debt has increased to 11.5
years following a reduction at 31 March 2020 to 9.6 years after we
drew down on our facilities. The weighted average cost of our debt
at 31 March 2021 was 2.2% (31 March 2020: 1.8%). The weighted
average cost of our net debt at 31 March 2021, which recognises the
minimal interest income on cash deposits, was also 2.2% (31 March
2020: 2.4%).
Dividend
During the year we reinstated quarterly dividends, having
suspended them due to the pandemic. We did not declare a first
quarterly dividend, but paid a second quarterly dividend of 12.0p
per share which we viewed as a combined first and second quarterly
dividend at a level of 6.0p per quarter. A third quarterly dividend
of 6.0p per share was paid on 30 March 2021. We are now
recommending a final dividend of 9.0p per share to be paid on 23
July 2021 to shareholders registered at the close of business on 18
June 2021. Together with the final dividend, our full year dividend
is 27.0p or GBP200m, up 16.4%. The first quarterly dividend,
payable in October 2021, will be announced nearer the time.
At 31 March 2021, the Company had distributable reserves of
GBP2.7bn. We do not anticipate that the level of distributable
reserves will limit distributions for the foreseeable future.
Martin Greenslade
Chief Financial Officer
Operating and portfolio review
At a glance
3/4 Valuation deficit of 13.7%(1)
3/4 Ungeared total property return of -9.6%
3/4 GBP24m of investment lettings, with a further GBP12m in solicitors' hands
3/4 Like-for-like voids: 4.4% (31 March 2020: 2.5%) and units in
administration: 2.2% (31 March 2020: 0.8%)
3/4 1.0 million sq ft of developments now on site
Central London
3/4 Valuation deficit of 6.5%(1)
3/4 Ungeared total property return of -2.3%
3/4 GBP9m of investment lettings with a further GBP1m in solicitors' hands
3/4 Like-for-like voids: 3.3% (31 March 2020: 1.3%) and units in
administration: 0.3% (31 March 2020: nil)
Regional retail
3/4 Valuation deficit of 31.4%(1)
3/4 Ungeared total property return of -28.4%
3/4 GBP9m of investment lettings, with a further GBP7m in solicitors' hands
3/4 Like-for-like voids: 7.5% (31 March 2020: 4.7%) and units in
administration: 5.8% (31 March 2020: 2.1%)
3/4 Footfall down 65.3% (ShopperTrak national benchmark down 58.2%)
3/4 Same centre sales (excluding automotive), taking into
account new lettings and occupier changes, down 59.4% (BRC national
benchmark down 29.2%)
Urban opportunities
3/4 Valuation deficit of 23.3%(1)
3/4 Ungeared total property return of -21.4%
3/4 GBP1m of investment lettings, with a further GBP1m in solicitors' hands
3/4 Like-for-like voids: 5.0% (31 March 2020: 4.8%) and units in
administration: 1.1% (31 March 2020: 0.4%)
Subscale sectors
3/4 Valuation deficit of 16.4%(1)
3/4 Ungeared total property return of -12.8%
3/4 GBP5m of investment lettings, with a further GBP3m in solicitors' hands
3/4 Like-for-like voids: 2.5% (31 March 2020: 2.0%) and units in
administration: 2.9% (31 March 2020: 0.9%)
1. On a proportionate basis.
We have a GBP10.8bn Combined Portfolio which is comprised of
office space in London, and retail, leisure and hotel assets across
the UK. We focus on maximising financial, physical and social value
through providing the spaces and environments to allow businesses
and people to thrive. This approach has been particularly important
during the challenging environment we have operated in during the
pandemic. Our focus during the year has been on supporting our
customers and positioning our business to emerge from the pandemic
in as strong a position as possible.
The impact of Covid-19 and our response
Our entire financial year was impacted by the pandemic.
Operationally, all areas of the business were affected but the
impact varied across the portfolio. Our office portfolio remained
open throughout the year; occupation was significantly below
pre-Covid-19 levels but we saw progressively higher levels of
occupancy during each successive lockdown. In retail, leisure and
hotels, the impact was more severe - during periods of lockdown,
only essential retail and services could trade, with other
operators limited to servicing online customers or providing
takeout services. The financial impact of Covid-19 was much more
acute in the retail and hospitality segments of our business, where
rent collection rates were significantly below pre-Covid-19 levels.
Almost all of the rent due from our office occupiers was
collected.
Our priorities throughout the year have been: (i) colleague and
visitor safety; (ii) proactively supporting our customers; and
(iii) preserving financial strength and flexibility. We tailored
our support to the specific needs of each area of the business.
In offices, we provided some financial support to a very small
number of occupiers whose businesses were particularly impacted by
the pandemic, but the majority of our support related to ensuring
the safety of our spaces and helping our customers to adapt their
spaces to meet their specific needs.
In retail and hospitality, our focus was on providing financial
support from our GBP80m customer support fund, ensuring our assets
allowed safe and easy navigation for guests, and providing
marketing and operational support for our customers.
For our people, we provided regular updates from our business
resilience team, increased the mental health and wellbeing support
available for those who needed it and we made sure there was
regular contact between teams while working from home. None of our
people have been furloughed.
We took advantage of resilient investment markets in London to
maintain financial capacity and flexibility through targeted
disposals, and minimised the disruption to our committed
developments while preserving optionality on our longer-term
pipeline.
As the year progressed, and the path out of the pandemic became
clearer, we focused on ensuring our portfolio and strategy were
positioned appropriately for a post-Covid-19 world. Covid-19 has
accelerated many existing trends which would otherwise have taken a
number of years to play out. The range of office products we offer
will enable us to provide the space our customers need as they
adapt to potentially different and more flexible ways of operating,
combining office and home-based working. Our Regional retail
portfolio is well placed to provide the right mix of exciting
retail brands, leisure and entertainment which will be essential
for successful centres. And our hotels and leisure assets are well
placed to benefit from the consumer-led recovery we expect to see
as we emerge from lockdown restrictions.
Valuation of investment properties
Our Combined Portfolio declined in value by 13.7% or GBP1,646m
over the year compared with a decrease in the prior year of
GBP1,179m. A breakdown of valuation movements by category is shown
in table 14 below.
Table 14: Valuation analysis
Market
value Rental Movement
31 March Valuation value Net initial Equivalent in equivalent
2021 movement change(1) yield yield yield
GBPm % % % % bps
------------------------------ --------- --------- ---------- ----------- ---------- ---------------
Offices 5,194 -4.3 -1.9 4.4 4.6 3
London retail 623 -26.7 -25.2 4.4 4.5 26
Other central London 420 -1.2 n/a 2.6 4.4 6
Regional shopping centres
and shops 1,041 -38.2 -21.5 7.9 7.6 140
Outlets 722 -18.5 -3.8 5.3 6.8 91
Urban opportunities 360 -23.4 -11.0 5.6 5.9 73
Leisure 483 -22.9 -7.1 6.9 7.6 118
Hotels 406 -13.4 -17.2 3.3 5.5 34
Retail parks 397 -10.1 -8.1 7.4 7.6 15
Total like-for-like portfolio 9,646 -14.8 -9.1 5.0 5.5 29
Proposed developments 286 -12.4 n/a - n/a n/a
Development programme 713 -0.2 n/a - 4.3 n/a
Acquisitions 146 -5.4 n/a 3.3 5.4 n/a
Total Combined Portfolio 10,791 -13.7 -9.1 4.5 5.4 29
------------------------------ --------- --------- ---------- ----------- ---------- ---------------
1. Rental value change excludes units materially altered during the year.
The 13.7% decline in the value of our Combined Portfolio is
mostly due to a fall in the value of our retail and leisure assets,
driven by reductions in rental values and expanding equivalent
yields. Within the like-for-like portfolio, regional shopping
centres and shops saw the largest reduction in values, down 38.2%
overall as rental values reduced by 21.5% and yields moved out
140bps. London retail reduced in value by 26.7% as rental values
declined by 25.2% and yields moved out by 26bps. Our leisure assets
declined in value by 22.9% with rental values 7.1% lower and yields
expanding by 118bps, while hotels were down by 13.4% due to the
impact of Covid-19 on our turnover rents and a 34bps expansion in
yields. Our office assets saw a more modest decrease in value of
4.3% as rental values declined by 1.9% and yields moved out
slightly. The values of our other central London assets,
principally Piccadilly Lights, W1, were down marginally.
Outside the like-for-like portfolio, values in the development
programme were broadly flat, with the value of 21 Moorfields, EC2
increasing as we approach completion of the development, offset by
declines at Lucent, W1 and n2, SW1 where expected rents have been
slightly reduced and development costs increased. The 12.4% decline
in the value of our proposed developments is due to Portland House,
SW1 and Timber Square, SE1 where expected rents have reduced and
costs on Portland House have increased. Our acquisitions fell in
value by 5.4%, driven by a decline in value of the X-Leisure
portfolio, where we acquired the remaining 5% in December 2019.
Optimise our Central London portfolio
Our GBP7.3bn Central London portfolio comprises offices (85%),
associated ground level retail (9%) and other assets (6%), the most
significant of which is Piccadilly Lights, W1. The portfolio is
characterised by its quality, resilience and liquidity and despite
challenging market conditions, valuations were resilient with our
office valuations declining by 4.1%. Our offices remain almost
fully let and rent collection remained strong, with almost all of
the rent due now collected, reflecting the strength of our occupier
base.
The central London market has been significantly impacted by the
pandemic but Landsec remains in a strong position with high levels
of rent collection and a clear strategy to create value.
Covid-19 impacted the London office market in two ways: low
levels of occupation and a significant reduction in demand for new
space. This, in turn, affected the London retail and hospitality
sectors which are dependent upon office workers and tourism for the
majority of their custom. Retail footfall in central London was
down 82% year on year, reflecting the challenging nature of this
market.
Physical occupancy in our offices portfolio was, on average,
6.2% reflecting a combination of working from home and social
distancing guidelines as employers imposed occupancy limits as part
of maintaining a Covid-19 secure workplace. Central London office
take-up in the 12 months to March 2021 was just 4.4million sq ft -
the lowest annual take-up rate for over 30 years. Availability
across the market increased to 25.3 million sq ft, compared with
the 10-year average of 14.8 million sq ft, driven by second-hand
space as leases expired and some occupiers looked to sub-let excess
office capacity. As a result, vacancy rates rose to 8.9%, the
majority of which is second-hand space. Despite this, there
continues to be demand for high-quality office space, with 39% of
total take-up being of new space. One of the trends accelerated by
Covid-19 is demand for sustainable, healthy work environments. This
is offered by the best space and is likely to continue the
bifurcation of the occupier market.
Investment market volumes in the 12 months to March 2021 were
below the long-term average with transactions totalling GBP7.2bn,
reflecting the logistical challenges of viewing assets particularly
by overseas investors, but there was continued demand for long
income, high-quality assets. London remains a global financial
centre and, with average prime yields of 3.75%, continues to offer
relative value compared with other major cities.
Supporting our Central London customers
Supporting our customers and maintaining their safety has been a
top priority this year. The vast majority of our office customers'
businesses were resilient throughout the year, but we used our
customer support fund to help three who were particularly
challenged. As customers start to plan for their return to the
office, we are liaising closely with them to understand their
intentions and help them return smoothly and safely.
While some customers will review and potentially consolidate
their requirements, there is ongoing demand for high quality office
space, and we are seeing the benefit of working alongside our
customers to understand their needs. For example, in Victoria, we
are currently in active discussions with seven occupiers across
300,000 sq ft in five buildings. This ranges from a 40% upsize to a
20% downsize. The outcome will be stronger customer relationships,
re-geared leases, a more diverse product mix and reduced vacancy
across the estate. This is not simply a function of upcoming lease
events, it is being driven by strategic partnerships with our
occupiers and a proactive approach to delivering the right
solutions for them.
While our office customers have remained resilient, the trading
environment for central London retail and hospitality has been
particularly challenged, and we expect this part of the market to
take longer to recover. Through our customer support fund we have
provided GBP6m of concessions, together with longer-term support
through turnover related leases for some customers. In addition to
financial support, we are helping customers with their reopening
plans. Alongside targeted marketing, we have worked closely with
local authorities to enable hospitality customers to extend their
outside trading capacity, creating space for 680 additional
covers.
We are seeing interest from occupiers in taking new space, but
the market remains challenging. In Victoria, One Rebel expanded
their footprint at Nova, we have good interest in the former
Goldsmiths unit at Cardinal Place, and we are exploring upsize
options for one of our existing brand partners. At One New Change,
EC4, we completed the letting of the former Topshop unit to Zara as
well as progressing renewal terms with a number of existing brand
partners.
Disposals
In line with our strategy to recycle capital out of assets where
there are limited opportunities for us to add further value, we
completed two disposals during the year. In September 2020, we sold
7 Soho Square, W1 for GBP78m at a 4.0% yield and 4.3% above the
March 2020 valuation, and in December, we sold 1 & 2 New
Ludgate, EC4 for GBP552m at a 4.2% yield and 1.1% above the March
2020 valuation. Both assets attracted significant interest from
bidders and demonstrate the continued demand for prime London
office assets.
Developments and acquisitions
During the year, our focus has been on progressing our committed
development schemes and preserving optionality on the others. We
maintained flexibility in the pipeline while we assessed the
long-term prospects of the London office market. Having completed
our review in the first quarter of 2021, we increased our
speculative developments to 451,000 sq ft by adding n2, SW1 to our
existing schemes at Lucent, W1 and The Forge, SE1. Alongside our
pre-let to Deutsche Bank at 21 Moorfields, EC2, this takes our
committed activity to 1.1 million sq ft, with a further 1.0 million
sq ft held for development.
At 21 Moorfields, the contractor Sir Robert McAlpine, doubled
the facilities space for construction workers in order to
accommodate more people on site in a Covid-secure way. Weekend
working was also introduced to mitigate some of the delays
resulting from lower on-site capacity. However, as a result of the
lower on-site capacity we now expect practical completion to be
delayed to July 2022.
At Lucent, The Forge and n2, we negotiated break options ahead
of entering into the main construction contracts. This enabled us
to progress with building to grade and construction of the cores
while maintaining optionality before committing to further work and
capex. With confidence in the long-term prospects of the London
office market, we fully committed to Lucent and The Forge in
September and n2 in March. Completion dates at The Forge, Lucent
and n2 are June 2022, December 2022 and June 2023 respectively.
To date, the additional costs resulting from the impact of
Covid-19 have been accommodated within the contingency allowances
of the schemes' total development costs (TDCs), but further
disruption may put modest upward pressure on TDCs as projects
complete. We continue to focus on mitigating the cost impact of
Covid-19 wherever possible.
Despite the current low levels of take-up in the market, we
remain confident about the occupational markets we will deliver
space into. Demand is expected to be strongest for prime,
high-quality, sustainable space and our three speculative office
schemes will meet this need in different locations in London, with
phased completion dates.
We added to our development potential with two acquisitions
during the year. In December, we purchased 55 Old Broad Street, EC2
for GBP87m. The acquisition offers significant marriage value as
the site is adjacent to an existing Landsec asset, Dashwood. We
also acquired the remaining undeveloped land on the Nova, SW1
island site from our joint venture for a consideration of GBP13m.
We now own 100% of the final two phases at Nova (n2 and Nova Place)
and we have recently satisfied all of the Nova P1 planning
obligations, meaning Nova Place is now an unencumbered site.
Positioning our London business for a post-pandemic world
The long-term impact of the pandemic on central London is not
yet clear but it won't be uniform. We are likely to see some
bifurcation of demand as quality of space and sustainability
credentials become significant factors for customers. Some sectors,
such as banking and professional services, may reduce their
floorspace. Others, such as tech, are not necessarily changing
footprint size but are focused on quality of space and employee
choice. We will work closely with our occupiers to understand and
deliver their needs and the scale that is required.
