17 May 2024
LAND
SECURITIES GROUP PLC ("Landsec")
Results
for the year ended 31 March 2024
Continued
operational strength, as values for best assets begin to
stabilise
Mark Allan, Chief Executive of Landsec,
commented:
"Our
continued operational outperformance, with rising occupancy and
positive rental uplifts in retail and London, is driving robust
like-for-like rental income growth and demonstrates the importance
of owning and operating the best-in-class real estate. Around 80%
of our portfolio is now invested in twelve places with significant
scarcity value, where our competitive advantages in shaping and
curating these places mean we expect like-for-like rents to
continue to grow.
"Following a
reset of values over the past two years driven by rising interest
rates, the stabilisation in rates and evidence of continued rental
growth is starting to attract increased investor interest for the
best assets. Around 60% of our portfolio already showed stable
values in the second half and overall yields were largely stable in
the final quarter, pointing to a positive outlook for our overall
return on equity.
"The quality and return prospects of our portfolio are
further bolstered by our strong balance sheet. After a period of
proactive capital recycling, most recently with over £600m of
non-core assets sold in the past seven months, we have meaningful
capacity to invest in high quality assets
that add to our
best-in-class portfolio at what we believe to be an
attractive point in the cycle."
Financial highlights
|
|
2024
|
2023
|
|
2024
|
2023
|
|
EPRA earnings (£m)(1)(2)
|
371
|
393(3)
|
Loss before tax (£m)
|
(341)
|
(622)
|
|
EPRA EPS (pence)(1)(2)
|
50.1
|
53.1(3)
|
Basic EPS (pence)
|
(43.0)
|
(83.6)
|
|
EPRA NTA per share (pence)(1)(2)
|
859
|
936
|
Net assets per share (pence)
|
863
|
945
|
|
Total return on equity (%)(1)(2)
|
(4.0)
|
(8.3)
|
Dividend per share (pence)
|
39.6
|
38.6
|
|
Group LTV ratio (%)(1)(2)
|
35.0
|
31.7
|
Net debt (£m)
|
3,517
|
3,348
|
¾ EPRA
EPS(1)(2) stable vs prior year's underlying
level(3) of 50.1p, in line with guidance, as occupancy
growth and 2.8% LFL income growth offset rise in interest costs and
impact of asset disposals
¾ Total
dividend up 2.6% to 39.6p per share, in line with guidance of low
single digit percentage growth
¾ Loss before
tax moderated to £341m, reflecting a £625m or -6.0% adjustment in
portfolio valuation weighted to first half of the year, as c. 60%
of portfolio was effectively stable in value in second
half
¾ Total return
on equity improved to -4.0%, with 8.2% reduction in EPRA NTA per
share(1) (2) to 859p, as outlook for return
on equity turns more positive as values begin to
stabilise
¾ Maintained
strong balance sheet with, pro-forma for disposals post year-end,
7.0x net debt/EBITDA and a 32.3% Group LTV(1)(2) - down 2.1ppt over past two years despite
adjustment in values
¾ FY25 EPRA
EPS, post £572m net sales since H1, expected to be slightly below
50.1 pence in FY24 before any reinvestment of sales proceeds; FY26
currently expected to be slightly ahead of FY24
Operational highlights: high quality of
portfolio underpins positive outlook for returns
Delivered continued outperformance in a market
increasingly focused on best-in-class space, reflected in 8%
uplifts on relettings/renewals and 130bps occupancy growth across
London and major retail, driving 2.8% like-for-like net rental
income growth. Values for best assets starting to stabilise, as
interest rate outlook is more balanced and investor interest starts
to return, which with c. 5.7% income return plus expectation of
continued rental growth supports positive outlook for overall
return on equity.
Central London: further growth in occupancy as
property values begin to stabilise
¾ Delivered
1.4% LFL net income growth in offices, with overall occupancy
+140bps to 97.3%, £35m of lettings signed or in solicitors' hands
6% above ERV and relettings/renewals 15% above previous
rent
¾ Registered
consistent upwards trend in office utilisation throughout the year,
with unique daily entries across our buildings up 18% vs prior
year, and 81% of lettings in year resulting in customers taking
more or same space, as demand remains firmly focused on
high-quality space in the best locations
¾ West End
values (72% of our London portfolio, up from 48% three years ago)
virtually stable in second half, with overall change in Central
London values moderating to -2.4% vs -4.5% in first half. Yields
remain stable in final quarter, as successful leasing drives 5.0%
ERV growth, in line with top end of guidance, with further low to
mid single digit percentage growth expected for current
year
¾ Started two
net zero carbon developments in Victoria and Southbank, with
expected 7.2% gross yield on total cost and c. 12% yield on capex,
as recently completed schemes are now 89% let or in solicitors'
hands, with rents 12% ahead of initial assumptions
Major retail: strong income growth, as rental
reversions reach inflection point and turn positive
¾ Delivered
6.9% LFL net income growth, with occupancy + 130bps to 95.4%, and
£37m of lettings signed or in solicitors' hands 6% above ERV and 2%
ahead of previous rent for relettings/renewals, marking inflection
point in rental reversions
¾ Further
focusing investment in best-in-class destinations, with the sale of
our two smallest outlets and accretive investment of c. £100m in
existing destinations over next c. 3 years
¾ Capitalised
on clear focus from brands on fewer, bigger, better stores, with
the attraction our locations offer reflected in above-market 4.1%
YoY sales growth, resulting in growing competition for space
¾ Attraction of
high and growing cashflow reflected in 0.2% increase in asset
values in second half (FY-1.1%), even though valuers' assumed 1.4%
ERV growth continues to trail operational performance, with low to
mid single digit percentage growth in ERVs expected for current
year
Mixed-use: starting first on-site preparations
in London whilst optimising rest of pipeline
¾ Secured
planning consent for 1,800-homes Finchley Road scheme and detailed
consent for first phase, with site enabling works starting later
this year, ahead of potential start of main project in
2025
¾ Progressing
optimisation of plans for Mayfield and rest of portfolio to enhance
risk/return profile
Underpinning our strategy: strong capital base
following pro-active capital recycling
¾ Sold £625m of
subscale and non-core assets since March 2023 including £400m post
year-end, on average in line with March 2023 book value, materially
exceeding acquisitions of £136m
¾ Maintained
strong capital base, with long 9.5-year average debt maturity,
£1.9bn cash and undrawn facilities, and pro-forma for disposals
since year-end, a low 7.0x net debt/EBITDA and low 32.3% LTV,
creating significant balance sheet capacity to become net investor
at attractive point in time
¾ Capitalised
on sector-leading access to credit, with AA/AA- ratings, via £300m
bond issue at 4.75%
1. An alternative performance measure. The
Group uses a number of financial measures to assess and explain its
performance, some of which are considered to be alternative
performance measures as they are not defined under IFRS. For
further details, see the Financial review and table 14 in the
Business analysis section.
2. 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.
3. Including the benefit of £22m year-on-year
increase in surrender premiums; adjusted for this, underlying EPRA
earnings and EPS were £371m and 50.1 pence respectively.
A live video webcast of the
presentation will be available at 9.00am
BST. A downloadable copy of the webcast will then be available by
the end of the day.
We will also be offering an audio conference
call line, details are available in the link below. Due to the
large volume of callers expected, we
recommend that you dial into the call 10 minutes before the start
of the presentation.
Please note that there will be an interactive
Q&A facility on both the webcast and conference call
line.
Webcast link: https://webcast.landsec.com/2024-full-year-results
Call title: Landsec
Annual Results 2024
Conference call:
https://webcast.landsec.com/2024-full-year-results/vip_connect
Forward-looking statements
These full year results, the latest Annual
Report and Landsec's website may contain certain 'forward-looking
statements' with respect to Land Securities Group PLC (the Company)
and the Group's financial condition, results of its operations and
business, and certain plans, strategies, objectives, goals and
expectations with respect to these items and the economies and
markets in which the Group operates.
Forward-looking statements are sometimes, but
not always, identified by their use of a date in the future or such
words as 'anticipates', 'aims', 'due', 'could', 'may', 'should',
'expects', 'believes', 'intends', 'plans', 'targets', 'goal' or
'estimates' or, in each case, their negative or other variations or
comparable terminology. Forward-looking statements are not
guarantees of future performance. By their very nature
forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.
Many of these assumptions, risks and uncertainties relate to
factors that are beyond the Group's ability to control or estimate
precisely. There are a number of such factors that could cause
actual results and developments to differ materially from those
expressed or implied by these forward-looking statements. These
factors include, but are not limited to, changes in the political
conditions, economies and markets in which the Group operates;
changes in the legal, regulatory and competition frameworks in
which the Group operates; changes in the markets from which the
Group raises finance; the impact of legal or other proceedings
against or which affect the Group; changes in accounting practices
and interpretation of accounting standards under IFRS, and changes
in interest and exchange rates.
Any forward-looking statements made in these
full year results, the latest Annual Report or Landsec's website,
or made subsequently, which are attributable to the Company or any
other member of the Group, or persons acting on their behalf, are
expressly qualified in their entirety by the factors referred to
above. Each forward-looking statement speaks only as of the date it
is made. Except as required by its legal or statutory obligations,
the Company does not intend to update any forward-looking
statements.
Nothing contained in these full year results,
the latest Annual Report or Landsec's website should be construed
as a profit forecast or an invitation to deal in the securities of
the Company.
Chief Executive's statement
Successful execution on strategy. Focus on
driving growth.
Over the last three years, our focus has been
two-fold: firstly, on increasing our investments in best-in-class
assets where our competitive advantages can drive long-term growth,
and secondly on preserving balance sheet strength. The success of
this is reflected in our continued like-for-like income growth and
rising occupancy, significantly outperforming market averages. And
despite the adjustment in property values over the past two years
following the sharp rise in global interest rates, our pro-active
capital recycling means that pro-forma for our recent hotels
disposal, our 32.3% LTV is now lower than it was two years ago, and
our net debt is down £1.1bn, creating balance sheet capacity to
grow.
Owning the right real estate has never been
more important, as the normalisation in cost of capital means value
drivers in real estate have fundamentally changed compared to much
of the 2010s decade, when ultra-cheap money and sector themes were
key drivers of performance. Irrespective of sector, there is now a
growing distinction between those assets that really fulfil
customers' future expectations and hence deliver like-for-like
income growth and those that do not. This means future performance
across the entire sector will be much more driven by asset quality
than generic themes.
The successful execution of our strategy over
the last few years means Landsec is well positioned in this
context. Customer demand for our high-quality product has remained
robust despite the unsettled political/economic backdrop, concerns
about hybrid working and cost of living pressures for consumers. In
London, our £6.2bn West End-focused portfolio is almost full, with
occupancy up to 97.3%, so rents are rising. In retail, our £1.8bn
portfolio of nine major destinations has seen occupancy rise to
95.4% and we have started to drive positive reversionary uplifts on
lettings and renewals. As a result, our like-for-like net rental
income increased by 2.8% last year and, following a period of
interest rate-driven asset repricing, the valuation of c. 60% of
our portfolio was effectively stable in the second half of last
year.
Looking forward, we expect high demand for
best-in-class space to persist and, as supply of this space remains
limited, this will continue to drive like-for-like income growth.
Meanwhile, as the interest rate outlook today appears more balanced
than at any point in the last couple of years, yields and values
for the best assets are starting to stabilise. Having sold early
when values were higher, we now have balance sheet capacity to
invest at an attractive point in time. As a result, Landsec is
well-placed for growth.
Continued strength in operational
performance
Our financial results reflect the quality of
our portfolio, the strong operational performance of our platform
and our resilient capital base. Our FY23 earnings included the
benefit of a £22m increase in surrender premiums, which we adjusted
for in our 50.1 pence underlying EPRA EPS. Our EPRA EPS last year
was stable vs this underlying level, in line with our guidance, as
the 2.8% growth in like-for-like income we delivered, and the
completion of our successful developments fully offset the impact
of our significant disposals during the past two years and a rise
in finance costs. Our dividend for the year is up 2.6% to 39.6
pence per share, again in line with our guidance, reflecting a
healthy dividend cover of 1.27 times.
During the first half of the year, the marked
rise in interest rates across the globe resulted in upwards
pressure on valuation yields, but this eased in the second half and
throughout the year the impact of this has been partly offset by
our 3.2% ERV growth. This meant that our portfolio value was down
6.0%, or £625m, for the year, driving a £341m loss and a 8.2%
reduction in EPRA NTA per share for the year. However, the impact
of this was weighted towards the first half, as yields remained
stable in the final quarter and our total return on equity for the
year improved to -4.0% from -8.3% in the prior year.
Table 1: Highlights
|
|
Mar 2024
|
Mar 2023
|
Change %
|
|
EPRA earnings (£m)(1,2)
|
371
|
393
|
(5.6)
|
|
Loss before tax (£m)
|
(341)
|
(622)
|
(45.2)
|
|
Total return on equity (%)
|
(4.0)
|
(8.3)
|
(51.8)
|
|
|
|
|
|
|
Basic (loss)/earnings per share
(pence)
|
(43.0)
|
(83.6)
|
(48.6)
|
|
EPRA earnings per share (pence)(1,2)
|
50.1
|
53.1
|
(5.6)
|
|
Underlying EPRA earnings per share (pence)
(1,2)
|
50.1
|
50.1
|
-
|
|
Dividend per share (pence)
|
39.6
|
38.6
|
2.6
|
|
|
|
|
|
|
Combined portfolio (£m)(1)
|
9,963
|
10,239
|
(2.7)
|
|
IFRS net assets (£m)
|
6,447
|
7,072
|
(8.8)
|
|
EPRA Net Tangible Assets per share
(pence)(1)
|
859
|
936
|
(8.2)
|
|
|
|
|
|
|
Adjusted net debt (£m)(1)
|
3,517
|
3,287
|
7.0
|
|
Group LTV ratio (%)(1)
|
35.0
|
31.7
|
10.4
|
|
|
|
|
|
|
Proportion of portfolio rated EPC A - B
(%)
|
49
|
36
|
|
|
Average upfront embodied carbon reduction
development pipeline (%)
|
40
|
36
|
|
|
Energy intensity reduction vs 2020
(%)
|
18
|
17
|
|
1. Including our proportionate share of
subsidiaries and joint ventures, as explained in the Presentation
of financial information in the Financial Review.
2. FY23 EPRA earnings and EPRA EPS include the
benefit of £22m increase in surrender premiums; underlying EPRA EPS
excludes this.
Our strategy
Since we launched our strategy in late 2020,
our focus has consistently been on our two key principles of
sustainable value creation: focusing our resources on where we have
a genuine competitive advantage and maintaining a strong balance
sheet. We have increased our investment in best-in-class assets
where our skillset allows us to enhance returns and drive long-term
growth. This has supported our like-for-like income growth and
operational outperformance thus far and should continue to do so in
the future. At the same time, our pro-active capital recycling
means that, despite the rise in interest rates and adjustment in
property values, pro-forma for our recent disposals, our 32.3% LTV
and 7.0x net debt/EBITDA are low.
For much of the decade leading up to 2022,
creating value in real estate was often about leveraging up a
spread between rental yields and ultra-low borrowing costs or
picking high-level sector themes. The significant rise in cost of
capital across the globe has not only changed the former but also
the latter, as shown by the challenges faced by low-margin online
retail models and the shift back to physical retail. As such,
irrespective of sector, quality has become a much more important
driver of future performance, which means it can be misleading to
look at market averages. Indeed, even though market-wide vacancy is
elevated, with London offices at 8.8%, retail at 12% and even
logistics at 7.8% now, the best assets in each of these sectors
have little vacancy and so continue to show good rental
growth.
The successful execution of our strategy means
we are well placed to benefit from this. Since late 2020, we have
sold around 40 standalone assets, including the 21 hotels we sold
since the year-end. We reinvested principally in our key places, be
it through development in Victoria, at Piccadilly Lights and in
Southwark, or by buying out JV partners in our retail destinations
at Bluewater and in Cardiff, such that c. 80% of our portfolio is
now invested in twelve key locations with significant scarcity
value. We expect each of these unique, multi-let places to drive
superior income returns and growth over time.
This provides a critical underpin for capital
values. The outlook for interest rates is more balanced now than it
has been for a couple of years, but we remain of the view that it
is unlikely that rates will come down sharply from current levels.
In what will therefore likely remain a higher nominal rate
environment, we think yields for assets which have inherent income
growth and therefore provide a real income stream look attractive,
yet for most assets which lack this growth, we think the risk to
values remains down.
In today's more normalised rate environment, we
continue to target to deliver a total return on equity of 8-10%
p.a. over time, comprising a mix of income and capital returns,
driven by rental growth and selective development upside. Short
term movements in valuation yields are outside of our control and
mean our return on equity will not be exactly in this range each
individual year, as we have seen over the past twelve months.
However, with an income return on our March 2024 NTA of c. 5.7%, an
expectation of further rental growth and yields starting to
stabilise, the outlook for this is encouraging.
As part of this, it is important that we
operate efficiently. We reduced our overhead costs by 9% during the
year and expect further savings over the next 2-3 years, driven
partly by our investments in data and technology. Although our EPRA
cost ratio has remained stable at 25%, this solely reflects the
impact of capital allocation decisions: since late 2020, we have
sold £2.2bn of mature, low-yielding offices which incurred minimal
operating costs, but equally had little room to add further value
and a mid-single digit forward IRR, whereas we acquired more
operational assets that come with higher operating cost, but also a
materially higher net income return and much higher forward
IRR.
As borrowing costs and our cost of capital have
increased, it is also critical we continue to think carefully about
our capital allocation decisions. Including our £400m of disposals
since the year-end, we have now sold £3.1bn of assets since late
2020, which means most of the c. £4bn disposal target we set out at
that time is done. Looking ahead, we have three principal
opportunities to invest in: acquiring major retail; our Central
London pipeline; and our mixed-use pipeline. We also have three
main sources of funding: our balance sheet headroom towards a
slightly higher LTV now that rates and values are starting to
stabilise; further capital recycling; or attracting other,
complementary sources of capital which can enhance our overall
growth, capitalise on our platform value, and grow our overall
return on equity.
In terms of opportunities, the right major
retail destinations offer attractive high single digit income
returns with income now starting to grow, as seen across our own
portfolio. Alongside our two committed office developments in
London, where the yield on the overall capex we are investing is
high at c. 12%, this is our key focus for investment at the moment
and where we plan to apply most of our existing balance sheet
capacity too. Following a period of limited transaction activity in
this sector, we are now seeing signs of activity levels around the
work-out of broken ownership structures starting to pick up.
Further capital recycling out of our residual retail parks will add
to our investment capacity in this space and, overall, this is
expected to enhance our income growth and return on
equity.
Given the significant size of our medium term
London and mixed-use pipelines and our desire to maintain a
sustainable level of development exposure, it is unlikely that we
will fund all of this on our own balance sheet. Rents for highly
sustainable, best-in-class space continue to grow and construction
cost inflation has normalised, yet returns on future commitments
will of course have to compensate for higher cost and higher exit
yields. We continue to optimise costs, planning consents and
delivery programmes in London and mixed-use to ensure any future
commitments deliver an appropriate return and risk premium vs the
return on any assets we choose to sell to fund our investment in
these. We will progress the schemes that deliver this, adjust plans
for others, or sell those where the holding cost of maintaining
optionality does not outweigh the future upside. Overall, this will
enhance our overall return on equity through development upside and
longer term rental growth, reflecting the quality of our
pipeline.
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. Customer demand continues
to polarise, as demand for modern, sustainable space in areas with
exciting amenities in London remains strong, even though overall
leasing across the market was down during the year. In retail,
brands continue to focus on fewer, but bigger and better stores in
key locations. Supply of both is constrained, which is driving
income and rental value growth across our assets.
In London, 77% of our portfolio is now located
in the vibrant West End and Southwark markets, up from 58% in 2020.
Our recently completed schemes are 89% let or in solicitors' hands,
up from 60% a year ago, with rents 12% above initial expectations.
Office utilisation is up 18% for the year and 81% of our lettings
over the year have seen customers grow or keep the same space.
Across our existing portfolio we signed or are in solicitors' hands
on £35m of leases, on average 6% above ERV, whilst occupancy is
up 140bps to 97.3%. With 15% uplifts on
relettings/renewals, our offices saw 1.4% LFL rental income growth
and overall ERVs were up 5.0%, at the top end of our guidance of
low to mid single digit growth.
Across our major retail destinations, we
completed or are in solicitors' hands on £37m of lettings, on
average 6% above ERV. Reflecting the marked turnaround of the best
assets in this space, we have started to capture positive
reversionary potential during the year, with relettings and
renewals on average 2% above previous passing rent, whilst
occupancy increased by a further 130bps to 95.4%. Combined with
strong turnover growth, this meant we delivered 6.9% growth in LFL
net rental income. Valuers' assumed ERVs continue to trail
operational performance, up 1.4%, albeit in line with our guided
range.
Our strong operational performance 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. £215m of value,
or in mixed-use, where we secured planning consent for our
1,800 homes-scheme at Finchley Road, including detailed consent for
the first phase. This ability is expected to serve us well when it
comes to new opportunities in the year ahead.
Delivering sustainably
We continue to make progress against our carbon
reduction targets, which are aligned with the Science Based Targets
Initiative's (SBTi) Net-Zero Standard. Our near-term target is to
reduce our direct and indirect greenhouse gas emissions by 47% by
2030 from a 2019/20 baseline and to reach net zero by 2040 from the
same baseline year. So far, emissions have already reduced by 24%
vs this baseline. During the year we updated our target to reduce
our energy intensity by 52% by 2030 from a 2019/20 baseline, to
align this with our carbon reduction target. We are already
tracking a 18% reduction, having achieved an energy intensity
reduction across our portfolio of 3.7% during the year vs the prior
year.
To make sure we meet our carbon reduction
target and stay ahead of the proposed Minimum Energy Efficiency
Standard Regulations requiring a minimum EPC 'B' rating by 2030, we
have continued to progress our net zero transition investment plan.
49% of our overall portfolio is already rated B or higher, up from
36% a year ago. We have started air source heat pump retrofits at
two sites and expect to start a further three this year, which will
result in improved EPC ratings from 2025 onwards when these become
operational. We also continue to focus on reducing upfront embodied
carbon from our development schemes and improving energy efficiency
across our operational assets, and have been expanding the work
with our largest customers to help them identify ways to save
energy.
In its first year, our
Landsec Futures fund, which is aimed at improving social
mobility in the real estate industry and will see us invest £20m
over 2023-2033, has already made a significant contribution to our
target to create £200m in social value and empower 30,000 people
towards the world of work by 2030. Since 2019/20, we have now
created £54m of social value and empowered 10,249 people to
work.
Outlook
The UK macro outlook has improved over the past
year, with a sharp reduction in inflation and a return to real wage
growth for consumers, even though economic growth is expected to
remain modest in the short term. Combined with the more normalised
interest rate environment, this means it has never been more
important to own the very best assets in the right locations that
cater for customers' future needs and can therefore deliver
positive like-for-like income growth.
In late 2022, we said that we expected property
values would continue to adjust for some time after a decade of
ultra-low interest rates. This has proven to be the case but there
are increasingly signs that this is now coming to an end. The
relative stabilisation of long-term rates is a clear positive and
reflecting the historically attractive pricing of good quality
income in London and major retail, we are starting to see interest
emerge from investors who have not been active in these markets for
some time. As such, we expect activity levels to pick up from here.
The refinancing of cheap debt issued before 2022 remains a
challenge for parts of the sector, yet absent any further macro
shocks, we think the value of high-quality assets has largely
bottomed out and will start to grow in the foreseeable future as
rents rise.
Against this backdrop, our actions over the
past three years leave us well placed:
¾ we increased
our focus on high-quality places where customer demand is
demonstrably strong;
¾ we preserved
our balance sheet strength, providing room to grow at an attractive
time in the cycle;
¾ we have a
built pipeline of attractive opportunities with flexibility on
future commitments.
As customer demand for the best space remains
robust, we expect our Central London and major retail assets to
again see ERVs grow by a low to mid single digit percentage this
year. We are now capturing positive leasing reversion across all
main parts of our portfolio, which delivered 2.8% growth in
like-for-like net rental income last year, and we expect
like-for-like growth to be similar for the year ahead.
Determining how this continued operational
growth will then translate into EPS growth will depend on the
quantum and timing of net investment from here, where we remain
disciplined on quality and price. We have created meaningful
balance sheet capacity through our significant asset disposals but
our recent sales activity does reduce annualised earnings by c. 4%,
all else equal. This means that, before reflecting the impact of
any reinvestment of these sales proceeds, EPS for the year to March
2025 would likely be slightly below the 50.1 pence for 2024. For
March 2026, we currently expect EPS to be slightly above this
level, reflecting the combined effect of continued like-for-like
income growth and accretive capital recycling. As a result, we
continue to expect our dividend to grow by a low single digit
percentage this year, as our dividend cover remains towards the
high end of our 1.2-1.3x target range.
As macro-economic signals look more encouraging
than they have for a while, with long-term interest rates
stabilising and customer demand for the best assets remaining
robust, the outlook for capital values of the best assets and, as a
result, our overall return on equity is positive. With capacity to
grow at an attractive point in time, we are positive about the
future.
