TIDMLAND
RNS Number : 3012T
Land Securities Group PLC
14 November 2023
14 November 2023
LAND SECURITIES GROUP PLC ("Landsec")
Results for the half year ended 30 September 2023
Further operational growth across the business; well positioned
for new market reality
Mark Allan, Chief Executive of Landsec, commented:
"Our high-quality, differentiated portfolio and focused capital
allocation mean we continue to benefit from customers concentrating
on best-in-class space. In London, our well-located, sustainable
offices in vibrant, amenity-rich areas continue to see growing
occupancy, growing utilisation, growing customer space requirements
and hence growing rents. In retail, sales in our locations continue
to outperform brands' overall sales growth, also driving further
growth in occupancy and rents. Despite the challenges in the
general economic outlook, we see no signs of these trends
abating.
" Since early 2022, we have been clear that we expected interest
rates to remain higher for longer and that asset values would have
to adjust to this new reality, which they have. We were decisive in
acting on this view by selling GBP1.4bn of single-let HQ offices,
mostly in the City, at prices ahead of today's values. Investment
activity remains thin, but we expect this to pick up in 2024, which
should start to support values for the best assets. We will
continue to recycle capital where our ability to add further value
is limited, but having been a net seller when prices were higher,
we are well-placed to take advantage of opportunities that will no
doubt arise as the new higher-for-longer reality is now more widely
accepted."
Financial highlights
Prior Prior
30 Sep period 30 Sep period
2023 (1) 2023 (1)
EPRA earnings (GBPm)(2)(3) 198 197 Loss before tax (GBPm) (193) (192)
------ ------- ---------------------- ------ -------
EPRA EPS (pence)(2)(3) 26.7 26.6 Basic EPS (pence) (24.4) (25.7)
------ ------- ---------------------- ------ -------
EPRA NTA per share Net assets per share
(pence)(2)(3) 893 936 (pence) 899 945
------ ------- ---------------------- ------ -------
Total return on equity Dividend per share
(%) (2)(3) (2.4) (2.9) (pence) 18.2 17.6
------ ------- ---------------------- ------ -------
Group LTV ratio (%)(2)(3) 34.4 31.7 Net debt (GBPm) 3,572 3,348
------ ------- ---------------------- ------ -------
3/4 EPRA EPS(2)(3) stable at 26.7p, in line with FY guidance, as
positive leasing, margin improvement and 2.8% LFL income growth
offset impact of deleveraging through asset sales during prior
year
3/4 Total dividend up 3.4% to 18.2p per share, in line with
guidance of low single digit percentage growth
3/4 Total return on equity improved to -2.4%, with loss before
tax of GBP193m (after a GBP375m, or -3.6%, adjustment in portfolio
value) resulting in a 4.6% reduction in EPRA NTA per share(2) (3)
to 893p
3/4 Maintained sector-leading balance sheet strength, with
AA/AA- credit rating, 7.2x net debt/EBITDA, Group LTV(2)(3) of
34.4% and weighted average debt maturity of 9.3 years
3/4 Continue to expect EPRA EPS for full year to be broadly
stable vs last year's underlying 50.1 pence and low to mid single
digit percentage growth in rental values in London and Major
Retail
Operational highlights: well-placed due to focused execution of
clear strategy
Delivered further growth in operational performance, underpinned
by continued customer focus on best-in-class space, as decisive
positioning for higher-for-longer rates through well-timed GBP1.4bn
of disposals during prior year leaves Landsec well-placed to
capture new opportunities and drive future growth.
Central London: strong customer demand underpins further growth
in ERVs and occupancy
3/4 Capitalised on continued customer demand for high-quality
space in best locations, with GBP17m of lettings completed or in
solicitors' hands, 3% ahead of valuers' assumptions, and overall
Central London occupancy up 60bps to 96.5%, with West End portfolio
effectively full at 99.6% occupancy
3/4 Recorded 10% increase in office attendance vs prior six
months, reflecting appeal of our well-located portfolio, with 27 of
35 lettings in last 12 months seeing customers taking more or same
space
3/4 Delivered 3.3% ERV growth on account of strong leasing
activity, comfortably on track vs full year guidance of low to mid
single digit percent ERV growth, as rise in valuation yields led to
4.5% softening of values
3/4 Started two new developments in West End and Southwark, with
expected 7.3% gross yield on total cost and c. 12% yield on
incremental investment, as recently completed schemes are now 83%
let or under offer, with lettings 12% ahead of initial
assumptions
Major retail destinations: brands' focus on best stores drives
growth in occupancy and ERVs
3/4 Continued to drive positive leasing momentum, as key brands
increase focus on fewer, bigger, better stores, with GBP24m of
lettings signed or in solicitors' hands on average 6% above ERV,
renewals on average 2% above previous passing rent, and current
occupancy up 100bps vs March at 95.3%
3/4 Facilitated +4.0% YoY sales growth for brands, with
like-for-like sales +5.4% above 2019/20 levels, as online non-food
sales fall for 26 months in a row whilst in-store sales continue to
grow
3/4 Delivered 1.4% ERV growth, on track vs guidance of low to
mid single digit percent growth for the full year, with high income
returns underpinning resilience in capital values (-1.3%)
Mixed-use urban neighbourhoods: preparing for first potential
development starts in 2024
3/4 Secured detailed planning consent for first phase of office
development at Mayfield, creating optionality for potential
earliest start of first c. GBP180m investment in first half of
2024
3/4 Progressed further planning and land assembly workstreams at
GBP1bn Finchley Road scheme to unlock potential start on site in
first half of 2024, whilst optimising preparations for rest of
long-term pipeline
Underpinning our strategy: strong capital base, operational
efficiency and focus on sustainability
3/4 Strong capital base, with AA/AA- credit rating, modest 34.4%
LTV, low 7.2x net debt/EBITDA, long 9.3-year average debt maturity,
GBP2.1bn undrawn facilities and no refinancing needs until 2026
3/4 Sold GBP85m of smaller and non-core assets, on average 6%
ahead of March book value, as further planned capital recycling
will further increase existing headroom to capitalise on new
opportunities
3/4 Improved operating margin, as review of operating model in
prior year and focus on cost led to reduction in overhead costs,
despite persistent UK inflation
3/4 Starting imminently with retrofit of air source heat pumps
at first two sites as part of net zero transition investment plan,
with 44% of office portfolio already EPC 'B' or higher vs 23% for
London market
3/4 Launched Landsec Futures Fund to invest GBP20m over next 10
years to enhance social mobility in our industry, empower more
people towards world of work and deliver GBP200m of social
value
1. Prior period measures are for the six months ended 30
September 2022 other than EPRA NTA per share, net assets per share,
Group LTV ratio and
net debt, which are as at 31 March 2023.
2. An alternative performance measure. The Group uses a number
of financial measures to assess and explain its performance, some
of which are considered to be alternative performance measures as
they are not defined under IFRS. For further details, see the
Financial review and table 14 in the Business analysis section.
3. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Financial review. The condensed
consolidated preliminary financial information is prepared under UK
adopted international accounting standards (IFRSs and IFRICs) where
the Group's interests in joint ventures are shown collectively in
the income statement and balance sheet, and all subsidiaries are
consolidated at 100%. Internally, management reviews the Group's
results on a basis that adjusts for these forms of ownership to
present a proportionate share. These metrics, including the
Combined Portfolio, are examples of this approach, reflecting our
economic interest in our properties regardless of our ownership
structure. For further details, see table 14 in the Business
analysis section.
A live video webcast of the presentatio n will be available at
9.00am GMT. A downloadable copy of the webcast will then be
available by the end of the day.
We will also be offering an audio conference call line, details
are available in the link below. Due to the large volume of callers
expe cted, we recommend that you dial into the call 10 minutes
before the start of the presentation.
Please note that there will be an interactive Q&A facility
on both the webcast and conference call line.
https://webcast.landsec.com/2023-half-year-results
Cal l title: Landsec half year results 2023
Forward-looking statements
These half year results, the latest Annual Report and Landsec's
website may contain certain 'forward-looking statements' with
respect to Land Securities Group PLC (the Company) and the Group's
financial condition, results of its operations and business, and
certain plans, strategies, objectives, goals and expectations with
respect to these items and the economies and markets in which the
Group operates.
Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
'anticipates', 'aims', 'due', 'could', 'may', 'should', 'expects',
'believes', 'intends', 'plans', 'targets', 'goal' or 'estimates'
or, in each case, their negative or other variations or comparable
terminology. Forward-looking statements are not guarantees of
future performance. By their very nature forward-looking statements
are inherently unpredictable, speculative and involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. Many of these
assumptions, risks and uncertainties relate to factors that are
beyond the Group's ability to control or estimate precisely. There
are a number of such factors that could cause actual results and
developments to differ materially from those expressed or implied
by these forward-looking statements. These factors include, but are
not limited to, changes in the political conditions, economies and
markets in which the Group operates; changes in the legal,
regulatory and competition frameworks in which the Group operates;
changes in the markets from which the Group raises finance; the
impact of legal or other proceedings against or which affect the
Group; changes in accounting practices and interpretation of
accounting standards under IFRS, and changes in interest and
exchange rates.
Any forward-looking statements made in these half year results,
the latest Annual Report or Landsec's website, or made
subsequently, which are attributable to the Company or any other
member of the Group, or persons acting on their behalf, are
expressly qualified in their entirety by the factors referred to
above. Each forward-looking statement speaks only as of the date it
is made. Except as required by its legal or statutory obligations,
the Company does not intend to update any forward-looking
statements.
Nothing contained in these half year results, the latest Annual
Report or Landsec's website should be construed as a profit
forecast or an invitation to deal in the securities of the
Company.
Chief Executive's statement
Well placed for a new reality. Ready to capitalise on future
opportunities.
Since we launched our strategy in late 2020, we have
consistently focused on two key principles of sustainable value
creation: focusing our resources where we have a genuine
competitive advantage and maintaining a strong balance sheet. The
external context has changed materially since then, but this clear
focus and our decisive actions mean we are well-placed for the
future.
A year ago, we clearly stated our view that the ultra-low rate
environment over the prior decade was the aberration, not the
increase in interest rates we had seen at the time, and that
markets would have to adjust to a new higher rate, higher yield
reality. We also said we expected the price adjustment in real
estate to continue as a result, which it has. Whereas many last
year paused activity in the hope that rates would fall back, we
chose instead to prepare for this new reality and sold GBP1.4bn of
assets; 86% of which were single-let City offices, where our
ability to add further value was limited. In March, we also seized
the opportunity to issue a GBP400m Green bond at 4.875%, so our
average debt maturity is over nine years.
This meant we started the current financial year knowing that we
could focus on driving operational results and preparing for future
growth opportunities, rather than having to worry about how to
reduce leverage or refinancing risks. This is precisely what we
have done over the past six months. Although the economic backdrop
remains uncertain, demand for the best-in-class space has remained
strong, hence we delivered further growth in occupancy,
like-for-like income and ERVs across our portfolio. We also
completed our recent development programme, which is now 83% let or
in solicitors' hands, with rents 12% ahead of initial expectations.
And on the back of the latter, we started two new, low carbon
office schemes in the vibrant, supply-constrained West End and
Southwark sub-markets.
Our focus remains underpinned by three areas of competitive
advantage: i) our high-quality portfolio; ii) the strength of our
customer relationships; and iii) our ability to unlock complex
opportunities through our development and asset management
expertise. As interest rates begin to stabilise, we expect
investment activity to improve in 2024, which should start to
support values for the best assets. Our balance sheet remains
strong, with a 34.4% LTV and net debt/EBITDA of 7.2x, so we are
well-placed to capitalise on opportunities which will no doubt
emerge, as the higher-for-longer reality has now sunk in more
widely.
Delivering consistent growth in operational performance
Building on the growing momentum across our business,
operational performance remains positive. This is supported by our
high quality portfolio, as people choose to spend time together in
inspiring places, be it to work, shop or spend their leisure time.
Recognising this, the focus from customers on the very best space
to attract their staff or customers is now deeply embedded and we
expect this to continue.
Reflecting this, we delivered 2.8% growth in like-for-like net
rental income, offsetting the impact from our GBP1.4bn of disposals
and significant deleveraging during the prior year. As a result,
EPRA EPS for the half year of 26.7 pence was stable vs the prior
period, in line with our guidance for EPRA EPS for the full year to
be broadly stable vs last year's underlying 50.1 pence. Our
dividend for the half year is 18.2 pence, up 3.4% vs last year in
line with our guidance and reflecting a dividend cover of a healthy
1.5 times.
The marked rise in bond yields since the start of the year put
further upward pressure on valuation yields, although the impact of
this was partly offset by our strong leasing activity. This drove
2.5% ERV growth, with positive growth across all segments of our
portfolio. As a result, the reduction in our portfolio value slowed
compared to the second half of last year, to -3.6%. Similarly, the
reduction in EPRA NTA per share slowed to 4.6% to 893 pence,
reflecting an improvement in total return on equity to -2.4%.
Table 1: Highlights
Sep 2023 Sep 2022 Change %
-------- -------- --------
EPRA earnings (GBPm)(1) 198 197 0.5
Loss before tax (GBPm)(2) (193) (192) (0.5)
Total return on equity (%) (2.4) (2.9) 0.5
Basic (loss)/earnings per share (pence) (24.4) (25.7) 5.1
EPRA earnings per share (pence)(1) 26.7 26.6 0.4
Dividend per share (pence) 18.2 17.6 3.4
Sep 2023 Mar 2023 Change %
-------- -------- --------
Combined portfolio (GBPm)(1) 10,146 10,239 (0.9)
IFRS net assets (GBPm) 6,728 7,072 (4.9)
EPRA Net Tangible Assets per share
(pence)(1) 893 936 (4.6)
Adjusted net debt (GBPm)(1) 3,524 3,287 7.2
Group LTV ratio (%)(1) 34.4 31.7 2.7
Proportion of portfolio rated EPC
'B' or higher (%) 41 36
Average upfront embodied carbon reduction
development pipeline (%) 45 36
Energy intensity reduction vs 2020
(%) 19.4 16.6
------------------------------------------ -------- -------- --------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
in the Financial Review.
2. Loss before tax of GBP193m as a result of a -GBP375m, or
-3.6%, movement in portfolio value.
Our strategy in a changing market
The environment we operate in has changed markedly since we
launched our strategy three years ago, yet our strategic focus
remains the right one. Each of our three key areas - Central London
offices, major retail destinations and mixed-use urban
neighbourhoods - continue to benefit from growing demand for
high-quality, well-located, sustainable space, which is driving
rents higher for the best assets. W hat binds these areas together
is the importance of a sense of place, as even though the
proportions of use vary, the lines between where people want to
work, live and spend their leisure time are blurring.
The surge in inflation and interest rates since early last year
has had a material impact on asset values globally, be it for real
estate, equities or bonds, but positively, inflation has come down
markedly from its recent highs. Still, we expect UK inflation to
remain relatively sticky, so whilst interest rates may now be close
to their peak, it seems optimistic to us to assume that they will
come down sharply anytime soon.
Our strategy in 2020 was never built on a view that the
ultra-low rate environment at the time would last and our actions
over the past three years reflect this, as we focused our
investments where we have a genuine competitive advantage that
enables us to create long-term value. As such, we acquired further
stakes in Bluewater and Cardiff at yields of 8-10%; we sold
GBP2.2bn of London offices at an average yield of 4.4%, 83% of
which were single-let buildings, mostly in the City and in line
with our view that HQ buildings would be more at risk from changes
in ways of working; we unlocked future optionality in mixed-use
schemes at Mayfield and Finchley Road; and we reduced our
borrowings.
In this more normalised rate environment, we continue to target
a total return on equity of 8-10% p.a. over time, comprising a mix
of income and capital returns, driven by rental value growth and
development upside. Starting with an income return on NTA of c.
5.5% we are in a good place to deliver on this, although short-term
fluctuations in valuation yields, which are outside of our control,
mean our return on equity is unlikely to be exactly in that range
every individual year. We are seeing this in the current year, but
this target remains what we base our medium-term decisions on.
In this context, it is critical that we continue to think
carefully about capital allocation decisions in terms of risk and
return. Major retail destinations, for the right assets, offer high
single digit income returns plus the prospect of a return to
sustainable rental growth, as evidenced by our own portfolio. Such
opportunities continue to look appealing. Similarly, the yield on
incremental spend for our near-term developments in London looks
very attractive, at c. 12%. In general, development returns are
naturally more challenged, as values are down and costs have gone
up, although build cost inflation is now beginning to moderate. As
such, we have been focused on realising design and cost
efficiencies to maintain healthy returns and have made important
progress on this, to preserve the valuable optionality of our
longer-term pipeline.
Funding this investment activity will continue to come primarily
from two sources. Firstly, from existing balance sheet capacity,
which remains healthy as a result of our proactive asset disposal
activity since early 2022. Secondly, from further capital
recycling, with the focus of this activity now likely to shift
increasingly to our GBP1.2bn subscale portfolio. Still, the extent
of opportunity in our pipeline, and for accretive external growth,
is such that over time this is likely to exceed our own balance
sheet capacity. As capital discipline remains our priority, we
continue to explore opportunities to enhance our own investment in
future growth with other, complementary sources of capital, to
accelerate our overall growth, capitalise on the platform value we
are creating, and to enhance our overall return on equity.
Creating value through our competitive advantages
In executing our strategy, we continue to focus on our three key
competitive advantages: our high quality portfolio; the strength of
our customer relationships; and our ability to unlock complex
opportunities. We have seen customer demand bifurcate further over
the half year, as demand for modern, sustainable space in areas
with the best amenities in London remained strong, even though
overall office leasing across the market slowed. In retail, the
focus from brands remains on fewer, but bigger and better stores in
key locations. Supply of both is limited, which continues to drive
rental value growth across our assets.
In London, 76% of our portfolio is now located in the vibrant
West End and Southwark markets, up from 58% in 2020, whilst our
City exposure is down to 24%. Our recently completed schemes are
83% let or in solicitors' hands, up from 60% six months ago, with
rents well above ERV. Office utilisation continues to rise and 77%
of our lettings over the last year have seen customers grow or keep
the same floorspace. Across our existing portfolio we signed or are
in solicitor's hands on GBP17m of leases, on average 3% above ERV.
Occupancy is up 60bps to 96.5% and at 99.6% our West End portfolio
is effectively full - both well ahead of the London market. This
drove 3.3% growth in ERVs over the first six months, which is
comfortably on track vs our full year guidance of low to mid single
digit percent ERV growth.
Across our major retail destinations, we completed or are in
solicitor's hands on GBP24m of lettings, on average 6% ahead of
ERV. For the first time in years, uplifts on lease renewals have
turned positive, on average 2% above previous passing rent, whilst
occupancy is up 100bps since March to 95.3%. We have seen 1.4% ERV
growth over the six months, which is on track vs our guidance of
low to mid single digit percent growth for the full year. Similar
to London, this growth very much reflects the high quality of our
portfolio, as we maintain our long-held view that demand for
generic retail and office space will remain lower than before the
pandemic.
This is supplemented by our ability to unlock complex
opportunities, such as in London, where we completed three projects
over live Underground stations featuring highly bespoke engineering
solutions, combined creating c. GBP215m of value; in retail, where
we are exploring further opportunities to leverage our leading
platform, post the discounted purchase of the debt on St David's
from two lenders in early 2023; and in mixed-use, where we are
progressing planning and land assembly at Finchley Road, following
the resolution to grant consent to build 1,800 homes in March, and
at Mayfield, where we obtained detailed consent for the first phase
of development late summer.
Delivering sustainably
At the start of the year we updated our carbon reduction targets
to align with the Science Based Targets Initiative's (SBTi) new
Net-Zero Standard, as we remain committed to following a
science-based net-zero pathway that ensures our actions respond to
the urgency of the climate crisis. We committed to a near-term
target of reducing our direct and indirect greenhouse gas emissions
by 47% by 2030 from a 2020 baseline and committed to reach net zero
by 2040 from the same baseline year. This target covers emissions
from all sources, including all of our reported Scope 3 emissions,
such as the emissions from our development pipeline, supply chain
and customers. Our emissions have already reduced by 26% compared
with baseline.
To align with our revised carbon reduction target, we have
updated our energy intensity target to reduce energy intensity by
52% by 2030 from a 2019/20 baseline. We are already tracking a 19%
reduction, having achieved an energy intensity reduction across our
portfolio of 3% vs last year during the period.
We continue to progress the implementation of our net zero
transition investment plan, which will ensure we meet our near-term
science-based carbon reduction target and stay ahead of the
proposed Minimum Energy Efficiency Standard Regulations. This
requires a minimum EPC 'B' certification by 2030, yet 44% of our
office portfolio and 41% of our overall portfolio is already rated
B or higher, up from 38% and 36% in March. We are about to start
retrofitting air source heat pumps at our first two office
locations and are progressing design work for a further four
buildings. The benefit of this in terms of improved EPC ratings
will be visible from 2025 onwards, when these become operational.