It is clear that customers who are looking to consolidate want
to occupy the best space. This plays to our strengths. Our
portfolio and product range gives us the opportunity to tailor our
customer conversations to meet upsize, downsize and servicing
needs, which is leading to several positive re-gearing discussions.
We are also working with some customers to consolidate into a
smaller number of buildings, freeing up development opportunities
in assets which otherwise would not have become vacant.
Building on the progress made to date, our Optimise strategy is
based on four objectives:
Creating value through development
Our focus for the coming year will be on progressing our
committed schemes while minimising the impact of Covid-19 on
completion dates and costs. We are already seeing occupier interest
in our three speculative schemes and we will continue to work
towards securing pre-lets as activity in the occupational market
increases.
At Portland House, SW1, strip out and design works continued
through to the end of April. We are currently assessing the
potential timing of the scheme and are likely to pause to manage
development exposure.
At Timber Square, SE1, demolition of the existing building is
due to commence by the end of May 2021 with a decision on
development to be taken by the autumn. The earliest PC date is
February 2024 and we will assess the expected demand levels and
rental tone before committing to the scheme.
At 55 Old Broad Street, EC2, we will continue to work towards
vacant possession in December 2024. In the meantime, we will be
working up development plans while protecting short-term
income.
Creating value through resilience
Our high rent collection throughout the year demonstrates the
resilience of income from our office portfolio and, despite the
challenges of the pandemic, we renewed GBP8m of leases during the
year and secured GBP1m of new lettings. As we look to position our
portfolio for future growth, we are using data and insight to focus
our activities and capital on sectors, locations and products that
we believe will be successful for the long term.
We have three office products which enable us to meet the space
requirements of existing and potential customers, large or small,
established companies or new businesses. At 123 Victoria Street,
SW1, Myo occupancy averaged 85% over the year, and we extended five
leases with existing customers. At 31 March 2021, occupancy dropped
to 71% through lease expiries, but we are having positive
discussions with new customers, as well as upsizing discussions
with two existing customers. We are also trialling Covid-secure
daily and weekly bookings at 123 Victoria Street.
The reduction in central London footfall significantly impacted
the out-of-home advertising market in the year, with short-term
bookings at Piccadilly Lights, W1 68% below 2019/20. However, we
are starting to see evidence of the market recovering, with
significant interest for summer bookings. We have demonstrated the
long-term appeal of Piccadilly Lights, signing a new 10-year
agreement with Samsung and we are in discussions with two other
brands about longer-term agreements.
We will look to strengthen our resilience further through
acquisitions. We have identified a number of potential acquisitions
within London providing a range of opportunities for us to add
value.
Creating value through relentless customer focus
We are progressing the roll-out of our office products and
continue to invest in delivering great customer experiences across
our office portfolio. We have invested significantly into Dashwood,
EC2 where a range of Myo, Customised and Blank Canvas spaces have
been delivered in a single building. Myo Liverpool Street at
Dashwood, provides flexible office, meeting and amenity spaces on
floors 6 to 8, with delivery of floor 9 to follow later this year.
The Customised show floor is complete on level 2, with further
Customised floors available to be delivered on demand. A
visualisation tool has been created for customers to configure
their space virtually to ensure it meets their specific needs
before physical work starts.
Customised is also being delivered at 55 Old Broad Street, EC2
and 30 Eastbourne Terrace, W2, with further expansion of this
product planned to meet customer demand across our portfolio.
Landsec lounge spaces have been completed at One New Change, EC4
and 6 New Street Square, EC4 to enhance the arrival experience and
provide informal drop-in work and meeting spaces.
With a focus on delivering healthy and sustainable spaces, we
are progressing our WELL Building portfolio accreditation, aiming
to achieve accreditation across the entire office portfolio.
Realising value through disciplined capital recycling
Disposals in the financial year totalled GBP0.6bn at an average
yield of 4.1%.
We have indicated our intention to sell approximately GBP2.5bn
of Central London assets with more limited asset management
opportunities. We have made GBP0.6bn of disposals since March 2020
and therefore expect to sell a further GBP1.9bn over the next two
to three years.
Reimagine our Regional retail portfolio
Our GBP1.8bn Regional retail portfolio comprises six regional
shopping centres and five outlets.
Covid-19 has had a profound effect on the retail sector. In
addition to the short-term impact resulting from three lockdowns
and social distancing restrictions, the pandemic has significantly
accelerated the structural trends which were already changing how
people shop. Online is now the primary growth channel across most
areas of retail. For retail property to be relevant and thrive in
an omnichannel world, it needs to be compelling in its own right,
complementary to online or offer something which cannot easily be
replicated online.
Retailers recognise the importance of physical retail to their
omnichannel strategy, but there is too much of it in the UK and a
lot of it is poor quality. 17% of retail space across the UK is
currently vacant and this is expected to rise to 25% in 2025,
equivalent to 158 million sq ft of excess or obsolete retail
space.
Outlets are one of the strongest retail formats as they offer a
service and experience which cannot be replicated online. The
higher quality regional shopping centres are generally well placed
to support and complement online - brand mix needs to evolve, but
rents are approaching sustainable levels which will support store
level profitability.
Rent collection was significantly impacted by Covid-19
throughout the year. We have now collected 58% of the net rent due
on 25 March 2021. For the four quarters to 25 March 2021, 71% of
the net rent due has been collected. The rent moratorium, which
remains in place, restricted our ability to enforce rent
collections. With lockdown measures easing and operators
re-opening, we hope to see a return to timely rent payments and
settlement of arrears.
The scale and pace of retail and leisure CVAs and
administrations has increased significantly during the year, and
some high-profile names have disappeared from the retail landscape.
During the year, GBP41m of annualised rental income was subject to
CVA or administration, of which we lost GBP29m. This compares with
GBP9m of annualised rental income in 2019/20. 360 units across 58
brand partners were impacted, with 48 units falling void as a
result. Like-for-like voids across the portfolio were 7.5% (31
March 2020: 4.7%) and units in administration were 5.8% (31 March
2020: 2.1%).
We have engaged with a number of brand partners during the year
on opportunities to reduce their overall store portfolio, with some
customers also seeking consensual rent reductions to reduce their
occupancy costs. We remain committed to working alongside our
customers to ensure rents are affordable, and we welcome open and
constructive dialogue. However, during the year we have also taken
legal action where we believe insolvency processes have been used
unfairly, or due legal process has not been followed.
Supporting our retail customers
The pandemic brought significant operational challenges for the
portfolio and safety has always been our first priority. The first
lockdown, starting on 23 March 2020, saw footfall at our regional
shopping centres reduce significantly. Throughout each lockdown and
reopening we have had a clear plan for each asset, and provided
frequent communications to our brand partners and guests. We
adapted our response as conditions allowed, with brand partners
evolving the way they used their space to support online fulfilment
through click & collect and food deliveries. Post lockdown,
24-hour trading at some Bluewater stores helped to spread capacity
and drive sales.
In early April 2020, soon after the start of the first national
lockdown, we established a customer support fund of GBP80m for
occupiers who most needed our support. We have now granted GBP42m
of agreed concessions from the fund to brand partners.
We continued to work closely with our brand partners,
particularly in the lead up to the reopening of non-essential
retail in England and Wales on 12 April and in Scotland on 26
April. Early evidence suggests there is pent-up demand from
customers to return to physical retail and leisure. Shopping centre
sales, excluding F&B, in England are up 5% versus the same
period in 2019 and outlets up 14%, with footwear and outdoor
particularly popular sectors.
Positioning our retail business for a post-pandemic world
There are increasingly clear trends which could offer an
opportunity for us to reset the portfolio and provide a more
sustainable future:
Trend Landsec action / evidence
Retail winners are looking 3/4 Zara business development during
for fewer, larger stores the pandemic period:
3/4 White Rose, Leeds - 21,000 sq ft
renewal
3/4 One New Change, EC4 - new letting
of 26,000 sq ft
3/4 St David's, Cardiff - opened a
new 38,000 sq ft store
3/4 Bluewater, Kent - upsize opened
Dec 2020, from 19,000 sq ft to 37,000
sq ft
3/4 Decathlon have opened their 35,000
sq ft unit at Trinity Leeds
=============================================
Flight to prime as retailers Our exposure to outlets and the quality
demand the right space of our shopping centres mean our portfolio
in the best locations is well placed to benefit from the flight
to prime:
3/4 Trinity Leeds accounts for 19%
of retail space in Leeds city centre
but has a 35% share of spend
=============================================
Greater focus on experiences 3/4 The outlets experience is not replicable
online and provides a resilient model
3/4 Leisure will be another important
element of experience -we have let the
80,000 sq ft former Debenhams space
to Gravity at Southside, Wandsworth,
providing a significant footfall driver
and improvement in mix
=============================================
Greater operational alignment 3/4 Increased operational risk is a
with brand partners reality but it is something that can
be embraced and treated as an opportunity,
particularly with rents approaching
sustainable levels. We have increased
the number of turnover only leases by
76% this year
=============================================
Looking forward, our Reimagine strategy is based on three
priorities:
Creating value through tailored guest experiences
We are putting guest experiences at the heart of everything we
do, so that our destinations continue to be relevant for the
communities they serve and deliver shopping and leisure experiences
that cannot be matched online. This will help ensure our
destinations remain the location of choice for our brand partners
to deliver their physical and digital propositions to meet specific
needs of our guests. During the pandemic, we added activities
services such as virtual shopping and click & collect, expanded
our 'al fresco' dining options and introduced drive through
collection points to help our brand partners to connect with their
customers.
Creating value through deep brand partner relationships
We are developing deeper relationships with our brand partners
to enable them to maximise the role of the physical retail
environment. By understanding our brand partners and their
aspirations for the physical environment, we can develop a range of
leasing models to suit different situations. There will not be a
one-size-fits-all solution on how we contract with our brand
partners, but rather different models that enable all parties to
share in the value of the physical store. We are currently
developing a suite of four products to address evolving space
needs. These will operate in a similar way to the three products we
have developed within our office portfolio, enabling us to better
serve our brand partners and attract and retain new ones across
existing and emerging market segments.
Creating value through asset management expertise
The last few years have demonstrated that some of our retail
destinations are over-sized, and we do not have the best occupier
mix and usage of space at all our assets. We are underway designing
a new approach to assessing and planning the right use and mix of
space at our destinations. The approach is underpinned by data;
catchment insight, economic forecasts and predictions of social
trends all contribute to determining how our assets can be best
placed to maximise future growth and de-risk returns.
Grow through Urban opportunities
Urban opportunities are essentially mixed-use, multi-phase
regeneration projects rooted in a need to redevelop parts of the
built environment that are no longer fit for purpose. Retail is the
most prominent example, and our Urban opportunities portfolio
comprises five suburban London projects with redevelopment
potential over 1.6 million sq ft with the potential to extend to
around 8.0 million sq ft of mixed-use space.
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 our most advanced scheme, Finchley Road, NW3, consultations
have taken place with a further phase of consultation due in early
summer as we progress our master planning and design. We remain on
track to submit our planning application this coming financial
year. Our other projects are all progressing through concept and
design during the pre-development phase. Our large mixed-use
schemes will embrace local communities and placemaking to deliver
the most suitable and sustainable developments in line with our
purpose to provide sustainable places and connect communities. We
have engaged external agencies to help develop our overall vision
for our Urban opportunities. And we have progressed discussions
with a number of leisure operators to trade rent reductions for
lease break points and flexibility as we progress towards vacant
possession.
The redevelopment potential and more convenience-led nature of
these assets has meant that valuations have been more resilient
than shopping centres but were still down 23.3% to GBP0.4bn. Across
our five schemes, 45% of retailers remained open throughout the
third lockdown, significantly ahead of the rest of the retail
assets in our portfolio. This reflects the local convenience nature
of our five schemes and demonstrates that these assets already play
an important role within their local communities.
The timeline for these projects is long but the right
opportunities can start delivering balanced returns in the near
future. We are also evaluating opportunities to add to our
portfolio, ideally with projects that offer an accelerated returns
horizon.
So, looking forward, our strategy will be to progress planning
and delivery strategies for our existing portfolio of projects and
to evaluate and ideally secure new complementary opportunities.
Realise capital from Subscale sectors
Our GBP1.3bn Subscale sectors portfolio comprises hotels,
leisure parks and retail parks, which we intend to divest over the
medium term.
The GBP0.4bn hotel portfolio has been impacted by the periods of
lockdown during the pandemic with the majority of our hotels closed
for 20 weeks on average over the year. The portfolio is let on
turnover based leases and income has been significantly lower
during the year, down 90%. As lockdown restrictions ease, we expect
to see a recovery in the hotel sector and our portfolio of two and
three-star hotels is well placed to benefit.
Our leisure portfolio comprises assets typically anchored by
cinemas and leisure and F&B operators. Social distancing
measures have impacted the performance at these assets. Cinemas
were closed for 41 weeks of the year and the F&B industry has
been particularly challenged. This was reflected in valuations
which were down 23.0% to GBP0.5bn. These assets, like the hotels,
are well placed to benefit from the expected consumer-led recovery.
We continue to work on asset management initiatives across the
portfolio to ensure it is well positioned for sale.
Our ten retail parks performed more strongly, benefiting from
their open-air design and increased spending on home and leisure
products. However, the portfolio was not immune from the challenges
faced by the wider market and values declined by 10.1% to GBP0.4bn.
The valuation declines in retail parks are less pronounced than
other retail assets, and there has been increased investor demand
for stronger retail parks in recent months.
The F&B segment of both portfolios has been challenged but
we have responded quickly to replace operators. In response to
Pizza Hut entering CVA, we replaced three units with Canadian fast
food operator Tim Hortons on 15 year leases. In addition, Tim
Hortons will convert these units into drive-thrus. We have also
completed two deals with both KFC and Burger King. At six sites, we
have replaced units previously occupied by Chiquito, Frankie and
Benny's and Bella Italia with foodhall operator Gourmet4 - their
concept reverses the classic restaurant model with a delivery
business supported by a strong eat-in operation.
Principal risks and uncertainties
The Company has identified certain principal risks and
uncertainties that could prevent the Group from achieving its
strategic objectives and has assessed how these risks could best be
mitigated through a combination of internal controls, risk
management and the purchase of insurance cover. The Board
undertakes an annual assessment of the principal risks, taking
account of those that would threaten our business model, future
performance, solvency or liquidity as well as the Group's strategic
objectives.
A description of the principal risks and uncertainties faced by
the Group, together with an assessment of their impact, is set out
below. The Group's approach to the management and mitigation of
these risks will be included in the 2021 Annual Report.
During the year the business responded to the Covid-19 pandemic
through the establishment of a workstream structure to assess and
mitigate the myriad of risks facing the business as a result of the
pandemic. Our assessment and response processes have now been
embedded into our operations.
The table below shows the change in the risk profile of our
principal risks between 1 April 2020 and 31 March 2021. A key
change includes the segmentation of Customer risk. Our Customer
risk has been split into two segments, namely Customer - Retail and
hospitality (including London retail) and Customer - London office.
At the same time, we have absorbed key elements of the previous
Disruption risk into these two new segmented risks and,
accordingly, Disruption will no longer be reported as a standalone
risk.
Risk description Change in year
Customer - Retail and hospitality ó
(includes London retail)
===============================================
3/4 Structural changes in 3/4 This remains our most significant
customer and consumer expectations risk. We elevated the risk in March
leading to a change in demand 2020 and the risk remains very high
for space and the consequent today. We were already operating in
impact on income. a tough retail environment before
the Covid-19 outbreak and the pandemic
has accelerated some of the changes
that we were closely monitoring with
a shift to greater online shopping
from physical stores. In addition,
London retail has in the past year
seen lower footfall and trading levels
than regional retail as it is more
reliant on the presence of office
staff and tourism. In the future,
if fewer workers use offices, this
change could persist.