Operating and portfolio review
Overview
Our combined portfolio was valued at £10.0bn as
of March, comprising the following segments:
¾ Central
London (62%): our well-connected, high-quality office (84%) and
retail and other commercial space (16%), located in the West End
(69%), City (23%) and Southwark (8%).
¾ Major retail
destinations (18%): our focused investments in six shopping centres
and three retail outlets, which are amongst the highest selling
locations for retailers in the UK.
¾ Mixed-use
urban neighbourhoods (7%): our investments in mixed-use urban
places in London and a small number of other major growth cities,
with medium-term repositioning or development potential.
¾ 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, leisure and hotels, the last
of which we have sold since the year-end.
Investment activity
During the financial year we sold £225m of
assets, including our two smallest retail outlets, a retail park in
Romford, and two small leisure assets and two mixed-use development
assets in London, on average at a 1% discount to March 2023 book
value. Since the year-end we have sold our hotel portfolio for
£400m, slightly ahead of the March 2023 book value. This
crystallised the strong recovery in performance post Covid yet as
the income on this portfolio was 100% turnover linked on long-term
leases to Accor, there was no opportunity for us to influence or
enhance its future operational performance.
During the year we made £136m of acquisitions
and spent £220m on development capex. We acquired an 89,000 sq ft
office in Kings Cross for £90m which we plan to reposition to Myo
for an opening in 2025, with an expected IRR in the mid-teens. In
addition, we bought a £30m site adjacent to our Timber Square
development for an implied price of c. £100 per sq ft. This could
almost double the size of the combined site and create a
significant c. 670,000 sq ft estate across four buildings. We also
spent £16m on a small number of site amalgamation opportunities
adjacent to existing assets. Whilst these acquisitions do not
produce income in the short term and therefore create a c. £6m
earnings drag in the current year because of finance costs, they
unlock substantial near-term upside potential at a low
in-price.
With the sale of our hotel portfolio, we have
now sold £3.1bn of the c. £4bn assets we said we intended to sell
over a period of c. 6 years when we launched our updated strategy
in late 2020. We will continue to recycle capital where assets do
not meet our return requirements or fit our strategic focus, but
this means we are now through the vast majority of our disposal
programme. As such, our focus for the rest of the year is now on
acquisitions, as we aim to recycle the proceeds of our hotels
disposal into additional opportunities in major retail. In London
and mixed-use, our own investment in new development commitments is
likely to be funded principally through future disposals of mature
or standalone assets, alongside other, complementary sources of
capital.
Portfolio valuation
The marked increase in interest rates during
the first half of the year meant that transaction activity across
global property markets has been subdued. As a result, valuation
yields softened so despite the fact that our successful leasing
delivered 3.2% ERV growth, our portfolio value reduced by 6.0%. The
impact of rising rates principally affected the first half of the
year, as yields remained flat in the final quarter and c. 60% of
our portfolio was effectively stable in value in the second
half.
Our Central London portfolio was down 6.9% for
the year, as upside from 5.0% ERV growth was offset by a 46bps
increase in yields to 5.4%. The value of our West End office
(-3.6%) and retail and other assets (-4.7%), which make up 77% of
our London investment portfolio following our significant City
disposals over the last three years, again proved more resilient
than City values (-13.9%). This reflects strong ERV growth, driven
by our successful leasing in Victoria, which means West End office
values were stable in the second half. Development values were down
9.9% given the early stage these projects are in, but we are
confident these will deliver attractive returns once these are
completed and let.
Major retail valuations were virtually stable
for the year, down just 1.1%, following a minor increase in the
second half (+0.2%), reflecting their high income return and
improving operational performance, with LFL net income up 6.9%.
Valuers' assumed ERVs continue to trail operational performance and
leasing, up just 1.4%, but despite this, major retail again was the
best performing part of our core portfolio with a 7.1% total return
over the year, ahead of Central London (-2.9%) and mixed-use
(-8.9%).
In mixed-use, values were down 14.0%, mostly
driven by outward yield shift at MediaCity and a softening of
yields and a reduction in income at our three existing retail
assets in Glasgow and London, as these have so far been managed for
short-term income to maximise flexibility for future
development.
Across our subscale portfolio, the value of our
hotels was up slightly (0.6%), whilst retail park values were
relatively resilient (-1.8%). The value of our leisure assets was
down 8.2% as investor sentiment towards cinemas remains subdued,
even though our largest leisure customer, Cineworld, successfully
recapitalised during the year and operational performance and ERV
growth remains positive.
Table 2: Valuation analysis
|
|
Market value 31 March 2024
|
(Deficit)/Surplus
|
FY valuation change
|
H2 valuation change
|
LFL rental value change(1)
|
Net initial
yield
|
Topped up net initial
yield
|
Equivalent
yield
|
LFL equivalent yield change
|
|
|
£m
|
£m
|
%
|
%
|
%
|
%
|
%
|
%
|
bps
|
|
West End offices
|
3,109
|
(111)
|
(3.6)
|
(0.5)
|
6.9
|
4.2
|
5.5
|
5.3
|
37
|
|
City offices
|
1,192
|
(188)
|
(13.9)
|
(4.6)
|
1.3
|
3.9
|
5.4
|
6.0
|
78
|
|
Retail and other
|
991
|
(48)
|
(4.7)
|
(3.3)
|
5.0
|
4.6
|
4.8
|
4.9
|
30
|
|
Developments
|
926
|
(102)
|
(9.9)
|
(4.1)
|
n/a
|
0.0
|
0.1
|
5.4
|
n/a
|
|
Total Central London
|
6,218
|
(449)
|
(6.9)
|
(2.4)
|
5.0
|
4.2(2)
|
5.3(2)
|
5.4
|
46
|
|
Shopping centres
|
1,226
|
1
|
0.1
|
-
|
1.5
|
8.1
|
8.7
|
8.1
|
23
|
|
Outlets
|
605
|
(21)
|
(3.3)
|
0.5
|
1.3
|
6.3
|
6.5
|
7.0
|
17
|
|
Total Major retail
|
1,831
|
(20)
|
(1.1)
|
0.2
|
1.4
|
7.5
|
8.0
|
7.8
|
22
|
|
London
|
191
|
(23)
|
(10.3)
|
(8.7)
|
2.0
|
4.2
|
4.2
|
6.6
|
22
|
|
Major regional cities
|
510
|
(93)
|
(15.3)
|
(6.6)
|
(1.2)
|
6.7
|
6.7
|
7.7
|
106
|
|
Total Mixed-use urban(3)
|
701
|
(116)
|
(14.0)
|
(7.8)
|
(0.3)
|
6.1(2)
|
6.1(2)
|
7.3
|
85
|
|
Leisure
|
423
|
(35)
|
(8.2)
|
(5.5)
|
1.5
|
8.7
|
8.9
|
8.8
|
26
|
|
Hotels
|
400
|
2
|
0.6
|
(1.1)
|
5.7
|
7.3
|
7.3
|
7.2
|
54
|
|
Retail parks
|
390
|
(7)
|
(1.8)
|
(1.2)
|
1.4
|
6.0
|
6.8
|
6.8
|
38
|
|
Total Subscale sectors
|
1,213
|
(40)
|
(3.2)
|
(2.6)
|
2.7
|
7.4
|
7.7
|
7.6
|
38
|
|
Total Combined Portfolio
|
9,963
|
(625)
|
(6.0)
|
(2.4)
|
3.2
|
5.4(2)
|
6.2(2)
|
6.2
|
45
|
1. Rental value change excludes units
materially altered during the period.
2. Excluding developments / land.
3. Previous Mixed-use urban sub-segments have
been changed to a classification based on geographical location,
which is better aligned to how these assets are managed internally
and our revised approach to a number of assets.
Looking ahead, we expect that the relative
stability in long-term rates and improvement in availability and
pricing of credit will support a pick-up in investment activity. We
are seeing investor interest emerge in London and shopping centres
from parties who have not been active in these markets for years,
but who are now attracted by historically attractive yields and
clear evidence of rental growth for best-in-class assets. The
refinancing of cheap debt issued pre-2022 remains a challenge for
parts of the sector, yet the risk of disorderly sales substantially
driving down the value of high-quality assets seems low. Markets
remain sensitive to rates, yet values for the best assets have
begun to stabilise, even though secondary likely has further to
fall. Whilst we are principally focused on driving like-for-like
income, we expect ERVs for our London and major retail assets to
grow by a low to mid single digit percentage this year.
Leasing and operational performance
Central
London
Customer demand remains firmly focused on
buildings with the best sustainability credentials, transport
connectivity and local amenities. The amount of space which meets
these criteria remains limited, so pricing of this continues to go
up, whereas space which does not meet these criteria is at risk of
becoming obsolete, almost regardless of price. We continue to see
the evidence of this strong demand across our portfolio, for
example in the new record rents we achieved in Victoria.
Reflecting the appeal of our buildings and
locations to people, we have seen an increase in daily turnstile
tap-ins of 18%, significantly ahead of the growth in TFL public
transport data. Across our leasing deals, we have also seen
customers plan for, on average, c. 30% more square foot per person
than they did before the pandemic in 2019, to create more space for
collaboration, focus work or wellbeing. As such, of our £40m of
office lettings over the past year, 47% saw customers increasing
floorspace, whilst only 19% reflected customers downsizing. This is
in line with market data which shows that only one-fifth of active
tenant requirements is for less space.
We have consistently said that we felt that
large HQ space and areas which lack the amenities to make people
want to spend time there are most at risk as a result of more
flexible ways of working. Virtually all of the £2.2bn offices we
sold since late 2020 were large, single-let HQ buildings where our
ability to add further value was limited, whilst we increased our
focus on multi-let clusters in the lively, well-connected West End
and Southbank markets. These now make up 77% of our London
portfolio vs 58% in 2020.
In a world where demand is concentrated in the
best part of the market, market averages become rather meaningless.
This is illustrated by the fact that, whereas overall office
vacancy in London is elevated, at 8.8%, 90% of all vacant space
sits in 10% of all buildings and close to 40% of vacant space sits
in just 1% of all offices in London. This shows vacancy is mostly a
building issue, not a market-wide issue. It also shows offices are
different than retail 5+ years ago, as in retail even the best
locations saw vacancy rise and, as a result, rents fall, whereas in
offices Grade A availability remains low, so rents continue to
rise.
Even though take-up across the overall London
market slowed, demand for space across our standing portfolio
remained resilient. We signed lettings during the year totalling
£30m of rent, on average 5% above valuers' assumptions, with a
further £5m in solicitors' hands, 9% above valuers'
estimates. Overall, relettings and renewals reflected a 15% uplift
vs previous passing rent and occupancy increased 140bps to 97.3% -
substantially outperforming the Central London market, where
occupancy fell by 100bps. Our two existing Myo locations saw
average occupancy for the year rise to 93%, up from 86%.
Major retail
destinations
We have continued to see a further shift back
from online to physical sales, with negative online non-food sales
growth for the last two years. The exact split between online and
offline is becoming less of a factor for the best locations as for
most major brands online and physical channels are firmly
interconnected. The increase in cost of capital and cost of doing
business online is keeping pressure on low-margin online sales.
This principally affects pure-play online models, which in response
have shifted their focus to improving profitability rather than
growing market share, increasing the cost for
consumers to buy online.
Reflecting this, we continue to see growing
demand from brands for physical space in the best locations. There
is a clear focus on 'fewer, bigger, better' stores, as leading
brands such as Inditex and H&M have announced significant
investments in their best stores, even though they often continue
to close the tail ends of their portfolio. Supported by the fact
that for many key brands, including JD, Zara, Boots and Next sales
growth in our centres is outperforming their overall sales growth,
this explains the strong demand for our space. Across our
portfolio, total sales grew 4.1% and like-for-like sales were up
1.5%. Footfall increased 3.9% and is now at c. 93% of pre-pandemic
levels.
On the back of this, we delivered 6.9%
like-for-like income growth and a 130bps increase in occupancy to
95.4% - effectively back to pre-pandemic levels. As a result, we
are seeing improved pricing tension and selective competition for
space. A year ago we said we expected the last large over-rented
leases to reset during the year, which has happened. Despite this,
for the first time in years we have started capturing positive
uplifts on renewals and relettings. This was still modest at 1% for
the year, but is up to 6% for deals in solicitors' hands. In total,
we completed 219 lettings totalling £27m of rent, on average 5%
ahead of ERV, with a further £10m in solicitors' hands, 7% above
ERV.
Mixed-use
urban neighbourhoods & subscale sectors
In mixed-use, the increase in vacancy partly
reflects the fact that we have so far managed part of the existing
income for maximum development flexibility. We expect this to
reverse with our revised approach to these assets, which involves
retaining more of the existing built stock to reduce embodied
carbon and build on the existing income, rather than working
towards a wholesale redevelopment in one go. The operational
performance of our retail parks and leisure remains strong, with
£7m of lettings on average 5% ahead of valuers' assumptions plus a
further £3m in solicitors' hands at a 3% premium, whilst occupancy
was up 30bps to 98.0%. We agreed a restructure of a number of
leases with Cineworld following its recapitalisation during the
first half resulting in an annual rent reduction of
less than £1m, but all our units continue to
trade. Our hotels, which are fully let to Accor, saw occupancy rise
from 94% to 98% of pre-Covid levels, driving an increase in RevPAR,
which supported our disposal post the year-end.
Table 3: Operational performance
analysis
|
|
Annualised rental income
|
Net estimated rental value
|
EPRA occupancy(1)
|
LFL occupancy change(1)
|
WAULT(1)
|
|
|
£m
|
£m
|
%
|
ppt
|
Years
|
|
West End offices
|
160
|
186
|
99.6
|
0.1
|
6.5
|
|
City offices
|
70
|
93
|
93.7
|
3.2
|
7.8
|
|
Retail and other
|
43
|
55
|
97.2
|
1.9
|
5.7
|
|
Developments
|
8
|
93
|
n/a
|
n/a
|
n/a
|
|
Total Central London
|
281
|
427
|
97.3
|
1.4
|
6.8
|
|
Shopping centres
|
121
|
122
|
95.1
|
1.0
|
4.3
|
|
Outlets
|
48
|
49
|
96.0
|
2.0
|
3.0
|
|
Total Major retail
|
169
|
171
|
95.4
|
1.3
|
3.9
|
|
London
|
11
|
16
|
90.2
|
(3.5)
|
9.0
|
|
Major regional cities
|
37
|
38
|
93.5
|
(4.1)
|
6.8
|
|
Total Mixed-use urban(2)
|
48
|
54
|
92.6
|
(4.0)
|
7.2
|
|
Leisure
|
46
|
42
|
96.9
|
1.6
|
10.2
|
|
Hotels
|
35
|
29
|
n/a
|
n/a
|
7.1
|
|
Retail parks
|
27
|
29
|
97.5
|
(1.1)
|
5.9
|
|
Total Subscale sectors
|
108
|
100
|
98.0
|
0.3
|
8.0
|
|
Total Combined Portfolio
|
606
|
752
|
96.5
|
0.8
|
6.2
|
1. Excluding developments.
2. Previous Mixed-use urban sub-segments have
been changed to a classification based on geographical location,
which is better aligned to how these assets are managed internally
and our revised approach to a number of assets.
Development pipeline
Central
London
We continue to see good demand for the
high-quality space we develop. During the year, we completed our n2
development in Victoria and Lucent behind Piccadilly Lights, both
of which were effectively fully let within four months post
completion, with rents on average 14% ahead of initial assumptions.
At The Forge in Southwark, Myo opened in the Phosphor building just
before Christmas, whilst the Bronze building is 42% let or in
solicitors' hands. We also completed the development of 21
Moorfields, which we sold in September 2022 for £809m,
crystallising a 25% profit on cost.
Aside from The Forge, we also opened two Myo
locations at One New Change and New Street Square just before
Christmas and in February, combined making up 138,000 sq ft, so all
three of these are currently in lease-up. We are opening a new Myo
at Lucent shortly and plan to open a seventh location in Kings
Cross in 2025, which will bring our total Myo space to c. 300,000
sq ft. Rents are broadly in line with our underwriting assumptions,
representing net margins of c. 20% over standard office
space.
Whilst the sharp increase in interest rates
over the past two years has naturally impacted property values, the
flipside is that it is limiting new supply. Compared to a year ago,
total space under construction has increased from 12m to 13m sq ft
yet 42% of this is already pre-let. This means that speculative
office space under construction which is expected to complete over
2024-26 is roughly half of the long-term average new-build office
take-up in London. As demand remains focused on the best, most
sustainable space, we expect this will drive further rental growth
for the best quality assets.
As such, during the year we started the major
refurbishment of Thirty High (formerly Portland House) in Victoria
and the development of Timber Square in Southwark. Reflecting our
positive outlook for rental values, we expect these to deliver a
gross yield on cost of 7.2% and be highly earnings accretive, with
an expected ERV of £59m once fully let vs £434m residual cost to
complete.
Table 4: Committed pipeline
|
Property
|
Sector
|
Size
sq ft
'000
|
Estimated completion
date
|
Net income/ ERV
£m
|
Market value
£m
|
Costs to complete
£m
|
TDC
£m
|
Gross yield on TDC
%
|
|
Thirty High, SW1
|
Office
|
299
|
Aug-25
|
30
|
238
|
183
|
412
|
7.3%
|
|
Timber Square, SE1
|
Office
|
381
|
Dec-25
|
29
|
137
|
251
|
411
|
7.1%
|
|
Total
|
|
680
|
|
59
|
375
|
434
|
823
|
7.2%
|
Table 5: Future Central London development
pipeline
|
Property
|
Sector
|
Proposed
sq ft
'000
|
Indicative TDC
£m
|
Indicative ERV
£m
|
Gross yield on TDC
%
|
Potential start
date
|
Planning status
|
|
Near-term
|
|
|
|
|
|
|
|
|
Red Lion Court, SE1
|
Office
|
250
|
335
|
24
|
7.2
|
H2 2024
|
Consented
|
|
Liberty of Southwark, SE1
|
Office/resi
|
225
|
260
|
17
|
7.4(1)
|
H1 2025
|
Consented
|
|
Total near-term
|
|
475
|
595
|
41
|
7.3
|
|
|
|
Medium-term
|
|
|
|
|
|
|
|
|
Old Broad Street, EC2
|
Office
|
285
|
|
|
|
2025
|
Consented
|
|
Hill House, EC4
|
Office
|
380
|
|
|
|
2026
|
Consented
|
|
Nova Place, SW1
|
Office
|
60
|
|
|
|
2025
|
Design
|
|
Southwark Bridge Road, SE1
|
Office
|
150
|
|
|
|
2025
|
Design
|
|
Timber Square Phase 2, SE1
|
Office
|
290
|
|
|
|
2026
|
Design
|
|
Total
medium-term
|
|
1,165
|
|
|
|
|
|
|
Total future pipeline
|
|
1,640
|
|
|
|
|
|
1. Gross yield on cost adjusted for residential
TDC.
In terms of future pipeline, we have started
the deconstruction of the existing building at Red Lion Court to
prepare this for a potential start late this year. We also secured
planning consents for the development of 55 Old Broad Street and
Hill House, at our New Street Square estate, and a significant
increase in scale of our planning consent at Liberty of Southwark.
Combined, this brings our consented pipeline to 1.1m sq ft. We also
acquired a site adjacent to Timber Square for a low implied land
value of c. £100 per sq ft, which unlocks the opportunity to create
a significant c. 670,000 sq ft estate across two phases, with
significant public realm incorporating the site's historic
Victorian railway arches.
Mixed-use
urban neighbourhoods
Landsec has a long history of creating thriving
urban places, such as in Victoria, Oxford, Leeds or Cardiff. These
places are scarce and their enduring attraction underpins their
longer-term growth, even though the exact mix of uses of space
differs by location. As consumer expectations on how we live, work
and spend our leisure time continue to change, we have a number of
opportunities in some of the fastest growing areas in the UK to
create and curate the next generation of such places.
At Finchley Road, in zone two London, we
received unconditional planning consent for our 1,800 homes
masterplan including detailed consent for the first 600 homes
during the year. We have started offsite utility upgrades with site
preparatory and enabling works to follow in autumn this year. We
anticipate spending c. £10m on these works over the next 18 months.
This will put us in a position where we can commit to the
development of the first 600 homes by late 2025. The investment for
this would be roughly £300m, with a target IRR in the low
double-digits. At the same time, we will look to rebuild the income
in the existing retail asset ahead of its potential longer term
redevelopment.
At Mayfield, adjacent to Manchester's main
train station, we have been working with our JV partners on
optimising the development strategy for this site. Building on the
successful place we have created with the new 6-acre park, we have
the option to start the first c. £140m office block late this year,
which would then also unlock the future residential phases of this
new mixed-use neighbourhood.
At Lewisham, south-east London, and Glasgow we
are evolving our plans to focus more on masterplans that can be
delivered in discrete incremental phases. Alongside this we will
seek to embrace opportunities to retain and reinvent existing
buildings in our ambition to reduce embodied carbon. This new
approach will improve overall returns by retaining more of the
existing income and growing this, alongside discrete development
interventions. We are still finalising our plans, but this will
likely result in less embodied carbon, lower risk and less capital
intensive routes to realising the potential of these mixed-use
estates.
Table 6: Mixed-use urban neighbourhoods
pipeline
|
Property
|
Landsec share
%
|
Proposed
sq ft
'000
|
Earliest start on site
|
Number of blocks
|
Estimated first/total scheme
completion
|
Indicative TDC
£m
|
Target yield on cost
%
|
Planning status
|
|
Near-term
|
|
|
|
|
|
|
|
|
|
Mayfield, Manchester
|
50-100
|
2,500
|
2024
|
18
|
2027/2034
|
800-950
|
7 - 8
|
Consented
|
|
Finchley Road, NW3
|
100
|
1,400
|
2025
|
10
|
2028/2035
|
950-1,050
|
6 - 7
|
Consented
|
|
Medium-term
|
|
|
|
|
|
|
|
|
|
MediaCity, Greater Manchester
|
75
|
|
2026
|
|
|
|
|
Consented
|
|
Buchanan Galleries, Glasgow
|
100
|
|
2026
|
|
|
|
|
Design
|
|
Lewisham, SE13
|
100
|
|
2026
|
|
|
|
|
Design
|
Rents for the highly sustainable, best-in-class
space we can deliver in London and across our mixed-use pipeline
continue to grow and construction cost inflation has normalised,
although returns on any future commitments will need to compensate
for higher costs and higher exit yields. We will therefore continue
to optimise designs, planning and delivery programmes to ensure our
future developments deliver an attractive return and sufficient
risk premium vs the return on assets we sell to fund our investment
in these. The significant size of our medium-term London and
mixed-use pipelines means it is unlikely that we will fund all of
this on our own balance sheet, so we will explore opportunities to
access other, complementary sources of capital to help accelerate
the delivery of these opportunities.
Delivering in a sustainable way
Aligned to the Science Based Targets
Initiative's (SBTi) new Net-Zero Standard, we have committed to a
target to reduce direct and indirect greenhouse gas emissions by
47% by 2030 vs a 2019/20 base year and to reach net zero by 2040
from the same base year. This includes emissions from all sources,
including all of our reported Scope 3 emissions such
as the emissions from our development pipeline, supply chain and
customers. So far, our emissions have already reduced by 24%
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 currently tracking a 18% reduction, having achieved an energy
intensity reduction across our portfolio of 3.7% vs the prior
year.
We continue to progress our net zero carbon
transition plan, which 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. 49% of our portfolio is already rated 'B' or higher,
including 44% of our office portfolio, up from 36% a year ago. We
expect this to increase from 2025 onwards, as the benefits from our
net zero investments come through.
We have now started the retrofit of air source
heat pumps at two office locations. We expect to start a further
three retrofit projects in the current year and progressing
detailed designs for another one. During the year, we have expanded
the work with our customers on energy audits from 25 to 38 of our
largest customers. These cover 56% of the energy used by our
customers in our office portfolio and so far this work has
identified potential annual carbon and
energy savings of 10-40% for the majority of customers.
With respect to our target to reduce upfront
embodied carbon by 50% vs a typical development by 2030, to below
500kgCO2e/sqm for offices and 400kgCO2e/sqm
for residential, our future pipeline is currently tracking at an
average 40% reduction. The two schemes we started this year are
already close to, or ahead of our 2030 reduction target. At Timber
Square, we achieved a reduction to 522kgCO2e/sqm due to
retention of part of the existing structure, a highly optimised
design and the use of low carbon cross laminated timber, whilst at
Thirty High, retaining the original structure and upgrading the
existing façade resulted in an upfront embodied carbon intensity of
just 347kgCO2e/sqm.
In March, we launched our new nature strategy,
Let nature in, which recognises the interdependency between the
climate and biodiversity crises and aims to consistently enhance
nature across our portfolio to improve biodiversity in the built
environment; promote health, wellbeing, and community engagement;
and create nature-based solutions to mitigate and adapt to climate
change.
Our Landsec Futures fund, which
will see us invest £20m over 2023-2033, aimed at
improving social mobility in real estate and tackling issues
local to our assets, continues to support the delivery of our 2030
target to create £200m of social value and empower 30,000 people
towards the world of work. From our 2019/20 baseline, we have so
far created £54m of social value and empowered 10,249
people.
