TIDMLAND
RNS Number : 5585M
Land Securities Group PLC
12 May 2020
Annual results for the year ended 31 March 2020
12 May 2020
Resilient operational performance, strong balance sheet and
decisive response to Covid-19
Chief Executive Mark Allan said:
"I join Landsec at an extraordinary time. The effects of
Covid-19 are accelerating ongoing structural trends across the real
estate sector, while its longer-term societal and economic
consequences are yet to be determined. Landsec's strong balance
sheet and resilient operational performance have enabled us to
respond to immediate challenges posed by Covid-19 with speed and
decisiveness. Our GBP80m rent relief fund has offered targeted
support to occupiers, alongside broader options of rent deferrals
and monthly payments, and our GBP500,000 of community grants is
providing financial assistance to our charity partners.
"I am confident Landsec is approaching the future from a
position of strength. We are prepared to be bold in our thinking as
we navigate both the challenges and opportunities arising in the
long term from changing market trends and will not lose sight of
our wider sustainability objectives. We will continue to lead the
sector on major issues such as climate change and remain committed
to acting as a force for good in the communities in which we
operate."
Financial results
- Revenue profit(1)(2) down 6.3% to GBP414m
- Revenue profit(1)(2) down 1.1% to GBP437m before provisions related to 2020/21 rent
- Loss before tax for the year of GBP837m (2019: loss of GBP123m)
- Adjusted diluted earnings per share(1)(2) down 6.4% to 55.9p
- No final dividend; full year dividend down 49.1% to 23.2p per share
- Combined Portfolio(1)(2) valued at GBP12.8bn, with a valuation
deficit(1)(2) of GBP1,179m or 8.8%(3)
- EPRA net tangible assets per share(1) down 11.6% to 1,192p
- Ungeared total property return(4) of -4.5%
- Total business return(1) of -8.2%
Strong financial position
- Group LTV ratio(1)(2) at 30.7% (31 March 2019: 27.1%)
- Adjusted net debt(1)(2) of GBP3.9bn (31 March 2019: GBP3.7bn)
- Weighted average cost of debt at 1.8% (31 March 2019: 2.7%)
- Weighted average maturity of debt at 9.6 years (31 March 2019: 12.3 years)
- Cash and available facilities(2) of GBP1.2bn
Resilient operational metrics
- High occupancy with like-for-like voids(4) at 2.4% (31 March 2019: 2.4%)
- Office at 1.3% (31 March 2019: 1.0%)
- Retail at 3.9% (31 March 2019: 4.0%)
- Specialist at 1.2% (31 March 2019: 1.5%)
- Like-for-like net rental income, before provisions related to
next year's rent, down GBP4m or 0.7%
- Office up GBP7m or 2.9%
- Retail down GBP10m or 3.9%
- Specialist down GBP1m or 1.2%
- Retail destinations significantly outperforming national benchmarks for footfall and sales
- 11 months footfall down 1.2% vs benchmark down 3.7%
- 11 months same centre sales up 0.9% (up 0.1% excluding
automotive sales) vs benchmark down 3.2%
Maintaining momentum and preserving optionality in our pipeline
of developments
- 0.6 million sq ft of fully committed developments in London,
scalable to 2.0 million sq ft of space within 2 years:
- On site constructing 0.6 million sq ft of fully pre-let office space at 21 Moorfields, EC2
- On site building to grade 0.4 million sq ft of speculative
office developments at Nova East, SW1; Lucent, W1 and 105 Sumner
Street, SE1 with the option to progress or cease construction later
in the year
- Progressing plans to re-purpose a number of retail assets in
key cities to include office and residential space.
- Option to commence a further 0.8 million sq ft of office-led
developments in London as early as this year and another 0.2
million sq ft in 2021
Decisive response to Covid-19
- GBP80m rent relief fund established to support occupiers, with
a focus on food and beverage operators and small businesses
alongside broader options of rent deferrals and monthly
payments
- GBP500,000 of grants immediately available to existing charity
partners, further supplemented by the Board of Directors waiving
20% of their base salaries or fees for an initial period of three
months
- Working with customers to manage the safety and security of
assets through the lockdown period and beyond
- Swiftly reduced service charge costs for occupiers
Industry leader in sustainability
- Committed to becoming a net zero carbon business by 2030, with
first net zero carbon building under way at 105 Sumner Street,
SE1
- Delivered a 42% reduction in carbon emissions compared with
2013/14 baseline, in line with our updated science-based target to
reduce emissions by 70% by 2030
- Recognised as sector leader, ranking first in the UK and
Europe among our peer group in the Global Real Estate
Sustainability Benchmark (GRESB), for mixed office and retail
space
- Achieved a place on the CDP climate change A-List for the
third year running. Landsec is the only UK REIT to hold an A
rating
- Delivered over GBP4.8m of social value through our community programme
Results summary
31 March 2020 31 March 2019 Change
Revenue profit(1)(2) GBP414m GBP442m Down 6.3%
============= ============= ============
Revenue profit(1)(2) before GBP437m GBP442m Down 1.1%
provisions related to 2020/21
rent
============= ============= ============
Valuation deficit(1)(2) GBP(1,179)m GBP(557)m Down 8.8%(3)
============= ============= ============
Loss before tax GBP(837)m GBP(123)m
============= ============= ============
Basic loss per share (112.4)p (16.1)p
============= ============= ============
Adjusted diluted earnings
per share(1)(2) 55.9p 59.7p Down 6.4%
============= ============= ============
Dividend per share 23.2p 45.55p Down 49.1%
============= ============= ============
Net assets per share 1,182p 1,341p Down 11.9%
============= ============= ============
EPRA net tangible assets
per share(1) 1,192p 1,348p Down 11.6%
============= ============= ============
Group LTV ratio(1)(2) 30.7% 27.1%
============= ============= ============
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 17 in the Business analysis section.
2. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Financial review.
3. The % change for the valuation deficit represents the fall in
value of the Combined Portfolio over the year, adjusted for net
investment.
4. For further details, see the Business analysis section.
Chief Executive's statement
I joined Landsec on 14 April 2020 and am conscious that I have
arrived at an extraordinary time. The speed and scale of the impact
of Covid-19 on business and the economy are unprecedented and
profound long-term consequences will play out long after the
government lockdown has lifted. Some of the long-term economic and
societal trends which were already disrupting the property industry
are likely to accelerate, new ones are sure to emerge and major
issues such as climate change will remain as significant as ever.
How we choose to respond to this unique and fluid combination of
challenges will define Landsec for years to come.
Landsec faces this situation from a position of strength. We
have a strong balance sheet, a portfolio of properties that are
amongst the highest quality for the sectors in which we operate and
a team of talented, dedicated people across the business. These
attributes stand us in good stead but will need to be allied to
bold, ambitious thinking and a willingness to adopt new and
creative approaches if we are to make the most of Landsec's
undoubted potential.
Overview
Although I did not join Landsec until after the financial year
had ended, looking at the results there are three distinct themes
that characterise our performance:
- Operational resilience. Despite a backdrop of prolonged
political uncertainty and subdued business confidence for much of
the year, the Office segment performed well in terms of both
occupancy levels and rental growth. And despite changing consumer
habits and a challenging market environment for retailers
generally, occupancy and rental income across our Retail segment
also held up well.
- Structural changes in retail. Ongoing structural changes to
the retail property sector, driven by the continued rise of online
shopping and changing consumer behaviour, had a material negative
impact on asset values. The nature of these changes, accompanied by
the continued downward pressure on retail rents, means that the
impact on valuations is more likely to be structural in nature than
cyclical.
- Covid-19. Although the scale of the global pandemic and
associated government policy response only began to become clear in
the last month of our financial year, it has had a negative impact
on asset valuations, necessitated higher debtor provisions and
resulted in significant economic uncertainty, such that the Board
concluded it was prudent to cancel the third interim dividend and
is not proposing a final dividend, in common with many other listed
businesses.
Outside of the themes mentioned above, the business took
important action in a number of areas that leaves us well placed
for the future:
- We committed to becoming a net zero carbon business by 2030.
Climate change remains the defining global challenge of the next 20
years and Landsec is clear in its ambition to play a leading role
in the property industry's response.
- We progressed our development programme to take advantage of
anticipated supportive conditions in the London market.
Importantly, this programme has been established in such a way that
we retain full optionality over the scale and extent of speculative
commitments for approximately the next six months, allowing us to
adapt our approach to best suit post Covid-19 conditions.
- We continued to manage our financial position with prudence
and flexibility in mind. As a result, we have significant balance
sheet capacity that will allow us both to weather a prolonged
downturn or capitalise on opportunities that arise.
Results and dividend
This year, Landsec recorded a loss before tax of GBP837m (2019:
GBP123m) as underlying earnings were more than offset by a fall in
the value of our assets, down 8.8% (or GBP1,179m). The majority of
the valuation deficit is attributable to our Retail segment, which
suffered a 20.5% decline over the 12 months as a result of the
challenging environment and ongoing structural changes, exacerbated
at the year end by the early effects of Covid-19.
Operationally, Landsec's results were resilient despite
persistent uncertainties in some of our core markets. We reported
revenue profit of GBP414m (2019: GBP442m), equating to adjusted
diluted earnings per share of 55.9p (2019: 59.7p), with the
majority of the decline (GBP23m) associated with provisions
relating to 2020/21 rent that was invoiced in March and where
recoverability is affected by Covid-19.
Our EPRA net tangible assets per share were down 11.6% at
1,192p, reflecting the loss for the year, while our loan-to-value
ratio increased to 30.7% from 27.1% a year ago, largely as a result
of the fall in portfolio value, but it remains at a prudent level
providing plenty of balance sheet capacity.
As a result of the significant uncertainty surrounding Covid-19,
the Board took the difficult decision in early April to cancel the
third interim dividend. With limited change in the situation since
then, the Board is also not proposing the payment of a final
dividend. We recognise that this is disappointing as income is an
important component of our return for shareholders and are
committed to resuming dividends at an appropriate level as soon as
conditions stabilise.
Covid-19 and our response
Our operational response to Covid-19 was both immediate and
proactive. Our site teams continue to follow all guidelines issued
by the relevant public health authorities and we are taking a
stringent approach to the cleanliness and hygiene of our assets. We
have worked with occupiers to allow them to access stock where safe
to do so, and our frontline staff are working to keep our assets
safe and secure for customers and guests.
We also acted swiftly to offer financial support to our
customers and communities. In early April we established an GBP80m
rent relief fund, targeted at our customers most in need, with a
particular focus on supporting F&B customers and small and
medium sized businesses. Further action will be required in the
months ahead; we recognise the importance of all stakeholders
working together collaboratively and are committed to playing our
part.
The immediate impact of Covid-19 has been particularly
significant on our Retail and Specialist segments. Only essential
services like supermarkets and pharmacies remain open at our retail
destinations, with four of our retail assets shut completely.
Although our Office segment has seen a less pronounced immediate
impact, the vast majority of our customers' employees are now
working from home, with less than 10% usage of our office space.
Rent collection rates in March and early April were impacted
negatively across the portfolio with an average 63% collected
within ten days of falling due, compared with 94% for the same
period in 2019.
June rent collection rates are likely to be worse than March
given that most of the negative economic impact from Covid-19 has
fallen in the second quarter, notwithstanding the commendable scale
and intent of the Government's economic response. The pace of
subsequent recovery from hereon will vary by sector. Ongoing social
distancing measures will affect certain sectors much more than
others, all businesses will need time to work with their global
supply chains and workforces to resume trading as normal and
heightened levels of caution amongst the general public are likely
to affect behaviour for many months to come. While it is too early
to predict outcomes with any certainty, it seems prudent to plan
for more business failures and higher vacancy rates across our
portfolio, in particular leisure and retail, and we don't expect to
see the economy recover to pre-Covid-19 levels before 2022 at the
earliest.
Recognising that the effects of Covid-19 will be felt for some
time to come, we will continue to take proactive measures to ensure
that Landsec emerges from this crisis in as strong a position as
possible:
- We will continue to focus on controlling operating costs, both
across our business and within service charges, but are committed
to doing so in a way that is sustainable and does not risk service
levels in the longer term.
- We will aim to preserve balance sheet capacity and
flexibility, both to ensure that we can weather a prolonged
downturn but also so that we are well placed to capitalise on any
opportunities that emerge over time.
- We will control capital expenditure carefully and retain
optionality over our speculative development programme for as long
as possible so that we can adapt our approach as the longer-term
effects of Covid-19 become clearer.
- We will work proactively with our customers and partners to
find solutions that derive mutual benefit at such a challenging
time.
We are also mindful that Covid-19 is likely to have profound
long-term effects on society and, by extension, the property
sector. Understanding, anticipating and responding to these likely
effects will be vital to the long-term success of Landsec and we
are committed to doing so.
Leadership in sustainability
In the face of the considerable near term impact of Covid-19, it
can be easy to lose sight of the very significant threat posed by
climate change. Landsec has always been a sector leader in this
space - we were the first real estate company in the world to
commit to science-based reduction targets for CO(2) and we built on
that in 2019 by committing to become net zero carbon by 2030 - and
I am determined that we continue to build on this leadership
position in the years ahead.
Of course, sustainability is about more than climate change and
I view our commitment to the communities in which we operate as
vitally important. In April, we made GBP500,000 of community grants
available to offer immediate financial assistance to our existing
charity partners, as they work to support the most disadvantaged in
society at this time of crisis. GBP100,000 of this amount was
donated to property charity LandAid to help fund their campaign to
end youth homelessness. This amount was further supplemented by the
Board of Directors waiving 20% of their base salaries or fees for
an initial period of three months.
At our sites, we offered free parking to key workers, offered
space for mobile blood banks and blood transfusion units, and
Public Health England used Piccadilly Lights free of charge to
display advice on health matters. Our community employment
programme has now helped over 1,500 people furthest from the job
market into work, including ex-offenders who have graduated from
one of our three prison academies, and we know this programme will
have a vital role in the months to come. We are also committed to
the UN Sustainable Development Goals and the Global Compact. And
we're making good progress on our commitment to generate GBP25m of
social value by 2025.