3/4 Hospitality has been highly impacted
by social distancing measures due
to Covid-19. This includes our leisure,
food & beverage and hotels. We are
regularly communicating with our customers
and are engaged in conversations about
how we can support them through this
difficult time. We continue to closely
monitor the rent collections across
the whole portfolio, which have reduced
significantly over the year. This
indicates a likely increase in business
failures and we are closely monitoring
customers in financial distress.
===============================================
Customer - London office ó
===============================================
3/4 Structural changes in 3/4 Leasing activity in the London
customer and consumer expectations office market has been severely depressed
leading to a change in demand by the pandemic and vacancy rates
for space and the consequent have risen. Our assets have seen a
impact on income. small rise in vacancy but are supported
by the continued differentiation of
our product offerings to align to
our customer needs and expectations,
including the successful introduction
of our flexible office products. However,
the reported success of workforces
working from home provides ongoing
uncertainty for this segment of our
business with some companies reappraising
their real estate options and how
they plan to use the office going
forward.
===============================================
Market cyclicality ò
===============================================
3/4 Market and political 3/4 The market cyclicality risk remains
uncertainty leading to a high at year-end due to the ongoing
reduction in demand or deferral impact of the pandemic on the economy
of decisions by occupiers, but has decreased since last year
impacting real estate values on the back of achieving a trade deal
and the ability to buy, develop, with the EU on the conclusion of Brexit
manage and sell assets at negotiations and the ongoing Covid-19
the appropriate time in the vaccine rollout.
property cycle.
===============================================
People and skills ó
===============================================
3/4 Inability to attract, 3/4 In response to Covid-19, the
retain, and develop the right majority of our employees have worked
people and skills required from home for much of the past year.
to deliver the business objectives Overall this transition has been smooth
in a culture and environment from a technology and communications
where employees can thrive. perspective. We have not seen any
significant impacts on employee productivity,
although we are carefully monitoring
employees' mental and physical wellbeing.
We have used regular 'Pulse' employee
surveys to understand employee engagement
and concerns throughout the pandemic.
===============================================
Major health, safety and ó
security incident
===============================================
3/4 Failure to identify, 3/4 We evaluated our fire management
mitigate and/or react effectively strategies across our entire property
to a major health, safety portfolio last year and identified
or security incident, leading some fire safety improvements. We
to: have now implemented these improvements.
3/4 Serious injury, illness 3/4 The fire safety regulatory environment
or loss of life continues to evolve and tighten requirements
3/4 Criminal/civil proceedings which is monitored closely at our
3/4 Loss of stakeholder Health, Safety & Security Committee.
confidence We have established a working group
3/4 Delays to building projects to respond to any new requirements
and access restrictions to around external cladding systems.
our properties resulting 3/4 As lockdown restrictions are
in loss of income eased, our efforts are focused on
3/4 Inadequate response ensuring we are well prepared for
to regulatory changes a gradual and safe return to our properties.
3/4 Reputational impact
===============================================
Information security and ó
cyber threat
===============================================
3/4 Data loss or disruption 3/4 The level of this risk has not
to the corporate systems changed, reflecting that, while companies
and building management systems continue to be subject to an increasing
resulting in a negative reputational, number of attempted cyber-attacks,
operational, regulatory or we have continued to develop and invest
financial impact. in the maturity of our mitigation
controls.
===============================================
Climate change ó
===============================================
3/4 Failure to properly 3/4 The residual risk is the same
identify and mitigate both as last year and we have intensified
physical and transition risks our mitigations, progressing plans
from climate change, leading to achieve our ambition to be a net
to a negative impact on our zero carbon business by 2030.
reputation, disruption in
our operations and stranded
assets.
===============================================
Investment and development ó
strategy
===============================================
3/4 Unable to effectively 3/4 This risk was elevated in March
execute our strategy of buying, 2020 and remains unchanged this year
developing and selling assets given the increased uncertainty around
at the appropriate time in the future economic environment into
the property cycle. Specifically: which we will deliver our developments.
3/4 Investment - inappropriate We have reprofiled our cash flows
sector or asset selection and commitments for the whole development
3/4 Development - unable pipeline and have completed analysis
to deliver capex programme on the pipeline based on potential
to agreed returns and/or future scenarios against the baseline
occupiers reluctant to commit budget.
to take new space
===============================================
Disruption n/a
===============================================
3/4 Inability to understand 3/4 Disruption risk, and the relevant
and mobilise effectively key risk indicators have been absorbed
to changes in our competitive into the customer segments as outlined
landscape and customer value above and will no longer be reported
chain. as a standalone risk.
===============================================
Statement of Directors' Responsibilities
The Annual Report 2021 will contain the following statements
regarding responsibility for the financial statements and business
reviews included therein.
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group and the Company financial statements in
accordance with the requirements of the Companies Act 2006. Under
the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules, group financial statements are required to be
prepared in accordance with international financial reporting
standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union. Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and the
Company and of the profit and loss of the Group and the Company for
that period.
In preparing these financial statements, the Directors are
required to:
3/4 select suitable accounting policies in accordance with IAS 8
'Accounting Policies, Changes in Accounting Estimates and Errors'
and then apply them consistently;
3/4 make judgements and accounting estimates that are reasonable and prudent;
3/4 present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
3/4 in respect of the group financial statements, state whether
international accounting standards in conformity with the
requirements of the Companies Act 2006 (and IFRSs adopted pursuant
to Regulation(EC) No 1606/2002 as it applies in the European Union)
have been followed, subject to any material departures disclosed
and explained in the financial statements;
3/4 in respect of the Company financial statements, state
whether international accounting standards in conformity with the
requirements of the Companies Act 2006 have been followed, subject
to any material departures disclosed and explained in the financial
statements;
3/4 provide additional disclosures when compliance with the
specific requirements of IFRS is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the Group's and Company's financial position and
performance; and
3/4 prepare the Group's and Company's financial statements on a
going concern basis, unless it is inappropriate to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company, and to
enable them to ensure that the Annual Report complies with the
Companies Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS regulation. They are also responsible for
safeguarding the assets of the Group and the Company and hence for
taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Directors' responsibility statement under the Disclosure and
Transparency Rules
Each of the Directors, whose names and functions appear below,
confirm to the best of their knowledge:
3/4 the Group financial statements, which have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 (and IFRSs adopted
pursuant to Regulation(EC) No 1606/2002 as it applies in the
European Union) give a true and fair view of the assets,
liabilities, financial position, performance and cash flows of the
Company and Group as a whole; and
3/4 the Strategic Report contained in the Annual Report includes
a fair review of the development and performance of the business
and the position of the Group and the Company, together with a
description of the principal risks and uncertainties faced by the
Group and Company.
Directors' statement under the UK Corporate Governance Code
Each of the Directors confirm that to the best of their
knowledge the Annual Report taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group's and Company's position,
performance, business model and strategy.
A copy of the financial statements of the Group is placed on the
Company's website. The Directors are responsible for the
maintenance and integrity of statutory and audited information on
the Company's website at landsec.com. Information published on the
internet is accessible in many countries with different legal
requirements. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
The Directors of Land Securities Group PLC as at the date of
this announcement are as set out below:
3/4 Cressida Hogg, Chairman*
3/4 Mark Allan, Chief Executive
3/4 Martin Greenslade, Chief Financial Officer
3/4 Vanessa Simms, Chief Financial Officer Designate
3/4 Colette O'Shea, Chief Operating Officer
3/4 Edward Bonham Carter, Senior Independent Director*
3/4 Nicholas Cadbury*
3/4 Madeleine Cosgrave*
3/4 Christophe Evain*
3/4 Stacey Rauch*
3/4 Manjiry Tamhane*
*Non-executive Directors
The Statement of Directors' Responsibilities was approved by the
Board of Directors on 17 May 2021 and is signed on its behalf
by:
Mark Allan Martin Greenslade
Chief Executive Chief Financial Officer
Financial statements
Income statement Year ended Year ended
31 March 2021 31 March 2020
Capital Capital
Revenue and other Revenue and other
profit items Total profit items Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ----- ------- ----------- -------- ------- ---------- --------
Revenue 5 631 4 635 740 1 741
Costs - bad and doubtful debts
expense 6 (110) - (110) (28) - (28)
Costs - other 6 (218) (5) (223) (241) (5) (246)
303 (1) 302 471 (4) 467
Share of post-tax profit/(loss)
from joint ventures 12 8 (200) (192) 22 (173) (151)
Profit/(loss) on disposal of
investment properties - 8 8 - (6) (6)
Net deficit on revaluation of
investment properties 10 - (1,448) (1,448) - (1,000) (1,000)
---------------------------------- ----- ------- ----------- -------- ------- ---------- --------
Operating profit/(loss) 311 (1,641) (1,330) 493 (1,183) (690)
Finance income 7 15 1 16 17 1 18
Finance expense 7 (75) (4) (79) (96) (69) (165)
---------------------------------- ----- ------- ----------- -------- ------- ---------- --------
Profit/(loss) before tax 251 (1,644) (1,393) 414 (1,251) (837)
Taxation - 5
---------------------------------- ----- ------- ----------- -------- ------- ---------- --------
Loss attributable to shareholders (1,393) (832)
---------------------------------- ----- ------- ----------- -------- ------- ---------- --------
Loss per share attributable
to shareholders:
Basic loss per share 4 (188.2)p (112.4)p
Diluted loss per share 4 (188.2)p (112.4)p
---------------------------------- ----- ------- ----------- -------- ------- ---------- --------
Statement of comprehensive income Year ended Year ended
31 March 2021 31 March 2020
Total Total
GBPm GBPm
---------------------------------------------------- -------------- --------------
Loss attributable to shareholders (1,393) (832)
------------------------------------------------------ -------------- --------------
Items that may be subsequently reclassified
to the income statement:
Movement in cash flow hedges - (1)
Items that will not be subsequently reclassified
to the income statement:
Movement in the fair value of other investments (3) (3)
Net re-measurement (loss)/gain on defined
benefit pension scheme (12) 6
Deferred tax credit/(charge) on re-measurement
above 2 (1)
Other comprehensive (loss)/income attributable
to shareholders (13) 1
------------------------------------------------------ -------------- --------------
Total comprehensive loss attributable
to shareholders (1,406) (831)
------------------------------------------------------ -------------- --------------
Balance sheet
2021 2020
Notes GBPm GBPm
-------------------------------------------------- ----- ------- -------
Non-current assets
Investment properties 10 9,607 11,297
Intangible assets 8 14
Net investment in finance leases 152 156
Investments in joint ventures 12 625 824
Trade and other receivables 170 178
Other non-current assets 22 32
-------------------------------------------------- ----- ------- -------
Total non-current assets 10,584 12,501
-------------------------------------------------- ----- ------- -------
Current assets
Trading properties 11 36 24
Trade and other receivables 354 433
Monies held in restricted accounts and deposits 15 10 9
Cash and cash equivalents 16 - 1,345
Other current assets 6 48
-------------------------------------------------- ----- ------- -------
Total current assets 406 1,859
-------------------------------------------------- ----- ------- -------
Total assets 10,990 14,360
-------------------------------------------------- ----- ------- -------
Current liabilities
Borrowings 14 (906) (977)
Trade and other payables (252) (270)
Other current liabilities (7) (2)
Total current liabilities (1,165) (1,249)
-------------------------------------------------- ----- ------- -------
Non-current liabilities
Borrowings 14 (2,610) (4,355)
Trade and other payables (1) (1)
Other non-current liabilities (2) (5)
Total non-current liabilities (2,613) (4,361)
-------------------------------------------------- ----- ------- -------
Total liabilities (3,778) (5,610)
-------------------------------------------------- ----- ------- -------
Net assets 7,212 8,750
-------------------------------------------------- ----- ------- -------
Equity
Capital and reserves attributable to shareholders
Ordinary shares 80 80
Share premium 317 317
Other reserves 28 27
Retained earnings 6,787 8,326
-------------------------------------------------- ----- ------- -------
Total equity 7,212 8,750
-------------------------------------------------- ----- ------- -------
The financial statements on pages 37 to 58 were approved by the
Board of Directors on 17 May 2021 and were signed on its behalf
by:
M C Allan M F Greenslade
Directors
Statement of changes in equity Attributable to shareholders
Ordinary Share Other Retained Total
shares premium reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- --------- --------- -------
At 1 April 2019 80 317 26 9,497 9,920
Total comprehensive loss for
the financial year - - - (831) (831)
Transactions with shareholders:
-------- -------- --------- --------- -------
Share-based payments - - 1 2 3
Dividends paid to shareholders - - - (342) (342)
Total transactions with shareholders - - 1 (340) (339)
At 31 March 2020 80 317 27 8,326 8,750
--------------------------------------- -------- -------- --------- --------- -------
Total comprehensive loss for
the financial year - - - (1,406) (1,406)
Transactions with shareholders:
-------- -------- --------- --------- -------
Share-based payments - - 4 - 4
Dividends paid to shareholders - - - (133) (133)
Acquisition of own shares - - (3) - (3)
-------- -------- --------- --------- -------
Total transactions with shareholders - - 1 (133) (132)
At 31 March 2021 80 317 28 6,787 7,212
--------------------------------------- -------- -------- --------- --------- -------
Statement of cash flows Year ended
31 March
2021 2020
Notes GBPm GBPm
---------------------------------------------------------- ----- ------- -----
Cash flows from operating activities
Net cash generated from operations 9 322 504
Interest received 4 16
Interest paid (83) (108)
Rents paid (9) (12)
Capital expenditure on trading properties (1) (2)
Other operating cash flows - 3
---------------------------------------------------------- ----- ------- -----
Net cash inflow from operating activities 9 233 401
---------------------------------------------------------- ----- ------- -----
Cash flows from investing activities
Investment property development expenditure (177) (154)
Other investment property related expenditure (41) (47)
Acquisition of investment properties (99) (16)
Disposal of investment properties 631 45
Deferred consideration received 10 -
Cash contributed to joint ventures 12 - (13)
Cash distributions from joint ventures 12 16 69
Other investing cash flows (6) -
---------------------------------------------------------- ----- ------- -----
Net cash inflow/(outflow) from investing activities 334 (116)
---------------------------------------------------------- ----- ------- -----
Cash flows from financing activities
Proceeds from new borrowings (net of finance fees) 14 - 1,701
Repayment of bank debt 14 (1,755) -
Repayment of medium term notes 14 - (47)
Redemption of medium term notes 14 (12) (196)
Premium paid on redemption of medium term notes 14 (3) (59)
Net cash outflow from derivative financial instruments (12) (1)
Settlement of redemption liability - (36)
Dividends paid to shareholders 8 (127) (342)
(Increase)/decrease in monies held in restricted accounts
and deposits (1) 27
Other financing cash flows (2) (1)
---------------------------------------------------------- ----- ------- -----
Net cash (outflow)/inflow from financing activities (1,912) 1,046
---------------------------------------------------------- ----- ------- -----
(Decrease)/increase in cash and cash equivalents for
the year (1,345) 1,331
Cash and cash equivalents at the beginning of the
year 1,345 14
---------------------------------------------------------- ----- ------- -----
Cash and cash equivalents at the end of the year 16 - 1,345
---------------------------------------------------------- ----- ------- -----
Notes to the financial statements
1. Basis of preparation and consolidation
=========================================
Basis of preparation
These financial statements have been prepared on a going concern
basis and in accordance with international accounting standards in
conformity with the Companies Act 2006. The Group financial
statements have been prepared in accordance with IFRSs and IFRICs
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union. The financial statements have been prepared in
Pounds Sterling (rounded to the nearest one million), which is the
presentation currency of the Group (Land Securities Group PLC and
all its subsidiary undertakings), and under the historical cost
convention as modified by the revaluation of investment property,
financial assets at fair value through other comprehensive income
(without recycling), derivative financial instruments and pension
assets.
The preparation of financial statements in conformity with
generally accepted accounting principles (GAAP) requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results
ultimately may differ from those estimates.