Financial review
Overview
External market conditions improved as the
year progressed. The relative stability in interest rates of late,
after the significant rise in the first half of the year, material
reduction in inflation and return to real wage growth for consumers
are all supportive for the outlook. Even though we do not
anticipate a sharp reduction in rates, our high-quality portfolio,
strong operational performance and robust capital base provide an
attractive base for future growth.
Reflecting the continued strength
in customer demand, like-for-like gross rental income was up 3.0%,
or 2.8% on a net rental income basis, driven by a further increase
in occupancy, positive uplifts on relettings and renewals, and
growth in turnover income. Combined with a reduction in overhead
costs, this offset the impact of higher finance costs and
disposals. As a result, our EPRA earnings were in line with the
prior year's underlying level of £371m and, in line with our
guidance, EPRA EPS was stable at 50.1p pence. Our total dividend
for the year of 39.6p pence is up 2.6%, in line with our guidance
of low single digit percentage growth. Our dividend cover of 1.27x
remains comfortably within our target range of 1.2-1.3x on an
annual basis.
Our successful leasing activity
increased overall occupancy and drove 3.2% growth in ERVs but as
investment volumes across the wider market remained subdued, the
valuation of our portfolio was down £625m, or 6.0%. This was driven
by an increase in valuation yields in the first half of the year in
particular, as c. 60% of our portfolio was stable in value in the
second half. This yield movement primarily drove an overall IFRS
loss before tax of £341m and basic EPS of -43.0 pence, compared
with a loss of £622m for the prior year, and a reduction in EPRA
NTA per share of 8.2% to 859 pence. Including dividends paid, our
total return on equity was -4.0%, reflecting a 5.3% income return
and 4.2% upside from ERV growth and developments, offset by -13.5%
on account of yield shift.
Our balance sheet remains strong
and comfortably within our operating guidelines. Net debt increased
slightly by £0.2bn to £3.5bn during the year, which combined with
the valuation movement of our portfolio resulted in an LTV of 35.0%
at the end of March. More importantly, at a time when
investment activity is low and the approach to valuations varies
widely in different markets, as a cash measure,
our net debt/EBITDA at the year-end remained low at 7.4x vs 7.0x a
year ago, in line with our target to keep this below 8x. Moreover,
pro-forma for our £0.4bn of disposals since the year-end, our net
debt/EBITDA is down to 7.0x whilst our 32.3% LTV is lower than it
was in March 2022, before the correction in values, and net debt is
£1.1bn down since then. Combined with our average debt maturity of
9.5 years and £1.9bn of cash and undrawn facilities, this provides
substantial capacity to invest in growth.
Presentation of financial
information
The condensed consolidated preliminary
financial information is prepared under UK adopted international
accounting standards (IFRSs and IFRICs) where the Group's interests
in joint ventures are shown collectively in the income statement
and balance sheet, and all subsidiaries are consolidated at 100%.
Internally, management reviews the Group's results on a basis that
adjusts for these forms of ownership to present a proportionate
share. The Combined Portfolio, with assets totalling £10.0bn, is an
example of this approach, reflecting our economic interest in our
properties regardless of our ownership structure.
Our key measure of underlying earnings
performance is EPRA earnings, which represents the underlying
financial performance of the Group's property rental business,
which is our core operating activity. A full definition of EPRA
earnings is given in the Glossary. This measure is based on the
Best Practices Recommendations of the European Public Real Estate
Association (EPRA) which are metrics widely used across the
industry to aid comparability and includes our proportionate share
of joint ventures' earnings. Similarly, EPRA Net Tangible Assets
per share is our primary measure of net asset value.
Measures presented on a proportionate basis
are alternative performance measures as they are not defined under
IFRS. This presentation provides additional information to
stakeholders on the activities and performance of the Group, as it
aggregates the results of all the Group's property interests which
under IFRS are required to be presented across a number of line
items in the statutory financial statements. For further details
see table 14 in the Business analysis section.
Income statement
Our strong leasing performance
continues to underpin the growth of our high-quality income. Our
pro-active disposals over the past two years have created room for
future growth, even though this came at a modest cost to income
during the year. Finance costs increased due to a rise in interest
rates and lower capitalised interest following our recent
development completions, but this has been offset by our positive
like-for-like income growth, income from our successful
developments and a reduction in administrative expenses.
Headline EPRA earnings in the prior
year benefitted from a £22m year-on-year increase in surrender
premiums received, which we adjusted for in the underlying earnings
we reported a year ago. As such, EPRA earnings of £371m are in line
with the prior year's underlying level.
Table 7: Income statement(1)
|
|
|
Year ended
31 March 2024
|
Year ended
31 March 2023
|
|
|
|
|
|
Central London
|
Major retail
|
Mixed-use urban
|
Subscale sectors
|
Total
|
Central London
|
Major retail
|
Mixed-use urban
|
Subscale sectors
|
Total
|
|
Change
|
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
|
Gross rental income(2)
|
|
291
|
181
|
57
|
112
|
641
|
310
|
171
|
57
|
109
|
647
|
|
(6)
|
|
Net service charge expense
|
|
(4)
|
(7)
|
(3)
|
(2)
|
(16)
|
(1)
|
(8)
|
(2)
|
(1)
|
(12)
|
|
(4)
|
|
Net direct property expenditure
|
|
(24)
|
(23)
|
(12)
|
(16)
|
(75)
|
(20)
|
(31)
|
(10)
|
(13)
|
(74)
|
|
(1)
|
|
Segment net rental income
|
|
263
|
151
|
42
|
94
|
550
|
289
|
132
|
45
|
95
|
561
|
|
(11)
|
|
Net administrative expenses
|
|
|
|
|
|
(77)
|
|
|
|
|
(84)
|
|
7
|
|
EPRA earnings before interest
|
|
|
|
|
|
473
|
|
|
|
|
477
|
|
(4)
|
|
Net finance expense
|
|
|
|
|
|
(102)
|
|
|
|
|
(84)
|
|
(18)
|
|
EPRA earnings
|
|
|
|
|
|
371
|
|
|
|
|
393(3)
|
|
(22)
|
|
Capital/other items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation deficit
|
|
|
|
|
|
(625)
|
|
|
|
|
(848)
|
|
223
|
|
Loss on changes in finance leases
|
|
|
|
|
|
-
|
|
|
|
|
(6)
|
|
6
|
|
Loss on disposals
|
|
|
|
|
|
(16)
|
|
|
|
|
(144)
|
|
128
|
|
Impairment charges
|
|
|
|
|
|
(12)
|
|
|
|
|
(24)
|
|
12
|
|
Fair value movement on interest rate
swaps
|
|
|
|
|
|
(17)
|
|
|
|
|
22
|
|
(39)
|
|
Other
|
|
|
|
|
|
(20)
|
|
|
|
|
(12)
|
|
(8)
|
|
Loss before tax attributable to shareholders of
the parent
|
|
|
|
|
|
(319)
|
|
|
|
|
(619)
|
|
300
|
|
Non-controlling interests
|
|
|
|
|
|
(22)
|
|
|
|
|
(3)
|
|
(19)
|
|
Loss before tax
|
|
|
|
|
|
(341)
|
|
|
|
|
(622)
|
|
281
|
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.
3. Underlying EPRA earnings of £371m excluding
£22m year-on-year increase in surrender premiums
Net rental income
Reported gross rental income was
down £6m to £641m, but up £16m adjusted for the aforementioned £22m
year-on-year increase in surrender premiums in the prior year and
up 3.0% on a like-for-like basis excluding the impact of these
movements. Surrender premiums over the last twelve months were £2m
higher than the underlying level over the previous two years, at
£18m, part of which relates to income foregone during the year. We
expect surrender receipts going forward to be lower than the levels
in recent years, as a result of lower levels of customer
rightsizing or repurposing activity across our portfolio.
Net rental income was up £11m on an
underlying basis. Direct property costs increased by £1m and net
service charge expenses were up £4m, primarily driven by the costs
associated with the initial lease-up phase of our recent London
office developments. The impact from the repurposing of
conventional office space to introduce two Myos reduced net rental
income by £2m, but given the c. 20% premium on Myo rent we achieve,
we expect this to more than reverse as we lease up this space.
Investment activity reduced income by £9m, reflecting our
significant deleveraging. On a like-for-like basis, our net rental
income was up £13m, or 2.8%. Reflecting continued demand for our
space, we expect like-for-like growth for the current year to be
broadly similar.
In line with our guidance, our
gross to net margin for the year reduced slightly to 85.8% from
86.7% in the prior year due to the start-up costs of opening three
new Myo locations and our completed developments. The sale of our
hotel portfolio will reduce our overall margin but on a
like-for-like basis we expect our gross to net margin to improve so
we expect our overall margin to be broadly stable this year.
Overall, insolvencies remain low, with rent from
customers in administration at 0.4%, in line with the
prior year.
Table 8: Net rental income(1)
|
|
|
£m
|
|
Net rental income for the year ended 31 March
2023
|
|
561
|
|
Gross rental income like-for-like movement in
the period(2):
|
|
|
|
Increase in variable and turnover-based
rents
|
|
8
|
|
Other movements
|
|
8
|
|
Total like-for-like gross rental
income
|
|
16
|
|
Like-for-like net service charge
expense
|
|
-
|
|
Like-for-like net direct property
expenditure
|
|
(3)
|
|
Decrease in surrender premiums
received
|
|
(20)
|
|
Developments(2)
|
|
5
|
|
Acquisitions since 1 April 2022(2)
|
|
12
|
|
Disposals since 1 April 2022(2)
|
|
(21)
|
|
Net rental income for the year ended 31 March
2024
|
|
550
|
1. Including our proportionate share of
subsidiaries and joint ventures, as explained in the Presentation
of financial information above.
2. Gross rental income on a like-for-like basis
and the impact of developments, acquisitions and disposals exclude
surrender premiums received.
Net administrative expenses
Net administrative expenses were
down £7m to £77m, as the cost savings from the organisational
review we undertook in late 2022 and our continued focus on
ensuring our cost base is efficient more than offset
inflation. For the current year, we expect
continued efficiency improvements to offset inflation and we
anticipate further savings from our investments in data and
technology over time.
Our EPRA cost ratio was virtually
stable at 25.0% vs 25.2% in the prior year, which reflects our
capital allocation decisions. Naturally, assets with long leases to
a single tenant often have lower operating costs than more
operational sectors such as flexible office, shopping centres, or
for example residential, yet this does not mean they generate a
better overall return. Illustrating this, over the last three years
we have sold £2.2bn of virtually triple-net offices with a 17-year
lease term where our ability to add further value was limited and
which had an expected mid-single digit forward IRR. We invested in
more operational assets with a higher net income yield and much
higher IRR, which clearly improved our overall returns, even though
the combined impact of this increased our EPRA cost ratio by almost
3ppt.
Net finance expenses
Net interest costs increased by
£18m to £102m, which reflected an increase in our weighted average
cost of debt and a reduction in capitalised interest following the
completion of our recent London developments, partly offset by our
deleveraging through disposals. All else equal, we expect net
interest costs for this year to be up slightly, as the reduction in
debt following our recent disposals is offset by an increase in
average borrowing costs reflecting our recent £300m bond issue and
the higher average floating rate compared to last year, with 94% of
our debt fixed or hedged at the end of March.
Non-cash finance income, which
includes the fair value movements on derivatives, caps and hedging
and which is not included in EPRA earnings, decreased from a net
income of £23m during the prior year to a net expense of £24m. 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 £625m. Our strong
leasing activity resulted in 3.2% ERV growth, yet the upside of
this was more than offset by a 45bps increase in valuation yields
driven by the sharp increase in bond yields during the first half of the year. This upwards pressure on
yields reduced during the second half, as our valuers indicated
yields were broadly stable in the final quarter of the
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 primarily as a
result of the above fair value adjustment of our investment
portfolio moderated to £341m, compared to £622m
for the prior year.
Net assets and return on equity
Our total return on equity for the
year was -4.0%, compared with -8.3% for the prior year.
Our income return at NTA is an attractive 5.3%, whilst ERV
growth and development upside drove a capital return of 4.2%. The
combination of these two factors therefore yielded a return of
9.5%, with the remaining negative impact driven by an increase in
valuations yields. As yields for the best assets begin to
stabilise, this shows we are inherently well
placed to deliver the 8-10% return on equity we target over
time.
After the £291m of dividends paid,
EPRA Net Tangible Assets, which reflects the value of our Combined
Portfolio less adjusted net debt, reduced to £6,398m, or 859 pence
per share. This represents a 8.2% reduction versus the prior year,
half of which was made up for by dividends.
Table 9: Balance sheet(1)
|
|
31 March 2024
|
31 March 2023
|
|
|
£m
|
£m
|
|
Combined Portfolio
|
9,963
|
10,239
|
|
Adjusted net debt
|
(3,517)
|
(3,287)
|
|
Other net assets
|
(48)
|
15
|
|
EPRA Net Tangible Assets
|
6,398
|
6,967
|
|
Shortfall of fair value over net investment in
finance leases book value
|
5
|
6
|
|
Other intangible asset
|
2
|
2
|
|
Excess of fair value over trading properties
book value
|
(25)
|
(12)
|
|
Fair value of interest-rate swaps
|
22
|
42
|
|
Net assets, excluding amounts due to
non-controlling interests
|
6,402
|
7,005
|
|
|
|
|
|
Net assets per share
|
863p
|
945p
|
|
EPRA Net Tangible Assets per share
(diluted)
|
859p
|
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
|
|
|
£m
|
pence
|
|
EPRA Net Tangible Assets at 31 March
2023
|
6,967
|
936
|
|
EPRA earnings
|
371
|
50
|
|
Like-for-like valuation movement
|
(460)
|
(62)
|
|
Development valuation movement
|
(102)
|
(14)
|
|
Impact of acquisitions/disposals
|
(63)
|
(8)
|
|
Total valuation deficit
|
(625)
|
(84)
|
|
Dividends
|
(291)
|
(39)
|
|
Loss on disposals
|
(16)
|
(3)
|
|
Other
|
(8)
|
(1)
|
|
EPRA Net Tangible Assets at 31 March
2024
|
6,398
|
859
|
|
|
|
|
| |
1. Including our proportionate share of
subsidiaries and joint ventures, as explained in the Presentation
of financial information above.
Net debt and leverage
Adjusted net debt, which includes
our share of JV borrowings, increased by £230m to £3,517m during
the year. We spent £137m on acquisitions and invested £328m in
capex, largely on London office developments, the
preparation of future developments and the investment in our
existing assets. This was partly offset by the sale of investment properties generating receipts of £176m during the
period.
Since the year-end we have sold
£400m of assets, which would reduce adjusted net debt to £3,117m on
a pro-forma basis. Following the completion of our
recent London pipeline, we have £399m committed capex to spend over
the next two years on our two new projects in Victoria and
Southbank.
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)
|
|
£m
|
|
Adjusted net debt at 31 March 2023
|
3,287
|
|
Adjusted net cash inflow from operating
activities
|
(353)
|
|
Dividends paid
|
291
|
|
Capital expenditure
|
328
|
|
Acquisitions
|
137
|
|
Disposals
|
(176)
|
|
Other
|
3
|
|
Adjusted net debt at 31 March 2024
|
3,517
|
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 7.4x based on our
net debt at the end of March 2024, or 7.3x 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 35.0%. This reduces to 32.3% pro-forma
for the hotels disposal post the year-end, which is 2.1ppt lower
than it was in March 2022, before the sharp rise in interest rates
and resulting correction in property values. We expect our LTV to
increase slightly from this level as we will look to invest at an
attractive point in the cycle, but to remain within our target
range of 25% to 40%.
Table 12: Net debt and leverage
|
|
31 March 2024
|
31 March 2023
|
|
Net debt
|
£3,594m
|
£3,348m
|
|
Adjusted net debt(1)
|
£3,517m
|
£3,287m
|
|
|
|
|
|
Interest cover ratio
|
3.9x
|
4.5x
|
|
Net debt/EBITDA (period-end)
|
7.4x
|
7.0x
|
|
Net debt/EBITDA (weighted average)
|
7.3x
|
8.0x
|
|
|
|
|
|
Group LTV(1)
|
35.0%
|
31.7%
|
|
Security Group LTV
|
37.0%
|
33.0%
|
1. Including our proportionate share of
subsidiaries and joint ventures, as explained in the Presentation
of financial information above.
Financing
Our gross borrowings of £3,703m are
diversified across various sources, including £2,607m of Medium
Term Notes (MTNs), £415m of syndicated and bilateral bank loans and
£681m of commercial paper. Our MTNs and the majority of bank loans
form part of our Security Group, which provides security on a
floating pool of assets valued at £9.2bn. This structure provides
flexibility to include or exclude assets, and an attractive cost of
funding, with our MTNs currently rated AA and AA- with a stable
outlook respectively by S&P and Fitch.
Our Security Group has a number of
tiered covenants, yet below 65% LTV and above 1.45x ICR, these
involve very limited operational restrictions. A default only
occurs when LTV is more than 100% or the ICR falls below 1.0x. Our
portfolio could withstand a c. 43% fall in value before we reach
the 65% LTV threshold and c. 63% before reaching 100% LTV, whilst
our EBITDA could fall by c. 63% before we reach the 1.45x ICR
threshold and c. 74% before reaching 1.0x ICR.
We had £1.9bn of cash and undrawn
facilities at the end of March 2024, providing substantial
flexibility. As expected, the percentage of borrowings which is
fixed or hedged reduced slightly to 94%, reflecting our net
investment in the year. Across the year we redeemed £427m of MTNs
on their expected maturity dates. In March, we issued a £300m bond
with a maturity of 7.5 years at 4.75%, representing a spread of
103bps over the reference gilt rate. This spread shows the strength
of our credit profile, and ensured our overall debt maturity
remains long, at 9.5 years, providing clear visibility and
underpinning the resilience of our attractive earnings profile. Our
average cost of debt rose to 3.3% compared with 2.7% in the prior
year. Reflecting our strong financial position, we expect this to
increase only slightly during the year ahead. At the end of March
2024, we had a limited £306m of debt maturing in the next two
years.
Table 13: Available facilities(1)
|
|
31 March 2024
£m
|
31 March 2023
£m
|
|
|
|
|
|
Medium Term Notes
|
2,607
|
2,736
|
|
|
|
|
|
Drawn bank debt
|
415
|
383
|
|
Outstanding commercial paper
|
681
|
312
|
|
Cash and available undrawn
facilities
|
1,889
|
2,353
|
|
Total committed credit facilities
|
2,907
|
3,007
|
|
|
|
|
|
Weighted average maturity of debt
|
9.5 years
|
10.3 years
|
|
Percentage of borrowings fixed or
hedged(1)
|
94%
|
98%
|
|
Weighted average cost of
debt(2)
|
3.3%
|
2.7%
|
1. Calculated as fixed rate debt and hedges
over gross debt based on the nominal values of debt and
hedges.
2. Including amortisation and commitment fees;
excluding this the weighted average cost of debt is 3.2% at 31
March 2024.
Outlook
Looking ahead, our high-quality
portfolio, strong operational performance actions and strong
capital base mean that, with an LTV and net debt-position which is
lower than it was two years ago, we are well placed to invest at an
attractive point in the cycle.
We maintain our target to deliver
an 8-10% annual return on equity over time, comprising
a mix of income and capital returns, driven by rental growth and
selective development upside. Short term movements in valuation
yields are outside of our control, and mean our return on equity
will not be exactly in this range each individual year, as we have
seen over the past twelve months. However, with an income return on
NTA of c. 5.7%, an expectation of further low-to-mid single digit
ERV growth in London and Major Retail this year and yields starting
to stabilise, the outlook for this is encouraging.
We are now capturing positive leasing
reversion, which supported 2.8% growth in like-for-like net rental
income over the past year and we expect growth for the current year
to be similar. How this will translate into EPS growth depends on
the quantum and timing of net investment from here. We have
meaningful balance sheet capacity following our significant
disposals yet our recent sales will reduce annualised earnings by
c. 4%, all else equal. This means that, before reflecting the
impact of any reinvestment of these sales proceeds, EPS for the
year to March 2025 would likely be slightly below the 50.1 pence
for 2024. For March 2026, we currently expect EPS to be slightly
above this level, reflecting the combined effect of continued
like-for-like income growth and accretive capital recycling. As a
result, we continue to expect our dividend to grow by a low single
digit percentage this year, as our dividend cover remains towards
the high end of our 1.2-1.3x target range.
Principal risks and uncertainties
The Board undertakes an annual assessment of
the principal risks as part of the Strategic Planning and Business
Planning processes, taking account of those that would threaten our
business model, future performance, solvency or liquidity or the
Group's strategic objectives. From this, the Group has identified
ten principal risks and uncertainties and has assessed how these
are managed through a combination of strategic risk management,
mitigating controls, or insurance.
The Group's approach to the management and
mitigation of these risks is included in the 2024 Annual Report.
The table below sets out our ten principal risks, with explanations
of changes in the risk profile across the year.
Changes to our principal risks from half-year
have been minor, as economic headwinds have stabilised, but not
abated, especially interest rates and inflation. Whilst these
factors put upward pressure on a number of risks, Landsec has
mitigated these pressures well and positioned itself strongly to
take advantage of future opportunities.
|
Risk description
|
Change in year
|
|
Macroeconomic outlook
|
ò
|
|
Changes in the macro-economic environment
result in reduction in demand for space or deferral of decisions by
retail and office occupiers. Due to the length of build projects,
the prevailing economic climate at initiation may be vastly
different from that at completion.
|
The UK economy has continued to be challenging
during 2023/24, with interest rates remaining high and high
inflation also having an impact through much of the
period.
Whilst the operating environment is still
affected by the implications of the recent economic environment,
the outlook is considered to be positive, with interest rates
expected to start falling during 2024/25. As such, the risk score
has been reduced during the period. The risk remains within
appetite.
|
|
Office occupier market
|
ó
|
|
Structural changes in customer expectations
leading to changes in demand for office space and the consequent
impact on income and asset values. Further, the risk encompasses
the inability to identify or adapt to changing markets in a timely
manner.
|
The outlook in respect of the office occupancy
market is positive, with increased demand and social appetite for
office working continuing to strengthen.
Whilst the current macro-economic environment
is also looking positive, it currently continues to apply pressure
in respect of the buoyancy of the market meaning this risk is
considered to have remained stable over the period.
The residual risk at year end was below
appetite our 'flexible' appetite however over the course of our
Strategic Plan we expect this risk to be brought into appetite
through opportunities for stronger leasing terms.
|
|
Retail and hospitality occupier
market
|
ó
|
|
Structural changes in customer expectations
leading to changes in demand for retail or hospitality space and
the consequent impact on income and asset values.
|
Similar to the office occupier market, the
outlook in respect of the retail and hospitality occupier market is
positive but this risk is currently considered to have remained
stable throughout the period as the economic environment continues
to have had an impact.
Our Strategic Plan and Business Plans outline
initiatives to further commercialise the use of our assets, expand
customer experience and raise awareness of our retail centres.
Whilst diversifying the offerings to our customers acts as a risk
mitigation, the risk to be taken in respect of potential yields for
these initiatives, and the onboarding of customers, will increase
the overall risk, bringing these risks into appetite.
|
|
Capital allocation
|
ñ
|
|
Capital allocated to specific assets, sectors
or locations does not yield the expected returns i.e. we are not
effective in placing capital or recycling.
|
In line with our Strategic and Business Plans,
we are anticipating increased development exposure leading to this
risk to have increased.
Our strategy remains to introduce third-party
capital into a number of our projects however we continue to have
flexibility to seek to resize our development to be appropriate for
our own balance sheet as required.
|
|
Development strategy
|
ñ
|
|
We may be unable to generate expected returns
as a result of changes in the occupier market for a given asset
during the course of the development, or cost or time overruns on
the scheme.
|
The external factors that influence this risk,
such as market conditions and inflation, have remained stable over
the year.
However, we are expecting to invest in a number
of new developments during the upcoming year which will increase
this risk to be closer to our flexible appetite.
|
|
Information security and cyber
threat
|
ó
|
|
Data loss or disruption to business processes,
corporate systems or building-management systems resulting in a
negative reputational, operational, regulatory or financial
impact.
|
Significant investment and operational
strengthening has been made over recent years, most recently
including the onboarding of a new Chief Data & Technology
Officer during the year.
The emphasis is now focused on continuous
improvement of the processes and controls.
The current position of this risk remains
within the overall Cautious risk appetite alignment for operational
risks.
|
|
Change projects
|
ó
|
|
Landsec is engaging in a number of important
internal change programmes. These projects aim to deliver important
benefits, both operationally and culturally. There is a risk that
these projects fail to deliver the benefits identified in a timely
manner and to budget.
|
Landsec has various technology and operational
change programmes underway, such as the upgrade and improvement of
the ERP system.
Whilst cultural change programmes are drawing
to a close, we continue to get deeper into the operational change
programmes. As such, the overall risk has remained
stable.