Strategy
The arrival of a new CEO provides a good opportunity for the
Board to step back and consider the long-term strategic direction
of the business and we intend to do exactly this over the next few
months, communicating the outcomes in the autumn.
In many ways, this is an ideal time to undertake such an
exercise. There are profound structural trends already disrupting
the real estate sector that present both risks and opportunities;
there is the significant short-term impact of Covid-19 to be
navigated and its longer-term consequences still to be determined;
and there is a political backdrop which, at least before Covid-19,
points to a period of improved stability after three years of
sustained uncertainty although we recognise our future trading
relationship with Europe is yet to be resolved.
Priorities for the year ahead
For virtually all businesses, 2020 and 2021 will be dominated by
tackling the consequences of Covid-19 and it is still too early to
predict what that will mean. Like all crises, the Covid-19 crisis
will pass in time but its impact in the longer term, from both a
societal and economic perspective, is likely to be profound. For
this reason, our focus at Landsec in the year ahead will be
twofold: firstly, doing everything we can to ensure Landsec emerges
from Covid-19 in as strong a position as possible; and secondly,
determining the long-term strategic direction for our business. We
approach these challenges from a position of strength and are
prepared to be bold in our thinking, determined to make the most of
Landsec's undoubted potential.
Mark Allan
Chief Executive
Financial review
Overview
While the Covid-19 pandemic only manifested itself in the final
month of this financial year, its impact on our financial
performance has been pronounced. It has resulted in additional
declines in asset values, a significant reduction in revenue profit
and the Board's decision to suspend dividends.
But even before the arrival of Covid-19, conditions in parts of
our market had been challenging. The political uncertainty and
retailer difficulties of last year had continued into this year
leading to further declines in retail values. However, once some of
the political uncertainty lifted following the UK general election,
occupational and investment demand for London offices increased and
office values rose in the final part of our financial year. The UK
lockdown in March, however, curtailed further growth and
precipitated additional difficulties for our retail and leisure
occupiers with asset values falling further.
The decline in the value of our assets is the main reason for
the GBP837m loss before tax this year and an increase in our
loan-to-value gearing measure to 30.7%. However, our balance sheet
remains strong and our GBP1.2bn of cash and available facilities
gives us plenty of capacity to withstand a reduction in cash flow
from rents and progress our development programme.
At a time of such significant upheaval to our normal way of
life, it is natural that there is a heightened degree of
uncertainty. The external valuation of our portfolio at 31 March
2020 contains a material uncertainty clause from CBRE, which is in
line with the RICS guidance to valuers and simply reflects the
increased difficulty in determining asset values when few, if any,
comparable transactions have occurred in the new trading
environment. As part of the preparation of our financial
statements, there has been a particular focus on our going concern
assessment. Further information on our approach and the results of
our assessment is included in note 1 of the financial
statements.
The UK lockdown has significantly impacted the level of recent
rent collections, leading to provisions for year end debtors
although the rent predominantly relates to the early part of
2020/21. We expect reduced rental payments to continue into the new
financial year. To assist our occupiers, we have a variety of
options from monthly rents, rent deferrals and a recently
established GBP80m rent relief fund for those most in need.
We have made a few changes to the financial information we
disclose. During the year, we merged our London and Retail business
units and changed our financial reporting to reflect the new
structure. We have also adopted the EPRA best practice
recommendations ('BPR') published in October 2019 and therefore
report EPRA net tangible assets (NTA) as our primary measure of net
asset value. Comparative disclosures have been adjusted to reflect
this change. Further details are disclosed below.
Table 1: Highlights
Year ended Year ended
31 March 2020 31 March 2019
-------------- --------------
Revenue profit(1) GBP414m GBP442m
Revenue profit(1) before provisions related to 2020/21 rent GBP437m GBP442m
Valuation deficit(1) GBP(1,179)m GBP(557)m
Loss before tax GBP(837)m GBP(123)m
Basic loss per share (112.4)p (16.1)p
Adjusted diluted earnings per share(1) 55.9p 59.7p
Dividend per share 23.2p 45.55p
31 March 2020 31 March 2019
-------------- --------------
Combined Portfolio(1) GBP12.8bn GBP13.8bn
Net assets per share 1,182p 1,341p
EPRA net tangible assets per share(2) 1,192p 1,348p
Adjusted net debt(1) GBP3.9bn GBP3.7bn
Group LTV ratio(1) 30.7% 27.1%
------------------------------------------------------------ -------------- --------------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
below.
2. New metric presented as a result of a change in EPRA best
practice recommendations. For further details see table 18 in the
Business analysis section.
Revenue profit for the year to 31 March 2020 was GBP414m, down
6.3% from GBP442m primarily due to the impact of Covid-19 on the
likelihood of us being able to collect a portion of our contracted
rents for the first quarter of 2020/21. Adjusted diluted earnings
per share were down 6.4% at 55.9p due to the reduction in revenue
profit. Over the year, our assets declined in value by 8.8% or
GBP1,179m (including our proportionate share of subsidiaries and
joint ventures) compared with a GBP557m decline in the prior year.
This decline in the value of our assets is behind our loss before
tax of GBP837m (2019: GBP123m) and the reduction in our EPRA net
tangible assets per share in the year, down 11.6% to 1,192p.
Presentation of financial information
Our property portfolio is a combination of properties that are
wholly owned by the Group, part owned through joint arrangements
and those owned by the Group but where a third party holds a
non-controlling interest. Internally, management reviews the
results of the Group on a basis that adjusts for these forms of
ownership to present a proportionate share. The Combined Portfolio,
with assets totalling GBP12.8bn, is an example of this approach,
reflecting the economic interest we have in our properties
regardless of our ownership structure. We consider this
presentation provides additional information to stakeholders on the
activities and performance of the Group, as it aggregates the
results of all the Group's property interests which under IFRS are
required to be presented across a number of line items in the
statutory financial statements.
The same approach is applied to many of the other measures we
discuss and, accordingly, a number of our financial measures
include the results of our joint ventures and subsidiaries on a
proportionate basis. Measures that are described as being presented
on a proportionate basis include the Group's share of joint
ventures on a line-by-line basis but exclude the non-owned elements
of our subsidiaries. This is in contrast to the Group's statutory
financial statements, where the Group's interest in joint ventures
is presented as one line on the income statement and balance sheet,
and all subsidiaries are consolidated at 100% with any non-owned
element being adjusted as a non-controlling interest or redemption
liability, as appropriate. Our joint operations are presented on a
proportionate basis in all financial measures.
Measures presented on a proportionate basis are alternative
performance measures as they are not defined under IFRS. Where
appropriate, the measures we use are based on best practice
reporting recommendations published by EPRA. In October 2019, EPRA
issued new best practice recommendations for financial disclosures
by listed real estate companies introducing three new measures of
net asset value: EPRA net tangible assets (NTA), EPRA net
reinvestment value (NRV) and EPRA net disposal value (NDV). We have
adopted these guidelines in the year ended 31 March 2020 and
consider EPRA NTA to be the most relevant measure for our business.
EPRA NTA is now our primary measure of net asset value, replacing
our previously reported EPRA net assets and EPRA net assets per
share measures. Total business return is now calculated based on
EPRA NTA. The prior year has been re-stated to reflect this change
in metric and a comparison with the previously reported metrics has
been provided on our website. For further details see tables 17 and
18 in the Business analysis section.
In previous years, our segmental reporting reflected the fact
that our operations were organised into a London Portfolio and a
Retail Portfolio. Earlier this financial year, we merged these two
business units and have amended our reporting to reflect this. In
order to maintain a detailed level of financial disclosure, our
segmental reporting now reflects the predominant use class of our
assets, grouped into Office, Retail and Specialist. Previously,
part of our indirect costs were allocated to the London and Retail
portfolios and part was unallocated. These indirect costs, which
are predominantly staff costs, have now all been treated as net
indirect expenses and are not allocated to individual segments. The
sector breakdown within our Combined Portfolio analysis disclosure
has been re-ordered to reflect the new segments but the detailed
disclosure remains. The prior year has been re-stated in the new
format and a reconciliation to the previous presentation has been
provided on our website.
Income statement
Our income statement has two key components: the income we
generate from leasing our investment properties net of associated
costs (including finance expense), which we refer to as revenue
profit, and items not directly related to the underlying rental
business, principally valuation changes, profits or losses on the
disposal of properties and finance charges related to bond
repurchases, which we call Capital and other items.
We present two measures of earnings per share: the IFRS measure
of basic earnings per share, which is derived from the total profit
or loss for the year attributable to shareholders, and adjusted
diluted earnings per share, which is based on tax-adjusted revenue
profit, referred to as adjusted earnings.
Table 2: Income statement
Year ended Year ended
31 March 2020 31 March 2019
Table GBPm GBPm
---------------------------------- ----- -------------- --------------
Revenue profit 3 414 442
Capital and other items 7 (1,251) (565)
-------------- --------------
Loss before tax (837) (123)
Taxation 5 4
---------------------------------- ----- -------------- --------------
Loss attributable to shareholders (832) (119)
---------------------------------- ----- -------------- --------------
Basic loss per share (112.4)p (16.1)p
Adjusted diluted earnings per
share 55.9p 59.7p
---------------------------------- ----- -------------- --------------
Our loss before tax was GBP837m, compared with GBP123m in the
prior year, due to a greater fall in the value of our assets this
year (down GBP1,179m compared with GBP557m last year) as well as a
GBP28m reduction in revenue profit. The increased loss this year
resulted in a loss per share of 112.4p, compared with loss per
share of 16.1p in the previous year. Adjusted diluted earnings per
share decreased by 6.4%, from 59.7p to 55.9p this year, as a result
of the decrease in revenue profit from GBP442m to GBP414m. There is
no difference between our adjusted diluted earnings per share and
the EPRA measure.
The reasons behind the movements in revenue profit and Capital
and other items are discussed in more detail below.
Revenue profit
Revenue profit is our measure of underlying pre-tax profit,
presented on a proportionate basis. A full definition of revenue
profit is given in the Glossary. The main components of revenue
profit, including the contributions from the Office, Retail and
Specialist assets, are presented in the table below.
Table 3: Revenue profit
Year ended Year ended
31 March 2020 31 March 2019
Office Retail Specialist Total Office Retail Specialist Total Change
Table GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ----- ------ ------ ---------- ----- ------ ------ ---------- ----- ------
Gross rental income(1) 265 300 98 663 262 309 99 670 (7)
Net service charge
income/(expense) 1 (3) (2) (4) 1 (2) (2) (3) (1)
Net direct property expenditure (5) (35) (13) (53) (5) (31) (13) (49) (4)
Provisions related to 2020/21
rent - (19) (4) (23) - - - - (23)
------------------------------- ----- ------ ------ ---------- ----- ------ ------ ---------- ----- ------
Segment net rental income 4 261 243 79 583 258 276 84 618 (35)
------ ------ ---------- ------ ------ ----------
Net indirect expenses (74) (78) 4
----- ----- ------
Revenue profit
before interest 509 540 (31)
Net finance expense 5 (95) (98) 3
------------------------------- ----- ------ ------ ---------- ----- ------ ------ ---------- ----- ------
Revenue profit 414 442 (28)
------------------------------- ----- ------ ------ ---------- ----- ------ ------ ---------- ----- ------
1. Includes finance lease interest, after rents payable.
Revenue profit decreased by GBP28m to GBP414m for the year ended
31 March 2020 (2019: GBP442m). This was the result of a GBP35m
decrease in net rental income for the year which was partly offset
by a GBP4m reduction in net indirect expenses and a GBP3m reduction
in net finance expense. The decrease in net rental income was
primarily driven by provisions against trade debtors at 31 March
2020 reflecting the impact of Covid-19 on cash collections. There
was also a GBP7m decrease in gross rental income in the year,
primarily in the Retail segment. The GBP4m increase in net direct
property expenditure largely relates to higher void related costs
and advisory fees. The movements are explained in more detail
below.
Net rental income
Table 4: Net rental income(1)
GBPm
------------------------------------------------------------- ----
Net rental income for the year ended 31 March 2019 618
Net rental income movement in the year:
----
Like-for-like investment properties - provisions related
to 2020/21 rent (23)
Like-for-like investment properties (4)
Proposed developments (2)
Development programme (2)
Completed developments -
Acquisitions since 1 April 2018 (1)
Disposals since 1 April 2018 (2)
Non-property related income (1)
----
(35)
------------------------------------------------------------- ----
Net rental income for the year ended 31 March 2020 583
-------------------------------------------------------------- ----
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Net rental income decreased by GBP35m in the year ended 31 March
2020 with reductions in rental income across the portfolio. We
recognised GBP23m of provisions in relation to next year's rent
which is explained in more detail below. The remaining GBP4m
decline in like-for-like net rental income reflects reductions in
income across our retail assets of GBP10m, primarily as a result of
CVAs and administrations leading to lower rents or voids. In our
Specialist assets (GBP1m lower than last year), we saw similar
rental pressure in leisure although this was largely offset by
improved revenue from Piccadilly Lights. Also, there was a GBP1m
reduction in the income from our hotels in the final weeks of the
year as a result of lower occupancy caused by Covid-19. The
declines in Retail and Specialist net rental income were partly
offset by a GBP7m increase in net rental income from our offices as
a result of lettings and rent reviews in the current and prior
years. There was a GBP1m decline in net rental income as a result
of the acquisition of a development opportunity at Lavington
Street, SE1 in the prior year and a GBP2m reduction in net rental
income following the sale of Poole Retail Park. The GBP2m reduction
in net rental income from assets in the development programme
reflects the reduction in income and higher costs at these assets.
In proposed developments, there was also a GBP2m reduction in net
rental income at Portland House, SW1, as we work towards vacant
possession ahead of development. Looking ahead, Portland House was
almost entirely vacated at the end of
March 2020 so GBP11m of rental income we recognised this year
will no longer be received next year.
Further information on the net rental income performance of the
portfolio is given in the Portfolio review.
Net indirect expenses
Net indirect expenses represent the indirect costs of the Group
including joint ventures. In total, net indirect expenses were
GBP74m (2019: GBP78m). The GBP4m decrease is primarily the result
of lower staff costs.
