TIDMLAND
RNS Number : 5055I
Land Securities Group PLC
02 April 2020
Land Securities Group PLC ("Landsec")
2 April 2020
Update on the impact of Coronavirus ("CV-19")
This announcement contains inside information.
Landsec owns and manages commercial property across the UK
comprising offices (50% by value at 30 September 2019), retail
(38%), and specialist assets (12%) which includes leisure and
hotels. The CV-19 pandemic began to impact Landsec in mid-March and
this update explains how our business has been affected by the
virus and what steps we are taking.
At Landsec, our people, service partners and customers are our
primary concern and we are focusing on supporting them during these
uncertain times while maintaining the long-term sustainability of
our business.
Summary:
Impact on Landsec
-- The rapid spread of CV-19 has brought with it a huge shift in
the use of our buildings. From 24 March, stores at our shopping
centres, outlets and leisure assets were substantially closed, save
for essential services as defined by the Government. Four retail
outlets and seven leisure and retail parks have been closed
entirely.
-- We have been informed by Accor that they have closed 15 of their 21 hotels in our portfolio.
-- Our office properties remain open on a reduced service.
-- 65% of the rent due on 25 March was paid by 31 March compared
with 96% for the equivalent period last year.
Our response
-- We continue to focus on supporting our customers through this
period of disruption and are agreeing rent deferrals with many of
our retail and leisure occupiers.
-- We have established a rent relief support fund of GBP80m to
help our customers most in need, with a particular focus on
supporting F&B customers and small and medium sized
businesses.
-- We will give GBP500,000 to support our existing charity
partners with their immediate challenges.
-- We are taking measures to reduce expenditure as far as
possible at our operating assets and reviewing the timing of
further commitment to expenditure in our development programme.
-- The Board has taken the decision to cancel our third interim
dividend due to be paid on 9 April 2020 and will regularly review
the position on future dividend payments, reinstating them as soon
as it is appropriate to do so.
Financial capacity and liquidity
-- We are financially robust with an LTV of 28.1% at September 2019.
-- Using September 2019 valuation numbers, we can withstand a
valuation fall of 62% or EBITDA reduction of GBP385m before our LTV
or ICR covenants prevent further bank drawings.
-- At 31 March 2020, we had GBP1.2bn of cash and available
facilities, net of repayments due under our commercial paper
programme.
-- Our external valuer has informed us that the valuation will
contain a "material uncertainty" clause.
Interim Chief Executive Martin Greenslade said:
"Landsec is in a robust financial position with GBP1.2bn of cash
and available facilities and no bond debt or bank facilities
maturing before September 2023. However, the impact of CV-19 on our
business and on market conditions continues to evolve. As a result,
the Board has taken a prudent decision to cancel our third interim
dividend due for payment on 9 April and will regularly review the
position on future dividends as the situation develops.
"These are unprecedented times and it is incumbent upon
businesses such as ours to be mindful of the huge challenges faced
by many of our stakeholders. That is why we have set up an GBP80m
support fund to provide rent relief to those of our customers who
are most in need of help. We are also making available GBP500,000
in grants to our charity partners, so they can continue the
excellent work they do in our communities. The health and wellbeing
of our people has always been our priority and we were quick to
encourage all our office-based staff to work from home from 16
March. These actions reflect that we recognise that the long term
success of Landsec is reliant on our customers, employees and the
communities in which we operate."
Operations
Prior to the impact of CV-19, we saw a continuation of the
market conditions and performance described at the half-yearly
results in November. The London office market was strong while the
retail sector remained challenged due to cyclical and structural
pressures.
During March, we saw a rapid drop off in visitor numbers to our
retail and leisure destinations and many of our office customers
invoked working from home protocols for their employees. All our
own office-based staff were advised to work from home from 16
March.
We continue to maintain basic operations at the majority of our
destinations, even though most stores at our shopping centres,
outlets and leisure assets have closed save for essential services
including pharmacies and supermarkets. Our office buildings are
still operational but on a significantly reduced service as many
customers still require access to their spaces.
During the year, we have focused on reducing occupational costs
for our customers, particularly in relation to service charge in
retail. In the short term, our aim will be to reduce service charge
costs further while helping our customers to prepare to re-open as
swiftly as possible when conditions allow.
Customer support and cash collection
We are focused on looking after our customers, particularly
those most in need. We have been working with over 300 retail,
F&B and leisure customers this month to support them as best we
can. We are establishing a support fund to provide up to GBP80m of
rent relief for customers who need our help most to survive. Around
GBP15m of this fund will support our F&B customers, broadly
equivalent to three months' rent free. The remaining GBP65m will be
allocated on a case by case basis to small and medium sized
businesses with a focus on helping those with limited access to
other sources of financial assistance. We are also working with
leisure and retail operators to agree deferred payment plans.