The current position of this risk, remains
within the overall Cautious risk appetite alignment for operational
risks.
|
|
Health and safety
|
ó
|
|
Failure to identify, mitigate or react
effectively to major health or safety incidents, leading
to:
- Serious injury, illness or loss of life
- Criminal/civil proceedings
- Loss of stakeholder confidence
- Delays to building projects and access restrictions to our
properties resulting in loss of income
- Inadequate response to regulatory changes
- Reputational impact
|
During the period, the risks associated with
the use of Reinforced Autoclaved Aerated Concrete
(RAAC) have been assessed, with action plans in
place where necessary, however the overall implications on
Landsec's Health & Safety environment are considered
immaterial.
The likelihood of a major health, safety or
security incident has remained constant throughout the year and
within appetite.
|
|
People and skills
|
ó
|
|
Inability to attract, retain and develop the
right people and skills to meet our strategic objectives, grow
enterprise value and meet shareholder expectations.
|
In recent years, this risk had increased due to
a combination of attrition due to ongoing transformation programmes
as well as the buoyant employment market at the time.
However, these pressures have now stabilised
leading to this risk remaining unchanged overall and within
appetite over the period.
|
|
Climate-change transition
|
ó
|
|
Climate change risk has two
elements:
- Our near and long-term science-based carbon reduction targets
by 2030 and 2040 are not met in time or are achieved at a
significantly higher cost than expected, leading to regulatory,
reputational and commercial impact.
- Failure to ensure all new developments are net zero in
construction and operation, as defined by the emerging net zero
standard for assets, leads to an inability to service market demand
for high-quality assets that meet the highest environmental and
wellbeing standards.
|
Operational and supply chain issues are
impacting the availability and cost of sustainable resources, which
are key to meeting the business's embodied carbon targets. This is
under regular review, however the overall risk position is
considered to have remained stable over the year, currently sitting
just below the Cautious risk appetite target.
|
Statement of Directors'
Responsibilities
The Annual Report 2024 will contain the
following statements regarding responsibility for the financial
statements and business reviews included therein.
The Directors are responsible for preparing the
Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year. Under that law the
Directors have prepared the Group and the Company financial
statements in accordance with the requirements of the Companies Act
2006. Under the Financial Conduct Authority's Disclosure Guidance
and Transparency Rules and Company law, group financial statements
are required to be prepared in accordance with UK adopted
international accounting standards (IFRSs and IFRICs). Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Group and the Company and of the profit and loss of the Group and
the Company for that period.
In preparing these financial statements, the
Directors are required to:
¾
select suitable accounting policies in accordance with IAS 8
'Accounting Policies, Changes in Accounting Estimates and Errors'
and then apply them consistently;
¾
make judgements and accounting estimates that are reasonable
and prudent;
¾
present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
¾ in
respect of the Group financial statements, state whether
international accounting standards in conformity with the
requirements of the Companies Act 2006 (and UK adopted
international accounting standards) have been followed, subject to
any material departures disclosed and explained in the financial
statements;
¾ in
respect of the Company financial statements, state whether
international accounting standards in conformity with the
requirements of the Companies Act 2006 have been followed, subject
to any material departures disclosed and explained in the financial
statements;
¾
provide additional disclosures when compliance with the
specific requirements of UK adopted international accounting
standards is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the
Group's and Company's financial position and performance;
and
¾
prepare the Group's and Company's financial statements on a
going concern basis, unless it is inappropriate to do
so.
The Directors are responsible for keeping
adequate accounting records that are sufficient to show and explain
the Group's and Company's transactions and disclose with reasonable
accuracy at any time the financial position of the Group and the
Company, and to enable them to ensure that the Annual Report
complies with the Companies Act 2006 and as regards the Group
financial statements, Article 4 of the IAS regulation. They are
also responsible for safeguarding the assets of the Group and the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Directors' responsibility statement under the
Disclosure and Transparency Rules
Each of the Directors, whose names and
functions appear below, confirm to the best of their
knowledge:
¾
the Group financial statements, which have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 (and UK adopted
international accounting standards)
¾
give a true and fair view of the assets, liabilities,
financial position, performance and cash flows of the Company and
Group as a whole; and
¾
the Strategic Report contained in the Annual Report includes
a fair review of the development and performance of the business
and the position of the Group and the Company, together with a
description of the principal risks and uncertainties faced by the
Group and Company.
Directors' statement under the UK Corporate
Governance Code
Each of the Directors confirm that to the best
of their knowledge the Annual Report taken as a whole is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Group's and Company's position,
performance, business model and strategy.
A copy of the financial statements of the Group
is placed on the Company's website. The Directors are responsible
for the maintenance and integrity of statutory and audited
information on the Company's website at landsec.com. Information
published on the internet is accessible in many countries with
different legal requirements. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors of Land Securities Group PLC as
at the date of this announcement are as set out below:
¾
Sir Ian Cheshire, Chairman*
¾
Mark Allan, Chief Executive
¾
Vanessa Simms, Chief Financial Officer
¾
Edward Bonham Carter, Senior Independent Director*
¾
James Bowling*
¾
Madeleine Cosgrave*
¾
Christophe Evain*
¾
Moni Mannings*
¾
Miles Roberts*
¾
Manjiry Tamhane*
*Non-executive Directors
The Statement of Directors' Responsibilities
was approved by the Board of Directors on 16 May 2024 and is signed
on its behalf by:
Mark
Allan
Vanessa Simms
Chief
Executive
Chief Financial Officer
Financial statements
|
Income statement
|
Year ended
31 March 2024
|
Year ended
31 March 2023
|
|
|
|
EPRA earnings
|
Capital and other items
|
Total
|
EPRA earnings
|
Capital and other items
|
Total
|
|
|
Notes
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Revenue
|
5
|
766
|
58
|
824
|
726
|
65
|
791
|
|
Costs
|
6
|
(325)
|
(84)
|
(409)
|
(289)
|
(93)
|
(382)
|
|
|
|
441
|
(26)
|
415
|
437
|
(28)
|
409
|
|
Share of post-tax profit/(loss) from joint
ventures
|
12
|
21
|
(19)
|
2
|
29
|
(30)
|
(1)
|
|
Loss on disposal of investment
properties
|
|
-
|
(16)
|
(16)
|
-
|
(144)
|
(144)
|
|
Net deficit on revaluation of investment
properties
|
10
|
-
|
(628)
|
(628)
|
-
|
(827)
|
(827)
|
|
Loss on changes in finance leases
|
|
-
|
-
|
-
|
-
|
(6)
|
(6)
|
|
Operating profit/(loss)
|
|
462
|
(689)
|
(227)
|
466
|
(1,035)
|
(569)
|
|
Finance income
|
7
|
11
|
1
|
12
|
11
|
23
|
34
|
|
Finance expense
|
7
|
(102)
|
(24)
|
(126)
|
(84)
|
(3)
|
(87)
|
|
Profit/(loss) before tax
|
|
371
|
(712)
|
(341)
|
393
|
(1,015)
|
(622)
|
|
Taxation
|
|
|
|
-
|
|
|
-
|
|
Loss for the year
|
|
|
|
(341)
|
|
|
(622)
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Shareholders of the parent
|
|
|
|
(319)
|
|
|
(619)
|
|
Non-controlling interests
|
|
|
|
(22)
|
|
|
(3)
|
|
|
|
|
|
(341)
|
|
|
(622)
|
|
|
|
|
|
|
|
|
|
|
Loss per share attributable to shareholders of
the parent:
|
|
|
|
|
|
|
|
|
Basic (loss)/earnings per share
|
4
|
|
|
(43.0)p
|
|
|
(83.6)p
|
|
Diluted (loss)/earnings per share
|
4
|
|
|
(43.0)p
|
|
|
(83.6)p
|
|
Statement of comprehensive income
|
|
Year ended
31 March 2024
|
Year ended
31 March 2023
|
|
|
|
|
Total
|
|
|
Total
|
|
|
|
|
£m
|
|
|
£m
|
|
Loss for the year
|
|
|
(341)
|
|
|
(622)
|
|
|
|
|
|
|
|
|
|
Items that may be subsequently reclassified to
the income statement:
|
|
|
|
|
|
|
|
Movement in cash flow hedges
|
|
|
(1)
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
Items that will not be subsequently
reclassified to the income statement:
|
|
|
|
|
|
|
|
Net re-measurement loss on defined benefit
pension scheme
|
|
|
(5)
|
|
|
(12)
|
|
Deferred tax credit on re-measurement
above
|
|
|
4
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss for the
year
|
|
|
(2)
|
|
|
(10)
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the
year
|
|
|
(343)
|
|
|
(632)
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
Shareholders of the parent
|
|
|
(321)
|
|
|
(629)
|
|
Non-controlling interests
|
|
|
(22)
|
|
|
(3)
|
|
|
|
|
(343)
|
|
|
(632)
|
|
Balance sheet
|
|
|
|
|
|
2024
|
2023
|
|
|
Notes
|
£m
|
£m
|
|
Non-current assets
|
|
|
|
|
Investment properties
|
10
|
9,330
|
9,658
|
|
Intangible assets
|
|
3
|
6
|
|
Net investment in finance leases
|
|
21
|
21
|
|
Investments in joint ventures
|
12
|
529
|
533
|
|
Investments in associates
|
|
-
|
3
|
|
Trade and other receivables
|
|
159
|
146
|
|
Other non-current assets
|
|
48
|
67
|
|
Total non-current assets
|
|
10,090
|
10,434
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Trading properties
|
11
|
100
|
118
|
|
Trade and other receivables
|
|
379
|
365
|
|
Monies held in restricted accounts and
deposits
|
15
|
6
|
4
|
|
Cash and cash equivalents
|
16
|
78
|
41
|
|
Other current assets
|
|
11
|
4
|
|
Total current assets
|
|
574
|
532
|
|
|
|
|
|
|
Total assets
|
|
10,664
|
10,966
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Borrowings
|
14
|
(975)
|
(315)
|
|
Trade and other payables
|
|
(348)
|
(306)
|
|
Provisions
|
|
(30)
|
-
|
|
Other current liabilities
|
|
-
|
(24)
|
|
Total current liabilities
|
|
(1,353)
|
(645)
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
Borrowings
|
14
|
(2,805)
|
(3,223)
|
|
Trade and other payables
|
|
(4)
|
(17)
|
|
Provisions
|
|
(42)
|
-
|
|
Other non-current liabilities
|
|
(13)
|
(9)
|
|
Total non-current liabilities
|
|
(2,864)
|
(3,249)
|
|
|
|
|
|
|
Total liabilities
|
|
(4,217)
|
(3,894)
|
|
|
|
|
|
|
Net assets
|
|
6,447
|
7,072
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Capital and reserves attributable to
shareholders
|
|
|
|
|
Ordinary shares
|
|
80
|
80
|
|
Share premium
|
|
319
|
318
|
|
Other reserves
|
|
23
|
13
|
|
Retained earnings
|
|
5,980
|
6,594
|
|
Equity
attributable to shareholders of the parent
|
|
6,402
|
7,005
|
|
Equity attributable to non-controlling
interests
|
|
45
|
67
|
|
Total equity
|
|
6,447
|
7,072
|
The financial statements on pages 28 to 49 were
approved by the Board of Directors on 16 May 2024 and were signed
on its behalf by:
|
Mark Allan
|
Vanessa Simms
|
|
Directors
|
|
|
Statement of changes in equity
|
|
Attributable to shareholders of the
parent
|
|
|
|
|
Ordinary shares
|
Share premium
|
Other reserves
|
Retained earnings
|
Total
|
Non-controlling interests
|
Total
equity
|
|
|
Notes
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
At 1 April 2022
|
|
80
|
317
|
9
|
7,511
|
7,917
|
74
|
7,991
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the financial
year
|
|
-
|
-
|
-
|
(629)
|
(629)
|
(3)
|
(632)
|
|
Transactions with shareholders of the
parent:
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
-
|
1
|
4
|
2
|
7
|
-
|
7
|
|
Dividends paid to shareholders of the
parent
|
8
|
-
|
-
|
-
|
(290)
|
(290)
|
-
|
(290)
|
|
Total transactions with shareholders of the
parent
|
|
-
|
1
|
4
|
(288)
|
(283)
|
-
|
(283)
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to non-controlling
interests
|
|
-
|
-
|
-
|
-
|
-
|
(4)
|
(4)
|
|
Total transactions with shareholders
|
|
-
|
1
|
4
|
(288)
|
(283)
|
(4)
|
(287)
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2023
|
|
80
|
318
|
13
|
6,594
|
7,005
|
67
|
7,072
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the financial
year
|
|
-
|
-
|
-
|
(321)
|
(321)
|
(22)
|
(343)
|
|
Transactions with shareholders of the
parent:
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
-
|
1
|
10
|
(2)
|
9
|
-
|
9
|
|
Dividends paid to shareholders of the
parent
|
8
|
-
|
-
|
-
|
(291)
|
(291)
|
-
|
(291)
|
|
Total transactions with shareholders of the
parent
|
|
-
|
1
|
10
|
(293)
|
(282)
|
-
|
(282)
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2024
|
|
80
|
319
|
23
|
5,980
|
6,402
|
45
|
6,447
|
|
|
|
|
|
|
|
|
|
| |
|
Statement of cash flows
|
|
|
|
|
|
2024
|
2023
|
|
|
Notes
|
£m
|
£m
|
|
Cash flows from operating activities
|
|
|
|
|
Net cash generated from operations
|
9
|
429
|
356
|
|
Interest received
|
|
24
|
16
|
|
Interest paid
|
|
(101)
|
(92)
|
|
Rents paid
|
|
(14)
|
(13)
|
|
Capital expenditure on trading
properties
|
|
(19)
|
(6)
|
|
Disposal of trading properties
|
|
18
|
18
|
|
Development income proceeds received
|
|
-
|
54
|
|
Other operating cash flows
|
|
1
|
9
|
|
Net cash inflow from operating
activities
|
9
|
338
|
342
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
Investment property development
expenditure
|
|
(202)
|
(253)
|
|
Other investment property related
expenditure
|
|
(126)
|
(102)
|
|
Acquisition of investment properties, net of
cash acquired
|
|
(137)
|
(94)
|
|
Disposal of investment properties
|
|
176
|
1,269
|
|
Cash distributions from joint
ventures
|
12
|
17
|
14
|
|
Net cash (outflow)/inflow from investing
activities
|
|
(272)
|
834
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
Net proceeds from new borrowings (net of
finance fees)
|
|
708
|
394
|
|
Repayment of borrowings
|
14
|
(427)
|
(1,407)
|
|
Net cash (outflow)/inflow from derivative
financial instruments
|
14
|
(18)
|
25
|
|
Dividends paid to shareholders of the
parent
|
14
|
(291)
|
(289)
|
|
Dividends paid to non-controlling
interests
|
8
|
-
|
(4)
|
|
Increase in monies held in restricted accounts
and deposits
|
|
(2)
|
-
|
|
Other financing cash flows
|
|
1
|
-
|
|
Net cash outflow from financing
activities
|
|
(29)
|
(1,281)
|
|
|
|
|
|
|
Increase/(decrease) in cash and cash
equivalents for the year
|
|
37
|
(105)
|
|
Cash and cash equivalents at the beginning of
the year
|
|
41
|
146
|
|
Cash and cash equivalents at the end of the
year
|
16
|
78
|
41
|
Notes to the financial statements
|
1. Basis of preparation and
consolidation
|
|
Basis of
preparation
These financial statements have been prepared
on a going concern basis and in accordance with UK adopted
international accounting standards (IFRSs and IFRICs), as applied
in accordance with the provisions of the Companies Act 2006. The
financial statements have been prepared in Pounds Sterling (rounded
to the nearest one million), which is the presentation currency of
the Group (Land Securities Group PLC and all its subsidiary
undertakings), and under the historical cost convention as modified
by the revaluation of investment property, financial assets at fair
value through profit or loss, derivative financial instruments and
pension assets.
The preparation of financial statements in
conformity with generally accepted accounting principles (GAAP)
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results ultimately may differ from those
estimates.
On 16 May 2024, the consolidated financial
statements of the Group and this preliminary announcement were
authorised for issue in accordance with a resolution of the
Directors and will be delivered to the Registrar of Companies
following the Group's Annual General Meeting. Statutory accounts
for the year ended 31 March 2023 have been filed unqualified and do
not contain any statement under Section 498(2) or Section 498(3) of
the Companies Act 2006. The annual financial information presented
in this preliminary announcement for the year ended 31 March 2024
is based on, and consistent with, the financial information in the
Group's audited financial statements for the year ended 31 March
2023. The audit report on these financial statements is unqualified
and did not contain a statement under Section 498(2) or 498(3) of
the Companies Act 2006. This preliminary announcement does not
constitute statutory financial statements of the Group within the
meaning of Section 435 of the Companies Act 2006. While the
information included in this preliminary announcement has been
prepared in accordance with the recognition and measurement
criteria of IFRS, this announcement does not itself contain
sufficient information to comply with IFRS.
A copy of the Group's Annual Report for the
year ended 31 March 2023 can be found on the website at
landsec.com/investors.
Going
concern
The impact of international and domestic
political and economic events over the course of the year has
resulted in the UK facing a prolonged period of high inflation,
rising interest rates and minimal GDP growth. Therefore, the
Directors have continued to place additional focus on the
appropriateness of adopting the going concern assumption in
preparing the financial statements for the year ended 31 March
2024. The Group's going concern assessment considers changes in the
Group's principal risks (see pages 23-25) 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 macro-economic
conditions, a deterioration in our ability to collect rent and
service charge from our customers and removes uncommitted capital
expenditure, acquisitions, disposals and developments.
The Group's key metrics from the mitigated
downside scenario as at the end of the going concern assessment
period, which covers the 16 months to 30 September 2025, are shown
below alongside the actual position at 31 March 2024.
|
Key metrics
|
|
|
Mitigated downside scenario
|
|
|
|
31 March 2024
|
30 September 2025
|
|
Security Group LTV
|
|
37.0%
|
42.8%
|
|
Adjusted net debt
|
|
£3,517m
|
£3,885m
|
|
EPRA net tangible assets
|
|
£6,398m
|
£5,559m
|
|
Available financial headroom
|
|
£1.9bn
|
£0.9bn
|
In our mitigated downside scenario, the Group
has sufficient cash reserves, with our Security Group LTV ratio
remaining less than 65% and interest cover above 1.45x, for a
period of 16 months from the date of authorisation of these
financial statements. Under this scenario, the Security Group's
asset values would need to fall by a further 34% from the
sensitised values forecasted at 30 September 2025 to be
non-compliant with the LTV covenant. This equates to a 43% fall in
the value of the Security Group's assets from the 31 March 2024
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 £198m in the full year ending 31 March
2025 and at least £232m in the full year ending 31 March 2026 for
interest cover to remain above 1.45x in the mitigated downside
scenario, which would ensure compliance with the Group's covenant
through to the end of the going concern assessment period. Security
Group earnings post year end 31 March 2024 are above the level
required to meet the interest cover covenant for the year ended 31
March 2025. The Directors do not anticipate a reduction in Security
Group earnings over the period ending 30 September 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 the
financial statements of the Group and parent for the year ended 31
March 2024.
Basis of consolidation and presentation of
results
The consolidated financial statements for the
year ended 31 March 2024 incorporate the financial statements of
the Company and all its subsidiary undertakings. Subsidiary
undertakings are those entities controlled by the Company. Control
exists where an entity is exposed to variable returns and has the
ability to affect those returns through its power over the
investee.
The results of subsidiaries and joint ventures
acquired or disposed of during the year are included from the
effective date of acquisition or to the effective date of disposal.
Accounting policies of subsidiaries and joint ventures which differ
from Group accounting policies are adjusted on
consolidation.
Where instruments in a subsidiary held by third
parties are redeemable at the option of the holder, these interests
are classified as a financial liability, called the redemption
liability. The liability is carried at fair value; the value is
reassessed at the balance sheet date and movements are recognised
in the income statement.
Where equity in a subsidiary is not
attributable, directly or indirectly, to the shareholders of the
parent, this is classified as a non-controlling interest. Total
comprehensive income or loss and the total equity of the Group are
attributed to the shareholders of the parent and to the
non-controlling interests according to their respective ownership
percentages.
Intra-group balances and any unrealised gains
and losses arising from intra-group transactions are eliminated in
preparing the consolidated financial statements. Unrealised gains
arising from transactions with joint ventures are eliminated to the
extent of the Group's interest in the joint venture concerned.
Unrealised losses are eliminated in the same way, but only to the
extent that there is no evidence of impairment.
Our property portfolio is a combination of
properties that are wholly owned by the Group, part owned through
joint arrangements and properties owned by the Group but where a
third party holds a non-controlling interest. Internally,
management review the results of the Group on a basis that adjusts
for these different forms of ownership to present a proportionate
share. The Combined Portfolio, with assets totalling £10.0bn, is an example of this
approach, reflecting the economic interest we have in our
properties regardless of our ownership structure. 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 (see note 10). We consider this presentation
provides further understanding to stakeholders of the activities
and performance of the Group, as it aggregates the results of all
of the Group's property interests which under IFRS are required to
be presented across a number of line items in the statutory
financial statements.
The same principle is applied to many of the
other measures we discuss and, accordingly, a number of our
financial measures include the results of our joint ventures and
subsidiaries on a proportionate basis. Measures that are described
as being presented on a proportionate basis include the Group's
share of joint ventures on a line-by-line basis and are adjusted to
exclude the non-owned elements of our subsidiaries. This is in
contrast to the Group's statutory financial statements, where the
Group's interest in joint ventures is presented as one line on the
income statement and balance sheet, and all subsidiaries are
consolidated at 100% with any non-owned element being adjusted as a
non-controlling interest or redemption liability, as appropriate.
Our joint operations are presented on a proportionate basis in all
financial measures.
EPRA earnings is the Group's measure of the
underlying pre-tax profit of the property rental business. EPRA
earnings excludes all items of a capital nature, such as valuation
movements and profits and losses on the disposal of investment
properties, as well as exceptional items. The Group believes that
EPRA earnings provides additional understanding of the Group's
operational performance to shareholders and other stakeholder
groups. A full definition of EPRA earnings is given in the
Glossary. The components of EPRA earnings are presented on a
proportionate basis in note 3. EPRA earnings is an alternative
performance measure.
|
2. Changes in accounting policies and
standards
|
|
The accounting policies used in these financial
statements are consistent with those applied in the last annual
financial statements, as amended where relevant to reflect the
adoption of new standards, amendments and interpretations which
became effective in the year as listed below:
- Amendments to IAS 1 and
IFRS Practice Statement 2 - Disclosure of accounting
policies
- Amendments to IAS 8 -
Definition of Accounting Estimates
- Amendments to IAS 12 -
Deferred tax related to assets and liabilities arising from a
single transaction
- Amendments to IAS 12 -
International tax reform - Pillar Two model rules
- IFRS 17 - Insurance
Contracts
There has been no material impact on the
financial statements of adopting any new standards, amendments and
interpretations.
Amendments to IFRS
A number of new standards, amendments to
standards and interpretations have been issued but are not yet
effective for the Group as listed below:
- Amendments to IAS 1 -
Classification of liabilities as current or non current
- Amendments to IAS 1 -
Non-current Liabilities with Covenants
- Amendments to IAS 7 and
IFRS 7 - Disclosures: Supplier finance arrangements
- Amendments to IFRS 10 and
IAS 28 - Sale or contribution of assets between an investor and its
associate or joint venture
- Amendments to IFRS 16 -
Lease liability in a sale and leaseback
- Amendments to IAS 21 - Lack
of exchangeability
- IFRS 18 - Presentation and
Disclosure in Financial Statements
-
The Group has yet to assess the full outcome of
these new standards, amendments and interpretations, however with
the exception of IFRS 18 these new standards, amendments and
interpretations are not expected to have a significant impact on
the Group's financial statements.
The Group's operations are all in the UK and
are managed across four operating segments, being Central London,
Major retail destinations (Major retail), Mixed-use urban
neighbourhoods (Mixed-use urban) and Subscale sectors.
The Central London segment includes all assets
geographically located within central London. Major retail
destinations includes all regional shopping centres and shops
outside London and our outlets. The Mixed-use urban segment
includes those assets where we see the most potential for capital
investment. Subscale sectors mainly includes assets that will not
be a focus for capital investment and consists of leisure and hotel
assets and retail parks.
Management has determined the Group's operating
segments based on the information reviewed by Senior Management to
make strategic decisions. The chief operating decision maker is the
Executive Leadership Team (ELT), comprising the Executive Directors
and the Managing Directors. The information presented to ELT
includes reports from all functions of the business as well as
strategy, financial planning, succession planning, organisational
development and Group-wide policies.
The Group's primary measure of underlying
profit before tax is EPRA earnings. However, Segment net rental
income is the lowest level to which the profit arising from the
ongoing operations of the Group is analysed between the four
segments. The administrative costs, which are predominantly staff
costs for centralised functions, are all treated as administrative
expenses and are not allocated to individual segments.
The Group manages its financing structure, with
the exception of joint ventures and non-wholly owned subsidiaries,
on a pooled basis. Individual joint ventures and non-wholly owned
subsidiaries may have specific financing arrangements in place.
Debt facilities and finance expenses, including those of joint
ventures, are managed centrally and are therefore not attributed to
a particular segment. Unallocated income and expenses are items
incurred centrally which are not directly attributable to one of
the segments.