Net finance expense (included in revenue profit)
Table 5: Net finance expense(1)
GBPm
----------------------------------------------------- ----
Net finance expense for the year ended 31 March 2019 98
Impact of:
Capitalised interest (3)
Net finance expense for the year ended 31 March 2020 95
----------------------------------------------------- ----
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Our net finance expense has decreased by GBP3m to GBP95m due to
an increase in interest capitalised on our developments in the
year.
Recent rent collection and related provisions
In general, rent is payable in advance, often on a quarterly
basis. In recent years, we have agreed with a number of occupiers
for rents to be paid on a monthly basis to assist with cash flow
management. GBP121m of rent was due on the 25 March quarter day and
a further GBP20m of rent was due on 1 April. The table below shows
the amount and percentage of this rent collected within 10 days of
the due date. All of the amounts due relate to rent for the year
ended March 2021 with the exception of a small element of the 25
March rents, which relate to the last few days of March 2020.
Table 6: Rent collections
Day 10 amounts Day 10 amounts Day 10 amounts
received received received
Amounts Amounts
due on 25 due on 1
March April Total Mar 20 Mar 20 Mar 19
GBPm GBPm GBPm GBPm % %
----------- ---------- --------- ----- -------------- -------------- --------------
Office 71 1 72 64 89 98
Retail 37 19 56 21 38 90
Specialist 13 - 13 4 31 86
----------- ---------- --------- ----- -------------- -------------- --------------
Total 121 20 141 89 63 94
----------- ---------- --------- ----- -------------- -------------- --------------
As a result of the unusually low level of rent receipts,
particularly from Retail and Specialist occupiers, we have assessed
these debtors for recoverability and provided GBP24m. Of this,
GBP23m relates to rent for the next financial year (and there is a
corresponding deferred income creditor on the balance sheet) but,
under accounting rules, we are required to take the full charge of
any debtor provision this year. The element of this charge which
relates to next year but is included as part of this year's revenue
profit has been referred to as 'Provisions related to 2020/21
rent'.
Capital and other items
Table 7: Capital and other items(1)
Year ended Year ended
31 March 2020 31 March 2019
Table GBPm GBPm
-------------------------------------- ----- -------------- --------------
Valuation and profits on disposals
Valuation deficit 8 (1,179) (557)
Loss on disposal of investment
properties (6) (2)
Profit on disposal of trading
properties 7 -
Net finance expense 9 (68) (4)
Other items
Fair value movement prior to
acquisition of non-owned element
of a joint venture - 9
Profit from long-term development
contracts 3 3
Other (3) -
Exceptional items (5) (14)
Capital and other items (1,251) (565)
-------------------------------------- ----- -------------- --------------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
An explanation of the main Capital and other items is given
below.
Valuation of investment properties
Our Combined Portfolio declined in value by 8.8% or GBP1,179m
compared with a decrease last year of GBP557m. A breakdown of
valuation movements by category is shown in table 8.
Table 8: Valuation analysis
Market value Movement
31 March Valuation Rental Net initial Equivalent in equivalent
2020 movement value change(1) yield yield yield
GBPm % % % % bps
------------------------------ ------------ --------- ---------------- ----------- ---------- ---------------
Office 6,009 1.9 4.6 4.3 4.6 6
London retail 1,307 -15.8 -5.6 4.6 4.6 37
Regional retail 1,494 -27.5 -9.8 6.4 6.2 103
Outlets 871 -10.3 2.3 5.6 5.9 56
Retail parks 444 -25.5 -7.7 7.5 7.4 111
Leisure and hotels 1,153 -10.9 -1.9 4.3 5.8 31
Other 398 1.7 - 3.3 4.4 18
------------------------------ ------------ --------- ---------------- ----------- ---------- ---------------
Total like-for-like portfolio 11,676 -8.8 -1.0 4.8 5.1 27
Proposed developments 218 -14.7 n/a - n/a n/a
Development programme 558 3.5 n/a - 4.3 n/a
Completed developments 169 -28.1 -11.4 6.1 6.0 113
Acquisitions 160 -9.3 n/a 2.2 4.8 n/a
------------------------------ ------------ --------- ---------------- ----------- ---------- ---------------
Total Combined Portfolio 12,781 -8.8 -1.2 4.5 5.1 25
------------------------------ ------------ --------- ---------------- ----------- ---------- ---------------
1. Rental value change excludes units materially altered during the year.
It has been another challenging year for retailers and casual
dining operators, exacerbated at the year end by the UK lockdown.
The 8.8% decline in the value of our Combined Portfolio is entirely
due to a fall in the value of our retail and leisure assets with
around a third of the decline attributable to the impact of
Covid-19. Within the like-for-like portfolio, regional retail saw
the largest reduction at 27.5% with similar results at all our
centres as rental values declined by 9.8% and yields moved out
103bps. Retail parks fell in value by 25.5% as rental values
declined by 7.7% and yields expanded by 111bps. Our Leisure assets
declined in value by 14.0% with rental values 2.9% lower and yields
moving out by 59bps, while hotels were down by 5.9% largely due to
the impact of Covid-19. Our Office assets proved resilient,
increasing in value by 1.9% as rental values rose by 4.6% and
yields expanded slightly. The value of our other assets increased
by 1.7%, primarily due to higher income expectations from
Piccadilly Lights.
Outside the like-for-like portfolio, values in the development
programme were up 3.5% over the year as construction risk reduced
at 21 Moorfields, EC2. The 14.7% decline in the value of our
proposed developments reflects the residual value of Portland
House, SW1 where income has now ceased and costs of the latest
redevelopment plans have increased. Our only completed development,
Westgate Oxford, reduced in value by 28.1%, in line with other
regional retail assets. Our acquisitions fell in value by 9.3% with
Lavington Street, SE1 down 8.3% reflecting capital expenditure
incurred as we work towards submitting a planning application as
well as higher expected construction costs.
Profit/(loss) on disposals
Profit on disposals in the year relates to the sale of
investment properties and trading properties. We made a total net
profit on disposals of GBP1m (2019: net loss of GBP2m). The loss on
disposal of investment properties of GBP6m primarily relates to the
sale of Poole Retail Park. The profit on disposal of trading
properties of GBP7m primarily relates to the sale of our freehold
land holding at Ebbsfleet and residential units at Nova.
Net finance expense (included in Capital and other items)
In the year ended 31 March 2020, we incurred GBP68m of net
finance expense which is excluded from revenue profit.
Table 9: Net finance expense(1)
Year ended Year ended
31 March 2020 31 March 2019
GBPm GBPm
------------------------------------------- -------------- --------------
Premium and fees on redemption of medium
term notes (MTNs) 59 2
Fair value movement on interest-rate swaps 9 6
Other net finance income - (4)
Total 68 4
------------------------------------------- -------------- --------------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
The increase over the prior year in this element of our net
finance expense is due to higher costs associated with the
redemption of medium term notes, and losses on our interest-rate
swaps as a result of fluctuations in market interest rates in the
year.
Fair value movement prior to acquisition of non-owned element of
a joint venture
The GBP9m fair value movement in the prior year relates to a
previously unrealised profit being recognised upon our acquisition
of the remaining 50% interest in The Oriana Limited
Partnership.
Profit from long-term development contracts
The profit from long-term development contracts in the year of
GBP3m (2019: GBP3m) is from the development at Selly Oak,
Birmingham which was pre-sold during the course of
construction.
Exceptional items
In the year ended 31 March 2020, we have incurred GBP5m (2019:
GBP14m) of impairment charges which have been classified as
exceptional.
As a result of a decline in the value of Bluewater, Kent, an
impairment test of the intangible asset related to the management
rights for the centre was carried out. This resulted in impairment
charges of GBP4m in the year (2019: GBP12m) against the intangible
asset we hold in the balance sheet and GBP1m (2019: GBP2m) against
the related goodwill.
Taxation
As a REIT, our income and capital gains from qualifying
activities are exempt from corporation tax. 90% of this income must
be distributed as a Property Income Distribution and is taxed at
the shareholder level to give a similar tax position to direct
property ownership. Non-qualifying activities, such as sales of
trading properties, are subject to corporation tax.
This year, there was a tax credit of GBP5m (2019: GBP4m) being a
current tax credit of GBP4m (2019: GBPnil) and a deferred tax
credit of GBP1m (2019: GBP4m). The current tax credit relates to
land remediation relief received and payment for losses surrendered
to a joint venture company.
The Group has met the REIT requirements, including the payment
by 31 March 2020 of the required Property Income Distribution (PID)
for the year ended 31 March 2019. The forecast minimum PID for the
year ended 31 March 2020 is GBP282m, which must be paid by 31 March
2021. The Group has already made PID dividends relating to 31 March
2020 of GBP204m, leaving GBP78m to be paid.
Table 10: Property Income Distributions (PID)
PID PID
PID Pre 31March
31 March 31 March 2019 Ordinary Total
2020 2019 dividend dividend
GBPm GBPm GBPm GBPm GBPm
----------------------- --------- --------- ------------- --------- ----------
Dividends paid in year
ended 31 March 2019 - 202 147 - 349
Dividends paid in year
ended 31 March 2020 204 138 - - 342
Minimum PID to be paid
by 31 March 2021 78 - n/a n/a n/a
----------------------- --------- --------- ------------- --------- ----------
Total PID required 282 340
----------------------- --------- ---------
If the minimum PID is not paid within 12 months of the end of an
accounting period, tax is payable on the underpaid amount at the
current corporation tax rate. Therefore, the potential tax charge
if no PID is made before 31 March 2021 is GBP15m. It is our
preference not to pay such a charge but to pay the dividends
instead, which would mean a distribution by 31 March 2021 of a
minimum of GBP78m, or 10.5p per share.
Within the REIT regulations, there are additional requirements
which the Group must satisfy including interest cover and balance
of business tests, either to avoid a tax charge or the loss of REIT
status. While the Group is confident it will continue to satisfy
the requirements for REIT status, our discussions with HMRC
indicate that they are likely to make allowance for any Covid-19
related breach of these requirements by REITs.
Our latest tax strategy can be found on our corporate website.
In the year, the total taxes we incurred and collected were GBP171m
(2019: GBP158m), of which GBP47m (2019: GBP36m) was directly borne
by the Group including environmental taxes, business rates and
stamp duty land tax. The Group has a low tax risk rating from
HMRC.
Balance sheet
Table 11: Balance sheet
31 March 2020 31 March 2019
GBPm GBPm
----------------------------------------- ------------- -------------
Combined Portfolio 12,781 13,750
Adjusted net debt (3,926) (3,737)
Other net liabilities (21) (24)
----------------------------------------- ------------- -------------
EPRA net tangible assets 8,834 9,989
Excess of fair value over net investment
in finance leases book value (90) (80)
Other intangible assets 7 11
Fair value of interest-rate swaps (1) -
Net assets 8,750 9,920
----------------------------------------- ------------- -------------
Net assets per share 1,182p 1,341p
EPRA net tangible assets per share(1)(2) 1,192p 1,348p
----------------------------------------- ------------- -------------
1. EPRA net tangible assets per share is a diluted measure.
2. New metric presented as a result of the change in EPRA best
practice recommendations. For further details see table 18 in the
Business analysis section.
Our net assets principally comprise the Combined Portfolio less
net debt. Both IFRS net assets and EPRA net tangible assets
declined over the year ended 31 March 2020 primarily due to the
reduction in the value of our investment properties.
At 31 March 2020, our net assets per share were 1,182p, a
decrease of 159p or 11.9% from 31 March 2019. EPRA net tangible
assets per share were 1,192p, a decrease of 156p or 11.6%.
Table 12 summarises the key components of the GBP1,155m decrease
in our EPRA net tangible assets in the year.
Table 12: Movement in EPRA net tangible assets(1)
Diluted per
share
GBPm pence
--------------------------------------------- ------- -----------
EPRA net tangible assets at 31 March 2019(2) 9,989 1,348
Revenue profit 414 56
Valuation deficit (1,179) (159)
Dividends (342) (46)
Redemption of MTNs (59) (8)
Other 11 1
EPRA net tangible assets at 31 March 2020 8,834 1,192
--------------------------------------------- ------- -----------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
2. New metric presented as a result of the change in EPRA best
practice recommendations. For further details see table 18 in the
Business analysis section.
Net debt and gearing
Table 13: Net debt and gearing
31 March 2020 31 March 2019
--------------------------------- ------------- -------------
Net debt GBP3,942m GBP3,747m
Adjusted net debt(1) GBP3,926m GBP3,737m
--------------------------------- ------------- -------------
Group LTV(1) 30.7% 27.1%
Security Group LTV 32.5% 28.6%
Weighted average cost of debt(1) 1.8% 2.7%
--------------------------------- ------------- -------------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Over the year, our net debt increased by GBP195m to GBP3,942m.
The main elements behind this increase are set out in our statement
of cash flows and note 14 to the financial statements.
Adjusted net debt was up GBP189m to GBP3,926m. For a
reconciliation of net debt to adjusted net debt, see note 13 to the
financial statements.
Table 14 sets out the main movements behind the increase in our
adjusted net debt.
Table 14: Movement in adjusted net debt(1)
GBPm
-------------------------------------- -----
Adjusted net debt at 31 March 2019 3,737
Net cash generated from operations (452)
Dividends paid 342
Development/other capital expenditure 217
Settlement of redemption liability 36
Acquisitions 16
Disposals (65)
Premium on redemption of MTNs 59
Head lease obligations 31
Other 5
-------------------------------------- -----
Adjusted net debt at 31 March 2020 3,926
-------------------------------------- -----
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Net cash generated from operations was GBP452m, partly offset by
dividend payments of GBP342m. Capital expenditure was GBP217m
(GBP215m on investment properties and GBP2m on trading properties),
largely spent on our development programme. We settled the
redemption liability in the X-Leisure unit trust for GBP36m by
buying the remaining units we didn't own. The cost of investment
properties acquired in the year was GBP16m. Net cash flows from
disposals totalled GBP45m from the sale of investment properties
and GBP20m from the sale of trading properties. The premium paid on
the redemption of some of our medium term notes was GBP59m and a
GBP31m increase in head lease obligations was reflected on the
balance sheet in the year.