On 17 May 2021, the consolidated financial statements of the
Group and this preliminary announcement were authorised for issue
in accordance with a resolution of the Directors and will be
delivered to the Registrar of Companies following the Group's
Annual General Meeting. Statutory accounts for the year ended 31
March 2020 have been filed unqualified and do not contain any
statement under Section 498(2) or Section 498(3) of the Companies
Act 2006. The annual financial information presented in this
preliminary announcement for the year ended 31 March 2021 is based
on, and consistent with, the financial information in the Group's
audited financial statements for the year ended 31 March 2020. The
audit report on these financial statements is unqualified and did
not contain a statement under Section 498(2) or 498(3) of the
Companies Act 2006. This preliminary announcement does not
constitute statutory financial statements of the Group within the
meaning of Section 435 of the Companies Act 2006. While the
information included in this preliminary announcement has been
prepared in accordance with the recognition and measurement
criteria of IFRS, this announcement does not itself contain
sufficient information to comply with IFRS.
A copy of the Group's Annual Report for the year ended 31 March
2020 can be found on the website at landsec.com/investors.
Going concern
As the impact of Covid-19 on the Group continues to be
significant, particularly on our ability to collect rent and
service charge from customers, the Directors have continued to
place additional focus on the appropriateness of adopting the going
concern assumption in preparing the financial statements for the
year ended 31 March 2021. The Group's going concern assessment
considers changes in the Group's principal risks (see pages 32-34)
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 continuation of
difficulties experienced collecting rent and service charge from
our customers and removes uncommitted acquisitions, disposals and
developments. 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 twelve
months to 31 May 2022, are shown below alongside the actual
position at 31 March 2021.
Key metrics Viability scenario
31 March 2021 31 May 2022
----------------------------- ------------- ------------------
Security Group LTV 32.7% 36.8%
Adjusted net debt GBP3,489m GBP3,319m
EPRA net tangible assets GBP7,300m GBP5,792m
Available financial headroom GBP1.6bn GBP1.8bn
------------------------------ ------------- ------------------
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 12 months
from the date of authorisation of these financial statements. The
value of our assets would need to fall from 31 March 2021 values by
a further 50% 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 GBP71m in the
year ending 31 March 2022 for interest cover to remain above 1.45x
in the Viability scenario, which would ensure compliance through to
the end of the going concern assessment period. Despite the
challenging trading conditions experienced during the year ended 31
March 2021, Security Group earnings are well above the level
required to meet the interest cover covenant. Therefore, the
Directors do not anticipate a reduction in Security Group earnings
over the period ending 31 May 2022 to a level that would result in
a breach of the interest cover covenant, even if the trading
conditions experienced in the year ended 31 March 2021 continue
over this period.
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 year ended 31 March 2021.
Basis of consolidation
The consolidated financial statements for the year ended 31
March 2021 incorporate the financial statements of the Company and
all its subsidiary undertakings. Subsidiary undertakings are those
entities controlled by the Company. Control exists where an entity
is exposed to variable returns and has the ability to affect those
returns through its power over the investee.
The results of subsidiaries and joint ventures acquired or
disposed of during the year are included from the effective date of
acquisition or to the effective date of disposal. Accounting
policies of subsidiaries and joint ventures which differ from Group
accounting policies are adjusted on consolidation.
Where instruments in a subsidiary held by third parties are
redeemable at the option of the holder, these interests are
classified as a financial liability, called the redemption
liability. The liability is carried at fair value; the value is
reassessed at the balance sheet date and movements are recognised
in the income statement.
Intra-group balances and any unrealised gains and losses arising
from intra-group transactions are eliminated in preparing the
consolidated financial statements. Unrealised gains arising from
transactions with joint ventures are eliminated to the extent of
the Group's interest in the joint venture concerned. Unrealised
losses are eliminated in the same way, but only to the extent that
there is no evidence of impairment.
Our property portfolio is a combination of properties that are
wholly owned by the Group, part owned through joint arrangements
and properties owned by the Group but where a third party holds a
non-controlling interest. Internally, management review the results
of the Group on a basis that adjusts for these different forms of
ownership to present a proportionate share. The Combined Portfolio,
with assets totalling GBP10.8bn, is an example of this approach,
reflecting the economic interest we have in our properties
regardless of our ownership structure. We consider this
presentation provides further understanding to stakeholders of the
activities and performance of the Group, as it aggregates the
results of all of the Group's property interests which under IFRS
are required to be presented across a number of line items in the
statutory financial statements.
The same principle is applied to many of the other measures we
discuss and, accordingly, a number of our financial measures
include the results of our joint ventures and subsidiaries on a
proportionate basis. Measures that are described as being presented
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. This is in contrast to the
Group's statutory financial statements, where the Group's interest
in joint ventures is presented as one line on the income statement
and balance sheet, and all subsidiaries are consolidated 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.
2. Changes in accounting policies
and standards
=================================
The accounting policies used in these financial statements are
consistent with those applied in the last annual financial
statements, as amended where relevant to reflect the adoption of
new standards, amendments and interpretations which became
effective in the year, none of which have had a significant impact
on the Group or Company's income statement or balance sheet.
Amendments to IFRS
A number of new standards, amendments to standards and
interpretations have been issued but are not yet effective for the
Group. The application of these new standards, amendments and
interpretations are not expected to have a significant impact on
the Group's income statement or balance sheet.
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.
In the year ended 31 March 2020, we merged our London Portfolio
and Retail Portfolio and amended our reporting to the Executive
Committee (ExecCom) to reflect the predominant use class of our
assets, grouped into Office, Retail and Specialist. Subsequently,
during the year ended 31 March 2021, we merged these three segments
into four new reporting segments to support our new strategy and
better reflect the way the business is now being managed. The
comparative year has been presented in the new format and a
reconciliation to the previous presentation has been provided on
our website.
Management has determined the Group's operating segments based
on the information reviewed by Senior Management to make strategic
decisions. Until 8 December 2020, the chief operating decision
maker was ExecCom, which comprised the Executive Directors, the
Group General Counsel and Company Secretary and the Group HR
Director. From 9 December 2020, ExecCom was replaced by the
Executive Leadership Team (ELT), comprising the Executive Directors
and the Managing Directors. The information presented to ELT
includes reports from all functions of the business as well as
strategy, financial planning, succession planning, organisational
development and Group-wide policies.
The Group's primary measure of underlying profit before tax is
revenue profit. 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 indirect
costs, which are predominantly staff costs, are all treated as
indirect 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 30.
2021 2020
Revenue profit Central Regional Urban Subscale Central Regional Urban Subscale
London retail opps sectors Total London retail opps sectors Total
----------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Rental income 300 162 26 81 569 324 201 29 115 669
Finance lease interest 9 - - - 9 9 - - - 9
---------------------------- ------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Gross rental income (before
rents payable) 309 162 26 81 578 333 201 29 115 678
Rents payable(1) (3) (5) - (1) (9) (6) (8) - (1) (15)
---------------------------- ------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Gross rental income (after
rents payable) 306 157 26 80 569 327 193 29 114 663
------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Service charge income 39 35 5 - 79 50 43 5 - 98
Service charge expense (39) (38) (5) (2) (84) (49) (46) (5) (2) (102)
------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Net service charge expense - (3) - (2) (5) 1 (3) - (2) (4)
Other property related
income 18 10 1 3 32 18 11 2 2 33
Direct property expenditure (27) (23) (5) (9) (64) (31) (30) (6) (9) (76)
Bad and doubtful debts
expense (17) (69) (10) (31) (127) (5) (18) (3) (7) (33)
Segment net rental income 280 72 12 41 405 310 153 22 98 583
Other income 2 2
Indirect expense (77) (72)
Depreciation (5) (4)
---------------------------- ------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Revenue profit before
interest 325 509
Finance income 15 17
Finance expense (75) (96)
Joint venture finance
expense (14) (16)
---------------------------- ------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Revenue profit 251 414
---------------------------- ------- -------- ----- -------- ----- ------- -------- ----- -------- -----
1. Included within rents payable is lease interest payable of
GBP2m (2020: GBP3m) and GBP1m (2020: GBP1m) for the Central London
and Subscale sectors segments respectively.
Reconciliation of revenue profit 2021 2020
to loss before tax
Total Total
GBPm GBPm
Revenue profit 251 414
Capital and other items
Valuation and profit on disposals
------- -------
Net deficit on revaluation of investment
properties (1,646) (1,179)
Profit/(loss) on disposal of investment
properties 5 (6)
(Loss)/profit on disposal of trading properties (1) 7
(1,642) (1,178)
Net finance expense (excluded from revenue
profit)
------- -------
Fair value movement on interest-rate swaps (1) (9)
Premium on redemption of medium term notes
(MTNs) (3) (59)
Other net finance income 1 -
------- -------
(3) (68)
Exceptional items
------- -------
Impairment of intangible asset (4) (4)
Impairment of goodwill - (1)
------- -------
(4) (5)
Other
------- -------
Profit from long-term development contracts - 3
Gain on settlement of liability 4 -
Other 1 (3)
------- -------
5 -
Loss before tax (1,393) (837)
------------------------------------------------------- ------- ---- ---- ---- ---- -------
4. Performance measures
=======================
In the tables below, we present earnings per share and net
assets per share calculated in accordance with IFRS, together with
our own adjusted measure and 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
adjusted diluted earnings per share, EPRA net tangible assets per
share and total business return.
Adjusted earnings, which is a tax adjusted measure of revenue
profit, is the basis for the calculation of adjusted earnings per
share. We believe adjusted earnings and adjusted 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 year to year.
Earnings per share Year ended Year ended
31 March 2021 31 March 2020
Loss Loss
for the EPRA Adjusted for the EPRA Adjusted
year earnings earnings year earnings earnings
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- -------- --------- --------- -------- --------- ---------
Loss attributable to shareholders (1,393) (1,393) (1,393) (832) (832) (832)
Taxation - - - - (5) (5)
Valuation and profit on disposals - 1,642 1,642 - 1,178 1,178
Net finance expense (excluded from
revenue profit) - 3 3 - 68 68
Exceptional items - 4 4 - 5 5
Other - (5) (5) - - -
-------------------------------------------- -------- --------- --------- -------- --------- ---------
(Loss)/profit used in per share calculation (1,393) 251 251 (832) 414 414
-------------------------------------------- -------- --------- --------- -------- --------- ---------
IFRS EPRA Adjusted IFRS EPRA Adjusted
-------------------------------------------- -------- --------- --------- -------- --------- ---------
Basic (loss)/earnings per share (188.2)p 33.9p 33.9p (112.4)p 55.9p 55.9p
Diluted (loss)/earnings per share(1) (188.2)p 33.9p 33.9p (112.4)p 55.9p 55.9p
-------------------------------------------- -------- --------- --------- -------- --------- ---------
1. In the years ended 31 March 2021 and 31 March 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 31 March 2021 31 March 2020
EPRA EPRA EPRA EPRA
Net assets NDV NTA Net assets NDV NTA
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ---------- ----- ----- ---------- ------ ------
Net assets attributable to shareholders 7,212 7,212 7,212 8,750 8,750 8,750
Excess of fair value over net investment
in finance leases book value - 93 93 - 90 90
Deferred tax liability on intangible
asset - - 1 - - 1
Goodwill on deferred tax liability - (1) (1) - (1) (1)
Other intangible asset - - (2) - - (7)
Fair value of interest-rate swaps - - (3) - - 1
Excess of fair value of debt over
book value (note 14) - (244) - - (274) -
Net assets used in per share calculation 7,212 7,060 7,300 8,750 8,565 8,834
----------------------------------------- ---------- ----- ----- ---------- ------ ------
IFRS EPRA EPRA IFRS EPRA EPRA
NDV NTA NDV NTA
Net assets per share 975p n/a n/a 1,182p n/a n/a
Diluted net assets per share 973p 953p 985p 1,181p 1,156p 1,192p
----------------------------------------- ---------- ----- ----- ---------- ------ ------
Number of shares 2021 2020
Weighted Weighted
average 31 March average 31 March
million million million million
--------------------------------- -------- -------- -------- --------
Ordinary shares 751 751 751 751
Treasury shares (10) (10) (10) (10)
Own shares (1) (1) (1) (1)
--------------------------------- -------- -------- -------- --------
Number of shares - basic 740 740 740 740
Dilutive effect of share options 1 1 1 1
--------------------------------- -------- -------- -------- --------
Number of shares - diluted 741 741 741 741
--------------------------------- -------- -------- -------- --------
Total business return is calculated as the cash dividends per
share paid in the year 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 year.
Total business return based on EPRA Year ended Year ended
NTA 31 March 2021 31 March 2020
pence pence
------------------------------------ -------------- --------------
Decrease in EPRA NTA per share (207) (156)
Dividend paid per share in the year
(note 8) 18 46
------------------------------------ -------------- --------------
Total return (a) (189) (110)
------------------------------------ -------------- --------------
EPRA NTA per share at the beginning
of the year (b) 1,192 1,348
Total business return (a/b) -15.9% -8.2%
------------------------------------ -------------- --------------
5. Revenue
==========
All revenue is classified within the 'Revenue profit' column of
the income statement, with the exception of proceeds from the sale
of trading properties, income from long-term development contracts
and the non-owned element of the Group's subsidiaries which are
presented in the 'Capital and other items' column.
2021 2020
Capital Capital
Revenue and other Revenue and other
profit items Total profit items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ ------- ---------- ----- ------- ---------- -----
Rental income (excluding adjustment
for lease incentives) 548 - 548 630 1 631
Adjustment for lease incentives (29) - (29) (20) - (20)
------------------------------------ ------- ---------- ----- ------- ---------- -----
Rental income 519 - 519 610 1 611
Service charge income 70 - 70 88 - 88
Other property related income 31 - 31 31 - 31
Finance lease interest 9 - 9 9 - 9
Gain on settlement of liability - 4 4 - - -
Other income 2 - 2 2 - 2
------------------------------------ ------- ---------- ----- ------- ---------- -----
Revenue per the income statement 631 4 635 740 1 741
------------------------------------ ------- ---------- ----- ------- ---------- -----
The following table reconciles revenue per the income statement
to the individual components of revenue presented in note 3.
2021 2020
Adjustment
Adjustment for non-
for non-wholly wholly
Joint owned Joint owned
Group ventures subsidiaries(1) Total Group ventures subsidiaries(1) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----- --------- ---------------- ----- ----- --------- ---------------- -----
Rental income 519 50 - 569 611 59 (1) 669
Service charge income 70 9 - 79 88 10 - 98
Other property related
income 31 1 - 32 31 2 - 33
Trading property sales
proceeds - 4 - 4 - 21 - 21
Finance lease interest 9 - - 9 9 - - 9
Long-term development
contract income - 1 - 1 - 3 - 3
Gain on settlement of
liability 4 - - 4 - - - -
Other income 2 2 - 4 2 - - 2
------------------------- ----- --------- ---------------- ----- ----- --------- ---------------- -----
Revenue in the segmental
information note 635 67 - 702 741 95 (1) 835
------------------------- ----- --------- ---------------- ----- ----- --------- ---------------- -----
1. This represents the interest in X-Leisure which we did not
own, but which is consolidated in the Group numbers. In December
2019, the Group purchased this interest thereby settling the
redemption liability.
6. Costs
========
All costs are classified within the 'Revenue profit' column of
the income statement, with the exception of the cost of sale of
trading properties, costs arising on long-term development
contracts, amortisation and impairments of intangible assets
arising on business combinations and the non-owned element of the
Group's subsidiaries which are presented in the 'Capital and other
items' column.