All items in the segmental information note are
presented on a proportionate basis.
|
Segmental results
|
|
|
|
|
2024
|
2023(2)
|
|
EPRA earnings
|
Central London
|
Major retail
|
Mixed-use urban
|
Subscale sectors
|
Total
|
Central London
|
Major
retail
|
Mixed-use urban
|
Subscale sectors
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Rental income
|
294
|
188
|
58
|
112
|
652
|
313
|
179
|
58
|
107
|
657
|
|
Finance lease interest
|
-
|
-
|
-
|
1
|
1
|
-
|
-
|
-
|
2
|
2
|
|
Gross rental income (before rents
payable)
|
294
|
188
|
58
|
113
|
653
|
313
|
179
|
58
|
109
|
659
|
|
Rents payable(1)
|
(3)
|
(7)
|
(1)
|
(1)
|
(12)
|
(3)
|
(8)
|
(1)
|
-
|
(12)
|
|
Gross rental income (after rents
payable)
|
291
|
181
|
57
|
112
|
641
|
310
|
171
|
57
|
109
|
647
|
|
Service charge income
|
59
|
53
|
11
|
-
|
123
|
46
|
42
|
10
|
-
|
98
|
|
Service charge expense
|
(63)
|
(60)
|
(14)
|
(2)
|
(139)
|
(47)
|
(50)
|
(12)
|
(1)
|
(110)
|
|
Net service charge expense
|
(4)
|
(7)
|
(3)
|
(2)
|
(16)
|
(1)
|
(8)
|
(2)
|
(1)
|
(12)
|
|
Other property related income
|
20
|
11
|
4
|
3
|
38
|
15
|
10
|
3
|
3
|
31
|
|
Direct property expenditure
|
(43)
|
(42)
|
(16)
|
(18)
|
(119)
|
(34)
|
(44)
|
(14)
|
(16)
|
(108)
|
|
Movement in bad and doubtful debts
provision
|
(1)
|
8
|
-
|
(1)
|
6
|
(1)
|
3
|
1
|
-
|
3
|
|
Segment net rental income
|
263
|
151
|
42
|
94
|
550
|
289
|
132
|
45
|
95
|
561
|
|
Other income
|
|
|
|
|
1
|
|
|
|
|
3
|
|
Administrative expense
|
|
|
|
|
(74)
|
|
|
|
|
(82)
|
|
Depreciation
|
|
|
|
|
(4)
|
|
|
|
|
(5)
|
|
EPRA earnings before interest
|
|
|
|
|
473
|
|
|
|
|
477
|
|
Finance income
|
|
|
|
|
11
|
|
|
|
|
11
|
|
Finance expense
|
|
|
|
|
(102)
|
|
|
|
|
(84)
|
|
Joint venture net finance expense
|
|
|
|
|
(11)
|
|
|
|
|
(11)
|
|
EPRA earnings attributable to shareholders of
the parent
|
|
|
|
|
371
|
|
|
|
|
393
|
1. Included within rents payable is lease
interest payable of £4m
(2023: £4m) across the four segments.
2. A reconciliation from the Group income
statement to the information presented in the segmental results
table for the year ended 31 March 2023 is included in table
27.
The following table reconciles the
Group's income statement to the segmental results.
Reconciliation of segmental information note to
statutory reporting
|
|
|
|
Year ended 31 March 2024
|
|
|
Group income statement
£m
|
Joint
ventures(1)
£m
|
Adjustment for non-wholly owned
subsidiaries(2)
£m
|
Total
£m
|
EPRA earnings
£m
|
|
Capital and other items
£m
|
|
Rental income
|
622
|
38
|
(8)
|
652
|
652
|
|
-
|
|
Finance lease interest
|
1
|
-
|
-
|
1
|
1
|
|
-
|
|
Gross rental income (before rents
payable)
|
623
|
38
|
(8)
|
653
|
653
|
|
-
|
|
Rents payable
|
(11)
|
(1)
|
-
|
(12)
|
(12)
|
|
-
|
|
Gross rental income (after rents
payable)
|
612
|
37
|
(8)
|
641
|
641
|
|
-
|
|
Service charge income
|
117
|
8
|
(2)
|
123
|
123
|
|
-
|
|
Service charge expense
|
(133)
|
(9)
|
3
|
(139)
|
(139)
|
|
-
|
|
Net service charge expense
|
(16)
|
(1)
|
1
|
(16)
|
(16)
|
|
-
|
|
Other property related income
|
35
|
3
|
-
|
38
|
38
|
|
-
|
|
Direct property expenditure
|
(114)
|
(6)
|
1
|
(119)
|
(119)
|
|
-
|
|
Movement in bad and doubtful debts
provision
|
6
|
-
|
-
|
6
|
6
|
|
-
|
|
Segment net rental income
|
523
|
33
|
(6)
|
550
|
550
|
|
-
|
|
Other income
|
1
|
-
|
-
|
1
|
1
|
|
-
|
|
Administrative expenses
|
(73)
|
(1)
|
-
|
(74)
|
(74)
|
|
-
|
|
Depreciation, including amortisation of
software
|
(4)
|
-
|
-
|
(4)
|
(4)
|
|
-
|
|
EPRA earnings before interest
|
447
|
32
|
(6)
|
473
|
473
|
|
-
|
|
Share of post-tax profit/(loss) from joint
ventures
|
2
|
(2)
|
-
|
-
|
-
|
|
-
|
|
Loss on disposal of investment
properties(3)
|
(16)
|
-
|
-
|
(16)
|
-
|
|
(16)
|
|
Net deficit on revaluation of investment
properties
|
(628)
|
(19)
|
22
|
(625)
|
-
|
|
(625)
|
|
Net development contract and transaction
expenditure
|
(18)
|
-
|
-
|
(18)
|
-
|
|
(18)
|
|
Fair value gain on remeasurement of
investment
|
3
|
-
|
-
|
3
|
-
|
|
3
|
|
Impairment of amounts due from joint
ventures
|
(2)
|
-
|
-
|
(2)
|
-
|
|
(2)
|
|
Impairment of goodwill
|
(1)
|
-
|
-
|
(1)
|
-
|
|
(1)
|
|
Impairment of trading properties
|
(11)
|
-
|
-
|
(11)
|
-
|
|
(11)
|
|
Depreciation
|
(2)
|
-
|
-
|
(2)
|
-
|
|
(2)
|
|
Other costs
|
(1)
|
-
|
-
|
(1)
|
-
|
|
(1)
|
|
Operating (loss)/profit
|
(227)
|
11
|
16
|
(200)
|
473
|
|
(673)
|
|
Finance income
|
12
|
-
|
-
|
12
|
11
|
|
1
|
|
Finance expense
|
(126)
|
(11)
|
6
|
(131)
|
(113)
|
|
(18)
|
|
(Loss)/profit before tax
|
(341)
|
-
|
22
|
(319)
|
371
|
|
(690)
|
|
Taxation
|
-
|
-
|
-
|
-
|
|
|
|
|
(Loss)/profit for the year
|
(341)
|
-
|
22
|
(319)
|
|
|
|
1. Reallocation of the share of post-tax profit
from joint ventures reported in the Group income statement to the
individual line items reported in the segmental results
table.
2. Removal of the non-wholly owned share of
results of the Group's subsidiaries. The non-wholly owned
subsidiaries are consolidated at 100% in the Group's income
statement, but only the Group's share is included in EPRA earnings
reported in the segmental results table. 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.
3. Included in the loss on disposal of
investment properties is a £2m charge (2023: £9m charge) related
to the provision for fire safety remediation works on properties no
longer owned by the Group but for which the Group is responsible
for remediating under the Building Safety Act 2022.
In the tables below, we present earnings per
share attributable to shareholders of the parent, calculated in
accordance with IFRS, and net assets per share attributable to
shareholders of the parent together with certain measures defined
by the European Public Real Estate Association (EPRA), which have
been included to assist comparison between European property
companies. Three of the Group's key financial performance measures
are EPRA earnings per share, EPRA Net Tangible Assets per share and
Total return on equity. Refer to table 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 year to year.
|
Earnings per share
|
Year ended
31 March 2024
|
Year ended
31 March 2023
|
|
|
Loss for the year
|
EPRA earnings
|
Loss for the year
|
EPRA earnings
|
|
|
£m
|
£m
|
£m
|
£m
|
|
Loss attributable to shareholders of the
parent
|
(319)
|
(319)
|
(619)
|
(619)
|
|
Valuation and loss on disposals
|
-
|
650
|
-
|
1,016
|
|
Net finance expense/(income) (excluded from
EPRA earnings)
|
-
|
20
|
-
|
(21)
|
|
Impairment of goodwill
|
-
|
1
|
-
|
5
|
|
Other
|
-
|
19
|
-
|
12
|
|
(Loss)/profit used in per share
calculation
|
(319)
|
371
|
(619)
|
393
|
|
|
|
|
|
|
|
|
IFRS
|
EPRA
|
IFRS
|
EPRA(2)
|
|
Basic (loss)/earnings per share
|
(43.0)p
|
50.1p
|
(83.6)p
|
53.1p
|
|
Diluted (loss)/earnings per share(1)
|
(43.0)p
|
50.1p
|
(83.6)p
|
53.1p
|
1. In the year ended 31 March 2024, 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.
2. Underlying EPRA EPS excluding the benefit of
increased surrender premiums in the prior year was
50.1p.
|
Net assets per share
|
31 March 2024
|
31 March 2023
|
|
|
Net assets
|
EPRA NDV
|
EPRA NTA
|
Net assets
|
EPRA NDV
|
EPRA NTA
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Net assets attributable to shareholders of the
parent
|
6,402
|
6,402
|
6,402
|
7,005
|
7,005
|
7,005
|
|
Shortfall of fair value over net investment in
finance leases book value
|
-
|
(5)
|
(5)
|
-
|
(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
|
-
|
-
|
(22)
|
-
|
-
|
(42)
|
|
Excess of fair value of trading properties over
book value
|
-
|
25
|
25
|
-
|
12
|
12
|
|
Shortfall of fair value of debt over book value
(note 14)
|
-
|
313
|
-
|
-
|
324
|
-
|
|
Net assets used in per share
calculation
|
6,402
|
6,735
|
6,398
|
7,005
|
7,334
|
6,967
|
|
|
|
|
|
|
|
|
|
|
IFRS
|
EPRA NDV
|
EPRA NTA
|
IFRS
|
EPRA NDV
|
EPRA NTA
|
|
Net assets per share
|
863p
|
n/a
|
n/a
|
945p
|
n/a
|
n/a
|
|
Diluted net assets per share
|
859p
|
904p
|
859p
|
942p
|
986p
|
936p
|
|
Number of shares
|
|
2024
|
|
2023
|
|
|
Weighted average
|
31 March
|
Weighted average
|
31 March
|
|
|
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
|
3
|
4
|
3
|
|
Number of shares - diluted
|
744
|
745
|
744
|
744
|
Total return on equity is calculated as the
cash dividends per share paid in the year plus the change in EPRA
NTA per share, divided by the opening EPRA NTA per share. We
consider this to be a useful measure for shareholders as it gives
an indication of the total return on equity over the
year.
|
Total return on equity based on EPRA
NTA
|
Year ended
31 March 2024
|
Year ended
31 March 2023
|
|
|
pence
|
pence
|
|
Decrease in EPRA NTA per share
|
(77)
|
(127)
|
|
Dividend paid per share in the year (note
8)
|
39
|
39
|
|
Total return (a)
|
(38)
|
(88)
|
|
EPRA NTA per share at the beginning of the year
(b)
|
936
|
1,063
|
|
Total return on equity (a/b)
|
(4.0)%
|
(8.3)%
|
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 or transactions and the non-owned element of
the Group's subsidiaries which are presented in the 'Capital and
other items' column.
|
|
2024
|
2023
|
|
|
EPRA earnings
|
Capital and other items
|
Total
|
EPRA earnings
|
Capital and other items
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Rental income (excluding adjustment for lease
incentives)
|
598
|
8
|
606
|
606
|
8
|
614
|
|
Adjustment for lease incentives
|
16
|
-
|
16
|
(2)
|
-
|
(2)
|
|
Rental income
|
614
|
8
|
622
|
604
|
8
|
612
|
|
Service charge income
|
115
|
2
|
117
|
88
|
3
|
91
|
|
Trading property sales proceeds
|
-
|
26
|
26
|
-
|
22
|
22
|
|
Other property related income
|
35
|
-
|
35
|
29
|
-
|
29
|
|
Finance lease interest
|
1
|
-
|
1
|
2
|
-
|
2
|
|
Development contract and transaction
income
|
-
|
22
|
22
|
-
|
32
|
32
|
|
Other income
|
1
|
-
|
1
|
3
|
-
|
3
|
|
Revenue per the income statement
|
766
|
58
|
824
|
726
|
65
|
791
|
The following table reconciles revenue per the
income statement to the individual components of revenue presented
in note 3.
|
|
2024
|
2023
|
|
|
Group
|
Joint ventures
|
Adjustment for non-wholly owned
subsidiaries
|
Total
|
Group
|
Joint
ventures
|
Adjustment
for non- wholly owned
subsidiaries
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Rental income
|
622
|
38
|
(8)
|
652
|
612
|
53
|
(8)
|
657
|
|
Service charge income
|
117
|
8
|
(2)
|
123
|
91
|
10
|
(3)
|
98
|
|
Other property related income
|
35
|
3
|
-
|
38
|
29
|
2
|
-
|
31
|
|
Finance lease interest
|
1
|
-
|
-
|
1
|
2
|
-
|
-
|
2
|
|
Other income
|
1
|
-
|
-
|
1
|
3
|
-
|
-
|
3
|
|
Revenue in the segmental information
note
|
776
|
49
|
(10)
|
815
|
737
|
65
|
(11)
|
791
|
|
Development contract and transaction
income
|
22
|
-
|
-
|
22
|
32
|
-
|
-
|
32
|
|
Trading property sales proceeds
|
26
|
-
|
-
|
26
|
22
|
-
|
-
|
22
|
|
Revenue including Capital and other
items
|
824
|
49
|
(10)
|
863
|
791
|
65
|
(11)
|
845
|
All costs are classified within the 'EPRA
earnings' column of the income statement, with the exception of the
cost of sale of trading properties, costs arising on development
contracts or transactions, amortisation and impairments of
intangible assets, and 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.
|
|
2024
|
2023
|
|
|
EPRA earnings
|
Capital and other items
|
Total
|
EPRA earnings
|
Capital and other items
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Rents payable
|
11
|
-
|
11
|
10
|
-
|
10
|
|
Service charge expense
|
130
|
3
|
133
|
98
|
2
|
100
|
|
Direct property expenditure
|
113
|
1
|
114
|
98
|
2
|
100
|
|
Movement in bad and doubtful debts
provision
|
(6)
|
-
|
(6)
|
(2)
|
-
|
(2)
|
|
Administrative expenses
|
73
|
-
|
73
|
80
|
-
|
80
|
|
Impairment of trading properties
|
-
|
11
|
11
|
-
|
19
|
19
|
|
Cost of trading property disposals
|
-
|
26
|
26
|
-
|
21
|
21
|
|
Development contract and transaction
expenditure
|
-
|
40
|
40
|
-
|
41
|
41
|
|
Depreciation, including amortisation of
software
|
4
|
2
|
6
|
5
|
3
|
8
|
|
Impairment of amounts due from joint
ventures
|
-
|
2
|
2
|
-
|
-
|
-
|
|
Impairment of goodwill
|
-
|
1
|
1
|
-
|
5
|
5
|
|
Fair value gain on remeasurement of
investment
|
-
|
(3)
|
(3)
|
-
|
-
|
-
|
|
Other costs
|
-
|
1
|
1
|
-
|
-
|
-
|
|
Total costs per the income statement
|
325
|
84
|
409
|
289
|
93
|
382
|
The following table reconciles costs per the
income statement to the individual components of costs presented in
note 3.
|
|
2024
|
2023
|
|
|
Group
|
Joint ventures
|
Adjustment for non-wholly owned
subsidiaries
|
Total
|
Group
|
Joint
ventures
|
Adjustment
for non-wholly owned subsidiaries
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Rents payable
|
11
|
1
|
-
|
12
|
10
|
2
|
-
|
12
|
|
Service charge expense
|
133
|
9
|
(3)
|
139
|
100
|
12
|
(2)
|
110
|
|
Direct property expenditure
|
114
|
6
|
(1)
|
119
|
100
|
10
|
(2)
|
108
|
|
Administrative expenses
|
73
|
1
|
-
|
74
|
80
|
2
|
-
|
82
|
|
Depreciation, including amortisation of
software
|
4
|
-
|
-
|
4
|
5
|
-
|
-
|
5
|
|
Movement in bad and doubtful debts
provision
|
(6)
|
-
|
-
|
(6)
|
(2)
|
(1)
|
-
|
(3)
|
|
Costs in the segmental information
note
|
329
|
17
|
(4)
|
342
|
293
|
25
|
(4)
|
314
|
|
Impairment of trading properties
|
11
|
-
|
-
|
11
|
19
|
-
|
-
|
19
|
|
Cost of trading property disposals
|
26
|
-
|
-
|
26
|
21
|
-
|
-
|
21
|
|
Development contract and transaction
expenditure
|
40
|
-
|
-
|
40
|
41
|
-
|
-
|
41
|
|
Depreciation
|
2
|
-
|
-
|
2
|
3
|
-
|
-
|
3
|
|
Impairment of amounts due from joint
ventures
|
2
|
-
|
-
|
2
|
-
|
-
|
-
|
-
|
|
Impairment of goodwill
|
1
|
-
|
-
|
1
|
5
|
-
|
-
|
5
|
|
Fair value gain on remeasurement of
investment
|
(3)
|
-
|
-
|
(3)
|
-
|
-
|
-
|
-
|
|
Other costs
|
1
|
-
|
-
|
1
|
-
|
-
|
-
|
-
|
|
Costs including Capital and other
items
|
409
|
17
|
(4)
|
422
|
382
|
25
|
(4)
|
403
|
|
7. Net finance expense
|
|
|
|
|
2024
|
2023
|
|
|
EPRA earnings
|
Capital and other items
|
Total
|
EPRA earnings
|
Capital and other items
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Finance income
|
|
|
|
|
|
|
|
Interest receivable from joint
ventures
|
11
|
-
|
11
|
11
|
-
|
11
|
|
Fair value movement on interest-rate
swaps
|
-
|
-
|
-
|
-
|
23
|
23
|
|
Other interest receivable
|
-
|
1
|
1
|
-
|
-
|
-
|
|
|
11
|
1
|
12
|
11
|
23
|
34
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
|
|
|
|
|
|
Bond and debenture debt
|
(85)
|
-
|
(85)
|
(68)
|
-
|
(68)
|
|
Bank and other short-term borrowings
|
(35)
|
(2)
|
(37)
|
(38)
|
(2)
|
(40)
|
|
Fair value movement on interest-rate
swaps
|
-
|
(22)
|
(22)
|
-
|
-
|
-
|
|
Other interest payable
|
(1)
|
-
|
(1)
|
-
|
(1)
|
(1)
|
|
|
(121)
|
(24)
|
(145)
|
(106)
|
(3)
|
(109)
|
|
Interest capitalised in relation to properties
under development
|
19
|
-
|
19
|
22
|
-
|
22
|
|
|
(102)
|
(24)
|
(126)
|
(84)
|
(3)
|
(87)
|
|
|
|
|
|
|
|
|
|
Net finance (expense)/income
|
(91)
|
(23)
|
(114)
|
(73)
|
20
|
(53)
|
|
Joint venture net finance expense
|
(11)
|
-
|
-
|
(11)
|
-
|
-
|
|
Net finance expense included in EPRA
earnings
|
(102)
|
-
|
-
|
(84)
|
-
|
-
|
Lease interest payable of £4m (2023: £4m) is included within rents payable
as detailed in note 3.
|
8. Dividends
|
|
|
|
Dividends paid
|
|
Year ended 31 March
|
|
|
|
Pence per share
|
2024
|
2023
|
|
|
Payment date
|
PID
|
Non-PID
|
Total
|
£m
|
£m
|
|
For the year ended 31 March 2022:
|
|
|
|
|
|
|
|
Third interim
|
7 April 2022
|
8.50
|
-
|
8.50
|
|
63
|
|
Final
|
22 July 2022
|
13.00
|
-
|
13.00
|
|
96
|
|
For the year ended 31 March 2023:
|
|
|
|
|
|
|
|
First interim
|
7 October 2022
|
8.60
|
-
|
8.60
|
|
64
|
|
Second interim
|
3 January 2023
|
9.00
|
-
|
9.00
|
|
67
|
|
Third interim
|
6 April 2023
|
9.00
|
-
|
9.00
|
67
|
|
|
Final
|
21 July 2023
|
12.00
|
-
|
12.00
|
89
|
|
|
For the year ended 31 March 2024:
|
|
|
|
|
|
|
|
First interim
|
6 October 2023
|
9.00
|
-
|
9.00
|
67
|
|
|
Second interim
|
2 January 2024
|
9.20
|
-
|
9.20
|
68
|
|
|
Gross dividends
|
|
|
|
|
291
|
290
|
|
|
|
|
|
|
|
|
|
Dividends in the statement of changes in
equity
|
|
|
|
|
291
|
290
|
|
Timing difference on payment of withholding
tax
|
|
|
|
|
-
|
(1)
|
|
Dividends in the statement of cash
flows
|
|
|
|
|
291
|
289
|
|
|
|
|
|
|
|
| |
The third quarterly interim dividend of
9.3p per ordinary share, or
£69m in total (2023: 9.0p or £67m in
total), was paid on 12 April 2024 as a Property Income Distribution
(PID). The Board has recommended a final dividend for the year
ended 31 March 2024 of 12.1p
per ordinary share (2023: 12.0p) to be paid as a PID. This
final dividend will result in a further estimated distribution
of £90m (2023: £90m). Subject
to shareholders' approval at the Annual General Meeting, the final
dividend will be paid on 26 July 2024 to shareholders registered at
the close of business on 14 June 2024.
The total dividend paid and recommended in
respect of the year ended 31 March 2024 is 39.6p per ordinary share (2023: 38.6p) resulting
in a total estimated distribution of £294m (2023: £288m).
The first quarterly dividend for the year
ending 31 March 2025 will be paid in October 2024 and will be
announced in due course.
A Dividend Reinvestment Plan (DRIP) has been
available in respect of all dividends paid during the year. The
last day for DRIP elections for the final dividend is close of
business on 28 June 2024.
|
9. Net cash generated from
operations
|
|
|
|
|
|
Reconciliation of operating loss to net cash
generated from operations
|
|
|
|
|
2024
|
2023
|
|
|
|
£m
|
£m
|
|
|
|
|
|
|
|
Operating loss
|
(227)
|
(569)
|
|
|
|
|
|
|
|
Adjustments for:
|
|
|
|
|
Net deficit on revaluation of investment
properties
|
628
|
827
|
|
|
Loss on changes in finance leases
|
-
|
6
|
|
|
Profit on disposal of trading
properties
|
-
|
(1)
|
|
|
Loss on disposal of investment
properties
|
16
|
144
|
|
|
Share of (profit)/loss from joint
ventures
|
(2)
|
1
|
|
|
Share-based payment charge
|
8
|
6
|
|
|
Impairment of goodwill
|
1
|
5
|
|
|
Impairment of amounts due from joint
ventures
|
2
|
-
|
|
|
Fair value gain on remeasurement of
investment
|
(3)
|
-
|
|
|
Non-cash development contract and transaction
expenditure
|
26
|
-
|
|
|
Rents payable
|
11
|
10
|
|
|
Depreciation and amortisation
|
4
|
5
|
|
|
Impairment of trading properties
|
11
|
19
|
|
|
|
475
|
453
|
|
|
Changes in working capital:
|
|
|
|
|
Increase in receivables
|
(32)
|
(17)
|
|
|
Decrease in payables and provisions
|
(14)
|
(80)
|
|
|
Net cash generated from operations
|
429
|
356
|
|
|
Reconciliation to adjusted net cash inflow from
operating activities
|
2024
|
2023
|
|
|
£m
|
£m
|
|
Net cash inflow from operating
activities
|
338
|
342
|
|
Joint ventures net cash inflow from operating
activities
|
15
|
17
|
|
Adjusted net cash inflow from operating
activities(1)
|
353
|
359
|
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
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
£m
|
£m
|
|
Net book value at the beginning of the
year
|
|
9,658
|
11,207
|
|
Transfer from joint venture
|
|
-
|
23
|
|
Acquisitions of investment
properties
|
|
144
|
218
|
|
Capital expenditure
|
|
374
|
356
|
|
Capitalised interest
|
|
19
|
22
|
|
Net movement in head leases
capitalised(1)
|
|
(30)
|
(16)
|
|
Disposals(2)
|
|
(207)
|
(1,319)
|
|
Net deficit on revaluation of investment
properties
|
|
(628)
|
(827)
|
|
Transfers to trading properties
|
|
-
|
(6)
|
|
Net book value at the end of the
year
|
|
9,330
|
9,658
|
1. See note 14 for details of the amounts
payable under head leases and note 3 for details of the rents
payable in the income statement.
2. Includes impact of disposals of
finance leases.