The most widely used gearing measure in our industry is
loan-to-value (LTV). We focus most on Group LTV, presented on a
proportionate basis, which increased from 27.1% at 31 March 2019 to
30.7% at 31 March 2020, largely due to the decline in the value of
our assets. Our Security Group LTV increased from 28.6% to 32.5%
for the same reason.
Financing
At 31 March 2020, our committed revolving facilities totalled
GBP2,715m (2019: GBP2,715m). The pricing of our facilities which
fall due in more than one year range from LIBOR +65 basis points to
LIBOR +75 basis points. Borrowings under our commercial paper
programme typically have a maturity of less than three months,
currently carry a weighted average interest rate of LIBOR +19 basis
points and are unsecured.
The total amount drawn under the bank debt was GBP1,944m (2019:
GBP225m) with GBP977m of commercial paper in issue (2019: GBP934m).
During March 2020, the sterling bond and commercial paper markets
effectively closed to new issuance as the Covid-19 crisis worsened.
To ensure that we had no liquidity issues in the first half of
2020/21 as our issued commercial paper becomes due for repayment,
we drew down sufficient funds from our bank facilities to cover
those redemptions and provide an additional liquidity buffer. As a
result, at 31 March 2020, the Group held cash balances of GBP1,345m
(31 March 2019: GBP14m). At 31 March 2020, we had GBP1.2bn of cash
and available facilities, net of our outstanding commercial
paper.
By drawing additional amounts on our shorter-term bank
facilities, the weighted average maturity of our debt has declined
to 9.6 years (2019: 12.3 years) at a weighted average cost of 1.8%
(2019: 2.7%). The weighted average cost of net debt, which
recognises the minimal interest income on cash deposits, was
2.4%.
During the year, the Group conducted tender exercises which
resulted in us buying back GBP196m (nominal value) of medium term
notes for a total premium of GBP59m. Further details are set out in
table 15 and note 14 to the financial statements.
Table 15: Redemption of medium term notes
Medium term note series
A4 A5 A6 A7 A10 A11 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ---- ---- ---- ---- ---- ---- -----
Nominal value purchased 8 91 12 75 4 6 196
------------------------ ---- ---- ---- ---- ---- ---- -----
Premium paid 1 20 3 31 1 3 59
------------------------ ---- ---- ---- ---- ---- ---- -----
Changes in accounting policy
The Group adopted IFRS 16 Leases on 1 April 2019. As a result of
adopting this standard, the Group now reports separately service
charge income for leases where a single payment is received to
cover both rent and service charge. The total payment received was
previously included within rental income, but the service charge
component has now been separated and reported as service charge
income in the notes to the financial statements. Comparatives have
been restated accordingly. In the year ended 31 March 2019, GBP6m
was separated from rental income and reported as service charge
income. There has been no net impact on profit attributable to
shareholders or on the Group's balance sheet. The Group's revised
accounting policies and the impact of the change in accounting
policy on the consolidated financial statements is detailed in
notes 2 and 17 of the financial statements.
Dividend
A third interim dividend of 11.6p per ordinary share was
declared on 5 February 2020. As announced on 2 April 2020, in light
of extreme market uncertainty due to Covid-19, the Board took the
decision to cancel the third interim dividend that was due to be
paid on 9 April 2020 and has decided not to propose a final
dividend. The Board will keep this situation under regular review
and intends to reinstate the payment of dividends as soon as it
considers it appropriate to do so. Based on our two quarterly
dividends of 11.6p per share already paid, our full year dividend
will be down 49.1% at 23.2p per share (2019: 45.55p) or GBP172m
(2019: GBP338m).
At 31 March 2020, the Company had distributable reserves of
GBP3.0bn. We do not anticipate that the level of distributable
reserves will limit distributions for the foreseeable future.
Martin Greenslade
Chief Financial Officer
Portfolio review
This review covers the entire financial year, including the
impact of Covid-19 and our responses to it.
Highlights
- Valuation deficit of 8.8%(1)
- GBP39m of investment lettings
- 1.0 million sq ft of developments now on site
Actions and outcomes
Focus for 2019/20 Progress in 2019/20 Focus for 2020/21
* Maintaining like-for-like net rental income * Like-for-like net rental income declined GBP4m (0.7%) * Balance protecting like-for-like net rental income
before the effect of bad debt provisions relating to with the need to support customers facing cash flow
next year's rent difficulties in the wake of Covid-19
===========================================================
* Providing property as a service, harnessing data and * Capital allocation, asset management and leasing * Continue to reduce occupancy costs without
technology, to improve customer experiences decisions are underpinned by improved data, research compromising rental income by delivering further
and technology including in our Retail segment where savings in service charge
we analyse and blend multiple data sources to provide
insight into the attractiveness of brands to our
catchment * Get 24.0 million sq ft of real estate re-occupied and
operating
* In our Office segment we are engaging directly with
our occupiers' people to better understand their * Work with our customers and partners to develop
needs so that we can optimise our environment and mutually beneficial solutions to the challenges of
ancillary retail and leisure offers operating in the wake of Covid-19
* Work with our construction partner at 21 Moorfields,
EC2 to ensure progress is as fast as possible while
maintaining
===========================================================
best practice health
* Researching and trialling ways to build better, * Modern methods of construction (MMC) implemented at and safety on site
faster and for less 105 Sumner Street, SE1 in kit-of-parts approach and * Maintain our optionality over speculative
automated processes developments by progressing build-to-grade works and
design; tracking market indicators to take decisions
about when and how to exercise our option to progress
* Design process embedded in development process at 25
Lavington Street, SE1 and Red Lion Court, SE1
* Obtain planning permission for our speculative office
schemes in Southwark at 25
* Hollow piling trial and Friendly Concrete used at
Nova East, SW1
===========================================================
Lavington Street, SE1
* Expanding customer offerings of Myo, Fitted and * Myo and Fitted fully let at 123 Victoria Street, SW1 and Red Lion Court,
Landsec Lounges and being rolled out in earliest available space at SE1
Dashwood House, EC2 * Progress our master planning and design of
residential-led re-purposing at our four suburban
London shopping centres, widening the scope of the
* Landsec Lounge in place or under construction at four programme to include
of our London properties
===========================================================
our regional retail
* Progress on time and on budget at 21 Moorfields, EC2, * Prior to the impact of Covid-19 in March 2020, 21 portfolio
Lucent, W1, Nova East, SW1 and 105 Sumner Street, SE1 Moorfields was on budget, with a three-month delay in * Generate GBP4m of social value across our community
expected completion to March 2022 due to tenant programmes, in support of our GBP25m corporate target
modifications. Subsequently we have seen a further by 2025
delay of up to two months with the eventual impact
dictated by productivity which is currently around
50% but improving * Improve energy management in support of 2030 energy
management corporate commitments
* Pre-Covid-19, Lucent, Nova East and 105 Sumner Street
were on-site progressing build-to-grade on time and * Deliver a review of the long-term strategic direction
on plan. We are now introducing greater flexibility for our business, wide in our scope and bold in our
by deferring contractual commitment to the more thinking, taking into account the structural trends
capital intensive elements of each of these schemes disrupting our sector, the short-term challenges of
Covid-19 and its longer-term consequences
===========================================================
* Progress plans for the future development pipeline of * Planning and vacant possession achieved on Portland
2.6 million sq ft in the existing portfolio and seek House, SW1
to grow the pipeline through acquisitions and
partnerships
* Planning submitted for 25 Lavington Street, SE1
* Continuing to progress design at Red Lion Court, SE1
and master planning for residential development of
four inner London retail destinations
===========================================================
* Delivery of key strategic MSUs at our major shopping * Polo Ralph Lauren at Braintree Village opened
centres November 2019
* Construction underway for Zara at Bluewater, Kent and
contractor selected for their letting at St David's,
Cardiff
===========================================================
* Generating GBP4m of social value across our community * Over GBP4.8m of social value generated across our
programmes, in support of GBP25m corporate target by community programmes
2025
===========================================================
* Improving energy management in support of 2030 energy * 21 energy management initiatives approved, which will
management corporate commitments result in a 3.2% reduction in energy consumption
across the portfolio against a 2013/14 baseline
=========================================================== =================================================================
At a glance
- Valuation deficit of 8.8%(1)
- Ungeared total property return of -4.5%
- The portfolio underperformed the MSCI Quarterly Universe (All Property) at -0.4%
- GBP39m of investment lettings
- Like-for-like voids: 2.4% (31 March 2019: 2.4%)
Office
- Valuation surplus of 1.1%(1)
- Ungeared total property return of 4.5%
- The portfolio outperformed the MSCI Quarterly benchmark
(Central and Inner London Office) at 3.5%
- GBP11m of investment lettings
- Like-for-like voids: 1.3% (31 March 2019: 1.0%)
Retail
- Valuation deficit of 20.5%(1)
- Ungeared total property return of -17.3%
- The portfolio underperformed the MSCI Quarterly benchmark (All Retail) at -9.8%
- GBP24m of investment lettings
- Like-for-like voids: 3.9% (31 March 2019: 4.0%) and units in
administration: 1.9% (31 March 2019: 0.9%)
- Footfall in our regional retail and outlets was down 1.2% but
was ahead of the ShopperTrak UK national benchmark (down
3.7%)(2)
- Same centre sales, taking into account new lettings and
occupier changes, were up 0.9% (up 0.1% excluding automotive sales)
(BRC national benchmark for physical stores down 3.2%; including
online, down 1.1%)(2)
Specialist
- Valuation deficit of 8.0%(1)
- Ungeared total property return of -3.9%
- GBP4m of investment lettings
- Like-for-like voids: 1.2% (31 March 2019: 1.5%) and units in
administration: 0.1% (31 March 2019: 0.2%)
1. On a proportionate basis.
2. Year-on-year for the 48 week period to 1 March 2020,
reflecting the period before the impact of Covid-19.
Overview
The London office market had continued to see strong demand for
high-quality space despite political uncertainty in the lead up to
the general election. A preference for new rather than second-hand
space led to limited availability of new HQ stock. This lack of
available supply of high-spec offices, with good transport
connections and sustainability credentials, led to an increase in
rental values.
The impact of Covid-19 will disrupt the market and, at this
stage, the extent of any changes to short- or longer-term trends on
the use of office space is uncertain. We anticipate that there is
likely to be a greater emphasis on health, air quality and the
flexibility of both layouts and working practices. We expect that
this will only reinforce a 'flight to quality' and our portfolio is
well positioned to meet these demands from occupiers. All of our
office customers have been impacted by Covid-19 but the strength of
our occupier base gives us confidence in the resilience of the
portfolio.
In the very near-term, Covid-19 will slow down progress at a
number of our development sites. We are keen to progress our
schemes as much as we can while minimising further commitments to
capital expenditure in the short term but retain the option to
pause all but 21 Moorfields, EC2, which is pre-let in its entirety.
We remain optimistic about the long-term prospects of London and
believe the fundamentals that make the capital the favoured home
for business are unchanged.
Even before we saw the impact of Covid-19, it was clear that the
retail market was having another tough year as it wrestled with
structural challenges, and property values fell further as a
result. Although occupancy levels and rental income at our retail
assets were relatively resilient, we were affected by the pressures
faced by retailers that, in some cases, saw them enter CVA or
administration. All our retail assets fell in value but, in
particular, regional centres and retail parks saw significant
valuation declines as yields moved out.
The effect of Covid-19 on the already struggling retail sector
will be significant. Following government action to address the
Covid-19 outbreak, most of our shopping centres, outlets and
leisure assets have closed save for essential shops. Apart from the
major supermarkets and some pure online players, few retailers will
emerge from Covid-19 in better financial condition than before the
virus arrived. Our immediate focus has been to support our
customers by reducing costs, agreeing rent relief for those in most
need and working to enable them to reopen as soon as conditions
allow and restrictions are lifted. We also continue to progress the
re-purposing of excess space at our assets, notably the residential
and office opportunities offered in key cities by our retail
destinations.
The like-for-like portfolio
Office
We have a high quality office portfolio in one of the greatest
cities in the world. Strong demand for quality means our
best-in-class office space is virtually full. As a result, we
achieved 17 new lettings in the year, totalling GBP11m, and
completed ten rent reviews totalling GBP23m, 7% ahead of previous
rent.
Our focus in the like-for-like portfolio remains on how we
improve our assets to secure rental uplifts and lease extensions.
Enhancing customer service and meeting future customer needs sit at
the heart of our response and, as part of this, we are investing in
amenities and introducing Landsec Lounges at a number of our
assets.
The high occupancy across our three office products, HQ, Fitted
and Myo, reflects the continued demand for space that offers
quality, convenience and flexibility. HQ customers will continue to
dominate our portfolio in the short term, giving us secure, stable
income. Fitted launched in 2019 on two floors at 123 Victoria
Street, SW1 and both are now let at a healthy premium to market
rents. Our launch of Myo exceeded expectations; the space is now
fully let and includes supporting existing HQ customers with their
shorter-term needs, as well as customers who are new to us. We will
roll out our flexible products within the development programme and
our existing portfolio as expiries allow, including at Dashwood
House in 2021.
Covid-19 is impacting our office customers with over 90% of
their employees now working from home. The vast majority of our
customers continue to pay their rent and 89% of the rent due on 25
March 2020 and 1 April 2020 was collected within ten days compared
with 98% for the same period last year. Open, collaborative
conversations with our customers are key to how we manage our
business, and these have been vital in recent weeks as we strive to
balance protecting income with supporting customers facing cash
flow issues. Under 10% of our occupier base is in sectors which we
have identified as at particular risk from the impact of Covid-19
including commodities, serviced offices, construction, fashion and
travel. This gives us confidence in the strength of our office
occupier base and the resilience of the portfolio.