2021 2020
Capital Capital
Revenue and other Revenue and other
profit items Total profit items Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------- ---------- ----- ------- ---------- -----
Rents payable 7 - 7 13 - 13
Service charge expense 75 - 75 90 - 90
Direct property expenditure 56 - 56 65 - 65
Bad and doubtful debts expense -
rent 98 - 98 28 - 28
Bad and doubtful debts expense -
service charge 12 - 12 - - -
Indirect expense 80 - 80 73 - 73
Amortisation of other intangible
asset - 1 1 - - -
Impairment of intangible asset - 4 4 - 4 4
Impairment of goodwill - - - - 1 1
--------------------------------- ------- ---------- ----- ------- ---------- -----
Costs per the income statement 328 5 333 269 5 274
--------------------------------- ------- ---------- ----- ------- ---------- -----
The following table reconciles costs per the income statement to
the individual components of costs presented in note 3.
2021 2020
Joint Joint
Group ventures Total Group ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ----- --------- ----- ----- --------- -----
Rents payable 7 2 9 13 2 15
Service charge expense 75 9 84 90 12 102
Direct property expenditure 56 8 64 65 11 76
Bad and doubtful debts expense -
rent 98 15 113 28 5 33
Bad and doubtful debts expense -
service charge 12 2 14 - - -
Indirect expense 80 2 82 73 3 76
Cost of trading property disposals - 5 5 - 14 14
Long-term development contract expenditure - 1 1 - - -
Amortisation of other intangible
asset 1 - 1 - - -
Impairment of intangible asset 4 - 4 4 - 4
Impairment of goodwill - - - 1 - 1
Costs in the segmental information
note 333 44 377 274 47 321
------------------------------------------- ----- --------- ----- ----- --------- -----
7. Net finance expense
========================================= ========================== ==========================
2021 2020
Capital Capital
Revenue and other Revenue and other
profit items Total profit items Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Finance income
Interest receivable from joint ventures 15 - 15 17 - 17
Fair value movement on other derivatives - 1 1 - 1 1
15 1 16 17 1 18
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Finance expense
Bond and debenture debt (68) - (68) (80) - (80)
Bank and other short-term borrowings (17) - (17) (22) - (22)
Fair value movement on interest-rate
swaps - (1) (1) - (9) (9)
Premium on redemption of medium term
notes - (3) (3) - (59) (59)
Revaluation of redemption liabilities - - - - (1) (1)
Other interest payable (1) - (1) (1) - (1)
(86) (4) (90) (103) (69) (172)
Interest capitalised in relation
to properties under development 11 - 11 7 - 7
----------------------------------------- ------- ---------- ----- ------- ---------- -----
(75) (4) (79) (96) (69) (165)
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Net finance expense (60) (3) (63) (79) (68) (147)
Joint venture net finance expense (14) (16)
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Net finance expense included in revenue
profit (74) (95)
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Lease interest payable of GBP3m (2020: GBP4m) is included within
rents payable as detailed in note 3.
8. Dividends paid
============================= ========== =================================
Year ended 31 March
Pence per share 2021 2020
Payment PID Non-PID Total GBPm GBPm
date
----------------------------- ---------- ----- ------- ----- ---- ----
For the year ended 31 March
2019:
12 April
Third interim 2019 11.30 - 11.30 84
25 July
Final 2019 11.65 - 11.65 86
For the year ended 31 March
2020:
4 October
First interim 2019 11.60 - 11.60 86
3 January
Second interim 2020 11.60 - 11.60 86
Third interim - - - - -
Final - - - - -
For the year ended 31 March
2021:
First interim - - - - -
4 January
Second interim 2021 12.00 - 12.00 89
30 March
Third interim 2021 6.00 - 6.00 44
----------------------------- ---------- ----- ------- ----- ---- ----
Gross dividends 133 342
----------------------------------------- ----- ------- ----- ---- ----
Dividends in the statement
of changes in equity 133 342
Timing difference on payment
of withholding tax (6) -
----------------------------------------- ----- ------- ----- ---- ----
Dividends in the statement
of cash flows 127 342
----------------------------------------- ----- ------- ----- ---- ----
In light of extreme market uncertainty due to Covid-19, the
Board took the decision not to pay a first interim dividend for the
year ended 31 March 2021 (2020: 11.60p or GBP86m paid in
total).
The Board has recommended a final dividend for the year ended 31
March 2021 of 9p per ordinary share (2020: GBPNil) to be paid as a
PID. This final dividend will result in a further estimated
distribution of GBP67m (2020: GBPNil). Subject to shareholders'
approval at the Annual General Meeting, the final dividend will be
paid on 23 July 2021 to shareholders registered at the close of
business on 18 June 2021.
The total dividend paid and recommended in respect of the year
ended 31 March 2021 is 27p per ordinary share (2020: 23.2p)
resulting in a total estimated distribution of GBP200m (2020:
GBP172m).
The first quarterly dividend for the year ending 31 March 2022
will be paid in October 2021 and will be announced in due
course.
A Dividend Reinvestment Plan (DRIP) has been available in
respect of all dividends paid during the year. The last day for
DRIP elections for the final dividend is close of business on 2
July 2021.
9. Net cash generated from operations
======================================================= ======= =====
Reconciliation of operating loss to net cash generated 2020
from operations 2021
GBPm GBPm
------------------------------------------------------- ------- -----
Operating loss (1,330) (690)
Adjustments for:
Net deficit on revaluation of investment properties 1,448 1,000
(Profit)/loss on disposal of investment properties (8) 6
Share of loss from joint ventures 192 151
Share-based payment charge 4 2
Impairment of intangible asset 4 4
Impairment of goodwill - 1
Rents payable 7 13
Depreciation 5 4
Other 6 2
328 493
Changes in working capital:
Decrease in receivables 8 3
(Decrease)/increase in payables and provisions (14) 8
------------------------------------------------------- ------- -----
Net cash generated from operations 322 504
------------------------------------------------------- ------- -----
Reconciliation to adjusted net cash inflow from operating 2021 2020
activities
GBPm GBPm
---------------------------------------------------------- ---- ----
Net cash inflow from operating activities 233 401
Joint ventures net cash inflow from operating activities 19 70
Trading property disposals (4) (20)
Trading property capital expenditure 1 1
---------------------------------------------------------- ---- ----
Adjusted net cash inflow from operating activities 249 452
---------------------------------------------------------- ---- ----
10. Investment properties
=========================================== ======= =======
2021 2020
GBPm GBPm
Net book value at the beginning of
the year 11,297 12,094
Acquisitions 115 16
Capital expenditure 221 199
Capitalised interest 11 7
Net movement in head leases capitalised(1) 1 30
Disposals (579) (49)
Net deficit on revaluation of investment
properties (1,448) (1,000)
Transfers to trading properties (11) -
Net book value at the end of the
year 9,607 11,297
-------------------------------------------- ------- -------
1. See note 14 for details of the amounts payable under head
leases and note 3 for details of the rents payable in the income
statement.
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.
2021 2020
Group Adjustment Group Adjustment
(excl. for (excl. for
joint Joint proportionate Combined joint Joint proportionate Combined
ventures) ventures(1) share(2) Portfolio ventures) ventures(1) share(2) Portfolio
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ---------- ------------ ------------- ---------- ---------- ------------ ------------- ----------
Market value 10,025 766 - 10,791 11,802 979 - 12,781
Less:
properties
treated
as finance
leases (249) - - (249) (249) - - (249)
Plus: head
leases
capitalised 61 9 - 70 60 9 - 69
Less: tenant
lease
incentives (230) (40) - (270) (316) (42) - (358)
------------ ---------- ------------ ------------- ---------- ---------- ------------ ------------- ----------
Net book
value 9,607 735 - 10,342 11,297 946 - 12,243
------------ ---------- ------------ ------------- ---------- ---------- ------------ ------------- ----------
Net deficit
on
revaluation
of
investment
properties (1,448) (198) - (1,646) (1,000) (181) 2 (1,179)
------------ ---------- ------------ ------------- ---------- ---------- ------------ ------------- ----------
1. Refer to note 12 for a breakdown of this amount by entity.
2. This represents the interest in X-Leisure which we did not
own, but which is consolidated in the Group numbers. In December
2019, the Group purchased this additional interest thereby settling
the redemption liability.
The net book value of leasehold properties where head leases
have been capitalised is GBP2,484m (2020: GBP2,561m).
Investment properties include capitalised interest of GBP232m
(2020: GBP221m). The average rate of interest capitalisation for
the year is 2.6% (2020: 2.6%). The historical cost of investment
properties is GBP7,554m (2020: GBP7,463m).
11. Trading properties
==================================== ======================== =========== =====
Development
land and infrastructure Residential Total
GBPm GBPm GBPm
------------------------------------ ------------------------ ----------- -----
At 1 April 2019 23 - 23
------------------------------------ ------------------------ ----------- -----
Capital expenditure 1 - 1
------------------------------------ ------------------------ ----------- -----
At 31 March 2020 24 - 24
------------------------------------ ------------------------ ----------- -----
Transfer from investment properties - 11 11
Capital expenditure - 1 1
At 31 March 2021 24 12 36
------------------------------------ ------------------------ ----------- -----
There were no cumulative impairment provisions in respect of
either Development land and infrastructure or Residential at 31
March 2021 and 31 March 2020.
12. Joint arrangements
======================
The Group's principal joint arrangements are described
below:
Joint ventures Percentage Business Year end Joint venture partner
owned & voting segment date(1)
rights
----------------------------- --------------- ----------------- ----------- --------------------------------
Held at 31 March 2021
Nova, Victoria(2) 50% Central London 31 March Suntec Real Estate
Investment Trust
Southside Limited Partnership 50% Urban 31 March Invesco Real Estate
opportunities European Fund
St. David's Limited 50% Regional retail 31 December Intu Properties plc(3)
Partnership
Westgate Oxford Alliance 50% Regional retail, 31 March The Crown Estate Commissioners
Limited Partnership Subscale sectors
Harvest(4)(5) 50% Subscale sectors 31 March J Sainsbury plc
The Ebbsfleet Limited 50% Subscale sectors 31 March Ebbsfleet Property
Partnership(4) Limited
West India Quay Unit 50% Subscale sectors 31 March Schroder UK Real Estate
Trust(4) Fund
----------------------------- --------------- ----------------- ----------- ------------------------------
Joint operation Ownership Business Year end Joint operation partners
interest segment date(1)
----------------------------- --------------- ----------------- ----------- ------------------------------
Held at 31 March 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
year and reporting date.
2. Nova, Victoria includes the Nova Limited Partnership, Nova
Residential Limited Partnership, Victoria Circle Developer Limited,
Nova GP Limited, Nova Business Manager Limited, Nova Residential
(GP) Limited, Nova Developer Limited, Nova Residential Intermediate
Ltd, 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 REIT.
3. 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.
4. Included within Other in subsequent tables.
5. Harvest includes Harvest 2 Limited Partnership, Harvest
Development Management Limited, Harvest 2 Selly Oak Limited,
Harvest 2 GP Limited and Harvest GP Limited.
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 holds
development land as a trading property 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 Year ended 31 March 2021
Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total Total
Group
Comprehensive income statement 100% 100% 100% 100% 100% 100% share
-----------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Revenue(1) 53 11 30 32 8 134 67
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Gross rental income (after
rents payable) 35 10 23 24 4 96 48
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Net rental income 32 4 6 6 1 49 24
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Revenue profit before
interest 28 4 5 5 1 43 22
Finance expense (22) (6) - - - (28) (14)
--------- ------------ ------------ ------------ ----- ----- ------
Net finance expense (22) (6) - - - (28) (14)
Revenue profit 6 (2) 5 5 1 15 8
Capital and other items
Net deficit on revaluation
of investment properties (23) (61) (179) (122) (11) (396) (198)
Loss on disposal of investment
properties (5) - - - - (5) (3)
Loss on disposal of trading
properties (1) - - - - (1) (1)
Other income - - - - 4 4 2
Loss before tax (23) (63) (174) (117) (6) (383) (192)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Post-tax loss (23) (63) (174) (117) (6) (383) (192)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total comprehensive loss (23) (63) (174) (117) (6) (383) (192)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
50% 50% 50% 50% 50% 50%
Group share of loss before
tax (12) (32) (87) (58) (3) (192)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Group share of post-tax
loss (12) (32) (87) (58) (3) (192)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Group share of total comprehensive
loss (12) (32) (87) (58) (3) (192)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
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 Year ended 31 March 2020
Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total Total
Group
Comprehensive income statement 100% 100% 100% 100% 100% 100% share
-----------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Revenue(1) 55 12 42 37 43 189 95
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Gross rental income (after
rents payable) 36 12 33 28 4 113 57
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Net rental income 32 7 22 19 3 83 41
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Revenue profit before
interest 28 7 21 18 3 77 38
Finance expense (27) (6) - - - (33) (16)
Net finance expense (27) (6) - - - (33) (16)
Revenue profit 1 1 21 18 3 44 22
Capital and other items
Net deficit on revaluation
of investment properties (12) (72) (139) (135) (3) (361) (181)
Movement in impairment
of trading properties 1 - - - - 1 -
Profit on disposal of
trading properties 1 - - - 12 13 7
Profit on long-term development
contracts - - - - 5 5 3
(Loss)/profit before tax (9) (71) (118) (117) 17 (298) (149)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Taxation - - - - (3) (3) (2)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Post-tax (loss)/profit (9) (71) (118) (117) 14 (301) (151)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total comprehensive (loss)/income (9) (71) (118) (117) 14 (301) (151)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
50% 50% 50% 50% 50% 50%
Group share of (loss)/profit
before tax (5) (35) (59) (59) 9 (149)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Group share of post-tax
(loss)/profit (5) (35) (59) (59) 7 (151)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Group share of total comprehensive
(loss)/income (5) (35) (59) (59) 7 (151)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
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 31 March 2021
Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total Total
Group
Balance sheet 100% 100% 100% 100% 100% 100% share
---------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- --------- ------------ ------------ ------------ ----- ------ -------
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) (2) 34 2 (3) 8 5 46 23
--------------------------- --------- ------------ ------------ ------------ ----- ------ -------
Joint ventures 31 March 2020
Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total Total
Group
Balance sheet 100% 100% 100% 100% 100% 100% share
---------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Investment properties(1) 849 192 425 358 67 1,891 946
--------- ------------ ------------ ------------ ----- ----- ------
Non-current assets 849 192 425 358 67 1,891 946
Cash and cash equivalents 17 2 12 10 6 47 23
Other current assets 75 3 13 19 - 110 55
--------- ------------ ------------ ------------ ----- ----- ------
Current assets 92 5 25 29 6 157 78
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total assets 941 197 450 387 73 2,048 1,024
Trade and other payables
and provisions (33) (4) (12) (12) (1) (62) (31)
--------- ------------ ------------ ------------ ----- ----- ------
Current liabilities (33) (4) (12) (12) (1) (62) (31)
Non-current liabilities (179) (144) (16) - - (339) (169)
--------- ------------ ------------ ------------ ----- ----- ------
Non-current liabilities (179) (144) (16) - - (339) (169)
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total liabilities (212) (148) (28) (12) (1) (401) (200)
Net assets 729 49 422 375 72 1,647 824
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Market value of investment
properties(1) 908 193 417 372 68 1,958 979
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Net cash/(debt) (2) 17 2 (4) 10 6 31 15
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
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.
2. Excludes funding provided by the Group and its joint venture
partners. See note 13 for further details.