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.
|
|
2024
|
2023
|
|
|
Group
(excl. joint ventures)
|
Joint ventures(1)
|
Adjustment for non-wholly owned
subsidiaries
|
Combined Portfolio
|
Group
(excl. joint ventures)
|
Joint
ventures(1)
|
Adjustment
for non-
wholly owned subsidiaries
|
Combined Portfolio
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Market value
|
9,465
|
616
|
(118)
|
9,963
|
9,743
|
635
|
(139)
|
10,239
|
|
Less: properties treated as finance
leases
|
(18)
|
-
|
-
|
(18)
|
(17)
|
-
|
-
|
(17)
|
|
Plus: head leases capitalised
|
77
|
1
|
-
|
78
|
107
|
1
|
-
|
108
|
|
Less: tenant lease incentives
|
(194)
|
(32)
|
-
|
(226)
|
(175)
|
(35)
|
-
|
(210)
|
|
Net book value
|
9,330
|
585
|
(118)
|
9,797
|
9,658
|
601
|
(139)
|
10,120
|
|
|
|
|
|
|
|
|
|
|
|
Net (deficit)/surplus on revaluation of
investment properties
|
(628)
|
(19)
|
22
|
(625)
|
(827)
|
(30)
|
9
|
(848)
|
1. Refer to note 12 for a breakdown
of this amount by entity.
The net book value of leasehold
properties where head leases have been capitalised is
£1,604m (2023:
£1,723m).
Investment properties include
capitalised interest of £290m
(2023: £271m). The average rate of interest
capitalisation for the year is 4.8%
(2023: 3.0%). The gross historical cost of
investment properties is £8,502m
(2023: £8,280m).
|
11. Trading properties
|
|
|
|
|
|
Development land and infrastructure
|
Residential
|
Total
|
|
|
£m
|
£m
|
£m
|
|
At 1 April 2022
|
128
|
17
|
145
|
|
Transfer from investment properties
|
6
|
-
|
6
|
|
Capital expenditure
|
6
|
(3)
|
3
|
|
Disposals
|
(17)
|
-
|
(17)
|
|
(Impairment)/reversal of impairment
|
(25)
|
6
|
(19)
|
|
At 31 March 2023
|
98
|
20
|
118
|
|
Capital expenditure
|
6
|
7
|
13
|
|
Capitalised interest
|
-
|
1
|
1
|
|
Disposals
|
(21)
|
-
|
(21)
|
|
Impairment
|
(11)
|
-
|
(11)
|
|
At 31 March 2024
|
72
|
28
|
100
|
The cumulative impairment provision at 31 March
2024 in respect of Development land and infrastructure was
£36m (2023: £25m); and in respect of
Residential was £nil (2023:
£nil).
The Group's principal joint arrangements are
described below:
|
Joint ventures
|
Percentage owned & voting
rights(1)
|
Business
segment
|
Year end date(2)
|
Joint venture partner
|
|
Held at 31 March 2024
|
|
|
|
|
|
|
Nova, Victoria(3)
|
50%
|
Central London
|
31 March
|
Suntec Real Estate Investment Trust
|
|
|
Southside Limited Partnership
|
50%
|
Major retail
|
31 March
|
Invesco Real Estate European Fund
|
|
|
Westgate Oxford Alliance Limited
Partnership
|
50%
|
Major retail, Subscale sectors
|
31 March
|
The Crown Estate Commissioners
|
|
|
Harvest(4)
|
50%
|
Subscale sectors
|
31 March
|
J Sainsbury plc
|
|
|
The Ebbsfleet Limited
Partnership(6)
|
50%
|
Subscale sectors
|
31 March
|
Ebbsfleet Property Limited
|
|
|
West India Quay Unit
Trust(6)
|
50%
|
Subscale sectors
|
31 March
|
Schroder UK Real Estate Fund
|
|
|
Mayfield(5)(6)
|
50%
|
Mixed-use urban
|
31 March
|
LCR Limited, Manchester City Council, Transport
for Greater Manchester
|
|
Curzon Park Limited(6)
|
50%
|
Subscale sectors
|
31 March
|
Derwent Developments (Curzon)
Limited
|
|
Plus X Holdings
Limited(6)
|
50%
|
Subscale sectors
|
31 March
|
Paul David Rostas, Matthew Edmund
Hunter
|
|
Landmark Court Partnership
Limited(6)
|
51%
|
Central London
|
31 March
|
TTL Landmark Court Properties
Limited
|
|
Opportunities for Sittingbourne
Limited(6)
|
50%
|
Mixed-use urban
|
31 March
|
Swale Borough Council
|
|
Cathedral (Movement, Greenwich)
LLP(6)
|
52%
|
Mixed-use urban
|
31 March
|
Mr Richard Upton
|
|
Circus Street Developments
Limited(6)
|
50%
|
Mixed-use urban
|
31 March
|
High Wire Brighton Limited
|
|
Joint operation
|
Ownership interest
|
Business
segment
|
Year end date(3)
|
Joint operation partners
|
|
|
Held at 31 March 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 year and reporting date.
3. Nova, Victoria includes the Nova Limited
Partnership, Nova Residential Limited Partnership, Nova GP Limited,
Nova Business Manager Limited, Nova Residential (GP) Limited, Nova
Residential Intermediate Limited, Nova Estate Management Company
Limited, Nova Nominee 1 Limited and Nova Nominee 2
Limited.
4. Harvest includes Harvest 2 Limited
Partnership, Harvest Development Management Limited, Harvest 2
Selly Oak Limited, Harvest 2 GP Limited and Harvest GP
Limited.
5. Mayfield includes Mayfield Development
Partnership LP and Mayfield Development (General Partner)
Limited.
6. Included within Other in subsequent
tables.
All of the Group's joint arrangements listed
above have their principal place of business in the United Kingdom.
All of the Group's principal joint arrangements own and operate
investment property, with the exception of:
- The Ebbsfleet Limited
Partnership and Plus X Holdings Limited, which are holding
companies;
- Harvest, which is engaged
in long-term development contracts; and
- Curzon Park Limited,
Landmark Court Partnership Limited, Opportunities for Sittingbourne
Limited and Circus Street Developments Limited, which are companies
continuing their business of property development.
The activities of all the Group's principal
joint arrangements are therefore strategically important to the
business activities of the Group.
All joint ventures listed above are registered
in England and Wales with the exception of Southside Limited
Partnership and West India Quay Unit Trust which are registered in
Jersey.
|
Joint ventures
|
|
|
|
Year ended 31 March 2024
|
|
|
Nova,
Victoria
|
Southside Limited Partnership
|
Westgate Oxford
Alliance Partnership
|
Other
|
Total
|
Total
|
|
|
Comprehensive income statement
|
100%
|
100%
|
100%
|
100%
|
100%
|
Group share
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Revenue(1)
|
49
|
11
|
35
|
5
|
100
|
49
|
|
|
|
|
|
|
|
|
|
|
|
Gross rental income (after rents
payable)
|
34
|
11
|
26
|
5
|
76
|
37
|
|
|
|
|
|
|
|
|
|
|
|
Net rental income
|
34
|
10
|
22
|
1
|
67
|
33
|
|
|
|
|
|
|
|
|
|
|
|
EPRA earnings before interest
|
32
|
9
|
21
|
1
|
63
|
32
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
(16)
|
(6)
|
-
|
-
|
(22)
|
(11)
|
|
|
Net finance expense
|
(16)
|
(6)
|
-
|
-
|
(22)
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
EPRA earnings
|
16
|
3
|
21
|
1
|
41
|
21
|
|
|
|
|
|
|
|
|
|
|
|
Capital and other items
|
|
|
|
|
|
|
|
|
Net deficit on revaluation of investment
properties
|
(24)
|
(3)
|
(1)
|
(9)
|
(37)
|
(19)
|
|
|
(Loss)/profit before tax
|
(8)
|
-
|
20
|
(8)
|
4
|
2
|
|
|
Post-tax (loss)/profit
|
(8)
|
-
|
20
|
(8)
|
4
|
2
|
|
|
Total comprehensive (loss)/income
|
(8)
|
-
|
20
|
(8)
|
4
|
2
|
|
|
|
|
|
|
|
|
|
|
|
Group share of (loss)/profit before
tax
|
(4)
|
-
|
10
|
(4)
|
2
|
|
|
|
Group share of post-tax
(loss)/profit
|
(4)
|
-
|
10
|
(4)
|
2
|
|
|
|
Group share of total comprehensive
(loss)/income
|
(4)
|
-
|
10
|
(4)
|
2
|
|
|
|
Joint ventures
|
Year ended 31 March 2023
|
|
|
Nova,
Victoria
|
Southside Limited
Partnership
|
St. David's Limited
Partnership
|
Westgate
Oxford
Alliance Partnership
|
Other
|
Total
|
Total
|
|
Comprehensive income statement
|
100%
|
100%
|
100%
|
100%
|
100%
|
100%
|
Group share
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
Revenue(1)
|
49
|
10
|
33
|
34
|
4
|
130
|
65
|
|
|
|
|
|
|
|
|
|
|
Gross rental income (after rents
payable)
|
36
|
10
|
25
|
27
|
4
|
102
|
51
|
|
|
|
|
|
|
|
|
|
|
Net rental income
|
36
|
7
|
16
|
22
|
2
|
83
|
42
|
|
|
|
|
|
|
|
|
|
|
EPRA earnings before interest
|
35
|
6
|
15
|
22
|
2
|
80
|
40
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
(17)
|
(6)
|
-
|
-
|
-
|
(23)
|
(11)
|
|
Net finance expense
|
(17)
|
(6)
|
-
|
-
|
-
|
(23)
|
(11)
|
|
|
|
|
|
|
|
|
|
|
EPRA earnings
|
18
|
-
|
15
|
22
|
2
|
57
|
29
|
|
|
|
|
|
|
|
|
|
|
Capital and other items
|
|
|
|
|
|
|
|
|
Net (deficit)/surplus on revaluation of
investment properties(2)
|
(67)
|
1
|
6
|
(8)
|
8
|
(60)
|
(30)
|
|
(Loss)/profit before tax(2)
|
(49)
|
1
|
21
|
14
|
10
|
(3)
|
(1)
|
|
Post-tax (loss)/profit(2)
|
(49)
|
1
|
21
|
14
|
10
|
(3)
|
(1)
|
|
Total comprehensive (loss)/income(2)
|
(49)
|
1
|
21
|
14
|
10
|
(3)
|
(1)
|
|
|
|
|
|
|
|
|
|
|
Group share of (loss)/profit before
tax(2)
|
(24)
|
-
|
10
|
7
|
6
|
(1)
|
|
|
Group share of post-tax
(loss)/profit(2)
|
(24)
|
-
|
10
|
7
|
6
|
(1)
|
|
|
Group share of total comprehensive
(loss)/income(2)
|
(24)
|
-
|
10
|
7
|
6
|
(1)
|
|
1. Revenue includes gross rental income (before
rents payable), service charge income, other property related
income, trading properties disposal proceeds
and income from long-term development contracts.
2. On 24 March 2023 the Group acquired the
remaining 50% interest in St David's Limited Partnership. Results
from its operations prior to that date are included as share of
profit or loss from joint ventures.
|
Joint ventures
|
|
|
|
31 March 2024
|
|
|
Nova, Victoria
|
Southside
Limited
Partnership
|
Westgate
Oxford
Alliance
Partnership
|
Other
|
Total
|
Total
|
|
|
Balance sheet
|
100%
|
100%
|
100%
|
100%
|
100%
|
Group share
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
Investment properties(1)
|
727
|
130
|
223
|
91
|
1,171
|
585
|
|
|
Non-current assets
|
727
|
130
|
223
|
91
|
1,171
|
585
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
32
|
4
|
21
|
4
|
61
|
31
|
|
|
Other current assets
|
58
|
7
|
11
|
85
|
161
|
80
|
|
|
Current assets
|
90
|
11
|
32
|
89
|
222
|
111
|
|
|
Total assets
|
817
|
141
|
255
|
180
|
1,393
|
696
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables and
provisions
|
(23)
|
(6)
|
(16)
|
(35)
|
(80)
|
(40)
|
|
|
Current liabilities
|
(23)
|
(6)
|
(16)
|
(35)
|
(80)
|
(40)
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
(104)
|
(147)
|
-
|
(19)
|
(270)
|
(135)
|
|
|
Non-current liabilities
|
(104)
|
(147)
|
-
|
(19)
|
(270)
|
(135)
|
|
|
Total liabilities
|
(127)
|
(153)
|
(16)
|
(54)
|
(350)
|
(175)
|
|
|
|
|
|
|
|
|
|
|
|
Net assets/(liabilities)
|
690
|
(12)
|
239
|
126
|
1,043
|
521
|
|
|
Comprised of:
|
|
|
|
|
|
|
|
|
Net assets
|
690
|
-
|
239
|
130
|
1,059
|
529
|
|
|
Accumulated losses recognised as net
liabilities(2)
|
-
|
(12)
|
-
|
(4)
|
(16)
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
Market value of investment
properties(1)
|
780
|
131
|
230
|
91
|
1,232
|
616
|
|
|
Net cash/(debt) (3)
|
32
|
4
|
21
|
4
|
61
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Joint ventures
|
|
|
|
|
|
31 March 2023
|
|
|
Nova, Victoria
|
Southside
Limited
Partnership
|
St. David's
Limited
Partnership
|
Westgate
Oxford
Alliance
Partnership
|
Other
|
Total
|
Total
|
|
Balance sheet
|
100%
|
100%
|
100%
|
100%
|
100%
|
100%
|
Group share
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
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/(debt) (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
|
|
|
|
|
|
|
|
Nova,
Victoria
|
Southside
Limited Partnership
|
St. David's
Limited Partnership
|
Westgate
Oxford
Alliance Partnership
|
Other
|
Total
|
|
Net investment
|
Group share
|
Group share
|
Group share
|
Group share
|
Group share
|
Group share
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
At 1 April 2022
|
372
|
(5)
|
113
|
125
|
90
|
695
|
|
Total comprehensive (loss)/income
|
(24)
|
-
|
10
|
7
|
6
|
(1)
|
|
Cash distributions
|
-
|
-
|
(4)
|
(8)
|
(2)
|
(14)
|
|
Other distributions
|
-
|
-
|
-
|
-
|
(7)
|
(7)
|
|
Disposals and transfers from joint
arrangements
|
-
|
-
|
(119)
|
-
|
(25)
|
(144)
|
|
Other non-cash movements
|
-
|
-
|
-
|
-
|
(1)
|
(1)
|
|
At 31 March 2023
|
348
|
(5)
|
-
|
124
|
61
|
528
|
|
Total
comprehensive (loss)/income
|
(4)
|
-
|
-
|
10
|
(3)
|
3
|
|
Cash and other
distributions
|
-
|
-
|
-
|
(12)
|
(5)
|
(17)
|
|
Other non-cash
movements
|
-
|
-
|
-
|
(1)
|
8
|
7
|
|
At 31 March
2024
|
344
|
(5)
|
-
|
121
|
61
|
521
|
|
Comprised of:
|
|
|
|
|
|
|
|
At 31 March 2023
|
|
|
|
|
|
|
|
Non-current assets
|
348
|
-
|
-
|
124
|
61
|
533
|
|
Non-current liabilities(1)
|
-
|
(5)
|
-
|
-
|
-
|
(5)
|
|
At 31 March 2024
|
|
|
|
|
|
|
|
Non-current
assets
|
344
|
-
|
-
|
121
|
64
|
529
|
|
Non-current
liabilities(1)
|
-
|
(5)
|
-
|
-
|
(3)
|
(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
|
|
|
|
|
|
2024
|
|
2023
|
|
|
Group
|
Joint ventures
|
Adjustment for non-wholly owned
subsidiaries
|
Combined
|
Group
|
Joint ventures
|
Adjustment for non-wholly owned
subsidiaries
|
Combined
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Property portfolio
|
|
|
|
|
|
|
|
|
|
Market value of investment
properties
|
9,465
|
616
|
(118)
|
9,963
|
9,743
|
635
|
(139)
|
10,239
|
|
Trading properties and long-term
contracts
|
100
|
-
|
-
|
100
|
118
|
-
|
-
|
118
|
|
Total property portfolio (a)
|
9,565
|
616
|
(118)
|
10,063
|
9,861
|
635
|
(139)
|
10,357
|
|
|
|
|
|
|
|
|
|
|
|
Net debt
|
|
|
|
|
|
|
|
|
|
Borrowings
|
3,703
|
-
|
(73)
|
3,630
|
3,431
|
-
|
(73)
|
3,358
|
|
Monies held in restricted accounts and
deposits
|
(6)
|
-
|
-
|
(6)
|
(4)
|
-
|
1
|
(3)
|
|
Cash and cash equivalents
|
(78)
|
(31)
|
4
|
(105)
|
(41)
|
(35)
|
2
|
(74)
|
|
Fair value of interest-rate swaps
|
(23)
|
-
|
2
|
(21)
|
(44)
|
-
|
2
|
(42)
|
|
Fair value of foreign exchange swaps and
forwards
|
(2)
|
-
|
|
(2)
|
6
|
-
|
-
|
6
|
|
Net debt (b)
|
3,594
|
(31)
|
(67)
|
3,496
|
3,348
|
(35)
|
(68)
|
3,245
|
|
Add/(less): Fair value of interest-rate
swaps
|
23
|
-
|
(2)
|
21
|
44
|
-
|
(2)
|
42
|
|
Adjusted net debt (c)
|
3,617
|
(31)
|
(69)
|
3,517
|
3,392
|
(35)
|
(70)
|
3,287
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted total equity
|
|
|
|
|
|
|
|
|
|
Total equity (d)
|
6,447
|
-
|
(45)
|
6,402
|
7,072
|
-
|
(67)
|
7,005
|
|
Fair value of interest-rate swaps
|
(23)
|
-
|
2
|
(21)
|
(44)
|
-
|
2
|
(42)
|
|
Adjusted total equity (e)
|
6,624
|
-
|
(43)
|
6,381
|
7,028
|
-
|
(65)
|
6,963
|
|
|
|
|
|
|
|
|
|
|
|
Gearing (b/d)
|
55.7%
|
|
|
54.6%
|
47.3%
|
|
|
46.3%
|
|
Adjusted gearing (c/e)
|
56.3%
|
|
|
55.1%
|
48.3%
|
|
|
47.2%
|
|
Group LTV (c/a)
|
37.8%
|
|
|
35.0%
|
34.4%
|
|
|
31.7%
|
|
EPRA LTV(1)
|
|
|
|
36.3%
|
|
|
|
33.2%
|
|
Security Group LTV
|
37.0%
|
|
|
|
33.0%
|
|
|
|
|
Weighted average cost of debt
|
3.3%
|
|
|
3.3%
|
2.7%
|
|
|
2.7%
|
|
|
|
|
|
|
|
|
|
|
|
| |
1. EPRA LTV differs from Group LTV as it
includes net payables and receivables, and includes trading
properties at fair value and debt instruments at nominal value
rather than book value.
|
14. Borrowings
|
|
|
|
|
|
|
2024
|
2023
|
|
|
Secured/
unsecured
|
Fixed/
floating
|
Effective
interest rate
%
|
Nominal/ notional value
£m
|
Fair
value
£m
|
Book value
£m
|
Nominal/ notional value
£m
|
Fair
value
£m
|
Book value
£m
|
|
Current borrowings
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
|
|
|
|
|
|
|
|
Sterling
|
Unsecured
|
Floating
|
Various(1)
|
15
|
15
|
15
|
-
|
-
|
-
|
|
Euro
|
Unsecured
|
Floating
|
Various(1)
|
518
|
518
|
518
|
167
|
167
|
167
|
|
US Dollar
|
Unsecured
|
Floating
|
Various(1)
|
148
|
148
|
148
|
145
|
145
|
145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated and bilateral bank debt
|
Secured
|
Floating
|
SONIA + margin
|
292
|
292
|
292
|
-
|
-
|
-
|
|
Total current borrowings
|
|
|
|
973
|
973
|
973
|
312
|
312
|
312
|
|
Amounts payable under head leases
|
|
|
|
2
|
2
|
2
|
3
|
3
|
3
|
|
Tot current borrowings including amounts
payable under head leases
|
|
|
|
975
|
975
|
975
|
315
|
315
|
315
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current borrowings
|
|
|
|
|
|
|
|
|
|
|
Medium term notes (MTN)
|
|
|
|
|
|
|
|
|
|
|
A10 4.875% MTN due 2025
|
Secured
|
Fixed
|
0.0
|
-
|
-
|
-
|
10
|
10
|
10
|
|
A12 1.974% MTN due 2026
|
Secured
|
Fixed
|
0.0
|
-
|
-
|
-
|
400
|
389
|
400
|
|
A4 5.391% MTN due
2026
|
Secured
|
Fixed
|
0.0
|
-
|
-
|
-
|
17
|
17
|
17
|
|
A5 5.391% MTN due
2027
|
Secured
|
Fixed
|
5.4
|
87
|
86
|
87
|
87
|
87
|
87
|
|
A16 2.375% MTN due 2027
|
Secured
|
Fixed
|
2.5
|
350
|
325
|
349
|
350
|
317
|
348
|
|
A6 5.376% MTN due
2029
|
Secured
|
Fixed
|
5.4
|
65
|
66
|
65
|
65
|
66
|
65
|
|
A13 2.399% MTN due 2031
|
Secured
|
Fixed
|
2.4
|
300
|
270
|
299
|
300
|
263
|
299
|
|
A18 4.750% MTN due 2031
|
Secured
|
Fixed
|
4.9
|
300
|
299
|
297
|
-
|
-
|
-
|
|
A7 5.396% MTN due
2032
|
Secured
|
Fixed
|
5.4
|
77
|
78
|
77
|
77
|
79
|
77
|
|
A17 4.875% MTN due 2034
|
Secured
|
Fixed
|
5.0
|
400
|
403
|
393
|
400
|
406
|
394
|
|
A11 5.125% MTN due 2036
|
Secured
|
Fixed
|
5.1
|
50
|
48
|
50
|
50
|
50
|
50
|
|
A14 2.625% MTN due 2039
|
Secured
|
Fixed
|
2.6
|
500
|
387
|
495
|
500
|
378
|
494
|
|
A15 2.750% MTN due 2059
|
Secured
|
Fixed
|
2.7
|
500
|
309
|
495
|
500
|
312
|
495
|
|
|
|
|
|
2,629
|
2,271
|
2,607
|
2,756
|
2,374
|
2,736
|
|
Syndicated and bilateral bank debt
|
Secured
|
Floating
|
SONIA + margin
|
123
|
123
|
123
|
383
|
383
|
383
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current borrowings
|
|
|
|
2,752
|
2,394
|
2,730
|
3,139
|
2,757
|
3,119
|
|
Amounts payable under head leases
|
Unsecured
|
Fixed
|
4.0
|
75
|
98
|
75
|
104
|
142
|
104
|
|
Total non-current borrowings including amounts
payable under head leases
|
|
|
|
2,827
|
2,492
|
2,805
|
3,243
|
2,899
|
3,223
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowing including amounts payable under
head leases
|
|
|
|
3,802
|
3,467
|
3,780
|
3,558
|
3,214
|
3,538
|
|
Total borrowings excluding amounts payable
under head leases
|
|
|
|
3,725
|
3,367
|
3,703
|
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
|
2024
|
2023
|
|
|
£m
|
£m
|
|
At the beginning of the year
|
3,538
|
4,553
|
|
Net proceeds from ECP issuance
|
378
|
-
|
|
Net proceeds from bank debt
|
33
|
-
|
|
Repayment of bank debt
|
-
|
(1,407)
|
|
Repayment of MTNs
|
(427)
|
-
|
|
Issue of MTNs (net of finance fees)
|
297
|
394
|
|
Foreign exchange movement on non-Sterling
borrowings
|
(9)
|
14
|
|
Movement in amounts payable under head
leases
|
(30)
|
(16)
|
|
At 31 March
|
3,780
|
3,538
|
|
Reconciliation of movements in liabilities
arising from financing activities
|
|
2024
|
|
|
|
|
Non-cash changes
|
|
|
|
At the beginning of the year
|
Cash flows
|
Foreign exchange movements
|
Other changes in fair values
|
Other changes
|
At the end
of the year
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Borrowings
|
3,538
|
281
|
(9)
|
-
|
(30)
|
3,780
|
|
Derivative financial instruments
|
(38)
|
(18)
|
10
|
21
|
-
|
(25)
|
|
|
3,500
|
263
|
1
|
21
|
(30)
|
3,755
|
|
|
|
|
|
|
|
|
|
|
|
|
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 £9.2bn at 31 March
2024 (31 March 2023: £9.6bn). 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 and
discount to redemption value. The MTNs are listed on the Irish
Stock Exchange and their fair values are based on their respective
market prices.
During the year, the Group purchased £nil of
MTNs (2023: £nil) for a total premium of £nil (2023:
£nil).