In addition, we continue to focus on reducing upfront embodied
carbon from our development schemes and improving energy
efficiency, expanding the work with our largest customers to help
them identify ways to save energy.
Earlier this year, we also launched our Landsec Futures fund,
which is aimed at improving social mobility in the real estate
industry and will see us invest GBP20m over the next decade. This
will ensure we deliver on our target to create GBP200m in social
value and empower 30,000 people towards the world of work by 2030.
This is built on our strong track-record of investing in our local
communities, which has already seen us create GBP27m of social
value and empower 7,925 people to work since 2020.
Outlook
Since the start of the year, the reduction in inflation, return
to real wage growth for consumers and better than expected
resilience in UK GDP have been encouraging. Still, we remain
mindful that the ongoing transition from a decade of free money and
excess liquidity to a higher interest rate world could continue to
create its dislocations and that higher-for-even-longer rates could
eventually start to impact consumer and customer demand, even
though we are not seeing any signs of this yet. Nevertheless, our
strategic decisions over the past three years mean we are in great
shape for any eventuality:
3/4 our portfolio quality is high, which has increasingly become
the decisive factor for our customers;
3/4 our balance sheet is strong, at 7.2x net debt/EBITDA and a 9.3-year average debt maturity;
3/4 we have sold GBP2bn+ of assets most at risk of repricing,
creating capacity for higher-return investments;
3/4 we have created an attractive pipeline of opportunities,
with flexibility on future commitments.
Investment activity remains subdued for now but the combination
of recent relative stability in long-term rates and greater
economic resilience so far means that we expect activity levels to
pick up in 2024. The refinancing of cheap debt issued before 2022
across the sector remains a challenge, but the apparent
availability of new equity and mezzanine finance to plug gaps in
the capital stack means that we see the risk of disorderly sales
putting significant pressure on the value of high-quality assets as
lower than six months ago. As a result, for the best assets we
expect values will start to stabilise during 2024, although
secondary assets where the sustainability of cashflow is
questionable will likely continue to fall.
From an income perspective, higher interest costs and cost
inflation are a headwind across every sector, yet the
sustainability of our earnings remains underpinned by our long
average debt maturity and growth in like-for-like income,
reflecting the strong demand for our high-quality space. For this
year, the upside from this is largely offset by our significant
disposals last year and the c. GBP10m impact on earnings from the
start-up cost of opening three new Myo locations, the last
over-rented retail leases resetting and the investment in our
systems we outlined in May. As such, we reiterate our guidance for
EPRA EPS this year to be broadly stable vs last year's underlying
level of 50.1 pence, before returning to growth next year. As our
dividend cover is at the high end of our 1.2-1.3x target range, we
continue to expect our dividend to grow by a low single digit
percentage per year over these two years.
Whilst macroeconomic signals remain mixed, with long-term rates
seemingly beginning to stabilise and occupier demand for the best
assets remaining robust, the outlook for values for best-in-class
assets should start to improve. We have made considerable progress
in executing our strategy over the past three years hence Landsec
is well placed for long-term growth. We remain excited about the
future.
Operating and portfolio review
Overview
Our combined portfolio was valued at GBP10.1bn as of September,
comprising the following segments:
3/4 Central London (62%): our modern, high-quality office (83%)
and retail and other commercial space (17%), located in the West
End (69%), City (24%) and Southwark (7%).
3/4 Major retail destinations (18%): our investments in six
shopping centres and five retail outlets, with the seven largest
assets comprising 84% of the overall retail portfolio value, most
of which are amongst the highest selling locations for retailers in
the UK.
3/4 Mixed-use urban neighbourhoods (8%): our investments in
mixed-use urban places, focused on five locations in London,
Manchester and Glasgow, some of which currently have a predominant
use as retail ahead of their medium-term repositioning.
3/4 Subscale (12%): assets in sectors where we have limited
scale or competitive advantage and which we therefore plan to
divest over time, split broadly equally between retail parks,
hotels and leisure.
Investment activity
In late 2020, we said we intended to sell c. GBP4bn of mature
London offices and assets in sectors which were subscale for us
over a period of circa six years, with a view to reinvest this into
higher growth opportunities. This remains on track, as half way
into this period, we have sold GBP2.5bn of assets.
Following our GBP1.4bn of disposals last year, we did not make
any material disposals during the half year, yet since then we have
sold one of our two smallest outlets and a number of non-core U+I
assets, taking total disposals to GBP85m, on average 6% above March
book value. When we set out our plan to sell c. GBP4bn of assets
three years ago, we said we would focus on the sale of c. GBP2.5bn
of offices first, as yields were at an all-time low and therefore
most at risk of moving out. With our timely disposal of GBP1.4bn of
offices last year, we have sold GBP2.2bn of our c. GBP2.5bn target
at an average yield of 4.4% and a modest 4% discount to book value.
Most of these were large City HQ buildings, so as a result our City
exposure is down from 42% three years ago to 24% currently. Our
focus is now mostly on recycling capital out of subscale sectors,
which we aim to progress in the second half, assuming no major
economic shocks.
During the first half, net acquisitions were GBP75m and we spent
GBP108m on development capex. Our sole acquisition was a 89,000 sq
ft, EPC B-rated office in Kings Cross, where in a back to back
deal, we agreed a lease surrender with the tenant. This unlocked
the opportunity to convert the space into a new Myo location, which
we expect to open in early 2025. Net of the received payment, the
acquisition price reflects a capital value of c. GBP800 per sq ft
and we expect the Myo conversion to deliver a mid-teens IRR.
Portfolio valuation
The significant increase in interest rates since the start of
the year meant that transaction volumes across global and UK
property markets have remained subdued. As a result, yields have
softened further, so despite positive ERV growth across every
segment, the value of our portfolio reduced by 3.6%.
Our Central London portfolio was down 4.5% over the period as
the upside from our 3.3% ERV growth was offset by a 33bps increase
in yields to 5.3%. The value of our West End office (-3.1%) and
retail and other assets (-1.4%), which make up 75% of our London
investment portfolio, again proved more resilient than our City
offices (-9.3%). This reflects our ongoing strong leasing activity
in the West End, where our entire Victoria estate is now 100% full,
driving 4.7% ERV growth. In the City, where we have sold around
half of our assets over the past three years, the higher
availability of space meant that ERV growth was more muted, in line
with our guidance, at 1.0%. The valuation of our development assets
was down 4.9%, as successful lettings and ERV growth were offset by
a general softening in yields.
The valuation of our major retail assets proved resilient, down
just 1.3% over the six months, as 1.4% growth in ERVs virtually
offset a 16bps softening in yields. Outlet values were down 3.8%,
mostly driven by an increase in yields, yet shopping centre
valuations were stable. This reflects the solid operational
performance and high day-one income returns, which makes yields
less sensitive to interest rate movements than low-yielding
sectors. As a result, with a 2.9% total return over the half year,
major retail again was the best performing part of our core
portfolio, ahead of London (-2.4%) and mixed-use (-3.8%).
The value of our mixed-use assets was down 6.2%, driven by 52bps
yield softening at MediaCity. Our future developments saw a 3.6%
reduction in value, as the majority of these are valued based on
their existing retail use. We manage income on a short-term basis
to maximise flexibility for development, but as the duration of
income reduced, values softened slightly. The valuation of our
Subscale portfolio was broadly stable, at -0.6%, reflecting strong
operational performance in hotels (+1.7%) and resilience in retail
parks (-0.6%). Following a marked reduction in the prior year, the
valuation of our leisure assets started to stabilise (-2.7%), as
its largest tenant, Cineworld, successfully recapitalised during
the period.
Looking ahead, we expect the current subdued investment activity
could result in some further yield softening in the near future.
The sharp rise in borrowing costs over the past two years will
reduce the interest cover on refinancing any pre-2022 debt,
especially where leverage is high and initial yields were low. In
the UK, on average roughly GBP40bn of commercial real estate loans
mature p.a. over 2024-27, but it is difficult to assess the exact
funding gap on this, as averages are somewhat meaningless in trying
to calculate this. However, the risk of disorderly sales driving
the value of high-quality assets down materially seems limited, as
there appears to be equity or mezzanine capital available to plug
gaps in the capital stack for such assets. As the outlook for
interest rates begins to stabilise, we therefore expect investment
activity to pick up in 2024 and values for the best assets which
offer clear rental growth potential to stabilise, although we
expect further pressure on the value of secondary assets where
occupational demand is questionable. For our portfolio, we continue
to expect ERVs in London and major retail to grow by a low to
mid-single digit percentage this year.
Table 2: Valuation analysis
Market
value LFL rental Topped
30 value up net
Sep Valuation change Net initial initial Equivalent LFL equivalent
2023 (Deficit)/Surplus change (1) yield yield yield yield change
GBPm GBPm % % % % % bps
----------------- ------ ----------------- --------- ---------- ----------- -------- ---------- --------------
West End offices 2,578 (78) (3.1) 4.7 4.8 5.6 5.4 31
City offices 1,221 (123) (9.3) 1.0 3.9 4.8 5.8 51
Retail and other 1,039 (15) (1.4) 3.4 4.4 4.6 4.9 22
Developments 1,364 (70) (4.9) n/a 0.0 1.8 5.0 n/a
----------------- ------ ----------------- --------- ---------- ----------- -------- ---------- --------------
Total Central
London 6,202 (286) (4.5) 3.3 4.5(2) 5.2(2) 5.3 33
----------------- ------ ----------------- --------- ---------- ----------- -------- ---------- --------------
Shopping centres 1,206 1 0.1 1.6 8.0 8.6 8.1 13
Outlets 665 (26) (3.8) 0.9 6.7 6.7 7.4 20
----------------- ------ ----------------- --------- ---------- ----------- -------- ---------- --------------
Total Major
retail 1,871 (25) (1.3) 1.4 7.5 7.9 7.8 16
----------------- ------ ----------------- --------- ---------- ----------- -------- ---------- --------------
Completed
investment 355 (38) (9.7) 0.6 6.0 6.1 6.8 52
Developments 473 (19) (3.6) n/a 5.4 5.3 5.8 n/a
----------------- ------ ----------------- --------- ---------- ----------- -------- ---------- --------------
Total Mixed-use
urban 828 (57) (6.2) 0.6 6.0(2) 6.1(2) 6.1 52
----------------- ------ ----------------- --------- ---------- ----------- -------- ---------- --------------
Leisure 424 (11) (2.7) 1.8 8.6 8.8 8.7 17
Hotels 404 7 1.7 5.2 6.9 6.9 6.7 5
Retail parks 417 (3) (0.6) 0.8 6.7 7.0 6.6 21
----------------- ------ ----------------- --------- ---------- ----------- -------- ---------- --------------
Total Subscale
sectors 1,245 (7) (0.6) 2.4 7.4 7.5 7.3 13
----------------- ------ ----------------- --------- ---------- ----------- -------- ---------- --------------
Total Combined
Portfolio 10,146 (375) (3.6) 2.5 5.7(2) 6.2(2) 6.1 29
----------------- ------ ----------------- --------- ---------- ----------- -------- ---------- --------------
1. Rental value change excludes units materially altered during
the period.
2. Excluding developments.
Leasing and operational performance
Central London
The focus in customer demand on buildings with the best
sustainability credentials, transport connectivity and local
amenities to make key talent want to spend time in the office is
now firmly embedded. As the amount of space which ticks all these
boxes is limited, pricing of this continues to go up, whilst space
which does not meet all these criteria is at risk of becoming
obsolete, almost irrespective of price.
Illustrating the appeal of high-quality space in the right
locations, we have set new record rents in Victoria. Office
attendance across our portfolio also continues to grow, as
turnstile tap-ins over the past six months are up 10% vs the
preceding six months and 22% year-on-year. Whilst utilisation is
still lower than it was pre-Covid, we are seeing our customers plan
for more square foot per person, to create more space for
collaboration, focus work or wellbeing. As such, of our 35 lettings
covering GBP58m of rent over the past year, 49% involved customers
increasing floorspace, whilst only 23% reflected customers
downsizing. This is in line with market data which shows that only
one-fifth of active requirements is for less space.
We have consistently said that we expected overall demand for UK
office space to reduce as a result of more flexible ways of
working, but that this would mostly impact large HQ type space and
areas which lack the amenities to make people want to spend time
there. The fact that we have started to see several high-profile
announcements of, for example, major banks reducing their
floorspace and relocating to different parts of London therefore
does not come as a surprise to us. Indeed, this is why virtually
all of our office disposals over the past three years have been
large, single-let HQ buildings and why we have increasingly focused
our portfolio on multi-let clusters, mostly in the West End and
Southwark.
This bifurcation in demand is also reflected in vacancy
statistics. Whilst the average vacancy rate across the London
office market is elevated, at 8.8%, 90% of all vacant space sits in
10% of all London offices and almost 40% of all vacant square foot
sits in just 1% of the buildings in the capital. Indeed, almost 85%
of all buildings have zero vacancy. This shows it is misleading to
look at averages, as vacancy is mostly a building issue, not a
market wide issue. This highlights why offices are different than
retail 5+ years ago, as in retail even the best locations saw
vacancy rise and, as a result, rents fall. Conversely, in offices,
Grade A availability remains low, at 1.7%, which continues to push
rents higher for the best space.
Although the wider economic uncertainty meant that take-up
across the overall London market slowed, demand for space in our
portfolio remained robust. We signed 23 lettings and renewals
during the half year, totalling GBP14m of rent, on average 2% ahead
of valuers' assumptions, with a further GBP3m in solicitors' hands,
5% above valuers' estimates. As a result, occupancy rose 60bps to
96.5%, with our West End offices basically full, at 99.6%
occupancy, well ahead of the 95.8% market average. We also continue
to see strong demand for our Myo flexible offer, as 123 Victoria
Street remains 100% let and Dashwood is now 94% let, up from 85% in
March. We will be opening three new Myo locations this autumn,
totalling 138,000 sq ft, with a further location opening in spring
2024. We are planning to open a further location in Kings Cross in
2025 which will bring our total Myo space to c. 300,000 sq ft.
Major retail destinations
For many key brands, including Next, UNIQLO, M&S and
H&M, sales growth in our centres is significantly outperforming
their overall sales growth, which explains the strength of demand
for space in our major retail destinations. Total retail sales
across our portfolio grew +4.0% YoY and like-for-like sales were
+5.4% above 2019 levels. Meanwhile, footfall across our shopping
centres increased by 5% vs the same period last year and is now at
c. 90% of pre-pandemic levels.
We have continued to see a further shift back from online to
physical sales, with negative online non-food sales growth for the
past 26 months, whilst in-store sales have continued to grow. For
most major brands online and physical channels have become firmly
interconnected, whilst the increase in cost of capital and cost of
doing business online is keeping the pressure on online pure-play
retail models to focus on growing profitability rather than market
share, increasing the cost for consumers to buy online.
As expected, many brands continue to reduce their overall store
footprints. However, the focus on 'fewer, bigger, better' stores
continues to support demand for more space in key destinations, as
brands upsize existing stores, or open new units as they relocate
from nearby stores to benefit from higher footfall in a 'flight to
prime'. As such, leasing momentum remained robust, despite the cost
of living challenges facing consumers in the early part of the year
in particular.
This meant we delivered 9.9% growth in like-for-like net rental
income. We signed 109 lettings totalling GBP13m of rent, up 7% vs
the prior year, on average in line with ERV, whilst we have a
further GBP11m of lettings in solicitors' hands, on average 14%
ahead of ERV. Occupancy was stable during the period at 94.3%, but
has increased 100bps to 95.3% since the period-end. Insolvencies
remain limited, so units in administration remain low at 0.7%
compared to 0.5% in March.
Looking ahead , in the second half of the year we expect
occupancy to improve further and some of the last over-rented
historical leases to reset, paving the way for solid like-for-like
income growth from next year onwards. Whilst sales in our shopping
centres are back to pre-pandemic levels, rents remain c. 25- 30%
lower, further underpinning the attraction of our major retail
destinations for omnichannel brands.
Mixed-use urban neighbourhoods & subscale sectors
Our completed investment assets in mixed-use at present solely
comprise our investment in MediaCity, where occupancy reduced
220bps following a 180bps increase in the prior year. The bulk of
the income in our mixed-use development assets relate to our three
shopping centres in London and Glasgow. This income is currently
managed on a short-term basis to maximise our flexibility for
potential future repositioning. Operational performance across our
subscale portfolio remains resilient. We completed GBP1m of retail
park and leisure lettings with a further GBP6m in solicitors'
hands, on average 3% above valuers' assumptions, whilst occupancy
increased 20bps. Our hotels, which are fully let to Accor, saw
occupancy rise to 97% of pre-Covid levels, driving a further
increase in RevPAR.
Table 3: Operational performance analysis
Annualised Net estimated
rental rental EPRA occupancy LFL occupancy WAULT
income value (1) change (1) (1)
GBPm GBPm % ppt Years
------------------------- ---------- ------------- -------------- ------------- ------
West End offices 136 153 99.6 0.1 6.2
City offices 64 94 92.1 1.6 8.3
Retail and other 39 53 95.5 0.1 7.9
Developments 16 133 n/a n/a n/a
------------------------- ---------- ------------- -------------- ------------- ------
Total Central London 255 433 96.5 0.6 6.9
------------------------- ---------- ------------- -------------- ------------- ------
Shopping centres 119 122 94.7 - 4.5
Outlets 54 60 93.6 - 3.1
------------------------- ---------- ------------- -------------- ------------- ------
Total Major retail 173 182 94.3 - 4.2
------------------------- ---------- ------------- -------------- ------------- ------
Completed investment 24 26 95.6 (2.2) 8.3
Developments 31 35 n/a n/a n/a
------------------------- ---------- ------------- -------------- ------------- ------
Total Mixed-use urban 55 61 95.6 (2.2) 8.3
------------------------- ---------- ------------- -------------- ------------- ------
Leisure 47 45 96.9 1.5 10.8
Hotels 35 29 n/a n/a 7.7
Retail parks 29 30 97.1 (1.5) 5.4
------------------------- ---------- ------------- -------------- ------------- ------
Total Subscale sectors 111 104 97.9 0.2 8.3
------------------------- ---------- ------------- -------------- ------------- ------
Total Combined Portfolio 594 780 96.0 0.2 6.3
------------------------- ---------- ------------- -------------- ------------- ------
1. Excluding developments.
Development pipeline
Central London
We continue to see strong demand for the high-quality space we
develop. We completed our two on-site developments, n2 in Victoria
and Lucent behind Piccadilly Lights, which are now 100% and 99% let
or in solicitors' hands, with rents on average 13% ahead of initial
assumptions. At The Forge in Southwark, we completed a new Myo
location this month and further progressed lettings, covering 49%
of this scheme including deals in solicitors' hands or advanced
negotiations. Once fully let, these three schemes are set to
generate a gross ERV of GBP45m, supporting near-term income growth.
We also completed the 21 Moorfields development in the City, which
we sold last year for GBP809m, crystallising a 25% profit on
cost.
Since March, development activity has remained relatively stable
and 39% of space under construction is already pre-let.
Refurbishments made up half of all new construction starts since
March, as aside from our projects, speculative new-build starts
across the capital were just 1.2m sq ft. At the same time, demand
for the best, most sustainable space continues to grow, partly
driven by tighter regulation, but much more so by customers' own
sustainability agendas and the expectations of their
stakeholders.
The combination of growing demand vs reduced new supply of
modern, sustainable space creates an attractive opportunity.
Building on the success of our recent completions, we have
therefore started the major refurbishment of Thirty High (formerly
Portland House) in Victoria and the development of Timber Square in
Southwark. The gross yield on total development cost is expected to
be 7.3%, whilst the yield on incremental spend is c. 12%, providing
an attractive return.
Table 4: Committed pipeline
Size Gross yield
sq Estimated Net income/ Market Costs on TDC
ft completion ERV value to complete TDC %
Property Sector '000 date GBPm GBPm GBPm GBPm
--------------- ------- ----- ----------- ----------- ------ ------------ ----- -----------
Thirty High,
SW1 Office 299 Aug-25 30 196 218 407 7.4%
--------------- ------- ----- ----------- ----------- ------ ------------ ----- -----------
Timber Square,
SE1 Office 376 Dec-25 30 114 286 408 7.3%
--------------- ------- ----- ----------- ----------- ------ ------------ ----- -----------
Total 675 60 310 504 815 7.3%
------------------------ ----- ----------- ----------- ------ ------------ ----- -----------
Beyond this, we have a potential pipeline of 1.3m sq ft, of
which 0.5m sq ft has planning. The earliest start of our two
consented schemes is mid to late 2024, as we are seeking to enhance
the existing consent at Liberty of Southwark, and are planning to
carefully de-construct Red Lion Court, SE1 so that we can re-use
part of its materials in our new Southwark pipeline to reduce
embodied carbon. Beyond these two schemes, we continue to progress
design and planning on our 0.9m sq ft of medium-term schemes.