Joint ventures Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total
Group
Net investment 50% 50% 50% 50% 50% share
----------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- --------- ------------ ------------ ------------ ----- ------
At 1 April 2019 359 61 277 258 76 1,031
Total comprehensive (loss)/income (5) (35) (59) (59) 7 (151)
Cash contributed 13 - - - - 13
Cash distributions (2) (1) (7) (12) (47) (69)
---------------------------------- --------- ------------ ------------ ------------ ----- ------
At 31 March 2020 365 25 211 187 36 824
---------------------------------- --------- ------------ ------------ ------------ ----- ------
Total comprehensive loss (12) (32) (87) (58) (3) (192)
Non-cash contributions 9 - - - - 9
Cash distributions (11) - - (4) (1) (16)
At 31 March 2021 351 (7) 124 125 32 625
---------------------------------- --------- ------------ ------------ ------------ ----- ------
13. Capital structure
2021 2020
Joint Joint
Group ventures Combined Group ventures Combined
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------ --------- -------- ------- --------- --------
Property portfolio
Market value of investment
properties 10,025 766 10,791 11,802 979 12,781
Trading properties and long-term
contracts 36 - 36 24 3 27
Total property portfolio
(a) 10,061 766 10,827 11,826 982 12,808
---------------------------------- ------ --------- -------- ------- --------- --------
Net debt
Borrowings 3,516 8 3,524 5,332 8 5,340
Monies held in restricted
accounts and deposits (10) - (10) (9) - (9)
Cash and cash equivalents - (31) (31) (1,345) (23) (1,368)
Fair value of interest-rate
swaps (3) - (3) 1 - 1
Fair value of foreign exchange
swaps and forwards 6 - 6 (37) - (37)
---------------------------------- ------ --------- -------- ------- --------- --------
Net debt (b) 3,509 (23) 3,486 3,942 (15) 3,927
Less: Fair value of interest-rate
swaps 3 - 3 (1) - (1)
Adjusted net debt (c) 3,512 (23) 3,489 3,941 (15) 3,926
---------------------------------- ------ --------- -------- ------- --------- --------
Adjusted total equity
Total equity (d) 7,212 - 7,212 8,750 - 8,750
Fair value of interest-rate
swaps (3) - (3) 1 - 1
Adjusted total equity (e) 7,209 - 7,209 8,751 - 8,751
---------------------------------- ------ --------- -------- ------- --------- --------
Gearing (b/d) 48.7% 48.3% 45.1% 44.9%
Adjusted gearing (c/e) 48.7% 48.4% 45.0% 44.9%
Group LTV (c/a) 34.9% 32.2% 33.3% 30.7%
Security Group LTV 32.7% 32.5%
Weighted average cost of
debt 2.2% 2.2% 1.8% 1.8%
---------------------------------- ------ --------- -------- ------- --------- --------
14. Borrowings
2021 2020
Effective Nominal/ Nominal/
interest notional Fair Book notional Fair Book
Secured/ Fixed/ rate value value value value value value
unsecured floating % GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- ---------- --------- --------- ------ ------ --------- ------ ------
Current borrowings
Commercial paper
LIBOR +
Sterling Unsecured Floating margin 84 84 84 4 4 4
LIBOR +
Euro Unsecured Floating margin 640 640 640 796 796 796
LIBOR +
US Dollar Unsecured Floating margin 182 182 182 177 177 177
------------------------- ----------- ---------- --------- --------- ------ ------ --------- ------ ------
Total current borrowings 906 906 906 977 977 977
-------------------------------------------------- --------- --------- ------ ------ --------- ------ ------
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 2.0 400 410 399 400 406 399
A4 5.391% MTN due
2026 Secured Fixed 5.4 17 19 17 17 20 17
A5 5.391% MTN due
2027 Secured Fixed 5.4 87 100 86 95 113 94
A6 5.376% MTN due
2029 Secured Fixed 5.4 65 80 65 65 84 65
A16 2.375% MTN due
2029 Secured Fixed 2.5 350 367 348 350 366 347
A13 2.399% MTN due
2031 Secured Fixed 2.4 300 314 299 300 314 299
A7 5.396% MTN due
2032 Secured Fixed 5.4 77 107 77 81 111 80
A11 5.125% MTN due
2036 Secured Fixed 5.1 50 68 50 50 71 50
A14 2.625% MTN due
2039 Secured Fixed 2.6 500 524 494 500 521 494
A15 2.750% MTN due
2059 Secured Fixed 2.7 500 540 495 500 542 495
--------- ------ ------ --------- ------ ------
2,356 2,540 2,340 2,368 2,559 2,350
Syndicated and bilateral LIBOR +
bank debt Secured Floating margin 209 209 209 1,944 1,944 1,944
Amounts payable under
head leases Unsecured Fixed 4.6 61 105 61 61 126 61
------------------------- ----------- ---------- --------- --------- ------ ------ --------- ------ ------
Total non-current
borrowings 2,626 2,854 2,610 4,373 4,629 4,355
-------------------------------------------------- --------- --------- ------ ------ --------- ------ ------
Total borrowings 3,532 3,760 3,516 5,350 5,606 5,332
-------------------------------------------------- --------- --------- ------ ------ --------- ------ ------
Reconciliation of the movement in borrowings 2021 2020
GBPm GBPm
--------------------------------------------- ------- -----
At the beginning of the year 5,332 3,781
Proceeds from new borrowings - 1,701
Repayment of bank debt (1,755) -
Repayment of MTNs - (47)
Redemption of MTNs (12) (196)
Foreign exchange movement on non-Sterling
borrowings (51) 60
Other 2 33
At 31 March 3,516 5,332
--------------------------------------------- ------- -----
Reconciliation of movements in liabilities 2021
arising from financing activities
Non-cash changes
At the
At the Other end
beginning Foreign changes of
of the Cash exchange in fair Other the
year flows movements values changes year
GBPm GBPm GBPm GBPm GBPm GBPm
Borrowings 5,332 (1,767) (51) - 2 3,516
Derivative financial instruments (36) (12) 51 - - 3
--------------------------------- ---------- ------- ---------- -------- -------- ------
5,296 (1,779) - - 2 3,519
--------------------------------- ---------- ------- ---------- -------- -------- ------
2020
--------------------------------- ---------- ------- --------------------------------------
Borrowings 3,781 1,458 60 - 33 5,332
Derivative financial instruments 16 1 (60) 7 - (36)
--------------------------------- ---------- ------- ---------- -------- -------- ------
3,797 1,459 - 7 33 5,296
--------------------------------- ---------- ------- ---------- -------- -------- ------
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 GBP10.6bn at 31 March 2021
(31 March 2020: GBP12.1bn). 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 year, the Group purchased GBP12m (2020: GBP196m) of
MTNs for a total premium of GBP3m (2020: GBP59m). Details of the
purchases and associated premium by series are as follows:
MTN purchases 2021 2020
Purchases Premium Purchases Premium
GBPm GBPm GBPm GBPm
------------------------ --------- ------- --------- -------
A10 4.875% MTN due 2025 - - 4 1
A4 5.391% MTN due 2026 - - 8 1
A5 5.391% MTN due 2027 8 2 91 20
A6 5.376% MTN due 2029 - - 12 3
A7 5.396% MTN due 2032 4 1 75 31
A11 5.125% MTN due 2036 - - 6 3
12 3 196 59
------------------------ --------- ------- --------- -------
At 31 March 2021, the Group's committed revolving facilities
totalled GBP2,715m (31 March 2020: GBP2,715m).
Syndicated and bilateral
bank debt Authorised Drawn Undrawn
Maturity
as at
31 March
2021 2021 2020 2021 2020 2021 2020
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ---------- ----- ----- ---- ----- ----- ----
Syndicated debt 2025 2,490 2,490 209 1,797 2,281 693
Bilateral debt 2024-25 225 225 - 147 225 78
------------------------- ---------- ----- ----- ---- ----- ----- ----
2,715 2,715 209 1,944 2,506 771
------------------------------------ ----- ----- ---- ----- ----- ----
All syndicated and bilateral facilities are committed and
secured on the assets of the Security Group. During the year ended
31 March 2021, the amounts drawn under the Group's facilities
decreased by GBP1,735 m.
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 31 March 2021 was GBP1,600m (31 March 2020: GBP1,139m).
15. Monies held in restricted accounts and deposits
==========================================================
2021 2020
GBPm GBPm
----------------------------------------- ------- ------
Cash at bank and in hand 3 4
Short-term deposits 7 5
----------------------------------------- ------- --------
10 9
----------------------------------------- ------- --------
The credit quality of monies held in restricted accounts and
deposits can be assessed by reference to external credit ratings of
the counterparty where the account or deposit is placed.
Counterparties with external credit ratings 2021 2020
GBPm GBPm
-------------------------------------------- ---- ----
A+ 7 5
A 2 3
BBB+ 1 1
-------------------------------------------- ---- ------
10 9
-------------------------------------------- ---- ------
16. Cash and cash equivalents
======================================
2021 2020
GBPm GBPm
------------------------- ---- -----
Cash at bank and in hand - 1,345
- 1,345
------------------------- ---- -----
As a result of the uncertainty created by Covid-19, the Group
drew down on its facilities in March 2020 in order to cover the
short-term commercial paper in issue at 31 March 2020 and to
provide additional liquid funds. These facilities have been repaid
during the year ended 31 March 2021.
The credit quality of cash and cash equivalents can be assessed
by reference to external credit ratings of the counterparty where
the account or deposit is placed.
2021 2020
GBPm GBPm
-------------------------------------------- ---- -----
Counterparties with external credit ratings
A+ - 1,345
- 1,345
-------------------------------------------- ---- -----
The Group's cash and cash equivalents and bank overdrafts are
subject to cash pooling arrangements. The following table provides
details of cash balances and bank overdrafts which are subject to
offsetting agreements.
2021 2020
Net amounts Net amounts
Gross Gross recognised Gross Gross recognised
amounts amounts in the amounts amounts in the
of financial of financial balance of financial of financial balance
assets liabilities sheet assets liabilities sheet
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------- ------------- ----------- ------------- ------------- -----------
Assets
Cash and cash equivalents 49 (49) - 1,363 (18) 1,345
49 (49) - 1,363 (18) 1,345
-------------------------- ------------- ------------- ----------- ------------- ------------- -----------
17. Events after the reporting period
=====================================
There were no significant events occurring after the reporting
period, but before the financial statements were authorised for
issue.
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
------------------------------- ------------------------ --------------
Revenue profit Profit/loss before tax Note 3
------------------------------- ------------------------ --------------
Adjusted earnings Profit/loss attributable Note 4
to shareholders
------------------------------- ------------------------ --------------
Adjusted earnings per share Basic earnings/loss per Note 4
share
------------------------------- ------------------------ --------------
Adjusted diluted earnings Diluted earnings/loss Note 4
per share per share
------------------------------- ------------------------ --------------
EPRA net tangible assets Net assets attributable Note 4
to shareholders
------------------------------- ------------------------ --------------
EPRA net tangible assets Net assets attributable Note 4
per share to shareholders
------------------------------- ------------------------ --------------
Total business return n/a Note 4
------------------------------- ------------------------ --------------
Adjusted net cash inflow Net cash inflow from Note 9
from operating activities operating activities
------------------------------- ------------------------ --------------
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 31 March 2021
EPRA NRV EPRA NTA EPRA NDV
GBPm GBPm GBPm
---------------------------------------------------- -------- -------- --------
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
---------------------------------------------------- -------- -------- ----------
31 March 2020
EPRA NRV EPRA NTA EPRA NDV
GBPm GBPm GBPm
---------------------------------------------------- -------- -------- --------
Net assets attributable to shareholders 8,750 8,750 8,750
Excess of fair value over net investment in finance
lease book value 90 90 90
Deferred tax liability on intangible asset 1 1 -
Goodwill on deferred tax liability (1) (1) (1)
Other intangible asset - (7) -
Fair value of interest-rate swaps 1 1 -
Excess of fair value of debt over book value
(note 14) - - (274)
Purchasers' costs(1) 768 - -
---------------------------------------------------- -------- -------- --------
Net assets used in per share calculation 9,609 8,834 8,565
---------------------------------------------------- -------- -------- --------
EPRA NRV EPRA NTA EPRA NDV
---------------------------------------------------- -------- -------- --------
Diluted net assets per share 1,297p 1,192p 1,156p
---------------------------------------------------- -------- -------- --------
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
31 March 2021
Landsec EPRA
Measure Definition for EPRA measure Notes measure measure
--------------------- ----------------------------------------------- ------ ---------- ----------
Adjusted earnings Recurring earnings from core operational 4 GBP251m GBP251m
activity
Adjusted earnings Adjusted earnings per weighted
per share number of ordinary shares 4 33.9p 33.9p
Adjusted diluted Adjusted diluted earnings per weighted
earnings per share number of ordinary shares 4 33.9p 33.9p
EPRA net tangible Net assets adjusted to exclude 4 GBP7,300m GBP7,300m
assets (NTA) the fair value of interest-rate
swaps, intangible assets and excess
of fair value over net investment
in finance lease book value
EPRA net tangible Diluted net tangible assets per
assets per share share 4 985p 985p
EPRA net disposal Net assets adjusted to exclude 4 GBP7,060m GBP7,060m
value (NDV) the fair value of debt and goodwill
on deferred tax and to include
excess of fair value over net investment
in finance lease book value
EPRA net disposal Diluted net disposal value per
value per share share 4 953p 953p
Table
--------------------- ----------------------------------------------- ------ ---------- ----------
ERV of vacant space as a % of ERV
of Combined Portfolio excluding
Voids/vacancy rate the development programme(1) 18 4.4% 4.3%
Annualised rental income less non-recoverable
Net initial yield costs as a % of market value plus
(NIY) assumed purchasers' costs(2) 20 5.0% 4.9%
Topped-up NIY NIY adjusted for rent free periods(2) 20 5.2% 5.0%
Total costs as a percentage of
gross rental income (including
Cost ratio(3) direct vacancy costs)(3) 21 19.4% 42.3%
Total costs as a percentage of
gross rental income (excluding
direct vacancy costs)(3) 21 n/a 40.0%
--------------------------------------------------------------------- ------ ---------- ----------
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 GBP14m and GBP14m 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 GBP6m, 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.
31 March 2021
GBPm
ERV of vacant properties 27
ERV of Combined Portfolio excluding properties under development 624
----------------------------------------------------------------- -------------
EPRA vacancy rate (%) 4.3%
----------------------------------------------------------------- -------------
Table 19: Change in net rental income from the like-for-like
portfolio
2021 2020 Change
------------
GBPm GBPm GBPm %
-------------------- ---- ---- ----- -----
Central London 257 276 (19) -6.9
Regional retail 68 149 (81) -54.4
Urban opportunities 11 21 (10) -47.6
Subscale sectors 41 96 (55) -57.3
-------------------- ---- ---- ----- -----
377 542 (165) -30.4
-------------------- ---- ---- ----- -----
Table 20: EPRA Net initial yield (NIY) and Topped-up NIY
31 March
2021
GBPm
Combined Portfolio 10,791
Trading properties 37
Less: Properties under development, trading properties under
development and land (769)
-------------------------------------------------------------------- --------
Like-for-like investment property portfolio, proposed and completed
developments, and completed trading properties 10,059
Plus: Allowance for estimated purchasers' costs 587
-------------------------------------------------------------------- --------
Grossed-up completed property portfolio valuation (a) 10,646
-------------------------------------------------------------------- --------
EPRA annualised cash passing rental income(1) 539
Net service charge expense(2) (5)
Void costs and other deductions (13)
EPRA Annualised net rent(1) (b) 521
Plus: Rent-free periods and other lease incentives (annualised) 14
-------------------------------------------------------------------- --------
Topped-up annualised net rents (c) 535
-------------------------------------------------------------------- --------
EPRA NIY (b/a) 4.9%
-------------------------------------------------------------------- --------
EPRA Topped-up NIY (c/a) 5.0%
-------------------------------------------------------------------- --------
1. EPRA Annualised cash passing rental income and EPRA
annualised net rent as calculated by the Group's external
valuer.