It's too early to predict the long-term impact of Covid-19 on
the office market. However, the way businesses and people use
workspaces will change. We anticipate a greater emphasis from
customers on the need for healthy buildings with excellent air
quality and higher lifting capacity. We expect our customers to
operate with lower occupation densities and with more flexible
working. They may require layout changes and that requires flexible
buildings. We know that occupiers and their insurers demand
standards of quality, safety and security of infrastructure that
cannot be replicated in the home.
Our offices can respond to change. We developed the majority of
our office portfolio and did so with adaptability in mind,
describing them as stage sets: changeable to meet our occupiers'
needs. With our strength of occupier base and high quality
adaptable space, we believe the portfolio is well-placed to meet
the unprecedented challenges presented by Covid-19.
Retail
Prior to the impact of Covid-19, the retail market continued to
face structural changes. Changing consumer shopping habits and
rising costs for retailers put pressure on rents across the sector,
and negotiations with customers have been challenging. This was
reflected in asset pricing, with rental values and market yield
movements leading to significant declines in valuations,
particularly in regional retail and retail parks.
We have been proactive in our response to the structural
challenges the retail market is facing. We have been busy working
to reduce service charge costs to ease pressure on retailers in the
short term. And, where there is surplus space in our portfolio, we
continue to progress our plans to re-purpose retail units, actively
working to introduce office and residential, particularly in our
key cities.
For the 48 weeks to 1 March 2020, same-centre sales at our
regional destinations and outlets were up 0.9% (up 0.1% excluding
automotive sales), ahead of the BRC benchmark, which was down 3.2%.
Footfall was down 1.2%, but well ahead of the ShopperTrak UK
national benchmark, down 3.7%.
The quality of our portfolio provided some protection against
the overall impact of CVAs. Like-for-like net rental income was
only down by 3.9% compared with last year, before provisions
related to next year's rent. Where we were impacted by CVAs, our
assets remained popular with occupiers and customers. We saw 94
units across 31 customers go into CVA or administration in the year
- some of those entering administration having previously been in
CVA - but of these only 29% of the stores closed as a result. Over
the last three years, we have had reasonable success with stores
that have closed, having now replaced over a third of the income
lost from customers entering CVA or administration.
Outlets continued to be our best performer in the Retail
segment, and we had a good year of letting activity, adding 33 new
brands across the five outlets. Consumer research and sales data
enabled us to target brands that will strengthen our line-up. At
Gunwharf Quays, Portsmouth, we added retailers including Loake,
Dune, Belstaff and Penhaligons, with Pho, Hubbox and The Alchemist
enhancing the food and beverage offer. At Braintree Village, last
year's opening of Polo Ralph Lauren continued to help the centre's
performance. The brand also attracted other premium retailers to
the centre including Lindt, Kate Spade and Lyle & Scott.
In regional retail, we continued to improve both tenant mix and
experience. Customer data and insight informs our decisions,
enabling us to find the right occupiers for customer demand, and
the right unit for each occupier. At Bluewater, Kent, following
Primark opening in March 2019, footfall was up 3.7% and sales at
the centre were up 4.9% (excluding automotive sales) for the 48
weeks to 1 March 2020. Zara signed at St David's, Cardiff and are
upsizing significantly at Bluewater. H&M also took a bigger
store at Trinity Leeds. We've also introduced new types of retailer
to our centres, adding cycling concept store Peloton at Bluewater
and Westgate Oxford.
In London retail, the market showed similar trends to the rest
of the UK, with restaurants and mid-market fashion struggling.
However, we continued to see demand for space. Following the
administration of Jamie's Italian, we re-let the majority of the
vacated space to the Ivy. And at One New Change, a new flagship for
Ivy Asia opened in the former Barbecoa unit. London retail
continues to evolve and trends are accelerating. In the future, we
anticipate a greater demand for service and experience-led
occupiers in increasingly mixed use destinations.
Retail parks now make up 3.5% of our portfolio and we will
continue to monitor our exposure to this sector. During the year we
made one disposal, selling Poole Retail Park for GBP45m at a net
initial yield to the purchaser of 8.0%.
Our Retail segment has seen a significant impact from Covid-19.
The majority of our destinations are closed save for essential
shops, and many of our customers are struggling. Only 38% of the
rent due on 25 March 2020 and 1 April 2020 was collected within ten
days compared with 90% for the same period last year. We have set
up an GBP80m support fund to provide rent relief to those customers
who are most in need of help, with a particular focus on supporting
F&B customers and small and medium sized businesses. We are
also working to reduce service charge costs further, while helping
our customers to prepare to re-open as swiftly as possible when
conditions allow.
Specialist
Prior to Covid-19, our leisure and hotel assets performed well
and occupancy levels remained high. Cinemas continued to be
popular, especially for blockbuster movies, and UK admissions were
up 8.0% for the 11 months to the end of February compared with the
same period last year. Mid-market restaurant chains continued to
find the conditions challenging and we expect this trend to
continue.
Our hotels provided good income, though performance across the
year was variable, often affected by local or seasonal factors such
as sporting or cultural events. The underlying site value of our
hotels remained well ahead of book value, offering opportunities
for future development.
Piccadilly Lights, W1 also performed well. We have two to
three-year leases with our long-term partners Coca-Cola, Samsung
and Hyundai and income from the shorter-let space continued to
grow, exceeding our income expectations for the eleven months to
February 2020.
Our Specialist segment has been hit hard by Covid-19. Our
leisure operators along with food and beverage occupiers are
currently unable to trade following government intervention and
face financial difficulties as a result. Only 31% of the rent due
on 25 March 2020 and 1 April 2020 was collected within ten days
compared with 86% for the same period last year. Our GBP80m rent
relief fund is designed to support these customers in particular.
Many of our hotels, the majority of which are let on turnover only
deals, are now closed and it remains unclear when they will reopen
for business. Demand for Piccadilly Lights diminished in the early
weeks of the pandemic, although we have been able to offer this
space to Public Health England for essential public health
messaging and remain in dialogue with customers regarding bookings
on the Lights for later in the year.
Net rental income
Table 16: Net rental income(1)
Office Retail Specialist Combined Portfolio
---------------------- ---------------------- ---------------------- ----------------------
31 31 31 31 31 31 31 31
March March March March March March March March
2020 2019 Change 2020 2019 Change 2020 2019 Change 2020 2019 Change
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Like-for-like
investment properties 250 243 7 246 256 (10) 83 84 (1) 579 583 (4)
Like-for-like
investment properties
- provisions
related to 2020/21
rent - - - (19) - (19) (4) - (4) (23) - (23)
Proposed developments 10 12 (2) - - - - - - 10 12 (2)
Development programme (1) - (1) - 1 (1) - - - (1) 1 (2)
Completed developments - - - 9 9 - - - - 9 9 -
Acquisitions
since 1 April
2018 (1) - (1) - - - - - - (1) - (1)
Sales since 1
April 2018 - - - 2 4 (2) - - - 2 4 (2)
Non-property
related income 3 3 - 5 6 (1) - - - 8 9 (1)
---------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net rental income 261 258 3 243 276 (33) 79 84 (5) 583 618 (35)
---------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
1. On a proportionate basis.
Net rental income from the Combined Portfolio declined by GBP35m
in the year ended 31 March 2020 primarily due to a GBP23m provision
against rental income invoiced prior to 31 March but which relates
to the next financial year. This was in addition to a GBP4m decline
in net rental income from our like-for-like portfolio which was the
result of difficult trading conditions in our Retail segment as
well as small reductions in income at our proposed developments and
from properties acquired and sold since 1 April 2018.
Net rental income from our Office assets increased by GBP3m to
GBP261m. Net rental income from our like-for-like properties
increased by GBP7m due to rent reviews and new lettings. We lost
GBP2m at our proposed development at Portland House, SW1 as we
worked towards vacant possession and GBP1m from acquisitions where
we incurred costs to maintain flexibility at 25 Lavington Street,
SE1, acquired as a development site in the prior year.
In Retail, net rental income declined by GBP33m to GBP243m,
predominantly due to a GBP19m provision against next year's rental
income which was invoiced in March 2020 but where recovery is in
doubt due to Covid-19. During the year, we saw a GBP10m reduction
in income from our like-for-like properties, primarily due to the
impact of CVAs and administrations across the portfolio. We also
lost GBP2m as a result of the sale of Poole Retail Park this
year.
In Specialist, we also took a provision of GBP4m against next
year's rental income invoiced in March 2020 but in doubt due to
Covid-19. This was the main driver for a GBP5m decrease in net
rental income to GBP79m.
The Development portfolio
We have over 4.0 million sq ft of development opportunities in
London and are active at four schemes totalling 1.0 million sq ft,
of which 56% is pre-let. We are making good progress across our
London development programme but development activity has slowed
due to Covid-19.
Importantly, however, the pipeline has been designed with
flexibility: our speculative schemes in the development programme
are all being built to grade, allowing us to call a stop to
development activity at ground level if we choose to, and we have
not yet committed to Portland House, SW1. This has enabled us to
step down our committed total development cost by around GBP700m
from where we had expected to be by March 2020, leaving around
GBP340m of committed unspent development expenditure on sites
currently in our development programme where we are still making
good progress.
The majority of that commitment is at 21 Moorfields, EC2, our
564,000 sq ft scheme which is pre-let in its entirety. All
construction contracts are agreed, and the steel framework has
progressed well. A three-month delay in expected practical
completion to March 2022 was due to tenant modifications and will
not impact rent start date. Following the impact of Covid-19, we
have experienced a further delay of up to two months. The eventual
completion date will be dictated by productivity which is currently
around 50% but improving. We continue to be in close dialogue with
the occupier, Deutsche Bank.
Where we are making additional commitments, we are doing so to
preserve optionality. At Lucent, W1, Nova East, SW1 and 105 Sumner
Street, SE1, we have committed GBP33m to progress as quickly as
possible in the current environment and secure long lead-time
packages. We have also negotiated break options before entering
into main construction contracts. In doing so, we have deferred
until September at the earliest the remaining GBP251m commitment
needed for the most capital intensive stages of these three
schemes. This flexibility allows us to keep reviewing the
occupational market we might deliver into and to decide at multiple
junctures whether to continue work, pause or to cease speculative
development entirely.
On the ground, at Nova East, our 166,000 sq ft scheme, we are
progressing the build-to-grade works, construction of the cores and
detailed design as well as placing orders for certain packages of
work.
At Lucent, our 144,000 sq ft scheme in the heart of the West
End, demolition is complete and, here too, we are building to
grade, constructing the cores and negotiating a flexible main
contract with our contractor. At 105 Sumner Street, we have
planning consent for two buildings totalling 140,000 sq ft plus a
new public square. We'll use our new, partly automated efficient
construction methods to reduce building time and cost, and to
create our first net zero carbon development. We are building to
grade, progressing construction of the basement and procuring long
lead time packages as we progress the detailed designs.
At Portland House, we now have planning permission to add a
14-storey extension to the existing building. Our proposed scheme
will create 400,000 sq ft of new or refurbished space. We intend to
incorporate HQ, Fitted and Myo, together with wellness and leisure
facilities and a roof-top restaurant. We achieved vacant possession
at the end of March and we are now stripping out the building and
advancing the design.
The remaining development opportunities are a mix of central
London office-led schemes and mixed use residential-led retail
re-purposing. At Lavington Street, SE1, we have submitted planning
for two buildings totalling 378,000 sq ft. We aim to deliver a
scheme with high sustainability credentials, and plan to use a
hybrid cross-laminated timber and steel structure to reduce the
carbon footprint of the development. At Red Lion Court, SE1, the
existing occupier has extended their lease to 2022. In parallel,
we're progressing our plans for a redevelopment of the building,
aiming to submit a planning application in Summer 2021. We also
continue to progress our plans for transforming our major city
retail schemes into ambitious mixed use destinations. We are now
working on plans for Finchley Road, NW3, Shepherd's Bush, W12,
Southside, Wandsworth, Lewisham shopping centre and Buchanan
Galleries, Glasgow.
Principal risks and uncertainties
The Company has identified certain principal risks and
uncertainties that could prevent the Group from achieving its
strategic objectives and has assessed how these risks could best be
mitigated through a combination of internal controls, risk
management and the purchase of insurance cover. These risks are
reviewed and updated on a regular basis and were last formally
assessed by the Board in May 2020.
A description of the principal risks and uncertainties faced by
the Group, together with an assessment of their impact, is set out
below. The Group's approach to the management and mitigation of
these risks will be included in the 2020 Annual Report. The risk of
Covid-19 has very quickly elevated from being an emerging risk to
impacting all of the principal risks facing our business. The speed
and scale of the impact of Covid-19 has been unprecedented in
recent times and fundamentally affected all aspects of our
business.
Our business resilience and risk planning has been tested in
recent months and the business has responded well to the challenges
presented by the crisis. All levels of our organisation have been
rapidly mobilised to assess, plan, respond and mitigate the myriad
of risks presented to the business by the current situation.
We established six workstreams to help us co-ordinate our
response to the impact of Covid-19 across our business: Customers,
People, Operations, Public Affairs and Regulation, Development and
Financial. Each workstream has a team leader, a dedicated team of
subject matter experts in the area and an Executive Director
sponsor. The workstreams have been co-ordinated by a central
project management office and the Executive Committee and the
workstream leads have been meeting regularly to discuss issues and
concerns, and where required quickly approve decisions. The Board
received weekly updates on our response to Covid-19 and briefings
at their meetings so that they could make any business critical
decisions quickly. In recent weeks, a seventh recovery workstream
has been constituted as we plan for a relaxation of the lockdown
restrictions and ensure the business is fully prepared to return to
normality as quickly as we can in order to provide the best
possible support to our people, customers, communities, and
partners.
We demonstrate the pervasive nature of the Covid-19 impact on
our business risks in the table below, showing the movement in each
principal risk as a consequence of Covid-19. The table shows two
changes for each risk; the change from March 2019 to December 2019
(before the impact of Covid-19) and the risk change from December
2019 to March 2020 (the quarter covering the first impact of
Covid-19).