GBP121m of rent was due on the 25 March rent payment date. The
table below shows the amount and percentage collected within five
days of the due date with a comparison to last year.
Amount due Day 5 equivalent
on 25 March Day 5 amount Day 5 amount amount received
2020 received received March 2019
GBPm GBPm % %
----------- ------------ ------------ -------------- ----------------
Office 71 61 86 98
Retail 37 15 41 91
Specialist 13 3 23 95
----------- ------------ ------------ -------------- ----------------
Total 121 79 65 96
----------- ------------ ------------ -------------- ----------------
Community
We are especially determined to help in the communities in which
we operate. Our community employment and education programmes -
which have, since 2011, helped more than 1,400 people furthest from
the job market back into work and engaged thousands of young people
about the property industry - are continuing at this crucial time.
In addition, in response to the immediate needs of the grass roots
charities we support, we are providing them with financial
assistance to help individuals and communities through these
unprecedented times. In the coming months, we will give grants
totalling GBP500,000 to our existing charity partners who are most
in need. This will include homeless charities and a GBP100,000
donation to the property industry charity, LandAid.
Our site teams are also providing practical assistance wherever
they can. For example, we are linking our food retailers in London
to local homeless charities we work with for food donations. In
Oxford, Leeds and Cardiff we are offering free parking to key
workers to reduce the number of people who are travelling on public
transport. In London, we are offering space for mobile blood banks
and mobile blood transfusion units to reduce the number of visitors
to hospitals. We're also offering our sites' car parks for NHS
Covid-19 testing facilities and we have offered Public Health
England free space on the Piccadilly Lights to share public health
information. And we're establishing virtual volunteering so our own
employees can offer their time and skills to organisations who
would like our help.
Developments
Our development sites are controlled and operated by our
contractors. It is their decision as to whether they can continue
work on site taking into account evolving government
guidelines.
Construction at 21 Moorfields, EC2 has paused. This is likely to
lead to a delay in delivery of the building to Deutsche Bank though
it is too early to give guidance on a revised delivery date.
Our development programme has a large amount of flexibility in
it. With the exception of 21 Moorfields, we have the ability to
stop development activity at ground level on the sites in our
programme. At 31 March 2020, our contracted development capital
expenditure was c.GBP300m of which c.GBP200m was expected to be
spent in the coming 12 months. However, given the suspension of
work at 21 Moorfields, we expect a proportion of this to be
deferred.
Year end process
Our financial year end is 31 March 2020. Currently, we expect to
be able to complete our processes in time for a Preliminary
Announcement date of 12 May. However, we will keep this date under
review and take into account any guidance from regulatory
bodies.
CBRE, our external valuer, has informed us that their valuation
at 31 March will include a "material uncertainty" clause in line
with recent RICS guidance.
Earnings
For the year ended 31 March 2020, our EPRA earning per share
would have been towards the upper end of analysts' estimates before
any impact from provisions related to emerging occupier
difficulties. At this point, it is too early to guide on the level
of provisions required this year or the impact of current market
conditions on next year's earnings.
Funding
At close of business on 31 March 2020, we had GBP2.15bn of cash
and available facilities of which GBP941m is treated as unavailable
(net GBP1.21bn) as it supports the outstanding short-term debt
issued under our GBP1.75bn commercial paper programme. Other than
this GBP941m of commercial paper, we have no debt maturing until 29
September 2023 when the A10 bond reaches its expected maturity
(GBP9.9m outstanding). Our bilateral and revolving credit
facilities have a weighted average maturity of 4.8 years with the
first maturity not until January 2024. Although access to the
commercial paper market has temporarily dried-up, we have both a P1
and F1 short-term credit rating and have applied to the Bank of
England to make use of their Covid Corporate Financing
Facility.
Using September 2019 valuation numbers, we can withstand a
valuation fall of 62% or EBITDA reduction of GBP385m (Security
Group EBITDA for 12 months to 30 September 2019: GBP505m) before
our LTV or ICR covenants prevent further bank drawings.
For further details on our funding position, please go to
Landsec.com/investors/debt-investors
Dividend
In light of the extreme market uncertainty, the Board believes
that conserving liquidity is in the best interests of shareholders.
Therefore, the Board has taken the decision to cancel our third
interim dividend due to be paid on 9 April 2020 and will regularly
review the position on future dividend payments, reinstating them
as soon as it is appropriate to do so.
Ends
Please contact:
Investors Press
Ed Thacker Bobby Leach / Danielle Dominey-Kent
+44 (0)20 7024 5185 +44 (0)20 7024 5472 / +44 (0)20
Edward.Thacker@landsec.com 7024 5241
Bobby.Leach@landsec.com /
Danielle.Dominey-Kent@Landsec.com
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END
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