At 31 March 2024, the Group's committed
facilities totalled £2,907m
(31 March 2023: £3,007m).
|
Syndicated and bilateral bank debt
|
|
Authorised
|
Drawn
|
Undrawn
|
|
|
Maturity as at
31 March 2024
|
2024
|
2023
|
2024
|
2023
|
2024
|
2023
|
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Syndicated debt
|
2024-27
|
2,682
|
2,782
|
415
|
383
|
2,267
|
2,399
|
|
Bilateral debt
|
2026
|
225
|
225
|
-
|
-
|
225
|
225
|
|
|
|
2,907
|
3,007
|
415
|
383
|
2,492
|
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 £292m was drawn at 31 March 2024 and £292m drawn at 31 March
2023). During the year ended 31 March 2024, the amounts drawn under
the Group's facilities decreased by £32m.
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. Commercial paper in issuance at 31
March 2024 was £681m (31
March 2023: £312m). The total amount of cash and available undrawn
facilities, net of commercial paper, at 31 March 2024 was
£1,889m (31 March 2023:
£2,353m).
|
15. Monies held in restricted accounts and
deposits
|
|
|
|
|
2024
|
2023
|
|
|
£m
|
£m
|
|
Short-term deposits
|
6
|
4
|
|
|
6
|
4
|
|
|
|
| |
The credit quality of monies held in restricted
accounts and deposits can be assessed by reference to external
credit ratings of the counterparty where the account or deposit is
placed.
|
|
2024
£m
|
2023
£m
|
|
Counterparties with external credit
ratings
|
|
|
|
A+
|
6
|
4
|
|
|
6
|
4
|
|
|
|
| |
|
16. Cash and cash equivalents
|
|
|
2024
|
2023
|
|
|
£m
|
£m
|
|
Cash at bank and in hand
|
78
|
41
|
|
|
78
|
41
|
|
|
|
| |
|
The credit quality of cash and cash equivalents
can be assessed by reference to external credit ratings of the
counterparty where the account or deposit is placed.
|
|
2024
|
2023
|
|
|
£m
|
£m
|
|
Counterparties with external credit
ratings
|
|
|
|
A+
|
78
|
34
|
|
A
|
-
|
6
|
|
A-
|
-
|
1
|
|
|
78
|
41
|
|
|
|
| |
The Group's cash and cash equivalents and bank
overdrafts are subject to cash pooling arrangements. The following
table provides details of cash balances and bank overdrafts which
are subject to offsetting agreements.
|
|
|
|
2024
|
|
|
2023
|
|
|
Gross amounts of financial assets
|
Gross amounts of financial
liabilities
|
Net amounts recognised in the balance
sheet
|
Gross amounts of financial assets
|
Gross amounts of financial
liabilities
|
Net amounts recognised in the balance
sheet
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
230
|
(152)
|
78
|
101
|
(60)
|
41
|
|
|
230
|
(152)
|
78
|
101
|
(60)
|
41
|
|
17. Events after the reporting
period
|
|
On 8 May 2024, the Group sold its interest in
LS Hotels Limited for a headline price of £400m.
No other significant events occurred after the
reporting period but before the financial statements were
authorised for issue.
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.
|
Alternative performance measure
|
Nearest IFRS measure
|
Reconciliation
|
|
EPRA earnings
|
Profit/loss before tax
|
Note 3
|
|
EPRA earnings per share
|
Basic earnings/loss per share
|
Note 4
|
|
EPRA diluted earnings per share
|
Diluted earnings/loss per share
|
Note 4
|
|
EPRA Net Tangible Assets
|
Net assets attributable to
shareholders
|
Note 4
|
|
EPRA Net Tangible Assets per share
|
Net assets attributable to
shareholders
|
Note 4
|
|
Total return on equity
|
n/a
|
Note 4
|
|
Adjusted net cash inflow from operating
activities
|
Net cash inflow from operating
activities
|
Note 9
|
|
Combined Portfolio
|
Investment properties
|
Note 10
|
|
Adjusted net debt
|
Borrowings
|
Note 13
|
|
Group LTV
|
n/a
|
Note 13
|
|
EPRA LTV
|
n/a
|
Note 13
|
EPRA disclosures
Table 15: EPRA net asset measures
|
EPRA net asset measures
|
31 March 2024
|
|
|
|
EPRA NRV
|
EPRA NTA
|
EPRA NDV
|
|
|
|
£m
|
£m
|
£m
|
|
|
Net assets attributable to
shareholders
|
6,402
|
6,402
|
6,402
|
|
|
Shortfall of fair value over net investment in
finance lease book value
|
(5)
|
(5)
|
(5)
|
|
|
Deferred tax liability on intangible
asset
|
-
|
-
|
-
|
|
|
Goodwill on deferred tax liability
|
-
|
-
|
-
|
|
|
Other intangible asset
|
-
|
(2)
|
-
|
|
|
Fair value of interest-rate swaps
|
(22)
|
(22)
|
-
|
|
|
Shortfall of fair value of debt over book value
(note 14)
|
-
|
-
|
313
|
|
|
Excess of fair value of trading properties over
book value
|
25
|
25
|
25
|
|
|
Purchasers' costs(1)
|
605
|
-
|
-
|
|
|
Net assets used in per share
calculation
|
7,005
|
6,398
|
6,735
|
|
|
|
|
|
|
|
|
|
EPRA NRV
|
EPRA NTA
|
EPRA NDV
|
|
|
Diluted net assets per share
|
940p
|
859p
|
904p
|
|
|
31 March 2023
|
|
|
EPRA NRV
|
EPRA NTA
|
EPRA NDV
|
|
|
£m
|
£m
|
£m
|
|
Net assets attributable to
shareholders
|
7,005
|
7,005
|
7,005
|
|
Shortfall of fair value over net investment in
finance lease 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)
|
-
|
|
Shortfall of fair value of debt over book value
(note 14)
|
-
|
-
|
324
|
|
Excess of fair value of trading properties over
book value
|
12
|
12
|
12
|
|
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
|
|
|
|
31 March 2024
|
|
Measure
|
Definition for EPRA measure
|
|
Notes
|
EPRA
measure
|
|
|
|
|
|
|
|
EPRA earnings
|
Recurring earnings from core operational
activity
|
|
4
|
£371m
|
|
EPRA earnings per share
|
EPRA earnings per weighted number of ordinary
shares
|
|
4
|
50.1p
|
|
EPRA diluted earnings per
share(1)
|
EPRA diluted earnings per weighted number of
ordinary shares
|
|
4
|
50.1p
|
|
EPRA Net Tangible Assets (NTA)
|
Net assets adjusted to exclude the fair value
of interest-rate swaps, intangible assets and excess of fair value
over net investment in finance lease book value
|
|
4
|
£6,398m
|
|
EPRA Net Tangible Assets per share
|
Diluted Net Tangible Assets per
share
|
|
4
|
859p
|
|
EPRA net disposal value (NDV)
|
Net assets adjusted to exclude the fair value
of debt and goodwill on deferred tax and to include excess of fair
value over net investment in finance lease book value
|
|
4
|
£6,735m
|
|
EPRA net disposal value per share
|
Diluted net disposal value per share
|
|
4
|
904p
|
|
EPRA loan-to-value
(LTV)(2)
|
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
|
|
13
|
36.3%
|
|
|
|
|
Table
|
|
|
Voids/vacancy rate
|
ERV of vacant space as a % of ERV of Combined
Portfolio excluding the development programme(3)
|
|
17
|
3.5%
|
|
Net initial yield (NIY)
|
Annualised rental income less non-recoverable
costs as a % of market value plus assumed purchasers'
costs(4)
|
|
19
|
5.4%
|
|
Topped-up NIY
|
NIY adjusted for rent free periods(4)
|
|
19
|
6.2%
|
|
Cost ratio(5)
|
Total costs as a percentage of gross rental
income (including direct vacancy costs)(5)
|
|
20
|
25.0%
|
|
|
Total costs as a percentage of gross rental
income (excluding direct vacancy costs)(5)
|
|
20
|
20.3%
|
1. In the year ended 31 March 2024,
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 year.
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, and are calculated by our external valuer. Topped-up
NIY reflects adjustments of £82m for 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
£9m.
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.
|
|
31 March 2024
|
|
|
£m
|
|
ERV of vacant properties
|
22
|
|
ERV of Combined Portfolio excluding properties
under development
|
632
|
|
EPRA vacancy rate (%)
|
3.5
|
Table 18: Change in net rental income from the
like-for-like portfolio
|
|
2024
|
2023
|
Change
|
|
|
£m
|
£m
|
£m
|
%
|
|
Central London
|
230
|
229
|
1
|
0%
|
|
Major retail
|
131
|
122
|
9
|
7%
|
|
Subscale sectors
|
111
|
108
|
3
|
3%
|
|
|
472
|
459
|
13
|
3%
|
Table 19: EPRA Net initial yield (NIY) and
Topped-up NIY
|
|
31 March 2024
|
|
|
£m
|
|
Combined Portfolio
|
9,963
|
|
Trading properties
|
125
|
|
Less: Properties under development, trading
properties under development and land
|
(1,087)
|
|
Like-for-like investment property portfolio,
proposed and completed developments, and completed trading
properties
|
9,001
|
|
Plus: Allowance for estimated purchasers'
costs
|
546
|
|
Grossed-up completed property portfolio
valuation (a)
|
9,547
|
|
|
|
|
EPRA annualised cash passing rental
income(1)
|
603
|
|
Net service charge expense(2)
|
(16)
|
|
Void costs and other deductions
|
(73)
|
|
EPRA Annualised net rent(1) (b)
|
514
|
|
Plus: Rent-free periods and other lease
incentives (annualised)
|
82
|
|
Topped-up annualised net rents (c)
|
596
|
|
|
|
|
EPRA NIY (b/a)
|
5.4%
|
|
EPRA Topped-up NIY (c/a)
|
6.2%
|
1. EPRA Annualised cash
passing rental income and EPRA annualised net rent as calculated by
the Group's external valuer.
2. Including costs recovered
through rents but not separately invoiced.
Table 20: Cost analysis
|
|
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
|
|
|
|
|
|
Total
£m
|
Cost ratio %(1)
|
Total
£m
|
Cost ratio %(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross rental income (before rents
payable)
|
653
|
|
659
|
|
|
|
|
|
|
|
|
|
Costs recovered through rents but not
separately invoiced
|
(9)
|
|
(9)
|
|
|
|
|
|
|
|
|
|
Adjusted gross rental income
|
644
|
|
650
|
|
|
|
|
£m
|
|
|
|
|
Rents payable
|
(12)
|
|
(12)
|
|
|
Gross rental income (before rents
payable)
|
|
653
|
|
|
|
|
EPRA gross rental income
|
632
|
|
638
|
|
|
Rents payable
|
|
(12)
|
|
|
|
|
|
|
|
|
|
|
Gross rental income (after rents
payable)
|
|
641
|
|
Direct
|
|
|
Managed operations
|
10
|
|
10
|
|
|
|
Net service charge expense
|
|
(16)
|
|
property
|
|
|
Tenant default
|
(6)
|
|
(3)
|
|
|
|
Net direct property expenditure
|
|
(81)
|
|
costs
|
|
|
Void related costs
|
30
|
|
27
|
|
|
|
Movement in bad and doubtful debts
provision
|
|
6
|
|
£90m
|
|
|
Other direct property costs
|
54
|
|
48
|
|
|
|
Segment net rental income
|
|
550
|
|
|
|
|
Development expenditure
|
9
|
|
14
|
|
|
|
Net indirect expenses
|
|
(77)
|
|
Net indirect
|
|
|
|
|
|
|
|
|
|
Segment profit before finance
expense
|
|
473
|
|
expenses
|
|
|
Asset management,
administration and
compliance
|
70
|
|
74
|
|
|
|
Net finance expense - Group
|
|
(91)
|
|
£77m
|
|
|
|
|
|
|
|
|
Net finance expense - joint ventures
|
|
(11)
|
|
|
|
|
|
|
|
|
|
|
EPRA earnings
|
|
371
|
|
|
|
|
Total (incl. direct vacancy costs)
|
167
|
|
170
|
|
|
|
|
|
|
|
|
|
|
Costs recovered through rents
|
(9)
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
EPRA costs (incl. direct vacancy
costs)
|
158
|
25.0
|
161
|
25.2
|
|
|
|
|
|
|
|
|
|
Less: Direct vacancy costs
|
(30)
|
|
(27)
|
|
|
|
|
|
|
|
|
|
|
EPRA (excl. direct vacancy costs)
|
128
|
20.3
|
134
|
21.0
|
|
1. Percentages represent costs divided by EPRA
gross rental income.
Table 21: Acquisitions, disposals and capital
expenditure
|
|
|
|
|
Year ended
31 March 2024
|
Year ended
31 March 2023
|
|
Investment properties
|
Group (excl. joint ventures)
£m
|
Joint
ventures
£m
|
Adjustment for non-wholly owned
subsidiaries(1)
£m
|
Combined
Portfolio
£m
|
Combined
Portfolio
£m
|
|
Net book value at the beginning of the
year
|
9,658
|
601
|
(139)
|
10,120
|
11,833
|
|
Transfer from joint venture
|
-
|
-
|
-
|
-
|
11
|
|
Acquisitions
|
144
|
-
|
-
|
144
|
223
|
|
Capital expenditure
|
374
|
3
|
(1)
|
376
|
340
|
|
Capitalised interest
|
19
|
-
|
-
|
19
|
22
|
|
Net movement in head leases
capitalised
|
(30)
|
-
|
-
|
(30)
|
(25)
|
|
Disposals
|
(207)
|
-
|
-
|
(207)
|
(1,430)
|
|
Net deficit on revaluation of investment
properties
|
(628)
|
(19)
|
(22)
|
(625)
|
(848)
|
|
Transfer to trading properties
|
-
|
-
|
-
|
-
|
(6)
|
|
Net book value at the end of the
year
|
9,330
|
585
|
(118)
|
9,797
|
10,120
|
|
|
|
|
|
|
|
|
Loss on disposal of investment
properties
|
(16)
|
-
|
-
|
(16)
|
(144)
|
|
|
|
|
|
|
|
|
Trading properties
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Net book value at the beginning of the
year
|
118
|
-
|
-
|
118
|
146
|
|
Transfer from investment properties
|
-
|
-
|
-
|
-
|
6
|
|
Capital expenditure
|
13
|
-
|
-
|
13
|
3
|
|
Capitalised interest
|
1
|
-
|
-
|
1
|
-
|
|
Disposals
|
(21)
|
-
|
-
|
(21)
|
(18)
|
|
Movement in impairment
|
(11)
|
-
|
-
|
(11)
|
(19)
|
|
Net book value at the end of the
year
|
100
|
-
|
-
|
100
|
118
|
|
|
|
|
|
|
|
|
Profit on disposal of trading
properties
|
-
|
-
|
-
|
-
|
1
|
|
Acquisitions, development and other capital
expenditure
|
Investment
properties(1)
£m
|
Trading
properties
£m
|
Combined
Portfolio
£m
|
Combined
Portfolio
£m
|
|
Acquisitions(2)
|
144
|
-
|
144
|
223
|
|
Development capital expenditure(3)
|
220
|
6
|
226
|
278
|
|
Other capital expenditure
|
156
|
7
|
163
|
65
|
|
Capitalised interest
|
19
|
1
|
20
|
22
|
|
Acquisitions, development and other capital
expenditure
|
539
|
14
|
553
|
588
|
|
|
|
|
|
|
|
Disposals
|
|
|
£m
|
£m
|
|
Net book value - investment property
disposals
|
|
|
207
|
1,430
|
|
Net book value - trading property
disposals
|
|
|
21
|
18
|
|
Net book value - other net assets
|
|
|
3
|
52
|
|
Loss on disposal - investment
properties
|
|
|
(16)
|
(144)
|
|
Profit on disposal - trading
properties
|
|
|
-
|
1
|
|
Other
|
|
|
1
|
(3)
|
|
Total disposal proceeds
|
|
|
216
|
1,354
|
1. See EPRA analysis of capital expenditure
table 22 for further details.
2. Properties acquired in the year.
Development capital expenditure for investment
properties comprises expenditure on the future development pipeline
and completed developments.
Table 22: EPRA analysis of capital
expenditure
|
|
|
Year ended 31 March 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other capital expenditure
|
|
|
|
|
|
|
|
|
|
Acquisitions(1)
£m
|
Development capital expenditure(2)
£m
|
Incremental lettable space(3)
£m
|
No incremental
lettable space(4)
£m
|
Tenant
improvements
£m
|
Total
£m
|
Capitalised interest
£m
|
Total capital expenditure - Combined
Portfolio
£m
|
|
Total capital expenditure - joint
ventures
(Group share)
£m
|
Adjustment for non-wholly owned
subsidiaries
£m
|
Total capital expenditure -
Group
£m
|
|
|
Central London
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West End offices
|
|
-
|
42
|
-
|
11
|
1
|
12
|
7
|
61
|
|
1
|
-
|
60
|
|
|
City offices
|
|
-
|
-
|
-
|
66
|
-
|
66
|
1
|
67
|
|
-
|
-
|
67
|
|
|
Retail and other
|
|
8
|
-
|
-
|
11
|
-
|
11
|
-
|
19
|
|
-
|
-
|
19
|
|
|
Developments
|
|
123
|
155
|
-
|
-
|
-
|
-
|
11
|
289
|
|
-
|
-
|
289
|
|
|
Total Central London
|
|
131
|
197
|
-
|
88
|
1
|
89
|
19
|
436
|
|
1
|
-
|
435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping centres
|
|
2
|
-
|
1
|
24
|
-
|
25
|
-
|
27
|
|
-
|
-
|
27
|
|
|
Outlets
|
|
-
|
-
|
-
|
9
|
1
|
10
|
-
|
10
|
|
-
|
-
|
10
|
|
|
Total Major retail
|
|
2
|
-
|
1
|
33
|
1
|
35
|
-
|
37
|
|
-
|
-
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mixed-use urban
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
London
|
|
-
|
11
|
-
|
1
|
-
|
1
|
-
|
12
|
|
-
|
-
|
12
|
|
|
Major regional cities
|
|
-
|
12
|
-
|
6
|
-
|
6
|
-
|
18
|
|
2
|
(1)
|
17
|
|
|
Total Mixed-use urban
|
|
-
|
23
|
-
|
7
|
-
|
7
|
-
|
30
|
|
2
|
(1)
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscale sectors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leisure
|
|
11
|
-
|
-
|
16
|
-
|
16
|
-
|
27
|
|
-
|
-
|
27
|
|
|
Hotels
|
|
-
|
-
|
-
|
2
|
-
|
2
|
-
|
2
|
|
-
|
-
|
2
|
|
|
Retail parks
|
|
-
|
-
|
-
|
7
|
-
|
7
|
-
|
7
|
|
-
|
-
|
7
|
|
|
Total Subscale sectors
|
|
11
|
-
|
-
|
25
|
-
|
25
|
-
|
36
|
|
-
|
-
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditure
|
|
144
|
220
|
1
|
153
|
2
|
156
|
19
|
539
|
|
3
|
(1)
|
537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing difference between accrual and cash
basis
|
|
|
|
|
|
|
|
(70)
|
|
2
|
-
|
(72)
|
|
|
Total capital expenditure on a cash
basis
|
|
|
|
|
|
|
|
|
469
|
|
5
|
(1)
|
465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
1. Investment properties acquired in the
year.
2. Expenditure on the future development
pipeline and completed developments.
3. Capital expenditure where the lettable area
increases by at least 10%.
4. Includes £35m of expenditure relating to
Myo.
Table 23: Top 12 occupiers at 31 March
2024
|
|
% of Group rent(1)
|
|
Accor
|
5.6
|
|
Central Government
|
5.5
|
|
Deloitte
|
2.2
|
|
Taylor Wessing
|
1.6
|
|
Cineworld
|
1.5
|
|
Boots
|
1.4
|
|
Peel
|
1.3
|
|
Qube RT
|
1.3
|
|
BBC
|
1.2
|
|
Sainsburys
|
1.0
|
|
H&M
|
1.0
|
|
Cheil
|
0.9
|
|
|
24.5
|
1. On a proportionate basis.
Table 24: Committed and future development
pipeline and trading property development schemes at 31 March
2024
|
Central London
|
|
|
|
|
|
|
|
|
|
|
Property
|
Description
of use
|
Ownership
interest
%
|
Size
sq ft
|
Letting
status
%
|
Market value
£m
|
Net income/ ERV
£m
|
Estimated completion
date
|
Total development costs to date
£m
|
Forecast total development cost
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed development pipeline
|
|
|
|
|
|
|
|
|
|
|
Thirty High, SW1
|
Office
|
100
|
299,000
|
-
|
238
|
30
|
Aug-2025
|
229
|
412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timber Square, SE1
|
Office
|
100
|
381,000
|
-
|
137
|
29
|
Dec-2025
|
160
|
411
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
Description of use
|
|
Ownership interest %
|
|
|
Proposed sq ft
|
|
Potential start date
|
|
|
|
|
|
|
|
|
|
|
|
|
Future development pipeline
|
|
|
|
|
|
|
|
|
|
|
Liberty of Southwark, SE1
|
|
Office/ Residential
|
|
100
|
|
|
225,000
|
|
2025
|
|
Red Lion Court, SE1
|
|
Office
|
|
100
|
|
|
250,000
|
|
2024
|
|
Property
|
Description
of use
|
Ownership
interest
%
|
Size
sq ft
|
Number
of units
|
Sales exchanged by unit
%
|
Estimated completion
date
|
Total development costs to date
£m
|
Forecast total development cost
£m
|
|
|
|
|
|
|
|
|
|
|
|
Trading property development schemes
|
|
|
|
|
|
|
|
|
|
Castle Lane, SW1
|
Residential
|
100
|
52,000
|
89
|
99
|
Jul-2024
|
38
|
47
|
|
Mixed-use urban
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
|
|
Ownership interest %
|
|
|
Proposed sq ft
|
|
Potential start date
|
|
|
|
|
|
|
|
|
|
|
|
|
Future development pipeline
|
|
|
|
|
|
|
|
|
|
|
Mayfield, Manchester
|
|
|
|
50-100
|
|
|
2,500,000
|
|
2024
|
|
Finchley Road, NW3
|
|
|
|
100
|
|
|
1,400,000
|
|
2025
|
Where the property is not 100% owned, floor
areas and letting status shown above represent the full scheme
whereas all other figures represent our proportionate share.
Letting % is measured by ERV and shows letting status at 31 March
2024. 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 31 March 2024 on unlet units, both after
rents payable.
Table 25: Combined Portfolio analysis
Total portfolio analysis
|
|
Market value(1)
|
Valuation
movement(1)
|
Rental income(1)
|
Annualised rental income(2)
|
Net estimated rental value(3)
|
|
|
31 March 2024
|
31 March 2023
|
(Deficit)/ surplus
|
Surplus/ (deficit)
|
31 March 2024
|
31 March 2023
|
31 March 2024
|
31 March 2023
|
31 March 2024
|
31 March 2023
|
|
|
£m
|
£m
|
£m
|
%
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Central London
|
|
|
|
|
|
|
|
|
|
|
|
West End offices
|
3,109
|
2,653
|
(111)
|
(3.6)
|
148
|
140
|
160
|
134
|
186
|
146
|
|
City offices
|
1,192
|
1,304
|
(188)
|
(13.9)
|
68
|
76
|
70
|
61
|
93
|
87
|
|
Retail and other
|
991
|
1,095
|
(48)
|
(4.7)
|
58
|
76
|
43
|
42
|
55
|
56
|
|
Developments(4)
|
926
|
1,190
|
(102)
|
(9.9)
|
20
|
21
|
8
|
5
|
93
|
57
|
|
Total Central London
|
6,218
|
6,242
|
(449)
|
(6.9)
|
294
|
313
|
281
|
242
|
427
|
346
|
|
Major retail
|
|
|
|
|
|
|
|
|
|
|
|
Shopping centres
|
1,226
|
1,196
|
1
|
0.1
|
131
|
120
|
121
|
114
|
122
|
123
|
|
Outlets
|
605
|
684
|
(21)
|
(3.3)
|
57
|
59
|
48
|
56
|
49
|
60
|
|
Total Major retail
|
1,831
|
1,880
|
(20)
|
(1.1)
|
188
|
179
|
169
|
170
|
171
|
183
|
|
Mixed-use urban
|
|
|
|
|
|
|
|
|
|
|
|
London
|
191
|
285
|
(23)
|
(10.3)
|
17
|
19
|
11
|
16
|
16
|
22
|
|
Major regional cities
|
510
|
530
|
(93)
|
(15.3)
|
41
|
39
|
37
|
36
|
38
|
35
|
|
Total Mixed-use urban(5)
|
701
|
815
|
(116)
|
(14.0)
|
58
|
58
|
48
|
52
|
54
|
57
|
|
Subscale sectors
|
|
|
|
|
|
|
|
|
|
|
|
Leisure
|
423
|
476
|
(35)
|
(8.2)
|
48
|
51
|
46
|
51
|
42
|
50
|
|
Hotels
|
400
|
408
|
2
|
0.6
|
35
|
30
|
35
|
31
|
29
|
28
|
|
Retail parks
|
390
|
418
|
(7)
|
(1.8)
|
30
|
28
|
27
|
28
|
29
|
30
|
|
Total Subscale sectors
|
1,213
|
1,302
|
(40)
|
(3.2)
|
113
|
109
|
108
|
110
|
100
|
108
|
|
Combined Portfolio
|
9,963
|
10,239
|
(625)
|
(6.0)
|
653
|
659
|
606
|
574
|
752
|
694
|
|
Properties treated as finance leases
|
-
|
-
|
-
|
-
|
(1)
|
(2)
|
|
|
|
|
|
Combined Portfolio
|
9,963
|
10,239
|
(625)
|
(6.0)
|
652
|
657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Represented by:
|
|
|
|
|
|
|
|
|
|
|
|
Investment portfolio
|
9,347
|
9,603
|
(606)
|
(6.2)
|
613
|
603
|
569
|
536
|
712
|
655
|
|
Share of joint ventures
|
616
|
636
|
(19)
|
(3.2)
|
39
|
54
|
37
|
38
|
40
|
39
|
|
Combined Portfolio
|
9,963
|
10,239
|
(625)
|
(6.0)
|
652
|
657
|
606
|
574
|
752
|
694
|
Total portfolio
analysis
Notes:
|
|
Net initial yield(6)
|
Equivalent yield(7)
|
|
|
31 March 2024
|
Movement in
like-for-like(8)
|
31 March 2024
|
Movement in
like-for-like(8)
|
|
|
%
|
bps
|
%
|
bps
|
|
Central London
|
|
|
|
|
|
West End offices
|
4.2
|
24
|
5.3
|
37
|
|
City offices
|
3.9
|
64
|
6.0
|
78
|
|
Retail and other
|
4.6
|
42
|
4.9
|
30
|
|
Developments(4)
|
(0.0)
|
n/a
|
5.4
|
n/a
|
|
Total Central London
|
4.2
|
39
|
5.4
|
46
|
|
Major retail
|
|
|
|
|
|
Shopping centres
|
8.1
|
3
|
8.1
|
23
|
|
Outlets
|
6.3
|
13
|
7.0
|
17
|
|
Total Major retail
|
7.5
|
8
|
7.8
|
22
|
|
Mixed-use urban
|
|
|
|
|
|
London
|
4.2
|
(108)
|
6.6
|
22
|
|
Major regional cities
|
6.7
|
64
|
7.7
|
106
|
|
Total Mixed-use urban(5)
|
6.1
|
21
|
7.3
|
85
|
|
Subscale sectors
|
|
|
|
|
|
Leisure
|
8.7
|
51
|
8.8
|
26
|
|
Hotels
|
7.3
|
61
|
7.2
|
54
|
|
Retail parks
|
6.0
|
(63)
|
6.8
|
38
|
|
Total Subscale sectors
|
7.4
|
17
|
7.6
|
38
|
|
Combined Portfolio
|
5.4
|
31
|
6.2
|
45
|
|
|
|
|
|
|
|
Represented by:
|
|
|
|
|
|
Investment portfolio
|
5.4
|
n/a
|
6.2
|
n/a
|
|
Share of joint ventures
|
6.0
|
n/a
|
6.0
|
n/a
|
|
Combined Portfolio
|
5.4
|
n/a
|
6.2
|
n/a
|
|
1. Refer to
Glossary for definition.