Risk description Change in year (prior Change in year (Covid-19
to Covid-19) impact)
----------------------------------------------------------- -----------------------------------------------------------
Customers ó ñ
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
* Structural changes in customer and consumer * We were already operating in a tough retail * The Covid-19 outbreak is a very challenging time for
expectations leading to a change in demand for space environment, with a number of company voluntary many businesses, and in particular, some of our
and the consequent impact on income. arrangements (CVAs) throughout the year, and retail and leisure customers.
like-for-like footfall and retail sales declining.
* We continue to closely monitor the cash collections
* We were closely monitoring our retailers at risk of of rents across the whole portfolio and we have a
CVA and looking at more flexible leasing options in seen a material reduction in cash collections in late
retail. March 2020. This indicates a likely increase in
business failures and we are monitoring any customers
in financial distress.
* The office market had remained resilient through
2019. We had elevated this risk in the prior year to
reflect the deterioration in the retail market. * We have established a support fund to provide up to
GBP80m of rent relief for customers as we expect to
see greater non-payment of rent as we move through
2020.
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
Market cyclicality ò ñ
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
* Market and political uncertainty leading to a * This risk reduced with greater certainty over the * Covid-19 has resulted in high levels of macroeconomic
reduction in demand or deferral of decisions by political landscape in the UK following the general and market uncertainty. As a result, we have seen a
occupiers, impacting real estate values and the election and some valuation write-downs already taken greater reduction in our retail and leisure asset
ability to buy, develop, manage and sell assets at in the retail segment. values.
the appropriate time in the property cycle.
* We were continuing to plan for a range of potential * We have refreshed our own economic outlook and
Brexit trade deal outcomes. The Audit Committee has modelled different scenarios to understand and plan
proactively reviewed and challenged our Brexit risk for the potential impact of Covid-19 on our business.
assessments over the year to ensure we are well
prepared and able to minimise downside business
consequences. * We see an increased risk of an economic downturn or
recession which could further impact the value of our
assets, including those in London.
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
Disruption ó ñ
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
* Inability to understand and mobilise effectively to * Consistent with our review of emerging risks * As outlined in Customers above, the Covid-19 outbreak
changes in our competitive landscape and customer impacting the business, we had seen the pace of has been disruptive for a number of our customers,
value chain. change continue to accelerate. impacting their ability to trade and demand for their
products.
* While we have improved our internal capability in
this area over the last year with an expanded * We believe there could be a structural shift in how
Business Foresight team, we continue to experience our customers use space going forward - for example,
ongoing structural challenges, particularly within the retail sector has seen greater use of online
the retail business. Therefore, the residual risk business models as a result of Covid-19 and these new
remained unchanged. business models may require less physical retail
space. In addition, as people become more comfortable
and familiar with virtual interactions, the use of
permanent office and physical meeting rooms may
decline.
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
People and skills ñ ó
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
* Inability to attract, retain, and develop the right * Employee uncertainty increased because we had * In response to Covid-19, the majority of our
people and skills required to deliver the business combined the main operating functions of the London employees are now working from home.
objectives in a culture and environment where and Retail business units and had also been in the
employees can thrive. process of transitioning to a new CEO following
Robert Noel's decision to retire. * Overall this transition has been smooth from a
technology and communications point of view. We have
not seen any significant impacts on employee
* This led to an increase in the people and skills productivity, although we are carefully monitoring
risk. This is consistent with the elevated risk that employees' physical and mental well-being.
we presented at the half-year.
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
Major health, safety ó ñ
and security incident
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
* Failure to identify, mitigate and/or react * As outlined in our half-year announcement, we * We have worked closely with our customers to safely
effectively to a major health, safety or security evaluated our fire management strategies across our and securely close all non-essential retail premises.
incident, leading to: entire property portfolio and identified some fire As the government eases lockdown restrictions, and
safety improvements. occupancy and footfall levels at our assets increase,
we remain aware that there is an increased risk of a
o Serious injury, illness health and safety incident related to Covid-19.
or loss of life * We have now implemented these improvements, although
o Criminal/civil proceedings the regulatory environment continues to evolve and
o Loss of stakeholder tighten requirements. * Our efforts are now focused on ensuring we are
confidence well-prepared for a gradual and safe return to our
o Delays to building properties.
projects and access * Physical security risk has decreased with the threat
restrictions to our level being changed from severe to substantial.
properties resulting
in loss of income
o Inadequate response * Overall the risk remained the same as last year.
to regulatory changes
o Reputational impact
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
Information security ó ñ
and cyber threat
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
* Data loss or disruption to the corporate systems and * The level of this risk has not changed, reflecting * This risk has slightly increased following an
building management systems resulting in a negative that, while companies continue to be subject to an increase in Covid-19 related phishing and fraud
reputational, operational, regulatory or financial increasing number of attempted cyber-attacks, we have attempts.
impact. continued to develop and invest in the maturity of
our mitigation controls.
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
Climate change ó ó
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
* Failure to properly identify and mitigate both * We elevated the risk last year in response to public * Covid-19 has not impacted the residual level of this
physical and transition risks from climate change, data demonstrating how global emissions continue to risk.
leading to a negative impact on our reputation, grow, increasing climate-related risks.
disruption in our operations and stranded assets.
* The residual risk is the same as we have intensified
our mitigations and launched our ambition to be a net
zero carbon business by 2030.
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
Investment and development ñ ñ
strategy
----------------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
* Unable to effectively execute our strategy of buying, * We have a large development pipeline and planned to * This risk has increased due to the impact of
developing and selling assets at the appropriate time have 1.4 million sq ft of development on site by programme delay from Covid-19 on our development
in the property cycle. Specifically: April 2020, increasing our development exposure and pipeline and increased uncertainty around the future
therefore our risk in this area. economic environment into which we will deliver our
developments.
o Investment - inappropriate
sector or asset selection
o Development - unable
to deliver capex programme
to agreed returns and/or
occupiers reluctant
to commit to take new
space
=========================================================== ===========================================================
Statement of Directors' Responsibilities
The Annual Report 2020 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 International Financial Reporting Standards (IFRS)
as adopted by the European Union (EU). 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:
- select suitable accounting policies in accordance with IAS 8
'Accounting Policies, Changes in Accounting Estimates and Errors'
and then apply them consistently;
- make judgements and accounting estimates that are reasonable and prudent;
- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
- state that the Group and Company has complied with IFRS as
adopted by the EU, subject to any material departures disclosed and
explained in the financial statements;
- provide additional disclosures when compliance with the
specific requirements of IFRS is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the Group's and Company's financial position and
performance; and
- 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:
- the Group financial statements, which have been prepared in
accordance with IFRS as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of
the Group;
- the Company financial statements, prepared in accordance with
IFRS as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position, performance and cash flows of the
Company; and
- 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:
- Cressida Hogg, Chairman*
- Mark Allan, Chief Executive
- Martin Greenslade, Chief Financial Officer
- Colette O'Shea, Managing Director, Portfolio
- Edward Bonham Carter, Senior Independent Director*
- Nicholas Cadbury*
- Madeleine Cosgrave*
- Christophe Evain*
- Stacey Rauch*
*Non-executive Directors
The Statement of Directors' Responsibilities was approved by the
Board of Directors on 11 May 2020 and is signed on its behalf
by:
Mark Allan Martin Greenslade
Chief Executive Chief Financial Officer
Financial statements
Income statement Year ended Year ended
31 March 2020 31 March 2019
Capital Capital
Revenue and other Revenue and other
profit items Total profit items Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
Revenue 5 740 1 741 748 9 757
Costs 6 (269) (5) (274) (249) (22) (271)
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
471 (4) 467 499 (13) 486
Share of post-tax profit/(loss)
from joint ventures 12 22 (173) (151) 22 (107) (85)
Loss on disposal of investment
properties - (6) (6) - - -
Net deficit on revaluation of
investment properties 10 - (1,000) (1,000) - (441) (441)
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
Operating profit/(loss) 493 (1,183) (690) 521 (561) (40)
Finance income 7 17 1 18 20 6 26
Finance expense 7 (96) (69) (165) (99) (10) (109)
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
Profit/(loss) before tax 414 (1,251) (837) 442 (565) (123)
Taxation 5 4
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
Loss attributable to shareholders (832) (119)
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
Loss per share attributable
to shareholders:
Basic loss per share 4 (112.4)p (16.1)p
Diluted loss per share 4 (112.4)p (16.1)p
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
Statement of comprehensive income Year ended Year ended
31 March 2020 31 March 2019
Total Total
GBPm GBPm
---------------------------------------------------- -------------- --------------
Loss attributable to shareholders (832) (119)
------------------------------------------------------ -------------- --------------
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:
Movement in the fair value of other investments (3) -
Net re-measurement gain on defined benefit
pension scheme 6 1
Deferred tax charge on re-measurement
above (1) -
Other comprehensive income attributable
to shareholders 1 -
------------------------------------------------------ -------------- --------------
Total comprehensive loss attributable
to shareholders (831) (119)
------------------------------------------------------ -------------- --------------
Balance sheet
2020 2019
Notes GBPm GBPm
-------------------------------------------------- ----- ------- -------
Non-current assets
Investment properties 10 11,297 12,094
Intangible assets 14 20
Net investment in finance leases 156 159
Investments in joint ventures 12 824 1,031
Investments in subsidiary undertakings - -
Trade and other receivables 178 176
Other non-current assets 32 30
-------------------------------------------------- ----- ------- -------
Total non-current assets 12,501 13,510
-------------------------------------------------- ----- ------- -------
Current assets
Trading properties 11 24 23
Trade and other receivables 433 437
Monies held in restricted accounts and deposits 15 9 36
Cash and cash equivalents 16 1,345 14
Other current assets 48 14
-------------------------------------------------- ----- ------- -------
Total current assets 1,859 524
-------------------------------------------------- ----- ------- -------
Total assets 14,360 14,034
-------------------------------------------------- ----- ------- -------
Current liabilities
Borrowings 14 (977) (934)
Trade and other payables (270) (273)
Other current liabilities (2) (18)
-------------------------------------------------- ----- ------- -------
Total current liabilities (1,249) (1,225)
-------------------------------------------------- ----- ------- -------
Non-current liabilities
Borrowings 14 (4,355) (2,847)
Trade and other payables (1) (1)
Other non-current liabilities (5) (5)
Redemption liability - (36)
-------------------------------------------------- ----- ------- -------
Total non-current liabilities (4,361) (2,889)
-------------------------------------------------- ----- ------- -------
Total liabilities (5,610) (4,114)
-------------------------------------------------- ----- ------- -------
Net assets 8,750 9,920
-------------------------------------------------- ----- ------- -------
Equity
Capital and reserves attributable to shareholders
Ordinary shares 80 80
Share premium 317 317
Other reserves 27 26
Merger reserve - -
Retained earnings 8,326 9,497
-------------------------------------------------- ----- ------- -------
Total equity 8,750 9,920
-------------------------------------------------- ----- ------- -------
The financial statements on pages 35 to 54 were approved by the
Board of Directors on 11 May 2020 and were signed on its behalf
by:
M C Allan M F Greenslade
Directors
Statement of changes in equity Attributable to shareholders
Ordinary Share Other Retained Total
shares premium reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- --------- --------- -------
At 1 April 2018 80 317 26 9,963 10,386
Total comprehensive loss for
the financial year - - - (119) (119)
Transactions with shareholders:
-------- -------- --------- --------- -------
Share-based payments - - - 2 2
Dividends paid to shareholders - - - (349) (349)
-------- -------- --------- --------- -------
Total transactions with shareholders - - - (347) (347)
At 31 March 2019 80 317 26 9,497 9,920
--------------------------------------- -------- -------- --------- --------- -------
Total comprehensive loss for
the financial year - - - (831) (831)
Transactions with shareholders:
-------- -------- --------- --------- -------
Share-based payments - - 1 2 3
Dividends paid to shareholders - - - (342) (342)
Total transactions with shareholders - - 1 (340) (339)
At 31 March 2020 80 317 27 8,326 8,750
--------------------------------------- -------- -------- --------- --------- -------
Statement of cash flows Year ended
31 March
2020 2019
Notes GBPm GBPm
---------------------------------------------------------- ----- ----- -----
Cash flows from operating activities
Net cash generated from operations 9 504 528
Interest received 16 4
Rents paid (12) (12)
Interest paid (108) (114)
Capital expenditure on trading properties (2) (2)
Disposal of trading properties - 22
Other operating cash flows 3 (2)
---------------------------------------------------------- ----- ----- -----
Net cash inflow from operating activities 401 424
---------------------------------------------------------- ----- ----- -----
Cash flows from investing activities
Investment property development expenditure (154) (54)
Other investment property related expenditure (47) (46)
Acquisition of investment properties (16) (136)
Disposal of investment properties 45 41
Cash contributed to joint ventures 12 (13) (29)
Cash distributions from joint ventures 12 69 62
Other investing cash flows - (4)
---------------------------------------------------------- ----- ----- -----
Net cash outflow from investing activities (116) (166)
---------------------------------------------------------- ----- ----- -----
Cash flows from financing activities
Proceeds from new borrowings (net of finance fees) 14 1,701 81
Repayment of medium term notes 14 (47) -
Redemption of medium term notes 14 (196) (8)
Repayment of bank debt 14 - (3)
Premium paid on redemption of medium term notes 14 (59) (2)
Net cash outflow from derivative financial instruments (1) (15)
Settlement of redemption liability (36) -
Dividends paid to shareholders 8 (342) (338)
Decrease/(increase) in monies held in restricted accounts
and deposits 27 (21)
Other financing cash flows (1) -
---------------------------------------------------------- ----- ----- -----
Net cash inflow/(outflow) from financing activities 1,046 (306)
---------------------------------------------------------- ----- ----- -----
Increase/(decrease) in cash and cash equivalents for
the year 1,331 (48)
Cash and cash equivalents at the beginning of the
year 14 62
---------------------------------------------------------- ----- ----- -----
Cash and cash equivalents at the end of the year 16 1,345 14
---------------------------------------------------------- ----- ----- -----
1. Basis of preparation and consolidation
===========================================
Basis of preparation
These financial statements have been prepared on a going concern
basis and in accordance with International Financial Reporting
Standards as adopted by the EU (IFRS), IFRIC Interpretations and
the Companies Act 2006 applicable to companies reporting under
IFRS. The financial statements have been prepared in Pounds
Sterling (rounded to the nearest one million), which is the
presentation currency of the Group (Land Securities Group PLC and
all its subsidiary undertakings), and under the historical cost
convention as modified by the revaluation of investment property,
financial assets at fair value through other comprehensive income
(without recycling), derivative financial instruments and pension
assets.