Table 5: Future Central London development pipeline
Proposed Gross
sq Indicative Indicative yield Potential
ft TDC ERV on TDC start
Property Sector '000 GBPm GBPm % date Planning status
---------------------- ------------ -------- ---------- ---------- ------- --------- --------------------
Near-term
Liberty of Southwark,
SE1 Office/resi 225 255 17 7.5(1) H2 2024 Consented
Red Lion Court,
SE1 Office 250 330 24 7.2 H2 2024 Consented
Tota l near-term 475 585 41 7.4
Medium-term
Old Broad Street, Office
EC2 290 2025 Planning application
---------------------- ------------ -------- ---------- ---------- ------- --------- --------------------
Hill House, EC4 Office 380 2026 Planning application
---------------------- ------------ -------- ---------- ---------- ------- --------- --------------------
Nova Place, SW1 Office 40 2025 Design
---------------------- ------------ -------- ---------- ---------- ------- --------- --------------------
Southwark Bridge Office
Road, SE1 150 2025 Design
---------------------- ------------ -------- ---------- ---------- ------- --------- --------------------
Total medium-term 860
------------------------------------ -------- ---------- ---------- ------- --------- --------------------
Total future pipeline 1,335
------------------------------------ -------- ---------- ---------- ------- --------- --------------------
1. Gross yield on cost adjusted for residential TDC.
Mixed-use urban neighbourhoods
As consumer expectations on how we live, work and spend our
leisure time change and sustainability requirements continue to
grow, there is a structural need to remodel many parts of the
existing urban environment, to make sure it is fit for future
needs. We control a select number of assets close to major
transportation links in some of the fastest growing urban areas in
the UK, such as London, Manchester and Glasgow, providing an
opportunity to deliver and curate thriving, sustainable mixed-use
places.
We continue to progress the preparation of our two most advanced
projects, creating optionality for a potential start on site next
year. At Mayfield, adjacent to Manchester's main train station, we
secured detailed planning consent for the first 330,000 sq ft of
office development across two buildings in September. The expected
investment for this is c. GBP180m. We continue to work on enhancing
our plans and expected returns, so subject to this, we could
potentially start this first phase in the first half of 2024 . At
Finchley Road, in zone two London, where we secured a resolution to
grant planning consent for our 1,800 homes masterplan in March, we
secured vacant possession of an important part of the first phase
of this site during the period. Subject to further planning and
land assembly workstreams, we could potentially start enabling
works in the first half of 2024 as well.
In conjunction, we continue to enhance our plans for our
longer-term projects in Lewisham, south-east London, and Glasgow.
This reflects our clear ambition to reduce embodied carbon by
working more with the existing built stock in place, rather than
demolishing everything and starting over, as set out in the
embodied carbon targets we announced last year. As the return
environment and our cost of capital has changed as well, we are
also looking at opportunities to retain more of the existing rental
income, to optimise our overall return on capital and income. This
will likely result in less carbon and less capital intensive
interventions in both locations, which we are currently
incorporating in new masterplans. Both sites continue to offer
significant potential, and with a 8%+ current income yield, the
holding cost is low.
In addition, we have a small number of potential longer-term
opportunities which are effectively held at option value. This
includes the second phase of MediaCity, where we continue to work
with our partner Peel on establishing the long-term vision for this
site. Overall, our mixed-use pipeline therefore continues to
provide a valuable opportunity to create an attractive mix of
income, development upside and medium-term growth potential, whilst
the mixed-use nature, ability to phase capex, geographic spread,
and the flexibility to adapt to changes in demand all add to the
balanced risk-profile of this part of our business.
Table 6: Mixed-use urban neighbourhoods development pipeline
Proposed Estimated Target
Landsec sq Earliest first/total Indicative yield
share ft start Number scheme TDC on cost Planning
Property % '000 on site of blocks completion GBPm % status
--------------------- ------- -------- -------- ---------- ------------ ---------- -------- ---------
Near-term
Mayfield, Manchester 50-100 2,500 2024 18 2026/2034 800-950 7 - 8 Consented
Finchley Road,
NW3 100 1,400 2024 10 2027/2035 950-1,050 6 - 7 Consented
--------------------- ------- -------- -------- ---------- ------------ ---------- -------- ---------
Medium-term
MediaCity, Greater
Manchester 75 1,900 2025 8 2027/2032 600-700 7 - 8 Consented
Buchanan Galleries, 2025
Glasgow 100 Design
--------------------- ------- -------- -------- ---------- ------------ ---------- -------- ---------
Lewisham, SE13 100 2026 Design
--------------------- ------- -------- -------- ---------- ------------ ---------- -------- ---------
Delivering in a sustainable way
Shortly after the start of this financial year, we updated our
carbon reduction targets to align with the Science Based Targets
Initiative's (SBTi) new Net-Zero Standard. This meant we were one
of the first companies in the world to have our science-based
targets validated under the Net-Zero Standard, which is the first
global framework for corporate net-zero target setting. In response
to the new SBTi standard, and in recognition of progress to date,
we committed to a near-term target of reducing direct and indirect
greenhouse gas emissions by 47% by 2030 from a 2020 base year and
committed to reach net zero by 2040 from the same base year. This
materially increased the scope of our targets, as it now includes
emissions from all sources, including all of our Scope 3 emissions
such as the emissions from our development pipeline, supply chain
and customers. Our emissions have already reduced by 26% compared
to this baseline.
To align with our revised carbon reduction target, we have
updated our energy intensity target to reduce energy intensity by
52% by 2030 from a 2019/20 baseline. We are already tracking a 19%
reduction, having achieved an energy intensity reduction across our
portfolio of 3% vs last year during the period.
Two years ago, we were the first UK property company to launch a
fully costed net zero carbon transition plan. This plan will ensure
we deliver our near-term science-based target and meet the proposed
Minimum Energy Efficiency Standard of EPC 'B' by 2030. The expected
cost to deliver this plan is already reflected in our current
portfolio valuation. At present, 41% of our portfolio is already
rated 'B' or higher, including 44% of our office portfolio, up from
36% in March. We expect this to increase further from 2025 onwards,
as the benefits from our net zero transition investments come
through.
As part of this investment plan, we are now about to start the
retrofit of air source heat pumps at our first two office
locations, 16 Palace Street, SW1 and Dashwood, EC2. We are
progressing detailed designs for a further four locations, two of
which we expect works to start on site during 2024. Working closely
with our customers, we are on track to expand our energy audits
from 25 to 38 of our largest customers this year. Combined, these
cover 56% of the energy used by our customers in our office
portfolio and so far our work has identified potential annual
carbon and energy savings of 10-20% per customer.
Focusing on the emissions from the development of our schemes
now included in our carbon reduction targets, we set a target last
year to reduce upfront embodied carbon by 50% vs a typical
development by 2030, to below 500kgCO(2) e/sqm for offices and
400kgCO(2) e/sqm for residential. Our future pipeline is currently
tracking at an average 45% reduction. At our recently started
Timber Square scheme we already achieved a reduction in embodied
carbon to 522kgCO(2) e/sqm due to retention of part of the existing
structure, a highly optimised design and the use of low carbon
cross laminated timber. Similarly, at our other recently started
project, Thirty High, retaining the original structure and
upgrading the existing façade has resulted in an upfront embodied
carbon intensity of just 347kgCO(2) e/sqm.
Enhancing our strong track-record of investing in our local
communities, earlier this year we launched our Landsec Futures
fund, which will see us invest GBP20m over the next decade, aimed
at improving social mobility in the real estate industry and
tackling issues local to our assets. This investment will support
the delivery of our 2030 targets to create GBP200m of social value
and empower 30,000 people towards the world of work. From our
2019/20 baseline, we have created GBP27m of social value and
empowered 7,925 people and we were recently recognised as
'Organisation of the Year' by the UK Social Mobility Awards for our
efforts.
Financial review
Overview
External market conditions remained unsettled over the half
year. Unsurprisingly, this continued to affect the valuation of
property and other assets globally, yet the impact of this was
mitigated significantly by our successful disposals over the prior
2.5 years, our high-quality portfolio and our strong operational
results. We anticipate interest rates to remain higher for longer,
yet as we expect they are probably close to their peak, this should
create a more supportive outlook for 2024. We are well-placed for
the opportunities this provides, which underpins our confidence in
our ability to grow earnings and dividend over time.
EPRA earnings for the half year were stable at GBP198m (+0.5%),
as our positive operational performance offset the impact of our
significant deleveraging through disposals during the prior year.
Like-for-like gross rental income was up 1.8%, or 2.8% on a net
rental income basis. This reflects our continued growth in
occupancy, retail turnover income and hotel income, but also our
tight cost control. As a result, EPRA EPS was effectively stable at
26.7 pence (+0.4%), in line with our guidance for full year EPRA
EPS to be broadly stable vs last year's underlying level of 50.1
pence. Our interim dividend is up 3.4% to 18.2 pence, in line with
our guidance of low single digit percentage growth this year, as we
continue to target a dividend cover of 1.2-1.3x on an annual
basis.
Even though we delivered further growth in occupancy and ERVs,
the valuation of our portfolio was down GBP375m due to an increase
in valuation yields, driven by the rise in bond yields during the
period. This resulted in a loss before tax of GBP193m, compared to
a respective loss of GBP192m and GBP430m over the first and second
half of the prior year. As a result, our total return on equity
including dividends paid improved to -2.4%, with basic EPS at -24.4
pence and EPRA NTA per share down 4.6% to 893 pence.
Our decisive action over the past few years in selling GBP2.5bn
of assets, principally long-let, single-tenant City offices, means
our balance sheet remains strong. Net debt increased GBP0.2bn to
GBP3.5bn in the half year, but remains well below the GBP4.2bn at
the start of the prior year. Our LTV increased slightly to 34.4%,
although this remains an imperfect measure to judge leverage when
investment activity is low and the approach to valuations varies
widely in different markets. In times like this, we therefore focus
more on net debt/EBITDA as a cash-on-cash measure, which stood at
7.2x at the end of September - broadly similar to the 7.0x in
March. Meanwhile, our average debt maturity remains high at 9.3
years and with GBP2.1bn of cash and undrawn facilities, we have no
need to refinance any maturing debt until 2026.
Presentation of financial information
The condensed consolidated preliminary financial information is
prepared under UK adopted international accounting standards (IFRSs
and IFRICs) where the Group's interests in joint ventures are shown
collectively in the income statement and balance sheet, and all
subsidiaries are consolidated at 100%. Internally, management
reviews the Group's results on a basis that adjusts for these forms
of ownership to present a proportionate share. The Combined
Portfolio, with assets totalling GBP10.1bn, is an example of this
approach, reflecting our economic interest in our properties
regardless of our ownership structure.
Our key measure of underlying earnings performance is EPRA
earnings, which represents the underlying financial performance of
the Group's property rental business, which is our core operating
activity. A full definition of EPRA earnings is given in the
Glossary. This measure is based on the Best Practices
Recommendations of the European Public Real Estate Association
(EPRA) which are metrics widely used across the industry to aid
comparability and includes our proportionate share of joint
ventures' earnings. Similarly, EPRA Net Tangible Assets per share
is our primary measure of net asset value.
Measures presented on a proportionate basis are alternative
performance measures as they are not defined under IFRS. This
presentation provides additional information to stakeholders on the
activities and performance of the Group, as it aggregates the
results of all the Group's property interests which under IFRS are
required to be presented across a number of line items in the
statutory financial statements. For further details see table 14 in
the Business analysis section.
Income statement
Our positive leasing performance, the high quality of our
portfolio and our focus on margin improvement are clearly reflected
in our resilience in income. Combined with our acquisition of the
discounted debt on 50% of the St David's shopping centre in Cardiff
just before the start of this year at an implied property yield of
almost 10%, this offset the impact of our significant London office
disposals during the prior year. Combined, this therefore improved
our overall balance sheet position and earnings profile.
Table 7: Income statement(1)
Six months ended Six months ended
30 September 2023 30 September 2022
Central Major Mixed-use Subscale Central Major Mixed-use Subscale
London retail urban sectors Total London retail urban sectors Total Change
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------- ------ --------- -------- ----- ------- ------ --------- -------- ----- ------
Gross rental
income(2) 146 92 29 56 323 160 84 28 53 325 (2)
Net service
charge expense (3) (4) (1) (2) (10) (1) (6) (1) (1) (9) (1)
Net direct
property
expenditure (11) (12) (5) (8) (36) (11) (15) (6) (6) (38) 2
Movement in
bad/doubtful
debts provisions - 4 - 1 5 1 3 (4) - - 5
Segment net
rental income 132 80 23 47 282 149 66 17 46 278 4
------- ------ --------- -------- ------- ------ --------- --------
Net
administrative
expenses (38) (41) 3
EPRA earnings
before
interest 244 237 7
Net finance
expense (46) (40) (6)
EPRA earnings 198 197 1
----------------- ------- ------ --------- -------- ----- ------- ------ --------- -------- ----- ------
Capital/other
items
Valuation deficit (375) (323) (52)
Loss on changes
in
finance leases - (6) 6
Loss on disposals (3) (92) 89
Impairment
charges (4) (8) 4
Fair value
movement
on interest rate
swaps 2 48 (46)
Other 1 (6) 7
----------------- ------- ------ --------- -------- ----- ------- ------ --------- -------- ----- ------
Loss before tax
attributable
to shareholders
of
the parent (181) (190) 9
----------------- ------- ------ --------- -------- ----- ------- ------ --------- -------- ----- ------
Non-controlling
interests (12) (2) (10)
----------------- ------- ------ --------- -------- ----- ------- ------ --------- -------- ----- ------
Loss before tax (193) (192) (1)
----------------- ------- ------ --------- -------- ----- ------- ------ --------- -------- ----- ------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
2. Includes finance lease interest, after rents payable.
Net rental income
Overall gross rental income was down GBP2m to GBP323m due to our
disposals. Like-for-like income was up GBP5m, or 1.8%, driven by
growth in like-for-like income in retail and subscale sectors and
was further supported by positive leasing in Central London.
Net rental income increased by GBP4m, which included a GBP5m
reversal of bad and doubtful debt provisions. Despite high UK
inflation, direct property expenditure fell by GBP2m and whilst net
service charge expenses were up GBP1m, this was primarily driven by
higher costs related to the initial lease-up phase of our recent
London office developments. The impact from developments and
repositioning of space, which includes repurposing conventional
office space to Myo, reduced income by GBP2m. We expect this to be
temporary, as we anticipate this space to be let at higher rents
and our recent development completions start to become
income-producing. On a like-for-like basis, our net rental income
was up GBP6m, or 2.8%.
As a result of our tight control of cost, our gross to net
margin improved by 1.9ppt to 87.4%. We expect our overall gross to
net margin for the full year to be close to last year's 86.7%.
We have seen minimal insolvencies and no CVAs during the half
year. Following the recapitalisation of Cineworld, which makes up
1.7% of our annual rent, and its exit from Chapter 11 bankruptcy
proceedings in the US, we agreed to restructure a number of leases,
resulting in an annual rent reduction of GBP1m, but all units in
our portfolio continue to trade and the company continues to pay
rent.
Table 8: Net rental income(1)
GBPm
-------------------------------------------------------- ----
Net rental income for the six months ended 30 September
2022 278
Gross rental income like-for-like movement in the
period(2):
----
Increase in variable and turnover-based rents 4
Other movements 1
----
Total like-for-like gross rental income 5
Like-for-like net service charge expense 2
Like-for-like net direct property expenditure (1)
Decrease in surrender premiums received (2)
Developments(2) (2)
Acquisitions since 1 April 2022(2) 8
Disposals since 1 April 2022(2) (11)
Movement in bad debts 5
Net rental income for the six months ended 30 September
2023 282
--------------------------------------------------------- ----
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
2. Gross rental income on a like-for-like basis and the impact
of developments, acquisitions and disposals exclude surrender
premiums received.
Net administrative expenses
Although UK inflation remained elevated, our net administrative
expenses were down GBP3m to GBP38m. This reflects the efficiency
benefits of the organisational review we did last year and our
continued focus on making sure our cost base is appropriate.
Reflecting this and our improved gross to net margin, our EPRA cost
ratio improved by 3.2ppt to 23.0%.
Even though high wage inflation and general cost inflation
continue to put upward pressure on costs, we still expect
administrative expenses for this year to be lower than the GBP84m
last year. Costs this year for our investment in upgrading our
systems and data capability are expected to be broadly in line with
last year, and will reduce from the year to March 2025. Partly
reflecting this investment in technology, we have identified clear
opportunities to improve efficiency beyond the current year.
Net finance expenses
Net interest costs increased GBP6m to GBP46m, principally
reflecting an increase in variable interest rates and the impact of
the GBP400m Green bond we issued in March. 92% of our debt is fixed
or hedged, but given the increase in cost of the small proportion
of variable rate debt and a reduction in capitalised interest as
our recent London developments have now completed, we expect net
interest cost in the second half of the year to be somewhat higher
than in the first half.
Non-cash finance income, which includes the fair value movements
on derivatives and which is not included in EPRA earnings,
decreased from a net income of GBP48m in the prior period to a net
income of GBP2m over the past six months. This is predominantly due
to the fair value movements of our interest-rate swaps as a result
of the increase in interest rates over the period.
Valuation of investment properties
The independent external valuation of our Combined Portfolio
showed a reduction in value of GBP375m. Our positive leasing
activity resulted in 2.5% ERV growth, yet the upside of this was
more than offset by an increase in valuation yields, driven by the
sharp increase in bond yields during the half year.
IFRS loss after tax
Substantially all our activity during the year was covered by UK
REIT legislation, which means our tax charge for the period
remained minimal. The IFRS loss after tax as a result of the above
fair value adjustment of our investment portfolio moderated to
GBP193m, compared to GBP192m in the first half and GBP430m in the
second half of last year.
Net assets and return on equity
Our total return on equity for the six months improved to -2.4%,
compared to -2.9% and -5.6% in the first and second half of last
year. Our income return was 2.8% and ERV growth and development
drove a capital return of 2.9%. On an annualised basis, this
compares favourably to the 8-10% return on equity we target over
time, before the short-term impact fluctuations in valuation yields
have in the short term.
After the GBP156m of dividends we paid, EPRA Net Tangible
Assets, which principally reflects the value of our Combined
Portfolio less adjusted net debt, reduced to GBP6,647m, or 893
pence per share. This marks a 4.6% reduction for the half year on a
per share basis, half of which was made up for by dividends.
Table 9: Balance sheet(1)
30 September 31 March 2023
2023
GBPm GBPm
----------------------------------------------------- ------------ -------------
Combined Portfolio 10,146 10,239
Adjusted net debt (3,524) (3,287)
Other net assets 25 15
----------------------------------------------------- ------------ -------------
EPRA Net Tangible Assets 6,647 6,967
Shortfall of fair value over net investment
in finance leases book value 6 6
Other intangible asset 2 2
Excess of fair value over trading properties
book value (26) (12)
Fair value of interest-rate swaps 44 42
----------------------------------------------------- ------------ -------------
Net assets, excluding amounts due to non-controlling
interests 6,673 7,005
----------------------------------------------------- ------------ -------------
Net assets per share 899p 945p
EPRA Net Tangible Assets per share (diluted) 893p 936p
----------------------------------------------------- ------------ -------------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Table 10: Movement in EPRA Net Tangible Assets(1)
Diluted per
share
GBPm pence
------------------------------------------ ----------- -----------
EPRA Net Tangible Assets at 31 March 2023 6,967 936
EPRA earnings 198 27
----------- -----------
Like-for-like valuation movement (290) (40)
Development valuation movement (69) (9)
Impact of acquisitions/disposals (16) (2)
----------- -----------
Total valuation deficit (375) (51)
Dividends (156) (21)
Loss on disposals (3) -
Other 16 2
------------------------------------------ ----------- -----------
EPRA Net Tangible Assets at 30 September
2023 6,647 893
------------------------------------------ ----------- -----------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Net debt and leverage
Following the GBP892m reduction during the prior financial year,
new investments increased adjusted net debt, which includes our
share of JV borrowings, by GBP237m over the past six months. Net
acquisitions amounted to GBP75m , reflecting our acquisition of an
office building for Myo in Kings Cross. Capital expenditure on our
portfolio was GBP177m, reflecting our London office developments,
the preparation of future developments and the investment in our
existing assets.
Following the completion of our recent London pipeline, we now
have GBP462m committed capex to spend over the next 2.5 years on
our two new projects in Victoria and Southwark. Having sold
GBP2.5bn of assets over the preceding 2.5 years, disposals over the
first six months of this year were minimal at GBP8m. However, we
have sold a further GBP77m of assets since the period-end and
assuming no major economic shocks, we aim to make further disposals
of assets which are non-core to our strategy or where we cannot add
further value in the second half.
The other key elements behind the decrease in net debt are set
out in our statement of cash flows and note 9 to the financial
statements, with the main movements in adjusted net debt shown
below. A reconciliation between net debt and adjusted net debt is
shown in note 13 of the financial statements.