2. Including costs recovered through rents but not separately invoiced.
Table 21: Cost analysis
2021 2020
Total Cost ratio Total Cost ratio
GBPm %(1) GBPm %(1)
---------------------- ----- ---------- ----------- -------------- ----- ---------- ----- -------------
Gross rental
income (before
rents payable) 578 678
-------------- ----- ---------- ----- -------------
Costs
recovered
through rents
but not
separately
invoiced (6) (6)
-------------- ----- ---------- ----- -------------
Adjusted gross
rental income 572 672
-------------- ----- ---------- ----- -------------
GBPm Rents payable (9) (15)
---------------------- ----- -------------- ----- ---------- ----- -------------
Gross rental income EPRA gross
(before rents payable) 578 rental income 563 657
----------------------- ----- -------------- ----- ---------- ----- -------------
Rents payable (9)
----------------------- ----- ----------- -------------- ----- ---------- ----- -------------
Gross rental income Managed
(after rents payable) 569 Direct operations 7 1.2 10 1.5
----------------------- ----- -------------- ----- ---------- ----- -----------
Net service charge
expense (5) property Tenant default 127 22.2 33 4.9
----------------------- ----- -------------- ----- ---------- ----- -----------
Net direct property Void related
expenditure (32) costs costs 13 2.3 13 1.9
----------------------- ----- -------------- ----- ---------- ----- -----------
Bad and doubtful debts Other direct
expense (127) GBP164m property costs 11 1.9 19 2.8
----------------------- ----- ----------- -------------- ----- ---------- ----- -----------
Segment net rental Development
income 405 expenditure 14 2.4 9 1.3
----------------------- ----- -----------
Net
Net indirect expenses (80) indirect
---------------------- -----
Asset
management,
administration
Segment profit before and
finance expense 325 expenses(2) compliance 72 12.7 70 10.4
----------------------- ----- --------------
Net finance expense - GBP80m
Group (60)
----------- --------------
Net finance expense -
joint ventures (14)
----------------------- ----- -------------- ----- ---------- ----- -----------
Total (incl.
direct vacancy
Revenue profit 251 costs) 244 42.7 154 22.9
----------------------- ----- -------------- ----- ---------- ----- -----------
Costs
recovered
through rents (6) (6)
Tenant
default(3) (127) (33)
----------- -------------- ----- ---------- ----- -----------
Total cost Adjusted total
ratio(1) 19.4% costs 111 19.4 115 17.1
----------- -------------- ----- ---------- ----- -----------
Tenant
default(3) 127 33
-------------- ----- ---------- ----- -----------
EPRA costs
(incl. direct
vacancy costs) 238 42.3 148 22.5
-------------- ----- ---------- ----- -----------
Less: Direct
vacancy costs (13) (13)
-------------- ----- ---------- ----- -----------
EPRA (excl.
direct vacancy
costs) 225 40.0 135 20.5
-------------- ----- ---------- ----- -----------
1. Percentages represent costs divided by Adjusted gross rental
income, except for EPRA measures which represent costs divided by
EPRA gross rental income.
2. Net indirect expenses amounting to GBP7m (2020: GBP7m) have
been capitalised as development costs and are excluded from table
21.
3. Provisions for bad and doubtful debts have been excluded from
our cost ratio, including those relating to rent which will be
earned in future accounting periods.
Table 22: Acquisitions, disposals and capital expenditure
Year ended Year ended
31 March 31 March
2021 2020
Investment properties Group (excl. Joint Combined Combined
joint ventures) ventures Portfolio Portfolio
GBPm GBPm GBPm GBPm
----------------------------------------- ---------------- --------- ---------- ----------
Net book value at the beginning of
the year 11,297 946 12,243 13,177
Acquisitions 115 - 115 48
Capital expenditure 221 2 223 207
Capitalised interest 11 - 11 8
Net movement in capitalised head leases 1 - 1 31
Disposals (579) (15) (594) (49)
Net deficit on revaluation of investment
properties (1,448) (198) (1,646) (1,179)
Transfer to trading properties (11) - (11) -
Net book value at the end of the year 9,607 735 10,342 12,243
----------------------------------------- ---------------- --------- ---------- ----------
Profit/(loss) on disposal of investment
properties 8 (3) 5 (6)
----------------------------------------- ---------------- --------- ---------- ----------
Trading properties GBPm GBPm GBPm GBPm
Net book value at the beginning of
the year 24 3 27 41
Transfer from investment properties 11 - 11 -
Capital expenditure 1 - 1 1
Disposals - (3) (3) (15)
Net book value at the end of the year 36 - 36 27
----------------------------------------- ---------------- --------- ---------- ----------
(Loss)/profit on disposal of trading
properties - (1) (1) 7
Investment Trading Combined Combined
Acquisitions, development and other properties(1) properties Portfolio Portfolio
capital expenditure GBPm GBPm GBPm GBPm
Acquisitions(2) 115 - 115 48
Development capital expenditure(3) 182 1 183 165
Other capital expenditure 41 - 41 43
Capitalised interest 11 - 11 8
-------------- ----------- ----------
Acquisitions, development and other
capital expenditure 349 1 350 264
Disposals GBPm GBPm
-------------- ----------- ---------- ----------
Net book value - investment property
disposals 594 49
Net book value - trading property
disposals 3 15
Net book value - other net assets 43 -
Profit/(loss) on disposal - investment
properties 5 (6)
(Loss)/profit on disposal - trading
properties (1) 7
Total disposal proceeds 644 65
1. See EPRA analysis of capital expenditure table 23 for further details.
2. Properties acquired in the year.
3. Development capital expenditure for investment properties
comprises expenditure on the development pipeline and completed
developments.
Table 23: EPRA analysis of capital expenditure
Year ended 31 March 2021
Other capital expenditure
Total
capital
Total expenditure Total
No capital - joint capital
Development Incremental incremental expenditure ventures expenditure
capital lettable lettable Tenant Capitalised - Combined (Group -
Acquisitions(1) expenditure(2) space(3) space improvements Total interest Portfolio share) Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Central London
Offices 89 180 1 21 - 22 11 302 1 301
London retail 23 2 - 1 - 1 - 26 - 26
Other central London - - - - - - - - - -
Total Central London 112 182 1 22 - 23 11 328 1 327
Regional retail
Regional shopping centres
and shops 3 - 1 5 - 6 - 9 1 8
Outlets - - - 4 1 5 - 5 - 5
Total Regional retail 3 - 1 9 1 11 - 14 1 13
Urban opportunities - - 2 - - 2 - 2 - 2
Subscale sectors
Leisure - - 1 - 1 2 - 2 - 2
Hotels - - - 1 - 1 - 1 - 1
Retail parks - - - 2 - 2 - 2 - 2
Total Subscale sectors - - 1 3 1 5 - 5 - 5
Total capital expenditure 115 182 5 34 2 41 11 349 2 347
Timing difference between accrual
and cash basis (34) (4) (30)
Total capital expenditure
on a cash basis 315 (2) 317
1. Investment properties acquired in the year.
2. Expenditure on the development pipeline and completed developments.
3. Capital expenditure where the lettable area increases by at least 10%.
Other business analysis
Table 24: Top 12 occupiers at 31 March 2021
% of Group
rent(1)
----------
Central Government 6.4
Deloitte 6.3
Cineworld 2.1
Boots 1.9
Sainsbury's 1.6
Taylor Wessing 1.5
Equinix 1.4
Lloyds Banking 1.2
M&S 1.2
Next 1.1
H&M 1.1
Vue 1.1
----------
26.9
----------
1. On a proportionate basis.
Table 25: Development pipeline and trading property development
schemes at 31 March 2021
Total Forecast
Net development total
Ownership Letting Market income/ Estimated costs development
Description interest Size status value ERV completion to date cost
Property of use % sq ft % GBPm GBPm date GBPm GBPm
Developments
approved
or in progress
------------ --------- -------- -----------
The Forge, SE1 Office 100 139,000 - 67 10 Jun 2022 63 139
Retail 1,000
---------------------------- --------- -------- -----------
21 Moorfields,
EC2 Office 100 564,000 100 523 38 Jul 2022 363 577
------------ --------- -------- -----------
Wardour Street,
W1(1) Residential 100 5,000 - 8 n/a Jul 2022 8 11
Lucent, W1 Office 100 111,000 - 95 13 Dec 2022 131 240
Retail 30,000
Residential 3,000
---------------------------- --------- -------- -----------
n2, SW1 Office 100 167,000 - 40 13 Jun 2023 54 205
------------ --------- -------- -----------
Proposed
developments
------------ --------- -------- -----------
Timber Square,
SE1 Office 100 365,000 n/a n/a n/a Feb 2024 n/a n/a
Retail 15,000
---------------------------- --------- -------- -----------
Portland House,
SW1 Office 100 360,000 n/a n/a n/a Sep 2024 n/a n/a
Retail 40,000
---------------------------- --------- -------- -----------
1. Affordable housing component of the Lucent development.
Total Forecast
Sales development total
Ownership exchanged Estimated costs development
Description interest Size Number by unit completion to date cost
Property of use % sq ft of units % date GBPm GBPm
Trading property
development
schemes
------------ --------- ----------
Castle Lane, SW1 Residential 100 51,000 89 99 Apr 2023 11 46
------------ --------- ----------
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 31 March 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 31 March 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 31 March 2021 on unlet units, both after rents payable.
Table 26: Combined Portfolio analysis
Like-for-like segmental analysis
Annualised
Valuation Rental rental Annualised Net estimated
Market value(1) movement(1) income(1) income(2) net rent(3) rental value(4)
31 31 31 30 31
March 31 March Surplus/ Surplus/ March 31 March 31 March March September March 31 March
2021 2020 (deficit) (deficit) 2021 2020 2021 2021 2020 2021 2020
GBPm GBPm GBPm % GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Central London
Offices 5,194 5,408 (214) -4.3% 238 235 234 250 255 266 272
London retail 623 852 (224) -26.7% 36 41 34 34 37 30 40
Other central
London 420 427 (5) -1.2% 17 22 13 13 13 21 21
Total Central
London 6,237 6,687 (443) -7.1% 291 298 281 297 305 317 333
Regional retail
Regional shopping
centres and
shops 1,041 1,679 (635) -38.2% 115 139 98 95 107 95 122
Outlets 722 881 (164) -18.5% 47 62 39 40 48 61 63
Total Regional
retail 1,763 2,560 (799) -31.4% 162 201 137 135 155 156 185
Urban
opportunities 360 469 (110) -23.4% 25 29 24 24 24 26 29
Subscale sectors
Leisure 483 615 (137) -22.9% 41 45 39 38 38 40 43
Hotels 406 469 (64) -13.4% 4 28 4 4 6 25 30
Retail parks 397 442 (43) -10.1% 34 38 33 34 35 32 35
Total Subscale
sectors 1,286 1,526 (244) -16.2% 79 111 76 76 79 97 108
Like-for-like
portfolio(8) 9,646 11,242 (1,596) -14.8% 557 639 518 532 563 596 655
Proposed
developments(1) 286 294 (41) -12.4% 1 12 1 1 1 - -
Development
programme(9) 713 566 (1) -0.2% - - - - - 67 68
Acquisitions(10) 146 55 (8) -5.4% 4 1 7 6 3 16 3
Sales(11) - 624 - - 16 26 - - 23 - 28
Combined
Portfolio 10,791 12,781 (1,646) -13.7% 578 678 526 539 590 679 754
Properties
treated
as finance
leases (9) (9)
Combined
Portfolio 10,791 12,781 (1,646) -13.7% 569 669
Total portfolio analysis
Annualised
Valuation Rental rental Annualised Net estimated
Market value(1) movement(1) income(1) income(2) net rent(3) rental value(4)
31 31 31 30 31
March 31 March Surplus/ Surplus/ March 31 March 31 March March September March 31 March
2021 2020 (deficit) (deficit) 2021 2020 2021 2021 2020 2021 2020
GBPm GBPm GBPm % GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Central London
Offices 6,268 6,810 (251) -4.1% 254 268 237 252 277 345 362
London retail 659 928 (229) -26.0% 38 43 36 36 39 31 45
Other central
London 420 437 (4) -1.0% 17 22 13 13 13 21 21
Total Central
London 7,347 8,175 (484) -6.5% 309 333 286 301 329 397 428
Regional
retail
Regional
shopping
centres and
shops 1,041 1,679 (635) -38.2% 115 139 98 95 107 95 122
Outlets 722 881 (164) -18.5% 47 62 39 40 48 61 63
Total Regional
retail 1,763 2,560 (799) -31.4% 162 201 137 135 155 156 185
Urban
opportunities 372 484 (112) -23.3% 26 29 25 25 25 27 30
Subscale
sectors
Leisure 506 649 (144) -23.0% 43 47 41 40 41 42 45
Hotels 406 469 (64) -13.4% 4 28 4 4 6 25 30
Retail parks 397 444 (43) -10.1% 34 40 33 34 34 32 36
Total Subscale
sectors 1,309 1,562 (251) -16.4% 81 115 78 78 81 99 111
Combined
Portfolio 10,791 12,781 (1,646) -13.7% 578 678 526 539 590 679 754
Properties
treated
as finance
leases (9) (9)
Combined
Portfolio 10,791 12,781 (1,646) -13.7% 569 669
Represented
by:
Investment
portfolio 10,025 11,802 (1,448) -13.1% 519 610 481 492 543 629 688
Share of joint
ventures 766 979 (198) -21.3% 50 59 45 47 47 50 66
Combined
Portfolio 10,791 12,781 (1,646) -13.7% 569 669 526 539 590 679 754
Analysis by
asset
use:
Offices 6,279 6,826 (255) -4.2% 255 270 238 253 279 349 364
Retail 3,136 4,348 (1,173) -27.4% 257 309 227 226 250 241 291
Leisure,
hotels
and other 1,376 1,607 (218) -13.9% 66 99 61 60 61 89 99
Combined
Portfolio 10,791 12,781 (1,646) -13.7% 578 678 526 539 590 679 754
Combined Portfolio analysis continued
Like-for-like segmental analysis
Gross estimated
rental Net initial Equivalent Voids (by
value(5) yield(6) yield(7) ERV)(1)
31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March
2021 2020 2021 2020 2021 2020 2021 2020
GBPm GBPm % % % % % %
Central London
Offices 270 275 4.4% 4.4% 4.6% 4.6% 3.5% 1.2%
London retail 30 41 4.4% 4.5% 4.5% 4.3% 4.0% 2.5%
Other central London 21 21 2.6% 3.4% 4.4% 4.3% - 0.5%
Total Central London 321 337 4.3% 4.3% 4.6% 4.6% 3.3% 1.3%
Regional retail
Regional shopping centres
and shops 102 130 7.9% 6.4% 7.6% 6.2% 7.9% 4.8%
Outlets 61 63 5.3% 5.6% 6.8% 5.9% 6.8% 4.4%
Total Regional retail 163 193 6.8% 6.1% 7.3% 6.1% 7.5% 4.7%
Urban opportunities 26 29 5.6% 4.9% 5.9% 5.2% 5.0% 4.8%
Subscale sectors
Leisure 40 44 6.9% 5.8% 7.6% 6.4% 5.2% 2.3%
Hotels 25 30 3.3% 2.3% 5.5% 5.2% - -
Retail parks 33 35 7.4% 7.6% 7.6% 7.4% 1.2% 3.4%
Total Subscale sectors 98 109 5.9% 5.2% 6.9% 6.3% 2.5% 2.0%
Like-for-like portfolio(8) 608 668 5.0% 4.9% 5.5% 5.2% 4.4% 2.5%
--------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Proposed developments(1) - - - - n/a n/a n/a n/a
Development programme(9) 69 70 - - 4.3% 4.3% n/a n/a
Acquisitions(10) 16 3 3.3% 5.5% 5.4% 5.8% n/a n/a
Sales(11) - 28 - 3.9% n/a n/a n/a n/a
--------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Combined Portfolio 693 769 4.5% 4.5% 5.4% 5.1% n/a n/a
--------------------------- -------- -------- -------- --------
Total portfolio analysis Notes:
Gross estimated 1. Refer to Glossary for
rental Net initial definition.
value(5) yield(6) 2. Annualised rental income
31 March 31 March 31 March 31 March is annual 'rental income'
2021 2020 2021 2020 (as defined in the Glossary)
GBPm GBPm % % at the balance sheet date,
-------------------------- -------- -------- -------- -------- except that car park and
Central London commercialisation income
Offices 351 367 3.7% 3.8% are included on a net basis
London retail 31 46 4.3% 4.3% (after deduction for operational
Other central London 21 21 2.6% 3.4% outgoings). Annualised rental
Total Central London 403 434 3.7% 3.8% income includes temporary
Regional retail lettings.