The preparation of financial statements in conformity with
generally accepted accounting principles (GAAP) requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results
ultimately may differ from those estimates.
On 11 May 2020, 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 2019 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 2020 is based
on, and consistent with, the financial information in the Group's
audited financial statements for the year ended 31 March 2020. The
audit report on these financial statements is unqualified and did
not contain a statement under Section 498(2) or 498(3) of the
Companies Act 2006. This preliminary announcement does not
constitute statutory financial statements of the Group within the
meaning of Section 435 of the Companies Act 2006. Whilst 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
2019 can be found on the website at landsec.com/investors.
Going concern
Given the significant impact of Covid-19 on the macro-economic
conditions in which the Group is operating, the Directors have
placed a particular focus on the appropriateness of adopting the
going concern basis in preparing the financial statements for the
year ended 31 March 2020. The Group's going concern assessment
considers the Group's principal risks (see page 29) and is
dependent on a number of factors, including financial performance,
continued access to borrowing facilities and the ability to
continue to operate the Group's secured debt structure within its
financial covenants. 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 either of these limits are exceeded, the allowed operating
environment becomes more restrictive with provisions coming into
effect to encourage a reduction in gearing. However, it is not
until the loan-to-value exceeds 100% or the interest cover ratio
falls below 1.0x that a breach occurs, at which point the Group
would enter a remedy period.
The going concern assessment is based on the first 12-months of
the Group's viability model, which is based on a severe but
plausible downside scenario including the anticipated impact of
Covid-19, reflecting the following key assumptions:
- GDP growth declines significantly in the short term, with a
recession in 2021 and increased rates of inflation from 1 April
2021
- Rental yields expand by up to 70bps and rental values decline
by up to 10% across the Combined Portfolio, driving a further
decline in capital values
- 75% reduction in rent receipts from our Retail and Specialist
tenants and a 20% reduction in rent receipts from our Office
tenants over a majority of the going concern assessment period
- A three month pause in committed developments, and no new developments progressing
- No asset sales
- No new financing is assumed in the assessment period, but
existing facilities are assumed to remain available.
Throughout this severe but plausible downside scenario the Group
has sufficient cash reserves, with the loan-to-value covenant
remaining less than 65% and interest cover above 1.45x, for a
period of at least 12 months from the date of authorisation of
these financial statements. The Directors have also considered an
extreme downside scenario, which assumes no further rent will be
received, to determine when our available cash resources are
exhausted. Even in this extreme downside scenario, the Group
continues to have sufficient cash reserves to continue in operation
throughout the going concern assessment period.
Based on these considerations, together with available market
information and the Directors' knowledge and experience of the
Group's property portfolio and markets, the Directors have adopted
the going concern basis in preparing the accounts for the year
ended 31 March 2020.
Basis of consolidation
The consolidated financial statements for the year ended 31
March 2020 incorporate the financial statements of the Company and
all its subsidiary undertakings. Subsidiary undertakings are those
entities controlled by the Company. Control exists where an entity
is exposed to variable returns and has the ability to affect those
returns through its power over the investee.
The results of subsidiaries and joint ventures acquired or
disposed of during the year are included from the effective date of
acquisition or to the effective date of disposal. Accounting
policies of subsidiaries and joint ventures which differ from Group
accounting policies are adjusted on consolidation.
Where instruments in a subsidiary held by third parties are
redeemable at the option of the holder, these interests are
classified as a financial liability, called the redemption
liability. The liability is carried at fair value; the value is
reassessed at the balance sheet date and movements are recognised
in the income statement.
Intra-group balances and any unrealised gains and losses arising
from intra-group transactions are eliminated in preparing the
consolidated financial statements. Unrealised gains arising from
transactions with joint ventures are eliminated to the extent of
the Group's interest in the joint venture concerned. Unrealised
losses are eliminated in the same way, but only to the extent that
there is no evidence of impairment.
Our property portfolio is a combination of properties that are
wholly owned by the Group, part owned through joint arrangements
and properties owned by the Group but where a third party holds a
non-controlling interest. Internally, management review the results
of the Group on a basis that adjusts for these different forms of
ownership to present a proportionate share. The Combined Portfolio,
with assets totalling GBP12.8bn, is an example of this approach,
reflecting the economic interest we have in our properties
regardless of our ownership structure. We consider this
presentation provides further understanding to stakeholders of the
activities and performance of the Group, as it aggregates the
results of all of the Group's property interests which under IFRS
are required to be presented across a number of line items in the
statutory financial statements.
The same principle is applied to many of the other measures we
discuss and, accordingly, a number of our financial measures
include the results of our joint ventures and subsidiaries on a
proportionate basis. Measures that are described as being presented
on a proportionate basis include the Group's share of joint
ventures on a line-by-line basis and are adjusted to exclude the
non-owned elements of our subsidiaries. This is in contrast to the
Group's statutory financial statements, where the Group's interest
in joint ventures is presented as one line on the income statement
and balance sheet, and all subsidiaries are consolidated at 100%
with any non-owned element being adjusted as a non-controlling
interest or redemption liability, as appropriate. Our joint
operations are presented on a proportionate basis in all financial
measures.
2. Changes in accounting policies
and standards
===================================
The accounting policies used in these financial statements are
consistent with those applied in the last annual financial
statements, as amended where relevant to reflect the adoption of
new standards, amendments and interpretations which became
effective in the year, the impact of which is outlined below.
Changes in accounting policy
The Group adopted IFRS 16 Leases on 1 April 2019. As a result of
adopting this standard, the Group now reports separately service
charge income for leases where a single payment is received to
cover both rent and service charge. The total payment received was
previously included within rental income, but the service charge
component has now been separated and reported as service charge
income in notes 3 and 5. In the year ended 31 March 2019, GBP6m was
separated from rental income and reported as service charge income.
There has been no net impact on profit attributable to shareholders
or on the Group's balance sheet. The Group's revised accounting
policies and the impact of the change in accounting policies on the
financial statements is detailed in note 17.
Amendments to IFRS
A number of new standards, amendments to standards and
interpretations have been issued but are not yet effective for the
Group. The application of these new standards, amendments and
interpretations are not expected to have a significant impact on
the Group's income statement or balance sheet.
3. Segmental information
==========================
The Group's operations are managed across three operating
segments, being Office, Retail and Specialist.
The Office segment includes all our offices, substantially all
of which are located in London. The Retail segment includes all our
shopping centres, outlets, retail parks and the retail units within
our London office buildings. The Specialist segment includes our
leisure and hotel assets, Piccadilly Lights and other specialist
assets which do not fall within either of the other segments. All
of the Group's operations are in the UK.
Management has determined the Group's operating segments based
on the information reviewed by Senior Management to make strategic
decisions. During the year, the chief operating decision maker was
the Executive Committee (ExecCom), which comprised the Executive
Directors, the Group General Counsel and Company Secretary, the
Group HR Director and until December 2019, the Corporate Affairs
and Sustainability Director. The information presented to ExecCom
includes reports from all functions of the business as well as
strategy, financial planning, succession planning, organisational
development and Group-wide policies.
In previous years, our segmental reporting reflected that our
operations were organised into a London Portfolio and a Retail
Portfolio. In the year ended 31 March 2020, we merged these two
business units and amended our reporting to the ExecCom to reflect
this. In order to maintain a detailed level of financial
disclosure, our segmental reporting now reflects the predominant
use class of our assets, grouped into Office, Retail and
Specialist. The comparative year has been presented in the new
format and a reconciliation to the previous presentation has been
provided on our website.
The Group's primary measure of underlying profit before tax is
revenue profit. However, Segment net rental income is the lowest
level to which the profit arising from the on-going operations of
the Group is analysed between the three segments. Previously the
Group reported Segment profit, which for the year ended 31 March
2019 was GBP56m lower than the Segment net rental income for the
same year as it included indirect property costs, including
depreciation, as well as the net finance costs directly incurred by
our joint ventures. The indirect costs, which are predominantly
staff costs, have now all been treated as indirect expenses and are
not allocated to individual segments. Depreciation previously
included within Group Services expenses has also been separated and
reported together with the depreciation previously included in
Segment profit.
The Group manages its financing structure, with the exception of
joint ventures, on a pooled basis. Individual joint ventures may
have specific financing arrangements in place. Since the use class
of individual joint ventures may span more than one segment, debt
facilities and finance expenses are not specific to a particular
segment. Unallocated income and expenses are items incurred
centrally which are not directly attributable to one of the
segments.
All items in the segmental information note are presented on a
proportionate basis. A reconciliation from the Group income
statement to the information presented in the segmental information
note is included in table 32.
2020 2019(1)
Revenue profit Office Retail Specialist Total Office Retail Specialist Total
-------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------ ------ ---------- ----- ------ ------ ---------- -----
Rental income 261 310 98 669 256 319 99 674
Finance lease interest 9 - - 9 9 - - 9
------------------------------- ------ ------ ---------- ----- ------ ------ ---------- -----
Gross rental income (before
rents payable) 270 310 98 678 265 319 99 683
Rents payable(2) (5) (10) - (15) (3) (10) - (13)
------------------------------- ------ ------ ---------- ----- ------ ------ ---------- -----
Gross rental income (after
rents payable) 265 300 98 663 262 309 99 670
------ ------ ---------- ----- ------ ------ ---------- -----
Service charge income 46 52 - 98 44 51 - 95
Service charge expense (45) (55) (2) (102) (43) (53) (2) (98)
------ ------ ---------- ----- ------ ------ ---------- -----
Net service charge expense 1 (3) (2) (4) 1 (2) (2) (3)
Other property related income 16 15 2 33 15 17 2 34
Direct property expenditure (21) (50) (15) (86) (20) (48) (15) (83)
Provisions related to 2020/21
rent - (19) (4) (23) - - - -
------------------------------- ------ ------ ---------- ----- ------ ------ ---------- -----
Segment net rental income 261 243 79 583 258 276 84 618
------ ------ ---------- ------ ------ ----------
Other income 2 3
Indirect expense (72) (76)
Depreciation (4) (5)
------------------------------- ------ ------ ---------- ----- ------ ------ ---------- -----
Revenue profit before interest 509 540
Finance income 17 20
Finance expense (96) (99)
Joint venture finance expense (16) (19)
------------------------------- ------ ------ ---------- ----- ------ ------ ---------- -----
Revenue profit 414 442
------------------------------- ------ ------ ---------- ----- ------ ------ ---------- -----
1. Restated for changes in accounting policies. See note 17 for details.
2. Included within rents payable is lease interest payable of
GBP3m (2019: GBP1m) and GBP1m (2019: GBP1m) for the Office and
Retail segments respectively.
Reconciliation of revenue profit to 2020 2019
loss before tax
Total Total
GBPm GBPm
------------------------------------------------ ------- -----
Revenue profit 414 442
Capital and other items
Valuation and profits on disposals
------- -----
Net deficit on revaluation of investment
properties (1,179) (557)
Loss on disposal of investment properties (6) (2)
Profit on disposal of trading properties 7 -
(1,178) (559)
Net finance expense
------- -----
Fair value movement on interest-rate swaps (9) (6)
Premium and fees on redemption of medium
term notes (MTNs) (59) (2)
Other net finance income - 4
------- -----
(68) (4)
Exceptional items
------- -----
Impairment of intangible asset (4) (12)
Impairment of goodwill (1) (2)
------- -----
(5) (14)
Other
------- -----
Fair value movement prior to acquisition
of non-owned element of a joint venture - 9
Profit from long-term development contracts 3 3
Other (3) -
------- -----
- 12
Loss before tax (837) (123)
------------------------------------------------- ------- -----
4. Performance measures
=========================
In the tables below, we present earnings per share and net
assets per share calculated in accordance with IFRS, together with
our own adjusted measure and certain measures defined by the
European Public Real Estate Association (EPRA), which have been
included to assist comparison between European property companies.
Three of the Group's key financial performance measures are
adjusted diluted earnings per share, EPRA net tangible assets per
share and total business return.
During the year, EPRA issued new best practice reporting
guidelines incorporating three new measures of net asset value:
EPRA Net Tangible Assets (NTA), Net Reinvestment Value (NRV) and
Net Disposal Value (NDV). We have adopted these guidelines in the
year ended 31 March 2020 and EPRA NTA is considered to be the most
relevant measure for our business. EPRA NTA is now our primary
measure of net asset value, replacing our previously reported EPRA
net assets and EPRA net assets per share metrics. Total business
return is now calculated based on EPRA NTA. Refer to the EPRA best
practices section on page 56 for more details, including
calculations of EPRA NRV, EPRA net assets and EPRA triple net
assets.
Adjusted earnings, which is a tax adjusted measure of revenue
profit, is the basis for the calculation of adjusted earnings per
share. We believe adjusted earnings and adjusted earnings per share
provide further insight into the results of the Group's operational
performance to stakeholders as they focus on the rental income
performance of the business and exclude Capital and other items
which can vary significantly from year to year.
Earnings per share Year ended 31 March Year ended 31 March
2020 2019
Loss Loss
for the EPRA Adjusted for the EPRA Adjusted
year earnings earnings year earnings earnings
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- -------- --------- --------- -------- --------- ---------
Loss attributable to shareholders (832) (832) (832) (119) (119) (119)
Taxation - (5) (5) - (4) (4)
Valuation and profits on disposals - 1,178 1,178 - 559 559
Net finance expense - 68 68 - 4 4
Exceptional items - 5 5 - 14 14
Other - - - - (12) (12)
(Loss)/profit used in per share calculation (832) 414 414 (119) 442 442
-------------------------------------------- -------- --------- --------- -------- --------- ---------
IFRS EPRA Adjusted IFRS EPRA Adjusted
-------------------------------------------- -------- --------- --------- -------- --------- ---------
Basic (loss)/earnings per share (112.4)p 55.9p 55.9p (16.1)p 59.7p 59.7p
Diluted (loss)/earnings per share(1) (112.4)p 55.9p 55.9p (16.1)p 59.7p 59.7p
-------------------------------------------- -------- --------- --------- -------- --------- ---------
1. In the years ended 31 March 2019 and 2020, share options are
excluded from the weighted average diluted number of shares when
calculating IFRS diluted loss per share because they are not
dilutive.