Table 11: Movement in adjusted net debt(1)
GBPm
--------------------------------------------------- -----
Adjusted net debt at 31 March 2023 3,287
Adjusted net cash inflow from operating activities (166)
Dividends paid 153
Capital expenditure 165
Acquisitions 75
Disposals (8)
Other 18
Adjusted net debt at 30 September 2023 3,524
--------------------------------------------------- -----
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Due to the modest increase in borrowings, net debt/EBITDA
increased slightly to 7.2x based on our net debt at the end of
September, or 6.9x based on our weighted-average net debt for the
period. We target net debt/EBITDA to remain below 8x over time.
Group LTV which includes our share of JVs, increased from 31.7% to
34.4%. This remains well within our target range of 25% to 40% and
in line with the low 30's level we said we expected to remain
at.
Table 12: Net debt and leverage
30 September 31 March 2023
2023
----------------------------------- ------------ -------------
Net debt GBP3,572m GBP3,348m
Adjusted net debt(1) GBP3,524m GBP3,287m
Interest cover ratio 4.2x 4.5x
Net debt/EBITDA (period-end) 7.2x 7.0x
Net debt/EBITDA (weighted average) 6.9x 8.0x
Group LTV(1) 34.4% 31.7%
Security Group LTV 36.9% 33.0%
----------------------------------- ------------ -------------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Financing
We have gross borrowings of GBP3,636m diversified across various
sources, including GBP2,727m of Medium Term Notes, GBP325m of
syndicated and bilateral bank loans and GBP584m of commercial
paper. Our MTNs and the majority of bank loans form part of our
Security Group, which provide security on a floating pool of assets
currently valued at GBP9.3bn. This provides flexibility to include
or exclude assets and an attractive cost of funding, with our MTNs
currently rated AA and AA- with a stable outlook respectively by
S&P and Fitch.
Our Security Group structure has a number of tiered covenants,
yet below 65% LTV, these involve very limited operational
restrictions. A default only occurs when LTV is more than 100% or
the ICR falls below 1.0x. With a Security Group LTV of 36.9%, our
portfolio could withstand a 43% fall in value before we reach the
65% threshold and 63% before reaching 100%, whilst our EBITDA could
fall by c. 75% before we reach 1.0x ICR.
We have GBP2.1bn of cash and undrawn facilities, which provides
substantial flexibility. As expected, the percentage of borrowings
which is fixed or hedged reduced slightly, from 100% to 92% at the
period end, reflecting our net investment in the period. We
continue to target a medium-term range of c. 80-90% to maintain
some flexibility for potential divestments. The well-timed issue of
our GBP400m 9.5-year Green bond in March at a coupon of 4.875%,
meant our overall debt maturity remains long, at 9.3 years, which
provides clear visibility and underpins the resilience of our
attractive earnings profile. Our average cost of debt rose to 3.3%,
reflecting the Green bond issue and higher utilisation of our
variable-rate borrowings.
We have GBP723m of debt maturing in the next two years, but all
of this is more than covered by existing undrawn facilities, which
means we have no refinancing requirements until 2026. As a result,
our overall financial position remains strong, which provides
flexibility to take advantage of future opportunities that will no
doubt arise as markets continue to adjust to a new higher rate
reality.
Table 13: Available facilities(1)
30 September 31 March 2023
2023 GBPm
GBPm
----------------------------------------- ------------ -------------
Medium Term Notes 2,727 2,736
Drawn bank debt 325 310
Outstanding commercial paper 584 312
Cash and available undrawn facilities 2,127 2,386
Total committed credit facilities 2,934 2,934
Weighted average maturity of debt 9.3 years 10.3 years
Percentage of borrowings fixed or hedged 92% 100%
Weighted average cost of debt(2) 3.3% 2.7%
----------------------------------------- ------------ -------------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
2. Including amortisation and commitment fees; excluding this
the weighted average cost of debt is 3.1% at 30 September 2023.
Principal risks and uncertainties
The principal risks of the business were set out on pages 56 -
59 of the 2023 Annual Report that was published in May. The
Executive Leadership Team and the Board review these risks
regularly, as well as monitor for changes and any emerging risks.
Though the risk landscape continues to evolve and change over time,
they remain most relevant and the principal risks at half year are
unchanged from those disclosed in the Annual Report.
The macroeconomic outlook remains our highest rated risk and it
also impacts our other strategic risks related to the workplace and
retail occupier markets. Though the impact of the Covid-19 pandemic
has now generally dissipated, high inflation and interest rates
have created headwinds, despite strong operational performance over
the first half of the year.
Our ten principal risks are summarised as follows:
Macroeconomic outlook - This risk incorporates the impacts
resulting from high inflation, resultant high interest rates, the
cost-of-living crisis and any possible resultant recession. Whilst
inflation has slowed over the last six months, interest rates
remain high, so this risk is not considered to have materially
changed over the last six months. For Landsec, this risk impacts
asset yields, and therefore valuations, and our cost-base,
including the cost of completing development projects, and our
ability to recycle assets. It may also give rise to opportunities
to acquire assets.
Office and retail occupier markets - These two risks previously
considered the impact of the Covid-19 pandemic however they have
been updated as the resultant changes in customer behaviour (office
attendance and online penetration) have become less significant
with the passage of time. These risks still represent the potential
for structural i.e., permanent changes in the use of our assets
over time. However, they now also incorporate the specific impact
of changes in the macroeconomic environment i.e., increases in
customer default, failure of retailers, lower footfall/dwell time
and average spend at shopping centres. Strong operational
performance in both Central London offices and retail destinations
indicate that the continued robustness of our prime assets and
locations is offset by the macroeconomic backdrop.
Information security and cyber threat - This is an area which
has been invested in over recent years to improve Landsec's cyber
resilience. The emphasis has now switched to continuous improvement
of the processes and controls to ensure that Landsec's cyber
framework is effective.
Change projects - The Group have important cultural and
operational change programmes underway, which creates the inherent
risk these change projects do not succeed in delivering the
operational benefits set out in their business cases. This risk has
remained stable over the period, with specific programme management
resource allocated and assurance obtained where appropriate.
Capital allocation and Development strategy - Both of these
risks are considered to have increased since the last year end, as
the Group increases the extent to which capital is allocated and
new developments commence. This increase brings both risks further
towards the desired risk appetite for capital allocation and
development. As further capital is committed and further new
developments commence, the risk level will be brought within the
desired risk appetite and the plans and measures to do this are
built into the Group's strategic and business planning
processes.
The three remaining principal risks (Health and safety, People
and skills and Climate change transition) have remained stable in
the six months since last year end.
Statement of Directors' Responsibilities
Each of the Directors, whose names and functions appear below,
confirm to the best of their knowledge that the condensed
consolidated interim financial statements have been prepared in
accordance with IAS 34, 'Interim Financial Reporting', as contained
in UK adopted international accounting standards and that the
interim management report herein includes a fair review of the
information required by the Disclosure and Transparency Rules
(DTR), namely:
3/4 DTR 4.2.7 (R): an indication of important events that have
occurred during the six month period ended 30 September 2023 and
their impact on the condensed interim financial statements and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
3/4 DTR 4.2.8 (R): any related party transactions in the six
month period ended 30 September 2023 that have materially affected,
and any changes in the related party transactions described in the
2023 Annual Report that could materially affect, the financial
position or performance of the enterprise during that period.
The Directors of Land Securities Group PLC as at the date of
this announcement are as set out below:
3/4 Sir Ian Cheshire, Chairman*
3/4 Mark Allan, Chief Executive
3/4 Vanessa Simms, Chief Financial Officer
3/4 Edward Bonham Carter, Senior Independent Director*
3/4 Nicholas Cadbury*
3/4 Madeleine Cosgrave*
3/4 Christophe Evain*
3/4 Manjiry Tamhane*
3/4 Miles Roberts*
3/4 James Bowling*
*Non-executive Directors
A list of the current Directors is maintained on the Land
Securities Group PLC website at landsec.com.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial information differs from
legislation in other jurisdictions.
By order of the Board
Mark Allan Vanessa Simms
Chief Executive Chief Financial Officer
Independent review report to Land Securities Group PLC
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2023 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated statement of cash flows and
the related notes to the financial statements 1 - 17. We have read
the other information contained in the half-yearly financial report
and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2023 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that management have inappropriately adopted
the going concern basis of accounting or that management have
identified material uncertainties relating to going concern that
are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the Directors
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the Directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions relating to going concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
13 November 2023
Financial statements
Unaudited income statement Six months ended Six months ended
30 September 2023 30 September 2022
Capital Capital
EPRA and other EPRA and other
earnings items Total earnings items Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ----- ----------- ----------- ------- --------- ---------- -------
Revenue 5 385 27 412 360 34 394
Costs - movement in bad and
doubtful debts provisions 6 5 - 5 - - -
Costs - other 6 (162) (27) (189) (143) (45) (188)
228 - 228 217 (11) 206
Share of post-tax profit/(loss)
from joint ventures 12 10 (17) (7) 14 1 15
Loss on disposal of investment
properties - (3) (3) - (92) (92)
Net deficit on revaluation of
investment properties 10 - (371) (371) - (331) (331)
Loss on changes in finance leases - - - - (6) (6)
---------------------------------- ----- ----------- ----------- ------- --------- ---------- -------
Operating profit/(loss) 238 (391) (153) 231 (439) (208)
Finance income 7 6 1 7 6 51 57
Finance expense 7 (46) (1) (47) (40) (1) (41)
---------------------------------- ----- ----------- ----------- ------- --------- ---------- -------
Profit/(loss) before tax 198 (391) (193) 197 (389) (192)
Taxation - - - - - -
---------------------------------- ----- ----------- ----------- ------- --------- ---------- -------
Profit/(loss) for the period 198 (391) (193) 197 (389) (192)
---------------------------------- ----- ----------- ----------- ------- --------- ---------- -------
Attributable to:
Shareholders of the parent (181) (190)
Non-controlling interests (12) (2)
------- --------- ---------- -------
(193) (192)
------- --------- ---------- -------
Loss per share attributable
to shareholders of the parent:
Basic loss per share 4 (24.4)p (25.7)p
Diluted loss per share 4 (24.4)p (25.7)p
---------------------------------- ----- ----------- ----------- ------- --------- ---------- -------
Unaudited statement of comprehensive Six months
income ended
30 September Six months ended
2023 30 September 2022
Total Total
GBPm GBPm
------------------------------------------------- ------------- ------------------
Loss for the period (193) (192)
--------------------------------------------------- ------------- ------------------
Items that will not be subsequently reclassified
to the income statement:
Net re-measurement loss on defined benefit
pension scheme (1) (2)
Other comprehensive loss for the period (1) (2)
--------------------------------------------------- ------------- ------------------
Total comprehensive loss for the period (194) (194)
--------------------------------------------------- ------------- ------------------
Attributable to:
Shareholders of the parent (182) (192)
Non-controlling interests (12) (2)
------------- ------------------
(194) (194)
------------- ------------------
Unaudited balance sheet 30 September 31 March
2023 2023
Notes GBPm GBPm
Non-current assets
Investment properties 10 9,562 9,658
Intangible assets 4 6
Net investment in finance leases 23 21
Investments in joint ventures 12 521 533
Investments in associates 3 3
Trade and other receivables 138 146
Other non-current assets 57 67
-------------------------------------------------- ----- ------------ --------
Total non-current assets 10,308 10,434
-------------------------------------------------- ----- ------------ --------
Current assets
Trading properties 11 111 118
Trade and other receivables 382 365
Monies held in restricted accounts and deposits 2 4
Cash and cash equivalents 80 41
Other current assets 22 4
-------------------------------------------------- ----- ------------ --------
Total current assets 597 532
-------------------------------------------------- ----- ------------ --------
Total assets 10,905 10,966
-------------------------------------------------- ----- ------------ --------
Current liabilities
Borrowings 14 (879) (315)
Trade and other payables (325) (306)
Other current liabilities (23) (24)
Total current liabilities (1,227) (645)
-------------------------------------------------- ----- ------------ --------
Non-current liabilities
Borrowings 14 (2,937) (3,223)
Trade and other payables - (17)
Other non-current liabilities (13) (9)
Total non-current liabilities (2,950) (3,249)
-------------------------------------------------- ----- ------------ --------
Total liabilities (4,177) (3,894)
-------------------------------------------------- ----- ------------ --------
Net assets 6,728 7,072
-------------------------------------------------- ----- ------------ --------
Equity
Capital and reserves attributable to shareholders
Ordinary shares 80 80
Share premium 319 318
Other reserves 18 13
Retained earnings 6,256 6,594
-------------------------------------------------- ----- ------------ --------
Equity attributable to shareholders of the parent 6,673 7,005
Equity attributable to non-controlling interests 55 67
-------------------------------------------------- ----- ------------ --------
Total equity 6,728 7,072
-------------------------------------------------- ----- ------------ --------
The financial statements on pages 26 to 46 were approved by the
Board of Directors on 13 November 2023 and were signed on its
behalf by:
Mark Allan Vanessa Simms
Directors
Unaudited statement of changes Attributable to shareholders
in equity of the parent
-------------------------------------------------
Ordinary Share Other Retained Non-controlling Total
shares premium reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- --------- --------- ------- --------------- -------
At 1 April 2022 80 317 9 7,511 7,917 74 7,991
Total comprehensive loss for the
financial period - - - (192) (192) (2) (194)
Transactions with shareholders
of the parent:
-------- -------- --------- --------- ------- --------------- -------
Share-based payments - - 1 2 3 - 3
Dividends paid to shareholders
of the parent - - - (159) (159) - (159)
Total transactions with shareholders
of the parent - - 1 (157) (156) - (156)
Dividends paid to non-controlling
interests - - - - - (2) (2)
-------- -------- --------- --------- ------- --------------- -------
Total transactions with shareholders - - 1 (157) (156) (2) (158)
-------- -------- --------- --------- ------- --------------- -------
At 30 September 2022 80 317 10 7,162 7,569 70 7,639
Total comprehensive loss for the
financial period - - - (437) (437) (1) (438)
Transactions with shareholders
of the parent:
-------- -------- --------- --------- ------- --------------- -------
Share-based payments - 1 3 - 4 - 4
Dividends paid to shareholders
of the parent - - - (131) (131) - (131)
-------- -------- --------- --------- ------- --------------- -------
Total transactions with shareholders
of the parent - 1 3 (131) (127) - (127)
Dividends paid to non-controlling
interests - - - - - (2) (2)
-------- -------- --------- --------- ------- --------------- -------
Total transactions with shareholders - 1 3 (131) (127) (2) (129)
-------- -------- --------- --------- ------- --------------- -------
At 31 March 2023 80 318 13 6,594 7,005 67 7,072
------------------------------------- -------- -------- --------- --------- ------- --------------- -------
Total comprehensive loss for the
financial period - - - (182) (182) (12) (194)
Transactions with shareholders
of the parent:
-------- -------- --------- --------- ------- --------------- -------
Share-based payments - 1 5 - 6 - 6
Dividends paid to shareholders
of the parent - - - (156) (156) - (156)
Total transactions with shareholders
of the parent - 1 5 (156) (150) - (150)
Dividends paid to non-controlling - - - - - - -
interests
-------- -------- --------- --------- ------- --------------- -------
Total transactions with shareholders - 1 5 (156) (150) - (150)
-------- -------- --------- --------- ------- --------------- -------
At 30 September 2023 80 319 18 6,256 6,673 55 6,728
------------------------------------- -------- -------- --------- --------- ------- --------------- -------
Unaudited statement of cash flows Six months
ended
30 September
2023 2022
Notes GBPm GBPm
------------------------------------------------------------ ----- ------- ------
Cash flows from operating activities
Net cash generated from operations 9 210 196
Interest paid (50) (86)
Interest received 15 13
Rents paid (7) (5)
Capital expenditure on trading properties (8) (12)
Disposal of trading properties 7 7
Development income proceeds received - 54
Other operating cash flows (1) 9
------------------------------------------------------------ ----- ------- ------
Net cash inflow from operating activities 166 176
------------------------------------------------------------ ----- ------- ------
Cash flows from investing activities
Investment property development expenditure (92) (132)
Other investment property related expenditure (65) (26)
Acquisition of investment properties, net of cash
acquired (91) (2)
Disposal of investment properties 1 870
Cash distributions from joint ventures 12 7 2
Decrease in monies held in restricted accounts and
deposits 2 -
Other investing cash flows - (2)
------------------------------------------------------------ ----- ------- ------
Net cash (out)/inflow from investing activities (238) 710
------------------------------------------------------------ ----- ------- ------
Cash flows from financing activities
Proceeds from new borrowings (net of finance fees) 14 284 -
Repayment of borrowings 14 (9) (858)
Net cash (out)/inflow from derivative financial instruments 14 (12) 27
Dividends paid to shareholders 8 (153) (155)
Dividends paid to non-controlling interests - (2)
Decrease in monies held in restricted accounts and
deposits - 3
Other financing cash flows 1 -
Net cash in/(out)flow from financing activities 111 (985)
------------------------------------------------------------ ----- ------- ------
Increase/(decrease) in cash and cash equivalents for
the period 39 (99)
Cash and cash equivalents at the beginning of the
period 41 146
------------------------------------------------------------ ----- ------- ------
Cash and cash equivalents at the end of the period 80 47
------------------------------------------------------------ ----- ------- ------
Notes to the financial statements
1. Basis of preparation and consolidation
-----------------------------------------
Basis of preparation
This condensed consolidated interim financial information
(financial statements) for the six months ended 30 September 2023
has been prepared on a going concern basis and in accordance with
the Disclosure and Transparency Rules of the Financial Conduct
Authority and IAS 34 'Interim Financial Reporting' as contained in
UK adopted international accounting standards (IFRS). As applied by
the Group, there are no material differences between UK adopted
international accounting standards and EU IFRS.
The condensed consolidated interim financial information does
not comprise statutory accounts within the meaning of section 434
of the Companies Act 2006. Statutory accounts for the year ended 31
March 2023, prepared in accordance with UK adopted international
accounting standards (IFRSs and IFRICs) and in conformity with the
Companies Act 2006, were approved by the Board of Directors on 15
May 2023 and delivered to the Registrar of Companies. The report of
the auditor on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498(2) or (3) of the Companies Act 2006. The
condensed consolidated interim financial information has been
reviewed, not audited, and should be read in conjunction with the
Group's annual financial statements for the year ended 31 March
2023.
In preparing the condensed consolidated interim financial
information, the Group has considered the impact of climate change
and concluded that climate change did not have a material impact on
the financial reporting judgements and estimates.
This condensed consolidated interim financial information was
approved for issue by the Directors on 13 November 2023.
Going concern
The impact of recent international and domestic political and
economic events has resulted in the UK facing a prolonged
recessionary period and therefore the Directors have continued to
place additional focus on the appropriateness of adopting the going
concern assumption in preparing the financial statements. The
Group's going concern assessment considers changes in the Group's
principal risks (see page 22) 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 base case, downside and reverse
stress test models, as well as a cash flow model which considers
the impact of pessimistic assumptions on the Group's operating
environment (the 'mitigated downside scenario'). This mitigated
downside scenario reflects unfavourable macroeconomic conditions, a
deterioration in our ability to collect rent and service charge
from our customers and removes uncommitted acquisitions, disposals
and developments.
The Group's key metrics from the mitigated downside scenario as
at the end of the going concern assessment period, which covers the
16 months to 31 March 2025, are shown below alongside the actual
position at 30 September 2023.
Key metrics 30 September 31 March 2023
2023 mitigated downside
latest mitigated scenario
downside scenario
30 September 31 March 2025 30 September
2023 2024
----------------------------- ------------ ------------------ -------------------
Security Group LTV 36.9% 46.7% 39.2%
Adjusted net debt GBP3,524m GBP3,971m GBP3,670m
EPRA Net Tangible Assets GBP6,647m GBP5,301m GBP6,021m
Available financial headroom GBP2.1bn GBP0.9bn GBP1.6bn
----------------------------- ------------ ------------------ -------------------
In our mitigated downside scenario, the Group has sufficient
cash reserves, with our Security Group LTV ratio remaining less
than 65% and interest cover above 1.45x, for a period of 16 months
from the date of authorisation of these financial statements. Under
this scenario, the Security Group's asset values would need to fall
by a further 28% from the sensitised values forecasted at 31 March
2025 to be non-compliant with the LTV covenant. This equates to
over a 40% fall in the value of the Security Group's assets from
the 30 September 2023 values for the LTV to reach 65%. The
Directors consider the likelihood of this occurring over the going
concern assessment period to be remote.
The Security Group also requires earnings before interest of at
least GBP177m in the full year ending 31 March 2024 and GBP243m in
the full year ending 31 March 2025 for interest cover to remain
above 1.45x in the mitigated downside scenario , which would ensure
compliance with the Group's covenant through to the end of the
going concern assessment period. Security Group earnings in the six
months to 30 September 2023 are already above the level required to
meet the interest cover covenant for the year ending 31 March 2024.