Regional shopping centres 3. Annualised net rent is
and shops 102 130 7.9% 6.4% annual cash rent, after the
Outlets 61 63 5.3% 5.6% deduction of rent payable,
Total Regional retail 163 193 6.8% 6.1% as at the balance sheet date.
Urban opportunities 27 30 5.6% 4.9% It is calculated using the
Subscale sectors same methodology as annualised
Leisure 42 46 6.9% 5.8% rental income but is stated
Hotels 25 30 3.3% 2.3% net of rent payable and before
Retail parks 33 36 7.4% 7.6% tenant lease incentive adjustments.
Total Subscale sectors 100 112 5.9% 5.3% 31 March 2020 annualised
Combined Portfolio 693 769 4.5% 4.5% net rent data not available,
-------------------------- therefore 30 September 2020
information has been included
for comparative purposes.
4. Net estimated rental value
Represented by: is gross estimated rental
Investment portfolio 641 702 4.5% 4.6% value, as defined in the
Share of joint ventures 52 67 5.3% 4.4% Glossary, after deducting
-------------------------- -------- -------- expected rent payable.
Combined Portfolio 693 769 4.5% 4.5% 5. Gross estimated rental
-------------------------- value (ERV) - refer to Glossary
for definition. The figure
Analysis by use type: for proposed developments
Offices 354 370 3.7% 3.8% relates to the existing buildings
Retail 249 300 6.1% 5.8% and not the schemes proposed.
Leisure, hotels and other 90 99 5.1% 4.1% 6. Net initial yield - refer
-------------------------- -------- -------- to Glossary for definition.
Combined Portfolio 693 769 4.5% 4.5% This calculation includes
-------------------------- all properties including
those sites with no income.
7. Equivalent yield - refer
to Glossary for definition.
Proposed developments are
excluded from the calculation
of equivalent yield on the
Combined Portfolio.
8. 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.
9. 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.
10. Includes all properties
acquired since 1 April 2019.
11. Includes all properties
sold since 1 April 2019.
Table 27: Combined Portfolio value by location at 31 March
2021(1)
Central Regional Subscale
London retail Urban opportunities sectors Total
% % % % %
Central, inner, and outer London 68.1 - 2.9 3.4 74.4
South East and East - 8.6 5.0 - 13.6
Midlands - - 1.0 - 1.0
Wales and South West - 2.2 0.5 - 2.7
North, North West, Yorkshire,
and Humberside - 4.2 2.0 - 6.2
Scotland and Northern Ireland - 1.4 0.7 - 2.1
Total 68.1 16.4 12.1 3.4 100.0
1. % figures calculated by reference to the Combined Portfolio value of GBP10.8bn.
For a full list of the Group's properties please refer to our
website: landsec.com.
Table 28: Combined Portfolio performance relative to MSCI
Total property return - year ended 31 March 2021
Landsec MSCI
% %
------- ----- ---
Central London -2.3 -2.6 (1)
Regional retail -28.4 -23.6 (2)
------- -----
Urban opportunities -21.4 -17.5 (3)
------- ----- ---
Subscale sectors -12.8 n/a (4)
Combined Portfolio -9.6 1.2 (5)
------- ----- ---
1. MSCI Central and Inner London Office benchmark / Central
London Retail weighted by Landsec exposure.
2. MSCI All Shopping Centres benchmark.
3. MSCI Rest of London Shopping Centres benchmark.
4. No benchmark available.
5. MSCI All Property Quarterly Universe.
Table 29: Lease lengths
Weighted average unexpired
lease term at 31 March
2021
Like-for-like
portfolio,
Like-for-like completed developments
portfolio and acquisitions
Mean(1) Mean(1)
Years Years
---------------------------------------- ------------- -----------------------
Central London
Offices 7.3 7.2
London retail 5.2 5.2
Other central London 53.5 53.5
Total Central London 7.3 7.2
Regional retail
Regional shopping centres and shops 4.9 4.9
Outlets 3.3 3.3
Total Regional retail 4.4 4.4
Urban opportunities 6.2 6.1
---------------------------------------- ------------- -----------------------
Subscale sectors
Leisure 10.3 10.3
Hotels 12.1 12.1
Retail parks 5.0 5.0
Total Subscale sectors 8.0 8.0
Combined Portfolio 6.6 6.6
---------------------------------------- ------------- -----------------------
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.
Table 30: 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).
Year ended 31 March
2021
Group Capital
income Joint Revenue and other
statement ventures(1) Total profit items
GBPm GBPm GBPm GBPm GBPm
---------- ------------ ------- ------- ----------
Rental income 519 50 569 569 -
Finance lease interest 9 - 9 9 -
---------- ------------ ------- ------- ----------
Gross rental income (before rents payable) 528 50 578 578 -
Rents payable (7) (2) (9) (9) -
---------- ------------ ------- ------- ----------
Gross rental income (after rents payable) 521 48 569 569 -
Service charge income 70 9 79 79 -
Service charge expense (75) (9) (84) (84) -
Net service charge expense (5) - (5) (5) -
Other property related income 31 1 32 32 -
Direct property expenditure (56) (8) (64) (64) -
Bad and doubtful debts expense (110) (17) (127) (127) -
Segment net rental income 381 24 405 405 -
Other income 2 - 2 2 -
Indirect expense (75) (2) (77) (77) -
Depreciation (5) - (5) (5) -
---------- ------------ ------- ------- ----------
Revenue profit before interest 303 22 325 325 -
Share of post-tax loss from joint ventures (192) 192 - - -
Net deficit on revaluation of investment
properties (1,448) (198) (1,646) - (1,646)
Profit/(loss) on disposal of investment
properties 8 (3) 5 - 5
Loss on disposal of trading properties - (1) (1) - (1)
Exceptional items (4) - (4) - (4)
Other 3 2 5 - 5
Operating (loss)/profit (1,330) 14 (1,316) 325 (1,641)
Finance income 16 - 16 15 1
Finance expense (79) (14) (93) (89) (4)
Loss before tax (1,393) - (1,393) 251 (1,644)
Taxation - - -
---------- ------------ -------
Loss attributable to shareholders (1,393) - (1,393)
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.
Year ended 31 March
2020
Group Proportionate Capital
income Joint share Revenue and other
statement ventures(1) of earnings(2) Total profit items
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ---------- ------------ --------------- ------- ------- ----------
Rental income 611 59 (1) 669 669 -
Finance lease interest 9 - - 9 9 -
---------------------------------- ---------- ------------ --------------- ------- ------- ----------
Gross rental income (before
rents payable) 620 59 (1) 678 678 -
Rents payable (13) (2) - (15) (15) -
---------------------------------- ---------- ------------ --------------- ------- ------- ----------
Gross rental income (after rents
payable) 607 57 (1) 663 663 -
Service charge income 88 10 - 98 98 -
Service charge expense (90) (12) - (102) (102) -
Net service charge expense (2) (2) - (4) (4) -
Other property related income 31 2 - 33 33 -
Direct property expenditure (65) (11) - (76) (76) -
Bad and doubtful debts expense (28) (5) - (33) (33) -
Segment net rental income 543 41 (1) 583 583 -
Other income 2 - - 2 2 -
Indirect expense (69) (3) - (72) (72) -
Depreciation (4) - - (4) (4) -
---------------------------------- ---------- ------------ --------------- ------- ------- ----------
Revenue profit before interest 472 38 (1) 509 509 -
Share of post-tax loss from
joint ventures (151) 151 - - - -
Net deficit on revaluation of
investment properties (1,000) (181) 2 (1,179) - (1,179)
Loss on disposal of investment
properties (6) - - (6) - (6)
Profit on disposal of trading
properties - 7 - 7 - 7
Profit from long-term development
contracts - 3 - 3 - 3
Exceptional items (5) - - (5) - (5)
Other - - (1) (1) - (1)
Operating (loss)/profit (690) 18 - (672) 509 (1,181)
Finance income 18 - - 18 17 1
Finance expense (165) (16) - (181) (112) (69)
Joint venture tax - (2) - (2) - (2)
(Loss)/profit before tax (837) - - (837) 414 (1,251)
Taxation 5 - - 5
---------------------------------- ---------- ------------ --------------- -------
Loss attributable to shareholders (832) - - (832)
1. Reallocation of the share of post-tax loss from joint
ventures reported in the Group income statement to the individual
line items reported in the segmental information note.
2. Removal of the non-wholly owned share of results of the
Group's subsidiaries. The non-wholly owned subsidiaries are
consolidated at 100% in the Group's income statement, but only the
Group's share is included in revenue profit reported in the
segmental information note.
Table 31: Property Income Distribution (PID) calculation
Year ended Year ended
31 March 2021 31 March 2020
GBPm GBPm
-------------- --------------
Loss before tax per income statement (1,393) (837)
Accounting (profit)/loss on residual operations (47) 5
Prior year adjustment - 7
Loss attributable to tax-exempt operations (1,440) (825)
Adjustments
Capital allowances (45) (47)
Capitalised interest (7) (5)
Revaluation deficit 1,646 1,179
Tax exempt disposals (6) 7
Capital expenditure 9 4
Other tax adjustments (3) 2
Goodwill amortisation and impairment 5 5
Estimated tax-exempt income for the year 159 320
--------------
PID thereon (90%) 143 288
-------------- --------------
The table above provides a reconciliation of the Group's loss
before tax to its estimated tax exempt income, 90% of which the
Company is required to distribute as a PID to comply with REIT
regulations.
The Company has 12 months after the year end to make the minimum
distribution. Accordingly, PID dividends paid in the year may
relate to the distribution requirements of previous periods. The
table below sets out the dividend allocation for the years ended 31
March 2021 and 31 March 2020:
PID allocation Ordinary Total
dividend dividend
Year ended Year ended Pre-31
31 March 31 March March
2021 2020 2020
GBPm GBPm GBPm GBPm GBPm
-----------------------
Dividends paid in year
to 31 March 2020 - 204 138 - 342
Dividends paid in year
to 31 March 2021 49 84 - - 133
Minimum PID to be paid
by 31 March 2022 94 - n/a n/a n/a
-----------------------
Total PID required 143 288
-----------------------
Investor information
1. Company website: landsec.com
The Group's half-yearly and annual reports to shareholders,
results announcements and presentations, are available to view and
download from the Company's website. The website also provides
details of the Company's current share price, the latest news about
the Group, its properties and operations, and details of future
events and how to obtain further information.
2. Registrar: Equiniti Group PLC
Enquiries concerning shareholdings, dividends and changes in
personal details should be referred to the Company's registrar,
Equiniti 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
https://help.shareview.co.uk . If you are not able to find the
answer to your question within the general Help information page, a
personal enquiry can be sent directly through Equiniti's secure
e-form on their website. Please note that you will be asked to
provide your name, address, shareholder reference number and a
valid e-mail address. Alternatively, shareholders can view and
manage their shareholding through the Landsec share portal which is
hosted by Equiniti - simply visit https://portfolio.shareview.co.uk
and follow the registration instructions.
3. Shareholder enquiries
If you have an enquiry about the Company's business or about
something affecting you as a shareholder (other than queries which
are dealt with by the Registrar), please email Investor Relations
(see details in 8. below).
4. Share dealing services: https:// shareview.co.uk
The Company's shares can be traded through most banks, building
societies and stockbrokers. They can also be traded through
Equiniti. To use their service, shareholders should contact
Equiniti: 0345 603 7037 from the UK. Lines are ordinarily open
Monday to Friday 08:00 to 16:30 for dealing and until 18:00 for
enquiries, excluding UK public holidays.
5. Dividends
A third quarterly interim dividend of 6p per ordinary share, or
GBP44m in total (2020: Nil), was paid on 30 March 2021 as a
Property Income Distribution (PID). The Board has recommended a
final dividend for the year ended 31 March 2021 of 9p per ordinary
share (2020: GBPNil) to be paid as a PID. This final dividend will
result in a further estimated distribution of GBP67m (2020:
GBPNil). Subject to shareholders' approval at the Annual General
Meeting, the final dividend will be paid on 23 July 2021 to
shareholders registered at the close of business on 18 June
2021.
The total dividend paid and recommended in respect of the year
ended 31 March 2021 is 27p per ordinary share (2020: 23.2p)
resulting in a total estimated distribution of GBP200m (2020:
GBP172m).
The first quarterly dividend for the year ending 31 March 2022
will be paid in October 2021 and will be announced in due
course.
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 and return it to Equiniti.
Dividend payments to overseas shareholders - Overseas Payment
Service (OPS)
Dividends are no longer paid by cheque. Shareholders need to
request that their dividends be paid directly to a personal bank
account overseas. For more information, please contact Equiniti or
download an application form online at https:// shareview.co.uk
.
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 .
7. Financial reporting calendar
2021
Financial year end 31 March
Preliminary results announcement 18 May
Half-yearly results announcement 9 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 earnings per share (Adjusted EPS)
Earnings per share based on revenue profit after related
tax.
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 2019.
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
year.
EPRA
European Public Real Estate Association.
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 tangible assets (NTA) per share
Diluted net assets per share adjusted to remove the cumulative
fair value movements on interest-rate swaps and similar
instruments, the carrying value of goodwill arising as a result of
deferred tax and other intangible assets, deferred tax on
intangible assets and to include the difference between the fair
value and the book value of the net investment in tenant finance
leases.
Equivalent yield
Calculated by the Group's external valuer, equivalent yield is
the internal rate of return from an investment property, based on
the gross outlays for the purchase of a property (including
purchase costs), reflecting reversions to current market rent and
such items as voids and non-recoverable expenditure but ignoring
future changes in capital value. The calculation assumes rent is
received annually in arrears.
ERV - Gross estimated rental value
The estimated market rental value of lettable space as
determined biannually by the Group's external valuer. For
investment properties in the development programme, which have not
yet reached practical completion, the ERV represents management's
view of market rents.
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 revenue profit
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 2019 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).
MSCI
Refers to the MSCI Direct Property indexes which measure the
property level investment returns in the UK.
Net assets per share
Equity attributable to owners divided by the number of ordinary
shares in issue at the end of the year. 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.
Revenue profit
Profit before 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.
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.
Temporary lettings
Lettings for a period of one year or less. These are included
within voids.
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 year plus the change in EPRA net
tangible assets per share, divided by EPRA net tangible assets per
share at the beginning of the year.
Total cost ratio
Total cost ratio represents all costs included within revenue
profit, other than rents payable, financing costs and provisions
for bad and doubtful debts, expressed as a percentage of gross
rental income before rents payable adjusted for costs recovered
through rents but not separately invoiced.
Total development cost (TDC)
Total development cost refers to the book value of the site at
the commencement of the project, the estimated capital expenditure
required to develop the scheme from the start of the financial year
in which the property is added to our development programme,
together with capitalised interest, being the Group's borrowing
costs associated with direct expenditure on the property under
development. Interest is also capitalised on the purchase cost of
land or property where it is acquired specifically for
redevelopment. The TDC for trading property development schemes
excludes any estimated tax on disposal.
Total property return (TPR)
The change in market value, adjusted for net investment, plus
the net rental income of our investment properties expressed as a
percentage of opening market value plus the time weighted capital
expenditure incurred during the year.
Total Shareholder Return (TSR)
The growth in value of a shareholding over a specified year,
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.
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.
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END
FR MZGMKRNNGMZM
(END) Dow Jones Newswires
May 18, 2021 02:00 ET (06:00 GMT)
Grafico Azioni Land Securities (LSE:LAND)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Land Securities (LSE:LAND)
Storico
Da Apr 2023 a Apr 2024