2. Annualised
rental income is annual 'rental income' (as defined in the
Glossary) at the balance sheet date, except that car park and
commercialisation income are included on a net basis (after
deduction for operational outgoings). Annualised rental income
includes temporary lettings.
3. Net estimated
rental value is gross estimated rental value, as defined in the
Glossary, after deducting expected rent payable.
4. Comprises the
development pipeline - refer to Glossary for definition.
5. The prior
year data has been restated to align with the updated categories
disclosed.
6. Net initial
yield - refer to Glossary for definition. This calculation includes
all properties including those sites with no income.
7. Equivalent
yield - refer to Glossary for definition. Future developments are
excluded from the calculation of equivalent yield on the Combined
Portfolio.
8. The
like-for-like portfolio - refer to Glossary for
definition.
|
Table 26: Floor Areas
|
|
31 March 2024
Million sq ft
|
|
Central London
|
|
|
|
West End offices
|
|
2.7
|
|
City offices
|
|
1.6
|
|
Retail and other
|
|
1.1
|
|
Total Central London
|
|
5.4
|
|
Major retail
|
|
|
|
Shopping centres
|
|
6.7
|
|
Outlets
|
|
1.0
|
|
Total Major retail
|
|
7.7
|
|
Mixed-use urban
|
|
|
|
London
|
|
0.8
|
|
Major regional cities
|
|
2.0
|
|
Total Mixed-use urban
|
|
2.8
|
|
Subscale sectors
|
|
|
|
Leisure
|
|
3.3
|
|
Hotels
|
|
1.9
|
|
Retail parks
|
|
1.7
|
|
Total Subscale sectors
|
|
6.9
|
|
Total
|
|
22.8
|
Table 27: Reconciliation of segmental
information note to statutory reporting for the year ended 31 March
2023
|
|
|
|
|
Year ended 31 March 2023
|
|
|
Group income statement
£m
|
Joint
ventures(1)
£m
|
Adjustment for non-wholly owned
subsidiaries(2)
£m
|
Total
£m
|
|
EPRA
earnings
£m
|
|
Capital and other items
£m
|
|
Rental income
|
612
|
53
|
(8)
|
657
|
|
657
|
|
-
|
|
Finance lease interest
|
2
|
-
|
-
|
2
|
|
2
|
|
-
|
|
Gross rental income (before rents
payable)
|
614
|
53
|
(8)
|
659
|
|
659
|
|
-
|
|
Rents payable
|
(10)
|
(2)
|
-
|
(12)
|
|
(12)
|
|
-
|
|
Gross rental income (after rents
payable)
|
604
|
51
|
(8)
|
647
|
|
647
|
|
-
|
|
Service charge income
|
91
|
10
|
(3)
|
98
|
|
98
|
|
-
|
|
Service charge expense
|
(100)
|
(12)
|
2
|
(110)
|
|
(110)
|
|
-
|
|
Net service charge expense
|
(9)
|
(2)
|
(1)
|
(12)
|
|
(12)
|
|
-
|
|
Other property related income
|
29
|
2
|
-
|
31
|
|
31
|
|
-
|
|
Direct property expenditure
|
(100)
|
(10)
|
2
|
(108)
|
|
(108)
|
|
-
|
|
Movement in bad and doubtful debt
provision
|
2
|
1
|
-
|
3
|
|
3
|
|
-
|
|
Segment net rental income
|
526
|
42
|
(7)
|
561
|
|
561
|
|
-
|
|
Other income
|
3
|
-
|
-
|
3
|
|
3
|
|
-
|
|
Administrative expenses
|
(80)
|
(2)
|
-
|
(82)
|
|
(82)
|
|
-
|
|
Depreciation
|
(5)
|
-
|
-
|
(5)
|
|
(5)
|
|
-
|
|
EPRA earnings before interest
|
444
|
40
|
(7)
|
477
|
|
477
|
|
-
|
|
Share of post-tax profit from joint
ventures
|
(1)
|
1
|
-
|
-
|
|
-
|
|
-
|
|
Profit on disposal of trading
properties
|
1
|
-
|
-
|
1
|
|
-
|
|
1
|
|
Loss on disposal of investment
properties(3)
|
(144)
|
-
|
-
|
(144)
|
|
-
|
|
(144)
|
|
Net deficit on revaluation of investment
properties
|
(827)
|
(30)
|
9
|
(848)
|
|
-
|
|
(848)
|
|
Net development contract expenditure
|
(9)
|
-
|
-
|
(9)
|
|
-
|
|
(9)
|
|
Loss on changes in finance leases
|
(6)
|
-
|
-
|
(6)
|
|
-
|
|
(6)
|
|
Impairment of goodwill
|
(5)
|
-
|
-
|
(5)
|
|
-
|
|
(5)
|
|
Impairment of trading properties
|
(19)
|
-
|
-
|
(19)
|
|
-
|
|
(19)
|
|
Depreciation
|
(3)
|
-
|
-
|
(3)
|
|
-
|
|
(3)
|
|
Operating (loss)/profit
|
(569)
|
11
|
2
|
(556)
|
|
477
|
|
(1,033)
|
|
Finance income
|
34
|
-
|
1
|
35
|
|
11
|
|
24
|
|
Finance expense
|
(87)
|
(11)
|
-
|
(98)
|
|
(95)
|
|
(3)
|
|
(Loss)/profit before tax
|
(622)
|
-
|
3
|
(619)
|
|
393
|
|
(1,012)
|
|
Taxation
|
-
|
-
|
-
|
-
|
|
|
|
|
|
(Loss)/profit for the year
|
(622)
|
-
|
3
|
(619)
|
|
|
|
|
1. Reallocation of the share of post-tax loss
from joint ventures reported in the Group income statement to the
individual line items reported in the segmental information
note.
2. Removal of the non-wholly owned share of
results of the Group's subsidiaries. The non-wholly owned
subsidiaries are consolidated at 100% in the Group's income
statement, but only the Group's share is included in EPRA earnings
reported in the segmental information note.
3. Included in the loss on disposal of
investment properties is a £9m charge related to the provision for
fire safety remediation works on properties no longer owned by the
Group but for which the Group is responsible for remediating under
the Building Safety Act 2022.
Table 28: Property Income Distribution (PID)
calculation
|
|
Year ended
31 March 2024
|
Year ended
31 March 2023
|
|
|
£m
|
£m
|
|
Loss before tax per income statement
|
(341)
|
(622)
|
|
Accounting loss on residual
operations
|
(23)
|
(67)
|
|
Prior year adjustment
|
-
|
77
|
|
Loss attributable to tax-exempt
operations
|
(364)
|
(612)
|
|
|
|
|
|
Adjustments
|
|
|
|
Capital allowances
|
(55)
|
(43)
|
|
Capitalised interest
|
(20)
|
(22)
|
|
Revaluation deficit
|
649
|
848
|
|
Tax exempt disposals
|
12
|
142
|
|
Capital expenditure
|
6
|
5
|
|
Other tax adjustments
|
(27)
|
(27)
|
|
Goodwill amortisation and impairment
|
-
|
5
|
|
Estimated tax-exempt income for the
year
|
201
|
296
|
|
|
|
|
|
PID thereon (90%)
|
181
|
266
|
As a REIT, our income and capital gains from
qualifying activities are exempt from corporation tax. 90% of this
income must be distributed as a Property Income Distribution and is
taxed at the shareholder level to give a similar tax position to
direct property ownership. Non-qualifying activities, such as sales
of trading properties, are subject to corporation tax. This year,
there was no net tax charge (2023: £nil).
The table above provides a reconciliation of
the Group's loss before tax to its estimated tax exempt income, 90%
of which the Company is required to distribute as a PID to comply
with REIT regulations.
The Company has 12 months after the year end to
make the minimum distribution. Accordingly, PID dividends paid in
the year may relate to the distribution requirements of previous
periods. The table below sets out the dividend allocation for the
years ended 31 March 2024 and 31 March 2023:
|
|
PID allocation
|
Ordinary
dividend
|
Total
dividend
|
|
|
Year ended
31 March 2024
£m
|
Year ended
31 March 2023
£m
|
Pre-31
March 2023
£m
|
£m
|
£m
|
|
Dividends paid in year to 31 March
2023
|
-
|
156
|
134
|
-
|
290
|
|
Dividends paid in year to 31 March
2024
|
181
|
110
|
-
|
-
|
291
|
|
Minimum PID to be paid by 31 March
2025
|
-
|
-
|
n/a
|
n/a
|
-
|
|
Total PID required
|
181
|
266
|
|
|
|
The Group has met all the REIT requirements,
including the payment by 31 March 2024 of the minimum Property
Income Distribution (PID) for the year ended 31 March 2023. The
forecast minimum PID for the year ended 31 March 2024 is £181m,
which must be paid by 31 March 2025. The Group has already made PID
dividends relating to 31 March 2024 of £181m.
Our latest tax strategy can be found on our
corporate website. In the year, the total taxes we incurred and
collected were £136m (2023: £134m), of which £37m (2023: £38m) was
directly borne by the Group including environmental taxes, business
rates and stamp duty land tax. The Group has a low tax risk rating
from HMRC.
Investor information
1. Company website: landsec.com
The Group's half-yearly and annual reports to
shareholders, results announcements and presentations, are
available to view and download from the Company's website. The
website also provides details of the Company's current share price,
the latest news about the Group, its properties and operations, and
details of future events and how to obtain further
information.
2. Registrar: Equiniti Group PLC
Enquiries concerning shareholdings, dividends
and changes in personal details should be referred to the Company's
registrar, Equiniti Group PLC (Equiniti), in the first instance.
They can be contacted using the details below:
Telephone:
- 0371 384 2128 (from the
UK)
- +44 121 415 7049 (from
outside the UK)
- Lines are ordinarily open
from 08:30 to 17:30, Monday to Friday, excluding UK public
holidays.
Correspondence address:
Equiniti Group PLC
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Information on how to manage your shareholding
can be found at https://help.shareview.co.uk.
If you are not able to find the answer to your question within the
general Help information page, a personal enquiry can be sent
directly through Equiniti's secure e-form on their website. Please
note that you will be asked to provide your name, address,
shareholder reference number and a valid e-mail address.
Alternatively, shareholders can view and manage their shareholding
through the Landsec share portal which is hosted by Equiniti -
simply visit https://portfolio.shareview.co.uk
and follow the registration instructions.
3. Shareholder enquiries
If you have an enquiry about the Company's
business or about something affecting you as a shareholder (other
than queries which are dealt with by the Registrar), please email
Investor Relations (see details in 8. below).
4. Share dealing services: https://shareview.co.uk
The Company's shares can be traded through most
banks, building societies and stockbrokers. They can also be traded
through Equiniti. To use their service, shareholders should contact
Equiniti: 0345 603 7037 from the UK. Lines are ordinarily open
Monday to Friday 08:00 to 16:30 for dealing and until 18:00 for
enquiries, excluding UK public holidays.
5. Dividends
The Board has recommended a final dividend for
the year ended 31 March 2024 of 12.1p
per ordinary share to be paid as Property Income Distribution
(PID). Subject to shareholders' approval at the Annual General
Meeting, the final dividend will be paid on 26 July 2024 to
shareholders registered at the close of business on 14 June 2024.
The last date for Dividend Reinvestment Plan (DRIP) elections will
be 28 June 2024. The total dividend paid and payable in respect of
the year ended 31 March 2024 is 39.6p
(2023: 38.6p).
The first quarterly dividend for the year
ending 31 March 2025 will be paid in October 2024 and will be
announced in due course.
6. Dividend related services
Dividend payments to UK shareholders - Dividend
mandates
Dividends are no longer paid by cheque.
Shareholders whose dividends have previously been paid by cheque
will need to have their dividends paid directly into their personal
bank or building society account or alternatively participate in
our Dividend Reinvestment Plan (see below) to receive dividends in
the form of additional shares. To facilitate this, please contact
Equiniti or complete a mandate instruction available on our
website: landsec.com/investors and return it to Equiniti.
Dividend payments to overseas shareholders -
Overseas Payment Service (OPS)
Dividends are no longer paid by cheque.
Shareholders need to request that their dividends be paid directly
to a personal bank account overseas. For more information, please
contact Equiniti or download an application form online at
https://shareview.co.uk.
Dividend Reinvestment Plan (DRIP)
A DRIP is available from Equiniti. This
facility provides an opportunity by which shareholders can
conveniently and easily increase their holding in the Company by
using their cash dividends to buy more shares. Participation in the
DRIP will mean that your dividend payments will be reinvested in
the Company's shares and these will be purchased on your behalf in
the market on, or as soon as practical after, the dividend payment
date.
You may only participate in the DRIP if you are
resident in the UK.
For further information (including terms and
conditions) and to register for any of these dividend-related
services, simply visit www.shareview.co.uk.
7. Financial reporting calendar
|
|
2024
|
|
Financial year end
|
31 March
|
|
Preliminary results announcement
|
17 May
|
|
Annual General Meeting
|
11 July
|
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.
Combined Portfolio
The Combined Portfolio comprises the investment
properties of the Group's subsidiaries, on a proportionately
consolidated basis when not wholly owned, together with our share
of investment properties held in our joint ventures.
Developments/development pipeline
Development pipeline consists of future
developments, committed developments, projects under construction
and developments which have reached practical completion within the
last two years but are not yet 95% let.
Development gross yield on total development
cost
Gross ERV, before adjustment for lease
incentives, divided by total development cost. Gross ERV reflects
Landsec's or the valuer's view of expected ERV at completion of the
scheme.
EPRA earnings
Profit before tax, excluding profits on the
sale of non-current assets and trading properties, profits on
development contracts, valuation movements, fair value movements on
interest-rate swaps and similar instruments used for hedging
purposes, debt restructuring charges, and any other items of an
exceptional nature.
EPRA loan-to- value (LTV)
Ratio of adjusted net debt, including net
payables, to the sum of the net assets, including net receivables,
of the Group, its subsidiaries and joint ventures, all on a
proportionate basis, expressed as a percentage. The calculation
includes trading properties at fair value and debt at nominal
value.
EPRA net disposal value (NDV) per
share
Diluted net assets per share adjusted to remove
the impact of goodwill arising as a result of deferred tax, and to
include the difference between the fair value and the book value of
the net investment in tenant finance leases and fixed interest rate
debt.
EPRA net initial yield
EPRA net initial yield is defined within EPRA's
Best Practice Recommendations as the annualised rental income based
on the cash rents passing at the balance sheet date, less
non-recoverable property operating expenses, divided by the gross
market value of the property. It is consistent with the net initial
yield calculated by the Group's external valuer.
EPRA Net Reinstatement Value (NRV) per
share
Diluted net assets per share adjusted to remove
the cumulative fair value movements on interest-rate swaps and
similar instruments, the carrying value of deferred tax on
intangible assets and to include the difference between the fair
value and the book value of the net investment in tenant finance
leases and add back purchasers' costs.
EPRA Net Tangible Assets (NTA) per
share
Diluted net assets per share adjusted to remove
the cumulative fair value movements on interest-rate swaps and
similar instruments, the carrying value of goodwill arising as a
result of deferred tax and other intangible assets, deferred tax on
intangible assets and to include the difference between the fair
value and the book value of the net investment in tenant finance
leases.
Equivalent yield
Calculated by the Group's external valuer,
equivalent yield is the internal rate of return from an investment
property, based on the gross outlays for the purchase of a property
(including purchase costs), reflecting reversions to current market
rent and such items as voids and non-recoverable expenditure but
ignoring future changes in capital value. The calculation assumes
rent is received annually in arrears.
ERV - Gross estimated rental value
The estimated market rental value of lettable
space as determined biannually by the Group's external valuer. For
investment properties in the development programme, which have not
yet reached practical completion, the ERV represents management's
view of market rents.
Gearing
Total borrowings, including bank overdrafts,
less short-term deposits, corporate bonds and cash, at book value,
plus cumulative fair value movements on financial derivatives as a
percentage of total equity. For adjusted gearing, see note
13.
Gross market value
Market value plus assumed usual purchaser's
costs at the reporting date.
Interest Cover Ratio (ICR)
A calculation of a company's ability to meet
its interest payments on outstanding debt. It is calculated using
EPRA earnings before interest, divided by net interest (excluding
the fair value movement on interest-rate swaps, foreign exchange
swaps, capitalised interest and interest on the pension scheme
assets and liabilities). The calculation excludes joint
ventures.
Investment portfolio
The investment portfolio comprises the
investment properties of the Group's subsidiaries on a
proportionately consolidated basis where not wholly
owned.
Lease incentives
Any incentive offered to occupiers to enter
into a lease. Typically, the incentive will be an initial rent-free
period, or a cash contribution to fit-out or similar costs. For
accounting purposes, the value of the incentive is spread over the
non-cancellable life of the lease.
Like-for-like portfolio
The like-for-like portfolio includes all
properties which have been in the portfolio since 1 April 2021 but
excluding those which are acquired or sold since that date.
Properties in the development pipeline and completed developments
are also excluded.
Loan-to-value (LTV)
Group LTV is the ratio of adjusted net debt,
including subsidiaries and joint ventures, to the sum of the market
value of investment properties and the book value of trading
properties of the Group, its subsidiaries and joint ventures, all
on a proportionate basis, expressed as a percentage. For the
Security Group, LTV is the ratio of net debt lent to the Security
Group divided by the value of secured assets.
Market value
Market value is determined by the Group's
external valuer, in accordance with the RICS Valuation Standards,
as an opinion of the estimated amount for which a property should
exchange on the date of valuation between a willing buyer and a
willing seller in an arm's-length transaction after proper
marketing.
Net initial yield
Net initial yield is a calculation by the
Group's external valuer of the yield that would be received by a
purchaser, based on the Estimated Net Rental Income expressed as a
percentage of the acquisition cost, being the market value plus
assumed usual purchasers' costs at the reporting date. The
calculation is in line with EPRA guidance. Estimated Net Rental
Income is determined by the valuer and is based on the passing cash
rent less rent payable at the balance sheet date, estimated
non-recoverable outgoings and void costs including service charges,
insurance costs and void rates.
Net rental income
Net rental income is the net operational income
arising from properties, on an accruals basis, including rental
income, finance lease interest, rents payable, service charge
income and expense, other property related income, direct property
expenditure and bad debts. Net rental income is presented on a
proportionate basis.
Net zero carbon building
A building for which an overall balance has
been achieved between carbon emissions produced and those taken out
of the atmosphere, including via offset arrangements. This relates
to operational emissions for all buildings while, for a new
building, it also includes supply-chain emissions associated with
its construction.
Passing rent
The estimated annual rent receivable as at the
reporting date which includes estimates of turnover rent and
estimates of rent to be agreed in respect of outstanding rent
review or lease renewal negotiations. Passing rent may be more or
less than the ERV (see over-rented, reversionary and ERV). Passing
rent excludes annual rent receivable from units in administration
save to the extent that rents are expected to be received. Void
units at the reporting date are deemed to have no passing rent.
Although temporary lets of less than 12 months are treated as void,
income from temporary lets is included in passing rents.
Property Income Distribution (PID)
A PID is a distribution by a REIT to its
shareholders paid out of qualifying profits. A REIT is required to
distribute at least 90% of its qualifying profits as a PID to its
shareholders.
Rental income
Rental income is as reported in the income
statement, on an accruals basis, and adjusted for the spreading of
lease incentives over the term certain of the lease in accordance
with IFRS 16 (previously, SIC-15). It is stated gross, prior to the
deduction of ground rents and without deduction for operational
outgoings on car park and commercialisation activities.
Reversionary or under-rented
Space where the passing rent is below the
ERV.
Reversionary yield
The anticipated yield to which the initial
yield will rise (or fall) once the rent reaches the ERV.
Security Group
Security Group is the principal funding vehicle
for the Group and properties held in the Security Group are
mortgaged for the benefit of lenders. It has the flexibility to
raise a variety of different forms of finance.
Topped-up net initial yield
Topped-up net initial yield is a calculation by
the Group's external valuer. It is calculated by making an
adjustment to net initial yield in respect of the annualised cash
rent foregone through unexpired rent-free periods and other lease
incentives. The calculation is consistent with EPRA
guidance.
Total return on equity
Dividend paid per share in the year plus the
change in EPRA Net Tangible Assets per share, divided by EPRA Net
Tangible Assets per share at the beginning of the year.
Total cost ratio
Total cost ratio represents all costs included
within EPRA earnings, other than rents payable, financing costs and
provisions for bad and doubtful debts, expressed as a percentage of
gross rental income before rents payable adjusted for costs
recovered through rents but not separately invoiced.
Total development cost (TDC)
Total development cost refers to the book value
of the site at the commencement of the project, the estimated
capital expenditure required to develop the scheme from the start
of the financial year in which the property is added to our
development programme, together with capitalised interest, being
the Group's borrowing costs associated with direct expenditure on
the property under development. Interest is also capitalised on the
purchase cost of land or property where it is acquired specifically
for redevelopment. The TDC for trading property development schemes
excludes any estimated tax on disposal.
Trading properties
Properties held for trading purposes and shown
as current assets in the balance sheet.
Vacancy rates
Vacancy rates are expressed as a percentage of
ERV and represent all unlet space, including vacant properties
where refurbishment work is being carried out and vacancy in
respect of pre-development properties, unless the scale of
refurbishment is such that the property is not deemed lettable. The
screen at Piccadilly Lights, W1 is excluded from the vacancy rate
calculation as it will always carry advertising although the number
and duration of our agreements with advertisers will
vary.
Valuation surplus/deficit
The valuation surplus/deficit represents the
increase or decrease in the market value of the Combined Portfolio,
adjusted for net investment and the effect of accounting for lease
incentives under IFRS 16 (previously SIC-15). The market value of
the Combined Portfolio is determined by the Group's external
valuer.
Voids
Voids are expressed as a percentage of ERV and
represent all unlet space, including voids where refurbishment work
is being carried out and voids in respect of pre-development
properties. Temporary lettings for a period of one year or less are
also treated as voids. The screen at Piccadilly Lights, W1 is
excluded from the void calculation as it will always carry
advertising although the number and duration of our agreements with
advertisers will vary. Commercialisation lettings are also excluded
from the void calculation.
Weighted average unexpired lease
term
The weighted average of the unexpired term of
all leases other than short-term lettings such as car parks and
advertising hoardings, temporary lettings of less than one year,
residential leases and long ground leases.