The Directors do not anticipate a reduction in Security Group
earnings over the year ending 31 March 2025 to a level that would
result in a breach of the interest cover covenant.
The Directors have also considered a reverse stress-test
scenario which assumes no further rent will be received, to
determine when our
available cash resources would be exhausted. Even under this
extreme scenario, although breaching the interest cover covenant,
the Group
continues to have sufficient cash reserves to continue in
operation throughout the going concern assessment period.
Based on these considerations, together with available market
information and the Directors' knowledge and experience of the
Group's property portfolio and markets, the Directors have adopted
the going concern basis in preparing these financial statements for
the period ended 30 September 2023.
Presentation of results
The Group income statement is presented in a columnar format,
split into those items that relate to EPRA earnings and Capital and
other items. The Total column represents the Group's results
presented in accordance with IFRS; the other columns provide
additional information. This is intended to reflect the way in
which the Group's senior management review the results of the
business and to aid reconciliation to the segmental
information.
A number of the financial measures used internally by the Group
to measure performance include the results of partly-owned
subsidiaries and joint ventures on a proportionate basis. Measures
that are described as being on a proportionate basis include the
Group's share of joint ventures on a line-by-line basis and are
adjusted to exclude the non-owned elements of our subsidiaries.
These measures are non-GAAP measures and therefore not presented in
accordance with IFRS. This is in contrast to the condensed
consolidated interim financial information presented in these half
year results, where the Group applies equity accounting to its
interest in joint ventures and associates, presenting its interest
collectively in the income statement and balance sheet, and
consolidating all subsidiaries at 100% with any non-owned element
being adjusted as a non-controlling interest or redemption
liability, as appropriate. Our joint operations are presented on a
proportionate basis in all financial measures used internally by
the Group.
2. Significant accounting policies
----------------------------------
The condensed consolidated interim financial information has
been prepared on the basis of the accounting policies, significant
judgements and estimates as set out in the notes to the Group's
annual financial statements for the year ended 31 March 2023, as
amended where relevant to reflect the new standards, amendments and
interpretations which became effective in the period. There has
been no material impact on the financial statements of adopting
these new standards, amendments and interpretations.
3. Segmental information
------------------------
The Group's operations are all in the UK and are managed across
four operating segments, being Central London, Major retail
destinations (Major retail), Mixed-use urban neighbourhoods
(Mixed-use urban) and Subscale sectors.
The Central London segment includes all assets geographically
located within central London. Major retail includes all regional
shopping centres and shops outside London and our outlets. The
Mixed-use urban segment includes those assets where we see the most
potential for capital investment. Subscale sectors mainly includes
assets that will not be a focus for capital investment and consists
of leisure and hotel assets and retail parks.
Management has determined the Group's operating segments based
on the information reviewed by senior management to make strategic
decisions. The chief operating decision maker is the Executive
Leadership Team (ELT), comprising the Executive Directors and the
Managing Directors. The information presented to the ELT includes
reports from all functions of the business as well as strategy,
financial planning, succession planning, organisational development
and Group-wide policies.
The Group's primary measure of underlying profit after tax is
EPRA earnings. However, segment net rental income is the lowest
level to which the profit arising from the ongoing operations of
the Group is analysed between the four segments. The administrative
costs, which are predominantly staff costs for centralised
functions, are all treated as administrative expenses and are not
allocated to individual segments.
The Group manages its financing structure, with the exception of
joint ventures and non-wholly owned subsidiaries, on a pooled
basis. Individual joint ventures and non-wholly owned subsidiaries
may have specific financing arrangements in place. Debt facilities
and finance expenses, including those of joint ventures, are
managed centrally and are therefore not attributed to a particular
segment. Unallocated income and expenses are items incurred
centrally which are not directly attributable to one of the
segments.
All items in the segmental results note are presented on a
proportionate basis.
Segmental results
-------------------------- -------------------------------------------- --------------------------------------------
Six months ended Six months ended
30 September 2023 30 September 2022(2)
EPRA earnings Central Major Mixed-use Subscale Central Major Mixed-use Subscale
London retail urban sectors Total London retail urban sectors Total
--------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------- ------- --------- -------- ----- ------- ------- --------- -------- -----
Rental income 148 95 29 56 328 160 88 28 54 330
Finance lease interest - - - - - 1 - - - 1
-------------------------- ------- ------- --------- -------- ----- ------- ------- --------- -------- -----
Gross rental income
(before
rents payable) 148 95 29 56 328 161 88 28 54 331
Rents payable(1) (2) (3) - - (5) (1) (4) - (1) (6)
-------------------------- ------- ------- --------- -------- ----- ------- ------- --------- -------- -----
Gross rental income (after
rents payable) 146 92 29 56 323 160 84 28 53 325
------- ------- --------- -------- ----- ------- ------- --------- -------- -----
Service charge income 28 28 6 - 62 22 20 5 - 47
Service charge expense (31) (32) (7) (2) (72) (23) (26) (6) (1) (56)
------- ------- --------- -------- ----- ------- ------- --------- -------- -----
Net service charge expense (3) (4) (1) (2) (10) (1) (6) (1) (1) (9)
Other property related
income 9 5 2 1 17 6 6 1 1 14
Direct property
expenditure (20) (17) (7) (9) (53) (17) (21) (7) (7) (52)
Movement in bad and
doubtful
debts provisions - 4 - 1 5 1 3 (4) - -
Segment net rental income 132 80 23 47 282 149 66 17 46 278
Other income 2 1
Administrative expense (38) (39)
Depreciation, including
amortisation of software (2) (3)
-------------------------- ------- ------- --------- -------- ----- ------- ------- --------- -------- -----
EPRA earnings before
interest 244 237
Finance income 6 6
Finance expense (46) (40)
Joint venture net finance
expense (6) (6)
-------------------------- ------- ------- --------- -------- ----- ------- ------- --------- -------- -----
EPRA earnings attributable
to shareholders of the
parent 198 197
-------------------------- ------- ------- --------- -------- ----- ------- ------- --------- -------- -----
1. Included within rents payable is lease interest payable of
GBP2m across the four segments (2022: GBP1m for the Central London
segment, GBP1m across the remaining three segments).
2. A reconciliation from the Group income statement to the
information presented in the segmental results table for the six
months to 30 September 2022 is included in table 25.
The following table reconciles the Group's income statement to
the segmental results.
Reconciliation of segmental information note to interim
reporting
Six months ended 30 September
2023
Adjustment
for non-wholly
owned Capital
Group income Joint subsidiaries EPRA and other
statement ventures(1) (2) Total earnings items
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------------ ------------ --------------- ----- --------- ----------
Rental income 312 20 (4) 328 328 -
Finance lease interest - - - - - -
--------------------------------- ------------ ------------ --------------- ----- --------- ----------
Gross rental income (before
rents payable) 312 20 (4) 328 328 -
Rents payable (5) - - (5) (5) -
--------------------------------- ------------ ------------ --------------- ----- --------- ----------
Gross rental income (after rents
payable) 307 20 (4) 323 323 -
------------ ------------ --------------- ----- --------- ----------
Service charge income 59 4 (1) 62 62 -
Service charge expense (68) (5) 1 (72) (72) -
------------ ------------ --------------- ----- --------- ----------
Net service charge expense (9) (1) - (10) (10) -
Other property related income 17 - - 17 17 -
Direct property expenditure (52) (2) 1 (53) (53) -
Movement in bad and doubtful
debts provisions 5 - - 5 5 -
Segment net rental income 268 17 (3) 282 282 -
Other income 2 - - 2 2 -
Administrative expenses (37) (1) - (38) (38) -
Depreciation (2) - - (2) (2) -
--------------------------------- ------------ ------------ --------------- ----- --------- ----------
EPRA earnings before interest 231 16 (3) 244 244 -
Share of post-tax loss from
joint ventures (7) 7 - - - -
Loss on disposal of trading
properties (1) - - (1) - (1)
Loss on disposal of investment
properties (3) - - (3) - (3)
Net deficit on revaluation of
investment properties (371) (17) 13 (375) - (375)
Net development contract income 3 - - 3 - 3
Impairment of trading properties (4) - - (4) - (4)
Depreciation (1) - - (1) - (1)
Operating (loss)/profit (153) 6 10 (137) 244 (381)
Finance income 7 - 2 9 6 3
Finance expense (47) (6) - (53) (52) (1)
(Loss)/profit before tax (193) - 12 (181) 198 (379)
Taxation - - - -
--------------------------------- ------------ ------------ --------------- -----
Loss for the period (193) - 12 (181)
--------------------------------- ------------ ------------ --------------- -----
1. Reallocation of the share of post-tax loss from joint
ventures reported in the Group income statement to the individual
line items reported in the segmental results table.
2. Removal of the non-wholly owned share of results of the
Group's subsidiaries. The non-wholly owned subsidiaries are
consolidated at 100% in the Group's income statement, but only the
Group's share is included in EPRA earnings reported in the
segmental results table. The non-owned element of the Group's
subsidiaries are included in the 'Capital and other items' column
presented in the Group's income statement, together with items not
directly related to the underlying rental business such as
investment properties valuation changes, profits or losses on the
disposal of investment properties, the proceeds from, and costs of,
the sale of trading properties, income from and costs associated
with development contracts, amortisation and impairment of
intangibles, and other attributable costs, arising on business
combinations.
4. Performance measures
-----------------------
In the tables below, we present earnings per share attributable
to the shareholders of the parent, calculated in accordance with
IFRS, and net assets per share attributable to shareholders of the
parent together with certain measures defined by the European
Public Real Estate Association (EPRA), which have been included to
assist comparison between European property companies. Three of the
Group's key financial performance measures are EPRA earnings per
share, EPRA Net Tangible Assets per share and total return on
equity. Refer to Table 14 in the Business Analysis section for
further details on these alternative performance measures.
EPRA earnings, which is a tax adjusted measure of underlying
earnings, is the basis for the calculation of EPRA earnings per
share. We believe EPRA earnings and EPRA earnings per share provide
further insight into the results of the Group's operational
performance to stakeholders as they focus on the rental income
performance of the business and exclude Capital and other items
which can vary significantly from period to period.
Earnings per share Six months ended Six months ended
30 September 2023 30 September 2022
Loss for Loss for
the period EPRA earnings the period EPRA earnings
GBPm GBPm GBPm GBPm
-------------------------------------------- ----------- ------------- ----------- -------------
Loss attributable to shareholders
of the parent (181) (181) (190) (190)
Valuation and loss on disposals - 383 - 435
Net finance income (excluded from
EPRA earnings) - (2) - (48)
Other - (2) - -
(Loss)/profit used in per share calculation (181) 198 (190) 197
-------------------------------------------- ----------- ------------- ----------- -------------
IFRS EPRA IFRS EPRA
-------------------------------------------- ----------- ------------- ----------- -------------
Basic (loss)/earnings per share (24.4)p 26.7p (25.7)p 26.6p
Diluted (loss)/earnings per share(1) (24.4)p 26.7p (25.7)p 26.6p
-------------------------------------------- ----------- ------------- ----------- -------------
1. In the six months ended 30 September 2023 and 30 September
2022, share options are excluded from the weighted average diluted
number of shares when calculating IFRS and EPRA diluted
(loss)/earnings per share because they are not dilutive.
Net assets per share 30 September 2023 31 March 2023
EPRA EPRA EPRA EPRA
Net assets NDV NTA Net assets NDV NTA
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ---------- ----- ----- ---------- ----- -----
Net assets attributable to shareholders
of the parent 6,673 6,673 6,673 7,005 7,005 7,005
Shortfall of fair value over net
investment in finance leases book
value - (6) (6) - (6) (6)
Deferred tax liability on intangible
asset - - - - - 1
Goodwill on deferred tax liability - - - - (1) (1)
Other intangible asset - - (2) - - (2)
Fair value of interest-rate swaps - - (44) - - (42)
Excess of fair value of trading properties
over book value - 26 26 - 12 12
Shortfall of fair value of debt over
book value - 457 - - 324 -
Net assets used in per share calculation 6,673 7,150 6,647 7,005 7,334 6,967
------------------------------------------- ---------- ----- ----- ---------- ----- -----
IFRS EPRA EPRA IFRS EPRA EPRA
NDV NTA NDV NTA
Net assets per share 899p n/a n/a 945p n/a n/a
Diluted net assets per share 897p 961p 893p 942p 986p 936p
------------------------------------------- ---------- ----- ----- ---------- ----- -----
Number of shares Six months Six months
ended ended
30 September 30 September
2023 2022
Weighted 30 September Weighted 31 March
average 2023 average 2023
million million million million
--------------------------------- ------------- ------------ ------------- --------
Ordinary shares 751 752 751 751
Treasury shares (7) (7) (7) (7)
Own shares (3) (3) (4) (3)
--------------------------------- ------------- ------------ ------------- --------
Number of shares - basic 741 742 740 741
Dilutive effect of share options 3 2 3 3
--------------------------------- ------------- ------------ ------------- --------
Number of shares - diluted 744 744 743 744
--------------------------------- ------------- ------------ ------------- --------
Total return on equity is calculated as the cash dividends per
share paid in the period plus the change in EPRA NTA per share,
divided by the opening EPRA NTA per share. We consider this to be a
useful measure for shareholders as it gives an indication of the
total return on equity over the period.
Total return on equity based on EPRA Six months ended Six months ended
NTA 30 September 2023 30 September 2022
pence pence
-------------------------------------- ------------------ ------------------
Decrease in EPRA NTA per share (43) (53)
Dividend paid per share in the period
(note 8) 21 22
-------------------------------------- ------------------ ------------------
Total return (a) (22) (31)
-------------------------------------- ------------------ ------------------
EPRA NTA per share at the beginning
of the period (b) 936 1,063
Total return on equity (a/b) (2.4)% (2.9)%
-------------------------------------- ------------------ ------------------
5. Revenue
----------
All revenue is classified within the 'EPRA earnings' column of
the income statement, with the exception of proceeds from the sale
of trading properties, income from development contracts and the
non-owned element of the Group's subsidiaries which are presented
in the 'Capital and other items' column.
Six months ended Six months ended
30 September 2023 30 September 2022
Capital Capital
EPRA and other EPRA and other
earnings items Total earnings items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ --------- ---------- ----- --------- ---------- -----
Rental income (excluding adjustment
for lease incentives) 305 4 309 306 4 310
Adjustment for lease incentives 3 - 3 (3) - (3)
------------------------------------ --------- ---------- ----- --------- ---------- -----
Rental income 308 4 312 303 4 307
Service charge income 58 1 59 42 1 43
Trading property sales proceeds - 7 7 - 15 15
Other property related income 17 - 17 13 - 13
Finance lease interest - - - 1 - 1
Development contract income(1) - 15 15 - 14 14
Other income 2 - 2 1 - 1
------------------------------------ --------- ---------- ----- --------- ---------- -----
Revenue per the income statement 385 27 412 360 34 394
------------------------------------ --------- ---------- ----- --------- ---------- -----
The following table reconciles revenue per the income statement
to the individual components of revenue presented in the segmental
results table in note 3.
Six months ended Six months ended
30 September 2023 30 September 2022
Adjustment Adjustment
for non-wholly for non-wholly
Joint owned Joint owned
Group ventures subsidiaries Total Group ventures subsidiaries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ----- --------- --------------- ----- ----- --------- --------------- -----
Rental income 312 20 (4) 328 307 27 (4) 330
Service charge income 59 4 (1) 62 43 5 (1) 47
Other property related
income 17 - - 17 13 1 - 14
Finance lease interest - - - - 1 - - 1
Other income 2 - - 2 1 - - 1
------------------------------- ----- --------- --------------- ----- ----- --------- --------------- -----
Revenue in the segmental
information note 390 24 (5) 409 365 33 (5) 393
------------------------------- ----- --------- --------------- ----- ----- --------- --------------- -----
Development contract income(1) 15 - - 15 14 - - 14
Trading property sales
proceeds 7 - - 7 15 - - 15
------------------------------- ----- --------- --------------- ----- ----- --------- --------------- -----
Revenue including Capital
and other items 412 24 (5) 431 394 33 (5) 422
------------------------------- ----- --------- --------------- ----- ----- --------- --------------- -----
1. Development contract income for the six months to 30
September 2023 and for the six months to 30 September 2022 includes
income released from the contract liability recorded on the
disposal of 21 Moorfields, recognised in line with costs incurred
on the development in Note 6.
6. Cost
---------
All costs are classified within the 'EPRA earnings' column of
the income statement, with the exception of the costs of sale and
impairment of trading properties, costs arising on development
contracts, amortisation and impairments of intangible assets, other
attributable costs arising on business combinations and the
non-owned element of the Group's subsidiaries which are presented
in the 'Capital and other items' column.
Six months ended Six months ended
30 September 2023 30 September 2022
Capital Capital
EPRA and other EPRA and other
earnings items Total earnings items Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- --------- ---------- ----- --------- ---------- -----
Rents payable 5 - 5 5 - 5
Service charge expense 67 1 68 50 1 51
Direct property expenditure 51 1 52 47 1 48
Administrative expenses 37 - 37 38 - 38
Depreciation, including amortisation
of software 2 1 3 3 2 5
Cost of trading property disposals - 8 8 - 14 14
Development contract expenditure(1) - 12 12 - 14 14
Impairment of goodwill - - - - 5 5
Impairment of trading properties - 4 4 - 8 8
Costs - other per the income statement 162 27 189 143 45 188
--------------------------------------- --------- ---------- ----- --------- ---------- -----
Movement in bad and doubtful debts
provisions - rent (5) - (5) - - -
Total costs per the income statement 157 27 184 143 45 188
--------------------------------------- --------- ---------- ----- --------- ---------- -----
The following table reconciles costs per the income statement to
the individual components of costs presented in the segmental
results table in note 3.
Six months ended Six months ended
30 September 2023 30 September 2022
Adjustment Adjustment
for non-wholly for non-wholly
Joint owned Joint owned
Group ventures subsidiaries Total Group ventures subsidiaries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ----- --------- --------------- ----- ----- --------- --------------- -----
Rents payable 5 - - 5 5 1 - 6
Service charge expense 68 5 (1) 72 51 6 (1) 56
Direct property expenditure 52 2 (1) 53 48 5 (1) 52
Administrative expenses 37 1 - 38 38 1 - 39
Depreciation, including
amortisation of software 2 - - 2 3 - - 3
Movement in bad and doubtful
debts provisions - rent (5) - - (5) - - - -
Costs in the segmental
information note 159 8 (2) 165 145 13 (2) 156
----------------------------- ----- --------- --------------- ----- ----- --------- --------------- -----
Cost of trading property
disposals 8 - - 8 14 - - 14
Development contract
expenditure(1) 12 - - 12 14 - - 14
Impairment of goodwill - - - - 5 - - 5
Impairment of trading
properties 4 - - 4 8 - - 8
Depreciation 1 - - 1 2 - - 2
Costs including Capital
and other items 184 8 (2) 190 188 13 (2) 199
----------------------------- ----- --------- --------------- ----- ----- --------- --------------- -----
1. Development contract expenditure for the six months to 30
September 2023 and the six months to 30 September 2022 includes
expenditure related to the ongoing development of 21 Moorfields
following the sale of the property.
The Group's costs include employee costs for the period of
GBP40m (2022: GBP37m), of which GBP3m (2022: GBP3m) is within
service charge expense, GBP7m (2022: GBP6m) is within direct
property expenditure and GBP30m (2022: GBP28m) is within
administrative expenses.
7. Net finance expense
----------------------------------------------------------------------------------------------------
Six months ended Six months ended
30 September 2023 30 September 2022
Capital Capital
EPRA and other EPRA and other
earnings items Total earnings items Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------- --------- ---------- ----- --------- ---------- -----
Finance income
Interest receivable from joint ventures 6 - 6 6 - 6
Fair value movement on interest-rate
swaps - 1 1 - 51 51
6 1 7 6 51 57
---------------------------------------- --------- ---------- ----- --------- ---------- -----
Finance expense
Bonds (44) - (44) (34) - (34)
Bank and other short-term borrowings (14) (1) (15) (20) (1) (21)
(58) (1) (59) (54) (1) (55)
Interest capitalised in relation
to properties under development 12 - 12 14 - 14
---------------------------------------- --------- ---------- ----- --------- ---------- -----
(46) (1) (47) (40) (1) (41)
---------------------------------------- --------- ---------- ----- --------- ---------- -----
Net finance (expense)/income (40) - (40) (34) 50 16
Joint venture net finance expense (6) (6)
---------------------------------------- --------- ---------- ----- --------- ---------- -----
Net finance expense included in EPRA
earnings (46) (40)
---------------------------------------- --------- ---------- ----- --------- ---------- -----
Lease interest payable of GBP2m (2022: GBP2m) is included within
rents payable as detailed in note 3.
8. Dividends
Dividends paid Six months ended 30 September
Pence per share 2023 2022
Payment PID Non-PID Total GBPm GBPm
date
----------------------------- -------- ------- --------- ------ ---- ------
For the year ended 31 March
2022:
7 April
Third interim 2022 8.50 - 8.50 63
22 July
Final 2022 13.00 - 13.00 96
For the year ended 31 March
2023:
6 April
Third interim 2023 9.00 - 9.00 67
21 July
Final 2023 12.00 - 12.00 89
----------------------------- -------- ------- --------- ------ ---- ------
Gross dividends 156 159
--------------------------------------- ------- --------- ------ ---- ------
Dividends in the statement
of changes in equity 156 159
Timing difference on payment
of withholding tax (3) (4)
--------------------------------------- ------- --------- ------ ---- ----
Dividends in the statement
of cash flows 153 155
--------------------------------------- ------- --------- ------ ---- ----
On 6 October 2023, the Company paid a first interim dividend in
respect of the current financial year of 9.0p per ordinary share
(2022: 8.6p), wholly as a Property Income Distribution (PID),
representing GBP67 m in total (2022: GBP64m).
The Board has declared a second interim dividend of 9.2p per
ordinary share to be payable wholly as a PID (2022: 9.0p) on 2
January 2024 to shareholders registered at the close of business on
24 November 2023.
A Dividend Reinvestment Plan (DRIP) has been available in
respect of all dividends paid during the period. The last day for
DRIP elections for the second interim dividend is close of business
on 8 December 2023.
9. Net cash generated from operations
------------------------------------------------------- ------------- -------------
Reconciliation of operating loss to net cash generated Six months Six months
from operations ended ended
30 September 30 September
2023 2022
GBPm GBPm
------------------------------------------------------- ------------- -------------
Operating loss (153) (208)
Adjustments for:
Net deficit on revaluation of investment properties 371 331
Loss on changes in finance leases - 6
Loss/(profit) of disposal of trading properties 1 (1)
Loss on disposal of investment properties 3 92
Share of loss/(profit) from joint ventures 7 (15)
Share-based payment charge 6 3
Rents payable 5 5
Depreciation and amortisation 3 5
Development contract income - (14)
Impairment of trading properties 4 8
Other - 1
247 213
Changes in working capital:
Increase in receivables (19) (7)
Decrease in payables (18) (10)
------------------------------------------------------- ------------- -------------
Net cash generated from operations 210 196
------------------------------------------------------- ------------- -------------
Reconciliation to adjusted net cash inflow from Six months Six months
operating activities ended ended
30 September 30 September
2023 2022
GBPm GBPm
------------- -------------
Net cash inflow from operating activities 166 176
Joint ventures net cash in/(out)flow from operating
activities - (8)
Adjusted net cash inflow from operating activities(1) 166 168
------------------------------------------------------ ------------- -------------
1. Includes cash flows relating to the interest in MediaCity
which is not owned by the Group, but is consolidated in the Group
numbers.
10. Investment properties
------------------------------------------- ------------- -------------- -------------
Six months Six months Six months
ended ended ended
30 September 31 March 2023 30 September
2023 2022
GBPm GBPm GBPm
Net book value at the beginning of
the period 9,658 10,187 11,207
Transfer from joint venture - - 23
Acquisitions of investment properties 91 216 2
Net movement in head leases capitalised(1) - (5) (11)
Capital expenditure(2) 173 169 187
Capitalised interest 12 8 14
Disposals (1) (415) (904)
Net deficit on revaluation of investment
properties (371) (496) (331)
Transfers to trading properties - (6) -
Net book value at the end of the
period 9,562 9,658 10,187
------------------------------------------- ------------- -------------- -------------
1. See note 14 for details of the amounts payable under head
leases and note 6 for details of the rents payable in the income
statement.
2. As at 30 September 2023, a provision of GBP18m (31 March
2023: GBP14m) has been recognised for fire safety remediation as a
result of the Building Safety Act 2022. Of the GBP4m movement since
31 March 2023, GBP5m has been included as capital expenditure on
properties currently owned by the Group, with a release of GBP1m
recorded in loss on disposal of investment properties related to
properties no longer owned by the Group.
The fair value of investment properties at 30 September 2023 was
determined by the Group's external valuers, CBRE and JLL. The
valuations are in line with RICS standards and were arrived at by
reference to market evidence of transactions for similar
properties. The valuations performed by the independent valuers are
reviewed internally by senior management and relevant people within
the business. This includes discussions of the assumptions used by
the external valuers, as well as a review of the resulting
valuations. Discussions about the valuation process and results are
held between senior management, the Audit Committee and the
external valuers on a half-yearly basis.
The Group considers all of its investment properties to fall
within 'Level 3', as defined by IFRS 13. There were no changes in
the Group's valuation processes, valuation techniques, and types of
inputs used in the fair value measurement of investment properties
during the period.
The market value of the Group's investment properties, as
determined by the Group's external valuers, differs from the net
book value presented in the balance sheet due to the Group
presenting tenant finance leases, head leases and lease incentives
separately. The following table reconciles the net book value of
the investment properties to the market value.
30 September 2023 31 March 2023
Adjustment Adjustment
Group for Group for
(excl. non-wholly (excl. non-wholly
joint Joint owned Combined joint Joint owned Combined
ventures) ventures(1) subsidiaries Portfolio ventures) ventures(1) subsidiaries Portfolio
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------ ---------- ---------- ------------ ------------ ----------
Market value 9,655 618 (127) 10,146 9,743 635 (139) 10,239
Less:
properties
treated
as finance
leases (17) - - (17) (17) - - (17)
Plus: head
leases
capitalised 107 1 - 108 107 1 - 108
Less: tenant
lease
incentives (183) (34) - (217) (175) (35) - (210)
------------ ------------ ------------ ------------ ---------- ---------- ------------ ------------ ----------
Net book
value 9,562 585 (127) 10,020 9,658 601 (139) 10,120
------------ ------------ ------------ ------------ ---------- ---------- ------------ ------------ ----------
Net deficit
on
revaluation
of
investment
properties (371) (17) 13 (375) (827) (30) 9 (848)
------------ ------------ ------------ ------------ ---------- ---------- ------------ ------------ ----------
1. Refer to note 12 for a breakdown of this amount by
entity.
As at 30 September 2023, the Group had contractually committed
development capital expenditure obligations of GBP416m (31 March
2023: GBP175m).
11. Trading properties
------------------------------------ ------------------------ ----------- -----
Development
land and infrastructure Residential Total
GBPm GBPm GBPm
------------------------------------ ------------------------ ----------- -----
At 1 April 2022 128 17 145
Capital expenditure 4 8 12
Disposals (5) (9) (14)
Impairment provision (7) (1) (8)
At 30 September 2022 120 15 135
Transfer from investment properties 6 - 6
Capital expenditure 2 (11) (9)
Disposals (12) 9 (3)
(Impairment provision)/reversal of
impairment (18) 7 (11)
At 31 March 2023 98 20 118
------------------------------------ ------------------------ ----------- -----
Capital expenditure 3 1 4
Disposals (7) - (7)
Impairment provision (4) - (4)
At 30 September 2023 90 21 111
------------------------------------ ------------------------ ----------- -----
The cumulative impairment provision at 30 September 2023 in
respect of Development land and infrastructure was GBP28m (31 March
2023: GBP25m) and in respect of Residential was GBPnil (31 March
2023: GBPnil).
12. Joint arrangements
----------------------
The Group's principal joint arrangements are described
below:
Joint ventures Percentage Business Year end Joint venture partner
owned & segment date(2)
voting
rights(1)
----------------------------- ---------- -------------- -------- --------------------------------
Held at 30 September
2023
Nova, Victoria(3) 50% Central London 31 March Suntec Real Estate Investment
Trust
Southside Limited Partnership 50% Major retail 31 March Invesco Real Estate European
Fund
Westgate Oxford Alliance 50% Major retail, 31 March The Crown Estate Commissioners
Limited Partnership Subscale
sectors
Harvest(4)(5) 50% Subscale 31 March J Sainsbury plc
sectors
The Ebbsfleet Limited 50% Subscale 31 March Ebbsfleet Property Limited
Partnership(5) sectors
West India Quay Unit 50% Subscale 31 March Schroder UK Real Estate
Trust(5) sectors Fund
Mayfield(5)(6) 50% Mixed-use 31 March LCR Limited, Manchester
urban City Council, Transport
for Greater Manchester
Curzon Park Limited(5) 50% Subscale 31 March Derwent Developments
sectors (Curzon) Limited
Plus X Holdings Limited(5) 50% Subscale 31 March Paul David Rostas, Matthew
sectors Edmund Hunter
Landmark Court Partnership 51% Central London 31 March TTL Landmark Court Properties
Limited(5) Limited
----------------------------- ---------- -------------- -------- ------------------------------
Joint operation Ownership Business Year end Joint operation partners
interest segment date(2)
----------------------------- ---------- -------------- -------- ------------------------------
Held at 30 September
2023
Bluewater, Kent 48.75% Major retail 31 March M&G Real Estate and GIC
Royal London Asset Management
Aberdeen Standard Investments
----------------------------- ---------- -------------- -------- ------------------------------
1. Investments under joint arrangements are not always
represented by an equal percentage holding by each partner. In a
number of joint ventures that are not considered principal joint
ventures and therefore not included in the table above, the Group
holds a majority shareholding but has joint control and therefore
the arrangement is accounted for as a joint venture.
2. The year end date shown is the accounting reference date of
the joint arrangement. In all cases, the Group's accounting is
performed using financial information for the Group's own reporting
period and reporting date.
3. Nova, Victoria includes the Nova Limited Partnership, Nova
Residential Limited Partnership, Nova GP Limited, Nova Business
Manager Limited, Nova Residential (GP) Limited, Nova Residential
Intermediate Limited, Nova Estate Management Company Limited, Nova
Nominee 1 Limited and Nova Nominee 2 Limited.
4. Harvest includes Harvest 2 Limited Partnership, Harvest
Development Management Limited, Harvest 2 Selly Oak Limited,
Harvest 2 GP Limited and Harvest GP Limited.
5. Included within Other in subsequent tables.
6. Mayfield includes Mayfield Development Partnership LP and
Mayfield Development (General Partner) 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 is a holding
company, and Harvest, which is engaged in long-term development
contracts. The activities of all the Group's principal joint
arrangements are therefore strategically important to the business
activities of the Group.
All joint ventures are registered in England and Wales with the
exception of Southside Limited Partnership and West India Quay Unit
Trust which are registered in Jersey.
Joint ventures Six months ended 30 September 2023
Westgate
Southside Oxford
Nova, Limited Alliance
Victoria Partnership Partnership Other Total
Total
Comprehensive income statement 100% 100% 100% 100% 100% Group share
-----------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- ------------ ------------ ----- ----- ------------
Revenue(1) 23 5 16 4 48 24
----------------------------------- --------- ------------ ------------ ----- ----- ------------
Gross rental income (after
rents payable) 17 6 13 4 40 20
----------------------------------- --------- ------------ ------------ ----- ----- ------------
Net rental income 16 5 10 1 32 16
----------------------------------- --------- ------------ ------------ ----- ----- ------------
EPRA earnings before interest 15 5 10 1 31 16
Finance expense (8) (3) - - (11) (6)
--------- ------------ ------------ ----- ----- ------------
Net finance expense (8) (3) - - (11) (6)
EPRA earnings 7 2 10 1 20 10
Capital and other items
Net deficit on revaluation
of investment properties (23) (3) - (7) (33) (17)
(Loss)/profit before tax (16) (1) 10 (6) (13) (7)
----------------------------------- --------- ------------ ------------ ----- ----- ------------
Post-tax (loss)/profit (16) (1) 10 (6) (13) (7)
----------------------------------- --------- ------------ ------------ ----- ----- ------------
Total comprehensive (loss)/income (16) (1) 10 (6) (13) (7)
----------------------------------- --------- ------------ ------------ ----- ----- ------------
Group share of (loss)/profit
before tax (8) (1) 5 (3) (7)
----------------------------------- --------- ------------ ------------ ----- ----- ------------
Group share of post-tax
(loss)/profit (8) (1) 5 (3) (7)
----------------------------------- --------- ------------ ------------ ----- ----- ------------
Group share of total comprehensive
(loss)/income (8) (1) 5 (3) (7)
----------------------------------- --------- ------------ ------------ ----- ----- ------------
1. Revenue includes gross rental income (before rents payable),
service charge income, other property related income, trading
properties disposal proceeds and income from development
contracts.
Joint ventures Six months ended 30 September 2022
Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership(2) Partnership Other Total Total
Group
Comprehensive income statement 100% 100% 100% 100% 100% 100% share
-----------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- ------------ --------------- ------------ ----- ----- ------
Revenue(1) 24 5 17 17 3 66 33
----------------------------------- --------- ------------ --------------- ------------ ----- ----- ------
Gross rental income (after
rents payable) 18 5 14 14 3 54 26
----------------------------------- --------- ------------ --------------- ------------ ----- ----- ------
Net rental income 18 (1) 10 12 3 42 21
----------------------------------- --------- ------------ --------------- ------------ ----- ----- ------
EPRA earnings before interest 17 (1) 9 12 3 40 20
Finance expense (9) (3) - - - (12) (6)
Net finance expense (9) (3) - - - (12) (6)
EPRA earnings 8 (4) 9 12 3 28 14
Capital and other items
Net (deficit)/surplus
on revaluation of investment
properties (31) 1 6 7 19 2 1
(Loss)/profit before tax (23) (3) 15 19 22 30 15
----------------------------------- --------- ------------ --------------- ------------ ----- ----- ------
Post-tax (loss)/profit (23) (3) 15 19 22 30 15
----------------------------------- --------- ------------ --------------- ------------ ----- ----- ------
Total comprehensive (loss)/income (23) (3) 15 19 22 30 15
----------------------------------- --------- ------------ --------------- ------------ ----- ----- ------
Group share of (loss)/profit
before tax (12) (2) 8 10 11 15
----------------------------------- --------- ------------ --------------- ------------ ----- ----- ------
Group share of post-tax
(loss)/profit (12) (2) 8 10 11 15
----------------------------------- --------- ------------ --------------- ------------ ----- ----- ------
Group share of total comprehensive
(loss)/income (12) (2) 8 10 11 15
----------------------------------- --------- ------------ --------------- ------------ ----- ----- ------
1. Revenue includes gross rental income (before rents payable),
service charge income, other property related income, trading
properties disposal proceeds and income from development
contracts.
2. On 24 March 2023 the Group acquired the remaining 50%
interest in St David's Limited Partnership. From that date, the
results of the operations from St David's are consolidated together
with other subsidiary undertakings. Results from its operations
prior to that date are included as share of profit or loss from
joint ventures.
Joint ventures 30 September
2023
Westgate
Southside Oxford
Limited Alliance
Nova, Victoria Partnership Partnership Other Total
Total
Balance sheet 100% 100% 100% 100% 100% Group share
------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ---------------- -------------- -------------- -------- ------ ------------
Investment properties(1) 725 129 224 92 1,170 585
---------------- -------------- -------------- -------- ------ ------------
Non-current assets 725 129 224 92 1,170 585
Cash and cash equivalents 27 3 13 8 51 26
Other current assets 62 8 14 68 152 75
---------------- -------------- -------------- -------- ------ ------------
Current assets 89 11 27 76 203 101
------------------------------ ---------------- -------------- -------------- -------- ------ ------------
Total assets 814 140 251 168 1,373 686
Trade and other payables
and provisions (15) (5) (8) (34) (62) (30)
---------------- -------------- -------------- -------- ------ ------------
Current liabilities (15) (5) (8) (34) (62) (30)
Non-current liabilities (119) (148) - (19) (286) (143)
---------------- -------------- -------------- -------- ------ ------------
Non-current liabilities (119) (148) - (19) (286) (143)
------------------------------ ---------------- -------------- -------------- -------- ------ ------------
Total liabilities (134) (153) (8) (53) (348) (173)
Net assets/(liabilities) 680 (13) 243 115 1,025 513
------------------------------ ---------------- -------------- -------------- -------- ------ ------------
Comprised of:
Net assets 680 - 243 118 1,041 521
Accumulated losses recognised
as net liabilities(2) - (13) - (3) (16) (8)
------------------------------ ---------------- -------------- -------------- -------- ------ ------------
Market value of investment
properties(1) 782 130 232 92 1,236 618
------------------------------ ---------------- -------------- -------------- -------- ------ ------------
Net cash(3) 27 3 13 8 51 26
------------------------------ ---------------- -------------- -------------- -------- ------ ------------
Joint ventures 31 March 2023
Westgate
Southside Oxford
Limited Alliance
Nova, Victoria Partnership Partnership Other Total
Total
Balance sheet 100% 100% 100% 100% 100% Group share
------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ -------------- ------------ ------------ ----- ----- ------------
Investment properties(1) 748 134 225 98 1,205 601
-------------- ------------ ------------ ----- ----- ------------
Non-current assets 748 134 225 98 1,205 601
Cash and cash equivalents 36 3 23 7 69 35
Other current assets 64 9 13 68 154 78
-------------- ------------ ------------ ----- ----- ------------
Current assets 100 12 36 75 223 113
------------------------------ -------------- ------------ ------------ ----- ----- ------------
Total assets 848 146 261 173 1,428 714
Trade and other payables
and provisions (22) (10) (14) (48) (94) (48)
-------------- ------------ ------------ ----- ----- ------------
Current liabilities (22) (10) (14) (48) (94) (48)
Non-current liabilities (131) (145) - - (276) (138)
-------------- ------------ ------------ ----- ----- ------------
Non-current liabilities (131) (145) - - (276) (138)
------------------------------ -------------- ------------ ------------ ----- ----- ------------
Total liabilities (153) (155) (14) (48) (370) (186)
Net assets/(liabilities) 695 (9) 247 125 1,058 528
------------------------------ -------------- ------------ ------------ ----- ----- ------------
Comprised of:
Net assets 695 - 247 125 1,067 533
Accumulated losses recognised
as net liabilities(2) - (9) - - (9) (5)
------------------------------ -------------- ------------ ------------ ----- ----- ------------
Market value of investment
properties(1) 807 134 233 98 1,272 635
------------------------------ -------------- ------------ ------------ ----- ----- ------------
Net cash(3) 36 3 23 7 69 35
------------------------------ -------------- ------------ ------------ ----- ----- ------------
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. The Group's share of accumulated losses of a joint venture
interest are recognised as net liabilities where there is an
obligation to provide for these losses.
3. Excludes funding provided by the Group and its joint venture
partners.
Joint ventures Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total
Net investment Group Group Group Group Group Group
share share share share share share
----------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- --------- ------------ ------------ ------------ ------ ------
At 1 April 2022 372 (5) 113 125 90 695
Total comprehensive (loss)/income (12) (2) 8 10 11 15
Cash distributions - - (2) - - (2)
Other distributions - - - - (8) (8)
Transfer from joint arrangements - - - - (24) (24)
Other non-cash movements - - - - (5) (5)
---------------------------------- --------- ------------ ------------ ------------ ------ ------
At 30 September 2022 360 (7) 119 135 64 671
---------------------------------- --------- ------------ ------------ ------------ ------ ------
Total comprehensive (loss)/income (12) 2 2 (3) (5) (16)
Cash distributions - - (2) (8) (2) (12)
Other distributions - - - - 1 1
Disposals and transfers
from joint arrangements - - (119) - (1) (120)
Other non-cash movements - - - - 4 4
At 31 March 2023 348 (5) - 124 61 528
---------------------------------- --------- ------------ ------------ ------------ ------ ------
Total comprehensive (loss)/income (8) (1) - 5 (3) (7)
Cash distributions - - - (6) (1) (7)
Other non-cash movements - - - (1) - (1)
At 30 September 2023 340 (6) - 122 57 513
---------------------------------- --------- ------------ ------------ ------------ ------ ------
Comprised of:
---------------------------------- --------- ------------ ------------ ------------ ------ ------
At 31 March 2023
Non-current assets 348 - - 124 61 533
Non-current liabilities(1) - (5) - - - (5)
At 30 September 2023
Non-current assets 340 - - 122 59 521
Non-current liabilities(1) - (6) - - (2) (8)
---------------------------------- --------- ------------ ------------ ------------ ------ ------
1. The Group's share of accumulated losses of a joint venture
interest are recognised as net liabilities where there is an
obligation to provide for these losses.
13. Capital structure
---------------------------- ----------------------------------------------------------------------------------------
30 September 2023 31 March 2023
Adjustment Adjustment
for non-wholly for non-wholly
Joint owned Joint owned
Group ventures subsidiaries Combined Group ventures subsidiaries Combined
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ----- --------- --------------- -------- ----- --------- --------------- --------
Property portfolio
Market value of investment
properties 9,655 618 (127) 10,146 9,743 635 (139) 10,239
Trading properties
and long-term contracts 111 - - 111 118 - - 118
Total property portfolio
(a) 9,766 618 (127) 10,257 9,861 635 (139) 10,357
---------------------------- ----- --------- --------------- -------- ----- --------- --------------- --------
Net debt
Borrowings 3,709 - (73) 3,636 3,431 - (73) 3,358
Monies held in restricted
accounts and deposits (2) - 1 (1) (4) - 1 (3)
Cash and cash equivalents (80) (26) 4 (102) (41) (35) 2 (74)
Fair value of interest-rate
swaps (46) - 2 (44) (44) - 2 (42)
Fair value of foreign
exchange swaps and
forwards (9) - - (9) 6 - - 6
---------------------------- ----- --------- --------------- -------- ----- --------- --------------- --------
Net debt (b) 3,572 (26) (66) 3,480 3,348 (35) (68) 3,245
Less: Fair value of
interest-rate swaps 46 - (2) 44 44 - (2) 42
Adjusted net debt (c) 3,618 (26) (68) 3,524 3,392 (35) (70) 3,287
---------------------------- ----- --------- --------------- -------- ----- --------- --------------- --------
Adjusted total equity
Total equity (d) 6,728 - (55) 6,673 7,072 - (67) 7,005
Fair value of interest-rate
swaps (46) - 2 (44) (44) - 2 (42)
Adjusted total equity
(e) 6,682 - (53) 6,629 7,028 - (65) 6,963
---------------------------- ----- --------- --------------- -------- ----- --------- --------------- --------
Gearing (b/d) 53.1% 52.2% 47.3% 46.3%
Adjusted gearing (c/e) 54.1% 53.2% 48.3% 47.2%
Group LTV (c/a) 37.0% 34.4% 34.4% 31.7%
EPRA LTV 35.8% 33.2%
Security Group LTV 36.9% 33.0%
Weighted average cost
of debt 3.2% 3.3% 2.7% 2.7%
---------------------------- ----- --------- --------------- -------- ----- --------- --------------- --------
14. Borrowings
30 September 2023 31 March 2023
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
Sterling Unsecured Floating Various(1) 5 5 5 - - -
Euro Unsecured Floating Various(1) 327 327 327 167 167 167
US Dollar Unsecured Floating Various(1) 252 252 252 145 145 145
Syndicated and bilateral SONIA +
bank debt Secured Floating margin 292 292 292 - - -
Total current borrowings 876 876 876 312 312 312
---------------------------------------------------- ---------- --------- ------ --------- ------ ------
Amounts payable under
head leases 3.5 3 3 3 3 3 3
---------------------------------------------------- ---------- --------- ------ ------ --------- ------ ------
Total current borrowings
including amounts
payable under head
leases 879 879 879 315 315 315
---------------------------------------------------- ---------- --------- ------ ------ --------- ------ ------
Non-current borrowings
Medium term notes
(MTN)
--------- ------ ------ --------- ------ ------
A10 4.875% MTN due
2025 Secured Fixed 5.0 - - - 10 10 10
A12 1.974% MTN due
2026 Secured Fixed 2.0 400 394 400 400 389 400
A4 5.391% MTN due
2026 Secured Fixed 5.4 17 17 17 17 17 17
A5 5.391% MTN due
2027 Secured Fixed 5.4 87 86 87 87 87 87
A16 2.375% MTN due
2029 Secured Fixed 2.5 350 313 348 350 317 348
A6 5.376% MTN due
2029 Secured Fixed 5.4 65 64 65 65 66 65
A13 2.399% MTN due
2031 Secured Fixed 2.4 300 257 299 300 263 299
A7 5.396% MTN due
2032 Secured Fixed 5.4 77 75 77 77 79 77
A17 4.875% MTN due
2034 Secured Fixed 5.0 400 381 394 400 406 394
A11 5.125% MTN due
2036 Secured Fixed 5.1 50 46 50 50 50 50
A14 2.625% MTN due
2039 Secured Fixed 2.6 500 350 495 500 378 494
A15 2.750% MTN due
2059 Secured Fixed 2.7 500 269 495 500 312 495
--------- ------ ------ --------- ------ ------
2,746 2,252 2,727 2,756 2,374 2,736
Syndicated and bilateral SONIA +
bank debt Secured Floating margin 106 106 106 383 383 383
Total non-current
borrowings 2,852 2,358 2,833 3,139 2,757 3,119
---------------------------------------------------- ---------- --------- ------ --------- ------ ------
Amounts payable under
head leases 3.5 104 122 104 104 142 104
---------------------------------------------------- ---------- --------- ------ ------ --------- ------ ------
Total non-current
borrowings including
amounts payable under
head leases 2,956 2,480 2,937 3,243 2,899 3,223
---------------------------------------------------- ---------- --------- ------ ------ --------- ------ ------
Total borrowings including
amounts payable under
head leases 3,835 3,359 3,816 3,558 3,214 3,538
---------------------------------------------------- ---------- --------- ------ ------ --------- ------ ------
Total borrowings excluding
amounts payable under
head leases 3,728 3,234 3,709 3,451 3,069 3,431
---------------------------------------------------- ---------- --------- ------ ------ --------- ------ ------
1. Non-Sterling commercial paper is immediately swapped into
Sterling. The interest rate is fixed at the time of the issuance
for the duration (1 to 3 months) and tracks SONIA swap rates.
Reconciliation of the movement in borrowings Six months ended
30 September Year ended
2023 31 March 2023
GBPm GBPm
--------------------------------------------- ---------------- --------------
At the beginning of the period 3,538 4,553
Proceeds from new borrowings 284 -
Redemption of MTNs (9) -
Repayment of bank debt - (1,407)
Issue of MTNs (net of finance fees) - 394
Foreign exchange movement on non-Sterling
borrowings 3 14
Movement in amounts payable under head
leases - (16)
At the end of the period 3,816 3,538
--------------------------------------------- ---------------- --------------
Reconciliation of movements in liabilities Six months ended 30
arising from financing activities September 2023
Non-cash changes
At the
At the Other end
beginning Foreign changes of
of the Cash exchange in fair Other the
period flows movements values changes period
GBPm GBPm GBPm GBPm GBPm GBPm
Borrowings 3,538 275 3 - - 3,816
Derivative financial instruments (38) (12) (3) (2) - (55)
--------------------------------- ---------- ------- ---------- -------- -------- -------
3,500 263 - (2) - 3,761
---------------------------------
Year ended 31 March
2023
--------------------------------- -------
Borrowings 4,553 (1,013) 14 - (16) 3,538
Derivative financial instruments (26) 25 (14) (23) - (38)
---------------------------------
4,527 (988) - (23) (16) 3,500
Medium term notes
The MTNs are secured on the fixed and floating pool of assets of
the Security Group. The Security Group includes wholly owned
investment properties, development properties and a number of the
Group's investment in other assets, in total valued at GBP9 .3bn at
30 September 2023 (31 March 2023: GBP9.6bn). The secured debt
structure has a tiered operating covenant regime which gives the
Group substantial flexibility when the loan-to-value and interest
cover in the Security Group are less than 65% and more than 1.45x
respectively. If these limits are exceeded, the operating
environment becomes more restrictive with provisions to encourage a
reduction in gearing. The interest rate of each MTN is fixed until
the expected maturity, being two years before the legal maturity
date of the MTN. The interest rate for the last two years may
either become floating on a SONIA basis plus an increased margin
(relative to that at the time of issue), or subject to a fixed
coupon uplift, depending on the terms and conditions of the
specific notes.
The effective interest rate is based on the coupon paid and
includes the amortisation of issue costs. The MTNs are listed on
the Irish Stock Exchange and their fair values are based on their
respective market prices.
During the period, the Group did not purchase any MTNs (31 March
2023: none) .
Syndicated and bilateral
bank debt Authorised Drawn Undrawn
Maturity
as at 30
September 30 Sept 31 March 30 Sept 31 March 30 Sept 31 March
2023 2023 2023 2023 2023 2023 2023
GBPm GBPm GBPm GBPm GBPm GBPm
Syndicated debt 2024-27 2,782 2,782 398 383 2,384 2,399
Bilateral debt 2026 225 225 - - 225 225
3,007 3,007 398 383 2,609 2,624
-------
All syndicated and bilateral facilities are committed and
secured on the assets of the Security Group, with the exception of
facilities secured on the assets at MediaCity (of which GBP292m was
drawn at 30 September 2023 and 31 March 2023). During the period
ended 30 September 2023, the amounts drawn under the Group's
facilities increased by GBP15 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,
net of commercial paper, at 30 September 2023 was GBP2,105m (31
March 2023: GBP2,353m).
Fair values
The fair value of the amounts payable under the Group's lease
obligations, using a discount rate of 3.3% (31 March 2023: 2.7%),
is GBP125m (31 March 2023: GBP145m). The fair value of the Group's
net investment in tenant finance leases, calculated by the Group's
external valuers by applying a weighted average equivalent yield of
8.0% (31 March 2023: 7.9%), is GBP17m (31 March 2023: GBP16m).
The fair values of any floating rate financial liabilities are
assumed to be equal to their nominal and book value. The fair
values of the MTNs fall within Level 1 of the fair value hierarchy,
the syndicated and bilateral facilities, commercial paper,
interest-rate swaps and foreign exchange swaps fall within Level 2,
and the amounts payable and receivable under leases fall within
Level 3.
The fair values of the financial instruments have been
determined by reference to relevant market prices, where available.
The fair values of the Group's outstanding interest-rate swaps have
been estimated by calculating the present value of future cash
flows, using appropriate market discount rates. These valuation
techniques fall within Level 2.
The fair value of the other investments is calculated by
reference to the net assets of the underlying entity. The valuation
is not based on observable market data and therefore the other
investments are considered to fall within Level 3.
15. Contingencies
The Group has contingent liabilities in respect of legal claims,
tax queries, contractor claims, remediation for building defects,
developer contractual arrangements, guarantees and warranties
arising in the ordinary course of business. This also includes
contingent liabilities for fire safety remediation arising from the
Building Safety Act 2022, for which it is not yet possible to
quantify any potential liability, and our ongoing review into
Reinforced Autoclaved Aerated Concrete.
The Group has received queries from tax authorities relating to
historical transactions which may result in additional tax
liabilities. Based on an assessment of the relevant tax rules, in
addition to advice received from external parties, the Group does
not believe that any tax is due and has written to the authorities
explaining that position. It is not possible to accurately state
the timing of any potential outflow, as the Group awaits further
correspondence from the tax authorities. The Group has not
disclosed an estimate of the financial effect as it is considered
this could be prejudicial to its position.
16. Related party transactions
------------------------------
There have been no related party transactions during the period
that require disclosure under Section 4.2.8 (R) of the Disclosure
and Transparency Rules or under IAS 34 Interim Financial
Reporting.
17. Events after the reporting period
-------------------------------------
Since 30 September 2023, the Group sold or exchanged contracts
to sell certain interests in trading properties acquired as part of
the U+I Group PLC in December 2021.
On 20 October 2023, the Group acquired a 100% interest in BM Com
Lease Extension LLP and completed a lease extension at the site in
Brighton, for a combined price of GBP7m.
On 26 October 2023, the Group completed on the sale of its
interest in Morden Wharf for proceeds of GBP23m.
On 9 November 2023, the Group sold its interest in Junction 32
for a headline price of GBP47m.
Alternative performance measures
Table 14: Alternative performance measures
The Group has applied the European Securities and Markets
Authority (ESMA) 'Guidelines on Alternative Performance Measures'
in these results. In the context of these results, an alternative
performance measure (APM) is a financial measure of historical or
future financial performance, position or cash flows of the Group
which is not a measure defined or specified in IFRS.
The table below summarises the APMs included in these results
and where the reconciliations of these measures can be found. The
definitions of APMs are included in the Glossary and in Table
16.
Alternative performance measure Nearest IFRS measure Reconciliation
EPRA earnings Profit/loss before tax Note 3
EPRA earnings per share Basic earnings/loss per Note 4
share
EPRA diluted earnings per Diluted earnings/loss per Note 4
share 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 per share
Total return on equity n/a Note 4
Adjusted net cash inflow Net cash inflow from operating Note 9
from operating activities activities
Combined Portfolio Investment properties Note 10
Adjusted net debt Borrowings Note 13
Group LTV n/a Note 13
EPRA LTV n/a Note 13
EPRA disclosures
Table 15: EPRA net asset measures
EPRA net asset measures 30 September 2023
EPRA NRV EPRA NTA EPRA NDV
GBPm GBPm GBPm
Net assets attributable to shareholders of
the parent 6,673 6,673 6,673
Shortfall of fair value over net investment
in finance leases book value (6) (6) (6)
Deferred tax liability on intangible asset - - -
Goodwill on deferred tax liability - - -
Other intangible asset - (2) -
Fair value of interest-rate swaps (44) (44) -
Excess of fair value of trading properties
over book value 26 26 26
Shortfall of fair value of debt over book value - - 457
Purchasers' costs(1) 614 - -
Net assets used in per share calculation 7,263 6,647 7,150
EPRA NRV EPRA NTA EPRA NDV
Diluted net assets per share 976p 893p 961p
31 March 2023
EPRA NRV EPRA NTA EPRA NDV
GBPm GBPm GBPm
Net assets attributable to shareholders of
the parent 7,005 7,005 7,005
Shortfall of fair value over net investment
in finance leases book value (6) (6) (6)
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 (42) (42) -
Excess of fair value of trading properties
over book value 12 12 12
Shortfall of fair value of debt over book value - - 324
Purchasers' costs(1) 617 - -
Net assets used in per share calculation 7,586 6,967 7,334
EPRA NRV EPRA NTA EPRA NDV
Diluted net assets per share 1,020p 936p 986p
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 16: EPRA performance measures
30 September 2023
EPRA
Measure Definition for EPRA measure Notes measure
EPRA earnings Recurring earnings from core 4 GBP198m
operational activity
EPRA earnings per EPRA earnings per weighted
share number of ordinary shares 4 26.7p
EPRA diluted earnings per weighted
EPRA diluted earnings number of ordinary
per share(1) shares 4 26.7p
EPRA Net Tangible Net assets adjusted to exclude 4 GBP6,647m
Assets (NTA) the fair value of interest-rate
swaps and intangible assets
and include the difference
between the fair value and
book value of net investment
in finance leases and trading
property
EPRA Net Tangible Diluted Net Tangible Assets
Assets per share per share 4 893p
EPRA net disposal Net assets adjusted to include 4 GBP7,150m
value (NDV) the difference between fair
value and book value of debt,
trading property and net investment
in finance leases
EPRA net disposal Diluted net disposal value
value per share per share 4 961p
Ratio of adjusted net debt,
including net payables, to
the sum of the net assets,
including net receivables,
of the Group, its subsidiaries
and joint ventures, all on
EPRA loan-to-value a proportionate basis, expressed
(LTV)(2) as a percentage 13 35.8%
Table
ERV of vacant space as a %
of ERV of Combined Portfolio
Voids/vacancy rate excluding the development programme(3) 17 4.0%
Annualised rental income less
non-recoverable costs as a
Net initial yield % of market value plus assumed
(NIY) purchasers' costs(4) 5.7%
NIY adjusted for rent free
Topped-up NIY periods(4) 6.2%
Total costs as a percentage
of gross rental income (including
Cost ratio direct vacancy costs)(5) 23.0%
Total costs as a percentage
of gross rental income (excluding
direct vacancy costs)(5) 18.3%
1. In the period to 30 September 2023, share options are
excluded from the weighted average diluted number of shares when
calculating EPRA diluted earnings per share because they are not
dilutive, based on IFRS loss for the period.
2. EPRA LTV differs from the Group LTV presented in Note 13 as
it includes net payables and receivables, and includes trading
properties at fair value and debt instruments at nominal value
rather than book value.
3. This measure reflects voids in the Combined Portfolio
excluding only properties under development.
4. This measure relates to the Combined Portfolio, excluding
properties currently under development. Topped-up NIY reflects
adjustments of GBP64m rent free periods and other incentives.
5. This measure is calculated based on gross rental income after
rents payable and excluding costs recovered through rents but not
separately invoiced of GBP5m.
Table 17: EPRA vacancy rate
The EPRA vacancy rate is based on the ratio of the estimated
market rent for vacant properties versus total estimated market
rent, for the Combined Portfolio excluding properties under
development. There are no significant distorting factors
influencing the EPRA vacancy rate.
30 September
2023
GBPm
ERV of vacant properties 26
ERV of Combined Portfolio excluding properties under development 647
EPRA vacancy rate (%) 4.0%
Table 18: Change in net rental income from the like-for-like
portfolio(1)
30 September 30 September
2023 2022 Change
GBPm GBPm GBPm %
------------
Central London 112 114 (2) (2)
Major retail 68 62 6 10
Subscale sectors 57 55 2 4
------------
237 231 6 3
------------ ---
1. Excludes surrender premiums received during the period.
Table 19: Acquisitions, disposals and capital expenditure
Six months Six months
ended ended
30 September 30 September
2023 2022
Investment properties Group
(excl. Adjustment
joint Joint for non-wholly Combined Combined
ventures) ventures owned subsidiaries Portfolio Portfolio
GBPm GBPm GBPm GBPm GBPm
Net book value at the beginning of
the period 9,658 601 (139) 10,120 11,833
Transfer from joint venture - - - - 11
Acquisitions 91 - - 91 2
Capital expenditure 173 1 (1) 173 170
Capitalised interest 12 - - 12 14
Net movement in head leases capitalised - - - - (11)
Disposals (1) - - (1) (904)
Net (deficit)/surplus on revaluation
of investment properties (371) (17) 13 (375) (323)
Net book value at the end of the period 9,562 585 (127) 10,020 10,792
Loss on disposal of investment properties (3) - - (3) (92)
Trading properties GBPm GBPm GBPm GBPm GBPm
----------
Net book value at the beginning of
the period 118 - - 118 146
Capital expenditure 4 - - 4 11
Disposals (7) - - (7) (14)
Movement in impairment (4) - - (4) (8)
Net book value at the end of the period 111 - - 111 135
(Loss)/profit on disposal of trading
properties (1) - - (1) 1
Acquisitions, development and other Investment Trading Combined Combined
capital expenditure properties(1) properties Portfolio Portfolio
GBPm GBPm GBPm GBPm
Acquisitions(2) 91 - 91 2
Development capital expenditure(3) 108 2 110 162
Other capital expenditure 65 2 67 19
Capitalised interest 12 - 12 14
Acquisitions, development and other
capital expenditure 276 4 280 197
Disposals GBPm GBPm
Net book value - investment property disposals 1 904
Net book value - trading property disposals 7 14
Net book value - other net assets of investment
property disposals - 51
Loss on disposal - investment properties (3) (92)
(Loss)/profit on disposal - trading properties (1) 1
Other 4 (1)
Total disposal proceeds 8 877
1. See EPRA analysis of capital expenditure table 20 for further
details.
2. Properties acquired in the period.
3. Development capital expenditure for investment properties
comprises expenditure on the development pipeline and completed
developments.
Table 20: EPRA analysis of capital expenditure
Six months ended 30 September 2023
Other capital expenditure
Total capital Adjustment Total
Total expenditure for non-wholly capital
No capital - joint owned expenditure
Development Incremental incremental expenditure ventures subsidiaries -
capital lettable lettable Tenant Capitalised - Combined (Group GBPm Group
Acquisitions(1) expenditure(2) space(3) space improvements Total interest Portfolio share)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Central London
West End offices - - - 3 2 5 - 5 - - 5
City offices - - - 36 1 37 - 37 - - 37
Retail and other 6 - - - 1 1 - 7 - - 7
Developments 85 96 - - - - 12 193 - - 193
Total Central London 91 96 - 39 4 43 12 242 - - 242
Major retail
Shopping centres - - - 6 - 6 - 6 - - 6
Outlets - - - 6 1 7 - 7 - - 7
Total Major retail - - - 12 1 13 - 13 - - 13
Mixed-use urban
Completed investment - - - 5 - 5 - 5 - (1) 6
Developments - 12 - - - - - 12 1 - 11
Total Mixed-use urban - 12 - 5 - 5 - 17 1 (1) 17
Subscale sectors
Leisure - - - 1 1 2 - 2 - - 2
Hotels - - - - - - - - - - -
Retail parks - - - 2 - 2 - 2 - - 2
Total Subscale sectors - - - 3 1 4 - 4 - - 4
Total capital expenditure 91 108 - 59 6 65 12 276 1 (1) 276
Timing difference between
accrual and cash basis (28) - - (28)
Total capital expenditure
on a cash basis 248 1 (1) 248
1. Investment properties acquired in the period.
2. Expenditure on the future development pipeline and completed
developments.
3. Capital expenditure where the lettable area increases by at
least 10%.
Other business analysis
Table 21: Top 12 occupiers at 30 September 2023
% of Group
rent(1)
----------
Accor 6.0
Central Government 5.7
Deloitte 2.3
Cineworld 1.7
Boots 1.7
Taylor Wessing 1.6
Peel 1.3
BBC 1.2
Sainsbury's 1.0
Qube Research & Technologies 1.0
H&M 1.0
M&S 1.0
----------
25.5
----------
1. On a proportionate basis.
Table 22: Committed and future development pipeline and trading
property development schemes at 30 September 2023
Central London
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
Committed
development
pipeline
-------------- -------------- ------- ----------
Thirty High, SW1
(formerly Portland
House) Office/Retail 100 299,000 - 196 30 Aug-25 189 407
Timber Square,
SE1 Office/Retail 100 376,000 - 114 30 Dec-25 122 408
Property Description Ownership Proposed Potential
of use interest sq ft start
% date
Future development pipeline
-------------- ------- ----------
Liberty of Southwark, Office/Retail/
SE1 Residential 100 225,000 2024
-------------- ------- ----------
Red Lion Court,
SE1 Office/Retail 100 250,000 2024
-------------- ------- ----------
Total Forecast
Sales development total
Ownership Size exchanged Estimated costs development
Description interest sq Number by unit completion to date cost
Property of use % ft of units % date GBPm GBPm
Trading property
development
schemes
-------------------- ------------ --------- ---------- ----------- ------------ ------------
Castle Lane, SW1 Residential 100 52,000 89 99 Jan-24 32 47
-------------------- ---------- ----------- ------------ ------------
Mixed-use urban
Property Ownership Proposed Potential
interest sq ft start
% date
Future development
pipeline
---------
Mayfield, Manchester 50-100 2,500,000 2024
---------
Finchley Road,
NW3 100 1,400,000 2024
---------
Where the property is not 100% owned, floor areas and letting
status shown above represent the full scheme whereas all other
figures represent our proportionate share. Letting % is measured by
ERV and shows letting status at 30 September 2023. Trading property
development schemes are excluded from the future development
pipeline.
Total development cost
Refer to the Glossary for definition.
Net income/ERV
Net income/ERV represents headline annual rent on let units plus
ERV at 30 September 2023 on unlet units, both after rents
payable.
Table 23: Combined Portfolio analysis
Total portfolio analysis
Valuation Annualised Net estimated
Market value(1) movement(1) Rental income(1) rental income(2) rental value(1)
30 30 30 30 30
September 31 March (Deficit)/ (Deficit)/ September September September 31 March September 31 March
2023 2023 surplus surplus 2023 2022 2023 2023 2023 2023
GBPm GBPm GBPm % GBPm GBPm GBPm GBPm GBPm GBPm
Central London
West End offices 2,578 2,653 (78) (3.1) 68 72 136 134 153 146
City offices 1,221 1,304 (123) (9.3) 35 40 64 61 94 87
Retail and other 1,039 1,095 (15) (1.4) 27 30 39 42 53 56
Developments(5) 1,364 1,190 (70) (4.9) 18 19 16 5 133 57
Total Central
London 6,202 6,242 (286) (4.5) 148 161 255 242 433 346
Major retail
Shopping centres 1,206 1,196 1 0.1 64 60 119 114 122 123
Outlets 665 684 (26) (3.8) 31 28 54 56 60 60
Total Major
retail 1,871 1,880 (25) (1.3) 95 88 173 170 182 183
Mixed-use urban
Completed
investment 355 389 (38) (9.7) 12 11 24 24 26 26
Developments(5) 473 426 (19) (3.6) 17 17 31 28 35 31
Total Mixed-use
urban 828 815 (57) (6.2) 29 28 55 52 61 57
Subscale sectors
Leisure 424 476 (11) (2.7) 23 24 47 51 45 50
Hotels 404 408 7 1.7 18 15 35 31 29 28
Retail parks 417 418 (3) (0.6) 15 15 29 28 30 30
Total Subscale
sectors 1,245 1,302 (7) (0.6) 56 54 111 110 104 108
Combined
Portfolio 10,146 10,239 (375) (3.6) 328 331 594 574 780 694
Properties
treated
as finance
leases - - - - - (1)
Combined
Portfolio 10,146 10,239 (375) (3.6) 328 330
Represented by:
Investment
portfolio 9,528 9,603 (358) (3.7) 308 303 557 536 740 655
Share of joint
ventures 618 636 (17) (2.8) 20 27 37 38 40 39
Combined
Portfolio 10,146 10,239 (375) (3.6) 328 330 594 574 780 694
Total portfolio analysis Notes:
Net initial Equivalent 1. Refer to Glossary for
yield(3) yield(4) definition.
Movement 2. Annualised rental income
30 September in 30 September Movement is annual 'rental income'
2023 like-for-like(6) 2023 in like-for-like(6) (as defined in the
% bps % bps Glossary)
------------------- ------------ ------------------ ------------ ------------------- at the balance sheet date,
Central London except that car park and
West End offices 4.8 13 5.4 31 commercialisation income
City offices 3.9 68 5.8 51 are included on a net basis
Retail and other 4.4 29 4.9 22 (after deduction for
Developments(5) - n/a 5.0 n/a operational
Total Central outgoings). Annualised
London 4.5 31 5.3 33 rental
Major retail income includes temporary
Shopping centres 8.0 (14) 8.1 13 lettings.
Outlets 6.7 21 7.4 20 3. Net initial yield -
Total Major retail 7.5 - 7.8 16 refer
Mixed-use urban to Glossary for definition.
Completed This calculation includes
investment 6.0 50 6.8 52 all properties including
Developments(5) 5.4 n/a 5.8 n/a those sites with no income.
------------------- ------------------ ------------------- 4. Equivalent yield - refer
Total Mixed-use to Glossary for definition.
urban 6.0 50 6.1 52 Future developments are
Subscale sectors excluded
Leisure 8.6 33 8.7 17 from the calculation of
Hotels 6.9 24 6.7 5 equivalent
Retail parks 6.7 16 6.6 21 yield on the Combined
Total Subscale Portfolio.
sectors 7.4 23 7.3 13 5. Comprises the
Combined Portfolio 5.7 26 6.1 29 development
------------------- pipeline - refer to
Glossary
Represented by: for definition.
Investment 6. The like-for-like
portfolio 5.7 n/a 6.1 n/a portfolio
Share of joint - refer to Glossary for
ventures 5.7 n/a 5.8 n/a definition.
------------------- ------------------ -------------------
Combined Portfolio 5.7 n/a 6.1 n/a
-------------------
Table 24: Floor Areas
30 September
2023
Million sq
ft
------------
Central London
West End offices 2.4
City offices 1.6
Retail and other 1.0
Developments 0.5
------------
Total Central London 5.5
------------
Major retail
Shopping centres 6.7
Outlets 1.5
------------
Total Major retail 8.2
------------
Mixed-use urban
Completed investment 1.2
Developments 1.9
------------
Total Mixed-use urban 3.1
------------
Subscale sectors
Leisure 3.3
Hotels 1.9
Retail parks 1.8
------------
Total Subscale sectors 7.0
------------
Total 23.8
------------
Table 25: Reconciliation of segmental information note to
interim reporting for the six months to 30 September 2022
Six months ended 30 September
2022
Adjustment
for non-wholly Capital
Group income Joint owned EPRA and other
statement ventures(1) subsidiaries(2) Total earnings items
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------------ ---------------- --------- ----------
Rental income 307 27 (4) 330 330 -
Finance lease interest 1 - - 1 1 -
------------ ---------------- --------- ----------
Gross rental income (before rents
payable) 308 27 (4) 331 331 -
Rents payable (5) (1) - (6) (6) -
------------ ---------------- --------- ----------
Gross rental income (after rents
payable) 303 26 (4) 325 325 -
------------ ---------------- --------- ----------
Service charge income 43 5 (1) 47 47 -
Service charge expense (51) (6) 1 (56) (56) -
------------ ---------------- ---------
Net service charge expense (8) (1) - (9 ) (9) -
Other property related income 13 1 - 14 14 -
Direct property expenditure (48) (5) 1 (52) (52) -
Movement in bad and doubtful debts - - - - - -
provisions
Segment net rental income 260 21 (3) 278 278 -
Other income 1 - - 1 1 -
Administrative expenses (38) (1) - (39) (39) -
Depreciation (3) - - (3) (3) -
------------ ---------------- --------- ----------
EPRA earnings before interest 220 20 (3) 237 237 -
Share of post-tax profit from joint
ventures 15 (15) - - - -
Profit on disposal of trading properties 1 - - 1 - 1
Loss on disposal of investment properties (92) - - (92) - (92)
Net (deficit)/surplus on revaluation
of investment properties (331) 1 7 (323) - (323)
Loss on changes in finance leases (6) - - (6) - (6)
Impairment of goodwill (5) - - (5) - (5)
Impairment of trading properties (8) - - (8) - (8)
Depreciation (2) - - (2) - (2)
Operating (loss)/profit (208) 6 4 (198) 237 (435)
Finance income 57 - (2) 55 6 49
Finance expense (41) (6) - (47) (46) (1)
(Loss)/profit before tax (192) - 2 (190) 197 (387)
Taxation - - - -
------------ ----------------
(Loss)/profit for the period (192) - 2 (190)
1. Reallocation of the share of post-tax profit from joint
ventures reported in the Group income statement to the individual
line items reported in the segmental information note.
2. Removal of the non-wholly owned share of results of the
Group's subsidiaries. The non-wholly owned subsidiaries are
consolidated at 100% in the Group's income statement, but only the
Group's share is included in EPRA earnings reported in the
segmental results table.
Table 26: Lease lengths
Weighted average unexpired
lease term at 30 September
2023
Like-for-like
portfolio,
Like-for-like completed developments
portfolio and acquisitions
Mean(1) Mean(1)
Years Years
----------------------- ------------- -----------------------
Central London
West End offices 6.2 6.8
City offices 8.3 7.9
Retail and other 7.9 7.3
Total Central London 6.9 7.1
-----------------------
Major retail
Shopping centres 4.5 4.5
Outlets 3.1 3.1
Total Major retail 4.2 4.2
-----------------------
Mixed-use urban 8.3 6.6
----------------------- ------------- -----------------------
Subscale sectors
Leisure 10.8 10.8
Hotels 7.7 7.7
Retail parks 5.4 5.4
Total Subscale sectors 8.3 8.3
-----------------------
Combined Portfolio 6.3 6.3
----------------------- ------------- -----------------------
1. Mean is the rent weighted average of the unexpired lease term
across all leases (excluding short-term leases). Term is defined as
the earlier of tenant break or expiry.
Investor information
1. Company website: landsec.com
The Group's half year and annual reports to shareholders,
results announcements and presentations, are available to view and
download from the Company's website. The website also provides
details of the Company's current share price, the latest news about
the Group, its properties and operations, and details of future
events and how to obtain further information.
2. Registrar: Equiniti Group PLC
Enquiries concerning shareholdings, dividends and changes in
personal details should be referred to the Company's registrar,
Equiniti Group PLC (Equiniti), in the first instance. They can be
contacted using the details below:
Telephone:
- 0371 384 2128 (from the UK)
- +44 121 415 7049 (from outside the UK)
- Lines are ordinarily open from 08:30 to 17:30, Monday to Friday, excluding UK public holidays.
Correspondence address:
Equiniti Group PLC
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Information on how to manage your shareholding can be found at
help.shareview.co.uk . If you are not able to find the answer to
your question within the general Help information page, a personal
enquiry can be sent directly through Equiniti's secure e-form on
their website. Please note that you will be asked to provide your
name, address, shareholder reference number and a valid e-mail
address. Alternatively, shareholders can view and manage their
shareholding through the Landsec share portal which is hosted by
Equiniti - simply visit portfolio.shareview.co.uk and follow the
registration instructions.
3. Shareholder enquiries
If you have an enquiry about the Company's business or about
something affecting you as a shareholder (other than queries which
are dealt with by the Registrar), please email Investor Relations
(see details in 8. below).
4. Share dealing services: shareview.co.uk
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. 2023/24 second quarterly dividend
The Board has declared a second quarterly dividend for the year
ending 31 March 2024 of 9.2p per ordinary share which will be paid
on 2 January 2024 to shareholders registered at the close of
business on 24 November 2023. This will be paid wholly as a
Property Income Distribution (PID). Together with the first
quarterly dividend of 9.0p already paid on 6 October 2023 wholly as
a PID, the first half dividend will be 18.2p per ordinary share
(six months ended 30 September 2022: 17.6p).
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 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 2024
Financial year end 31 March
Preliminary results announcement 14 May*
Half year results announcement 12 November*
* Provisional date only
8. Investor relations enquiries
For investor relations enquiries, please contact Edward Thacker,
Head of Investor Relations at Landsec, by telephone on +44 (0)20
7413 9000 or by email at enquiries@landsec.com.
Glossary
Adjusted net cash inflow from operating activities
Net cash inflow from operating activities including the Group's
share of our joint ventures' net cash inflow from operating
activities.
Adjusted net debt
Net debt excluding cumulative fair value movements on
interest-rate swaps and amounts payable under head leases. It
generally includes the net debt of subsidiaries and joint ventures
on a proportionate basis.
Book value
The amount at which assets and liabilities are reported in the
financial statements.
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.
Development pipeline
The development programme together with proposed
developments.
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.
EPRA
European Public Real Estate Association.
EPRA earnings
Profit after tax, excluding profits on the sale of non-current
assets and trading properties, profits on development contracts,
valuation movements, fair value movements on interest-rate swaps
and similar instruments used for hedging purposes, debt
restructuring charges, and any other items of an exceptional
nature.
EPRA loan-to-value (LTV)
Ratio of adjusted net debt, including net payables, to the sum
of the net assets, including net receivables, of the Group, its
subsidiaries and joint ventures, all on a proportionate basis,
expressed as a percentage. The calculation includes trading
properties at fair value and debt at nominal value.
EPRA net disposal value (NDV) per share
Diluted net assets per share adjusted to remove the impact of
goodwill arising as a result of deferred tax, and to include the
difference between the fair value and the book value of the net
investment in tenant finance leases, trading property 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 valuers.
EPRA Net Reinstatement Value (NRV) per share
Diluted net assets per share adjusted to remove the cumulative
fair value movements on interest-rate swaps and similar
instruments, the carrying value of deferred tax on intangible
assets and to include the difference between the fair value and the
book value of the net investment in tenant finance leases and
trading property and add back purchasers' costs.
EPRA Net Tangible Assets (NTA) per share
Diluted net assets per share adjusted to remove the cumulative
fair value movements on interest-rate swaps and similar
instruments, the carrying value of goodwill arising as a result of
deferred tax and other intangible assets, deferred tax on
intangible assets and to include the difference between the fair
value and the book value of the net investment in tenant finance
leases and trading property.
Equivalent yield
Calculated by the Group's external valuers, 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 valuers. For
investment properties in the development programme, which have not
yet reached practical completion, the ERV represents management's
view of market rents.
ERV - Net estimated rental value
The estimated market rental value of lettable space as
determined biannually by the Group's external valuers, after
deducting expected rent payable. 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 (also known as 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.
Gearing
Total borrowings, including bank overdrafts, less short-term
deposits, corporate bonds and cash, at book value, plus cumulative
fair value movements on financial derivatives as a percentage of
total equity. For adjusted gearing, see note 13.
Gross market value
Market value plus assumed usual purchaser's costs at the
reporting date.
Head lease
A lease under which the Group holds an investment property.
Interest Cover Ratio (ICR)
A calculation of a company's ability to meet its interest
payments on outstanding debt. It is calculated using EPRA earnings
before interest, divided by net interest (excluding the
mark-to-market movement on interest-rate swaps, foreign exchange
swaps, capitalised interest and interest on the pension scheme
assets and liabilities).
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.
Lease incentives
Any incentive offered to occupiers to enter into a lease.
Typically, the incentive will be an initial rent-free period, or a
cash contribution to fit-out or similar costs. For accounting
purposes, the value of the incentive is spread over the
non-cancellable life of the lease.
Like-for-like portfolio
The like-for-like portfolio includes all properties which have
been in the portfolio since 1 April 2022 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 valuers, in
accordance with the RICS Valuation Standards, as an opinion of the
estimated amount for which a property should exchange on the date
of valuation between a willing buyer and a willing seller in an
arm's-length transaction after proper marketing.
Net assets per share
Equity attributable to owners divided by the number of ordinary
shares in issue at the end of the period. Net assets per share is
also commonly known as net asset value per share (NAV per
share).
Net initial yield
Net initial yield is a calculation by the Group's external
valuers 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 valuers and is based on the passing cash rent less rent payable
at the balance sheet date, estimated non-recoverable outgoings and
void costs including service charges, insurance costs and void
rates.
Net rental income
Net rental income is the net operational income arising from
properties, on an accruals basis, including rental income, finance
lease interest, rents payable, service charge income and expense,
other property related income, direct property expenditure and bad
debts. Net rental income is presented on a proportionate basis.
Net zero carbon building
A building for which an overall balance has been achieved
between carbon emissions produced and those taken out of the
atmosphere, including via offset arrangements. This relates to
operational emissions for all buildings while, for a new building,
it also includes supply-chain emissions associated with its
construction.
Passing rent
The estimated annual rent receivable as at the reporting date
which includes estimates of turnover rent and estimates of rent to
be agreed in respect of outstanding rent review or lease renewal
negotiations. Passing rent may be more or less than the ERV
(over-rented or reversionary). Passing rent excludes annual rent
receivable from units in administration save to the extent that
rents are expected to be received. Void units at the reporting date
are deemed to have no passing rent. Although temporary lets of less
than 12 months are treated as void, income from temporary lets is
included in passing rents.
Property Income Distribution (PID)
A PID is a distribution by a REIT to its shareholders paid out
of qualifying profits. A REIT is required to distribute at least
90% of its qualifying profits as a PID to its shareholders.
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.
Rental income
Rental income is as reported in the income statement, on an
accruals basis, and adjusted for the spreading of lease incentives
over the term certain of the lease in accordance with IFRS 16
(previously, SIC-15). It is stated gross, prior to the deduction of
ground rents and without deduction for operational outgoings on car
park and commercialisation activities.
Reversionary or under-rented
Space where the passing rent is below the ERV.
Reversionary yield
The anticipated yield to which the initial yield will rise (or
fall) once the rent reaches the ERV.
Security Group
Security Group is the principal funding vehicle for the Group
and properties held in the Security Group are mortgaged for the
benefit of lenders. It has the flexibility to raise a variety of
different forms of finance.
SONIA
The Sterling Overnight Index Average reflects the average
overnight interest rate paid by banks for unsecured sterling
transactions with a range of institutional investors. It is
calculated based on actual transactions and is often used as a
reference rate in bank facilities.
Topped-up net initial yield
Topped-up net initial yield is a calculation by the Group's
external valuers. 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 cost ratio
Total cost ratio represents all costs included within EPRA
earnings, other than rents payable, financing costs and provisions
for bad and doubtful debts, expressed as a percentage of gross
rental income before rents payable adjusted for costs recovered
through rents but not separately invoiced.
Total development cost (TDC)
Total development cost refers to the book value of the site at
the commencement of the project, the estimated capital expenditure
required to develop the scheme from the start of the financial
period in which the property is added to our development programme,
together with capitalised interest, being the Group's borrowing
costs associated with direct expenditure on the property under
development. Interest is also capitalised on the purchase cost of
land or property where it is acquired specifically for
redevelopment. The TDC for trading property development schemes
excludes any estimated tax on disposal.
Total return on equity
Dividend paid per share in the year plus the change in EPRA Net
Tangible Assets per share, divided by EPRA Net Tangible Assets per
share at the beginning of the year.
Trading properties
Properties held for trading purposes and shown as current assets
in the balance sheet.
Vacancy rates
Vacancy rates are expressed as a percentage of ERV and represent
all unlet space, including vacant properties where refurbishment
work is being carried out and vacancy in respect of pre-development
properties, unless the scale of refurbishment is such that the
property is not deemed lettable. The screen at Piccadilly Lights,
W1 is excluded from the vacancy rate calculation as it will always
carry advertising although the number and duration of our
agreements with advertisers will vary.
Valuation surplus/deficit
The valuation surplus/deficit represents the increase or
decrease in the market value of the Combined Portfolio, adjusted
for net investment and the effect of accounting for lease
incentives under IFRS 16 (previously SIC-15). The market value of
the Combined Portfolio is determined by the Group's external
valuers.
Voids
Voids are expressed as a percentage of ERV and represent all
unlet space, including voids where refurbishment work is being
carried out and voids in respect of pre-development properties.
Temporary lettings for a period of one year or less are also
treated as voids. The screen at Piccadilly Lights, W1 is excluded
from the void calculation as it will always carry advertising
although the number and duration of our agreements with advertisers
will vary. Commercialisation lettings are also excluded from the
void calculation.
Weighted average unexpired lease term
The weighted average of the unexpired term of all leases other
than short-term lettings such as car parks and advertising
hoardings, temporary lettings of less than one year, residential
leases and long ground leases.
Yield shift
A movement (negative or positive) in the equivalent yield of a
property asset.
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END
IR VXLFFXFLEFBD
(END) Dow Jones Newswires
November 14, 2023 02:00 ET (07:00 GMT)
Land Securities (LSE:LAND)
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Land Securities (LSE:LAND)
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