Net assets per share 31 March 2020 31 March 2019(1)
EPRA EPRA EPRA EPRA
Net assets NDV NTA Net assets NDV NTA
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ---------- ------ ------ ---------- ------ ------
Net assets attributable to shareholders 8,750 8,750 8,750 9,920 9,920 9,920
Excess of fair value over net investment
in finance lease book value - 90 90 - 80 80
Deferred tax liability on intangible
asset - - 1 - - 2
Goodwill on deferred tax liability - (1) (1) - (2) (2)
Other intangible assets - - (7) - - (11)
Fair value of interest-rate swaps - - 1 - - -
Excess of fair value of debt over
book value (note 14) - (274) - - (239) -
Net assets used in per share calculation 8,750 8,565 8,834 9,920 9,759 9,989
----------------------------------------- ---------- ------ ------ ---------- ------ ------
IFRS EPRA EPRA IFRS EPRA EPRA
NDV NTA NDV NTA
----------------------------------------- ---------- ------ ------ ---------- ------ ------
Net assets per share 1,182p n/a n/a 1,341p n/a n/a
Diluted net assets per share 1,181p 1,156p 1,192p 1,339p 1,317p 1,348p
----------------------------------------- ---------- ------ ------ ---------- ------ ------
1. New metrics presented as a result of the change in EPRA best
practice recommendations. See table 18 in the Business analysis
section for more details. EPRA net assets at 31 March 2019 as
previously reported was GBP9,920m and EPRA triple net assets was
GBP9,679m (1,339p and 1,306p per share respectively).
Number of shares Weighted 31 March Weighted 31 March
average 2020 average 2019
million million million million
--------------------------------- -------- -------- -------- --------
Ordinary shares 751 751 751 751
Treasury shares (10) (10) (10) (10)
Own shares (1) (1) (1) (1)
--------------------------------- -------- -------- -------- --------
Number of shares - basic 740 740 740 740
Dilutive effect of share options 1 1 - 1
--------------------------------- -------- -------- -------- --------
Number of shares - diluted 741 741 740 741
--------------------------------- -------- -------- -------- --------
Total business return is calculated as the cash dividends per
share paid in the year plus the change in EPRA NTA per share,
divided by the opening EPRA NTA per share. We consider this to be a
useful measure for shareholders as it gives an indication of the
total return on equity over the year.
Total business return based on EPRA Year ended 31 March Year ended 31 March
NTA 2020 2019(1)
pence pence
------------------------------------ ------------------- -------------------
Decrease in EPRA NTA per share (156) (62)
Dividend paid per share in the year
(note 8) 46 47
------------------------------------ ------------------- -------------------
Total return (a) (110) (15)
------------------------------------ ------------------- -------------------
EPRA NTA per share at the beginning
of the year (b) 1,348 1,410
Total business return (a/b) -8.2% -1.1%
------------------------------------ ------------------- -------------------
1. Restated for change in net asset metric from EPRA net assets
to EPRA NTA. See table 18 in the Business analysis section for
further details. Total business return at 31 March 2019 based on
EPRA net assets per share as previously reported was -1.2%.
5. Revenue
==========
All revenue is classified within the 'Revenue profit' column of
the income statement, with the exception of proceeds from the sale
of trading properties, income from long-term development contracts
and the non-owned element of the Group's subsidiaries which are
presented in the 'Capital and other items' column.
2020 2019(1)
Capital Capital
Revenue and other Revenue and other
profit items Total profit items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ ------- ---------- ----- ------- ---------- -----
Rental income (excluding adjustment
for lease incentives) 630 1 631 616 2 618
Adjustment for lease incentives (20) - (20) 1 - 1
------------------------------------ ------- ---------- ----- ------- ---------- -----
Rental income 610 1 611 617 2 619
Service charge income 88 - 88 86 - 86
Other property related income 31 - 31 33 - 33
Trading property sales proceeds - - - - 7 7
Finance lease interest 9 - 9 9 - 9
Other income 2 - 2 3 - 3
------------------------------------ ------- ---------- ----- ------- ---------- -----
Revenue per the income statement 740 1 741 748 9 757
------------------------------------ ------- ---------- ----- ------- ---------- -----
1. Restated for changes in accounting policies. See note 17 for details.
The following table reconciles revenue per the income statement
to the individual components of revenue presented in note 3.
2020 2019(1)
Adjustment
Adjustment for non-
for non-wholly wholly
Joint owned Joint owned
Group ventures subsidiaries(2) Total Group ventures subsidiaries(2) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----- --------- ---------------- ----- ----- --------- ---------------- -----
Rental income 611 59 (1) 669 619 57 (2) 674
Service charge income 88 10 - 98 86 9 - 95
Other property related
income 31 2 - 33 33 1 - 34
Trading property sales
proceeds - 21 - 21 7 32 - 39
Finance lease interest 9 - - 9 9 - - 9
Long-term development
contract income - 3 - 3 - 30 - 30
Other income 2 - - 2 3 - - 3
------------------------- ----- --------- ---------------- ----- ----- --------- ---------------- -----
Revenue in the segmental
information note 741 95 (1) 835 757 129 (2) 884
------------------------- ----- --------- ---------------- ----- ----- --------- ---------------- -----
1. Restated for changes in accounting policies. See note 17 for details.
2. This represents the interest in X-Leisure which we did not
own, but which is consolidated in the Group numbers. In December
2019, the Group settled the redemption liability which represented
this interest resulting in 100% ownership.
6. Costs
==========
All costs are classified within the 'Revenue profit' column of
the income statement, with the exception of the cost of sale of
trading properties, costs arising on long-term development
contracts, amortisation and impairments of intangible assets
arising on business combinations and the non-owned element of the
Group's subsidiaries which are presented in the 'Capital and other
items' column.
2020 2019
Capital Capital
Revenue and other Revenue and other
profit items Total profit items Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------- ---------- ----- ------- ---------- -----
Rents payable 13 - 13 10 - 10
Service charge expense 90 - 90 88 - 88
Direct property expenditure 72 - 72 72 - 72
Provisions related to 2020/21 rent 21 - 21 - - -
Indirect expense 73 - 73 79 - 79
Cost of trading property disposals - - - - 7 7
Amortisation of other intangible
asset - - - - 1 1
Impairment of intangible asset - 4 4 - 12 12
Impairment of goodwill - 1 1 - 2 2
Costs per the income statement 269 5 274 249 22 271
----------------------------------- ------- ---------- ----- ------- ---------- -----
The following table reconciles costs per the income statement to
the individual components of costs presented in note 3.
2020 2019
Joint Joint
Group ventures Total Group ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ----- --------- ----- ----- --------- -----
Rents payable 13 2 15 10 3 13
Service charge expense 90 12 102 88 10 98
Direct property expenditure 72 14 86 72 11 83
Provisions related to 2020/21 rent 21 2 23 - - -
Indirect expense 73 3 76 79 2 81
Cost of trading property disposals - 14 14 7 32 39
Long-term development contract expenditure - - - - 27 27
Amortisation of other intangible
asset - - - 1 - 1
Impairment of intangible asset 4 - 4 12 - 12
Impairment of goodwill 1 - 1 2 - 2
Costs in the segmental information
note 274 47 321 271 85 356
------------------------------------------- ----- --------- ----- ----- --------- -----
7. Net finance expense
========================================= ========================== ==========================
2020 2019
Capital Capital
Revenue and other Revenue and other
profit items Total profit items Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Finance income
Interest receivable from joint ventures 17 - 17 19 - 19
Fair value movement on other derivatives - 1 1 - 6 6
Other - - - 1 - 1
17 1 18 20 6 26
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Finance expense
Bond and debenture debt (80) - (80) (81) - (81)
Bank and other short-term borrowings (22) - (22) (22) - (22)
Fair value movement on interest-rate
swaps - (9) (9) - (6) (6)
Fair value movement on other derivatives - - - - (1) (1)
Redemption of medium term notes - (59) (59) - (2) (2)
Revaluation of redemption liabilities - (1) (1) - (1) (1)
Other interest payable (1) - (1) - - -
(103) (69) (172) (103) (10) (113)
Interest capitalised in relation
to properties under development 7 - 7 4 - 4
----------------------------------------- ------- ---------- ----- ------- ---------- -----
(96) (69) (165) (99) (10) (109)
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Net finance expense (79) (68) (147) (79) (4) (83)
Joint venture net finance expense (16) (19)
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Net finance expense included in revenue
profit (95) (98)
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Lease interest payable of GBP4m (2019: GBP2m) is included within
rents payable as detailed in note 3.
8. Dividends
========================================= =========================== ====
Dividends paid Year ended 31 March
Pence per share 2020 2019
Payment PID Non-PID Total GBPm GBPm
date
----------------------------- ---------- ----- ------- ----- ---- ----
For the year ended 31 March
2018:
6 April
Third interim 2018 9.85 - 9.85 73
27 July
Final 2018 14.65 - 14.65 108
For the year ended 31 March
2019:
5 October
First interim 2018 11.30 - 11.30 84
4 January
Second interim 2019 11.30 - 11.30 84
12 April
Third interim 2019 11.30 - 11.30 84
25 July
Final 2019 11.65 - 11.65 86
For the year ended 31 March
2020:
4 October
First interim 2019 11.60 - 11.60 86
3 January
Second interim 2020 11.60 - 11.60 86
----------------------------- ---------- ----- ------- ----- ---- ----
Gross dividends 342 349
----------------------------------------- ----- ------- ----- ---- ----
Dividends in the statement
of changes in equity 342 349
Timing difference on payment
of withholding tax - (11)
----------------------------------------- ----- ------- ----- ---- ----
Dividends in the statement
of cash flows 342 338
----------------------------------------- ----- ------- ----- ---- ----
A third interim dividend of 11.6p per ordinary share was
declared on 5 February 2020 (2019: 11.30p or GBP84m paid in total).
As announced on 2 April 2020, in light of extreme market
uncertainty due to Covid-19, the Board took the decision to cancel
the third interim dividend that was due to be paid on 9 April 2020.
The Board is not proposing a final dividend for the year ended 31
March 2020 (2019: 11.65p). The total dividend recommended in
respect of the year ended 31 March 2020 is 23.2p per ordinary share
(2019: 45.55p) resulting in a total distribution of GBP172m (2019:
GBP338m).
A Dividend Reinvestment Plan (DRIP) has been available in
respect of all dividends paid during the year.
9. Net cash generated from operations
======================================================= =============
Reconciliation of operating loss to net cash generated 2020 2019
from operations
GBPm GBPm
------------------------------------------------------- ------ -----
Operating loss (690) (40)
Adjustments for:
Net deficit on revaluation of investment properties 1,000 441
Loss on disposal of investment properties 6 -
Share of loss from joint ventures 151 85
Share-based payment charge 2 2
Impairment of intangible asset 4 12
Impairment of goodwill 1 2
Impairment of investment in subsidiary - -
Rents payable 13 10
Other 6 10
------------------------------------------------------- ------ -----
493 522
Changes in working capital:
Decrease in receivables 3 20
Increase/(decrease) in payables and provisions 8 (14)
------------------------------------------------------- ------ -----
Net cash generated from operations 504 528
------------------------------------------------------- ------ -----
10. Investment properties
=========================================== ======= ======
2020 2019
GBPm GBPm
Net book value at the beginning of
the year 12,094 12,336
Acquisitions 16 136
Capital expenditure 199 94
Capitalised interest 7 5
Net movement in head leases capitalised(1) 30 -
Disposals (49) (36)
Net deficit on revaluation of investment
properties (1,000) (441)
Net book value at the end of the
year 11,297 12,094
-------------------------------------------- ------- ------
1. See note 14 for details of the amounts payable under head
leases and note 7 for details of the associated rents payable in
the income statement.
The market value of the Group's investment properties, as
determined by the Group's external valuer, differs from the net
book value presented in the balance sheet due to the Group
presenting tenant finance leases, capitalised head leases and lease
incentives separately. The following table reconciles the net book
value of the investment properties to the market value.
2020 2019
Group Adjustment Group Adjustment
(excl. for (excl. for
joint Joint proportionate Combined joint Joint proportionate Combined
ventures) ventures(1) share(2) Portfolio ventures) ventures(1) share(2) Portfolio
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ---------- ------------ ------------- ---------- ---------- ------------ ------------- ----------
Market value 11,802 979 - 12,781 12,637 1,149 (36) 13,750
Less:
properties
treated
as finance
leases (249) - - (249) (239) - 1 (238)
Plus: head
leases
capitalised 60 9 - 69 30 8 - 38
Less: tenant
lease
incentives (316) (42) - (358) (334) (40) 1 (373)
------------ ---------- ------------ ------------- ---------- ---------- ------------ ------------- ----------
Net book
value 11,297 946 - 12,243 12,094 1,117 (34) 13,177
------------ ---------- ------------ ------------- ---------- ---------- ------------ ------------- ----------
Net deficit
on
revaluation
of
investment
properties (1,000) (181) 2 (1,179) (441) (117) 1 (557)
------------ ---------- ------------ ------------- ---------- ---------- ------------ ------------- ----------
1. Refer to note 12 for a breakdown of this amount by entity.
2. This represents the interest in X-Leisure which we did not
own, but which is consolidated in the Group numbers. In December
2019, the Group settled the redemption liability which represented
this interest resulting in 100% ownership.
The net book value of leasehold properties where head leases
have been capitalised is GBP2,561m (2019: GBP2,110m).
Investment properties include capitalised interest of GBP221m
(2019: GBP214m). The average rate of interest capitalisation for
the year is 2.6% (2019: 3.5%). The historical cost of investment
properties is GBP7,463m (2019: GBP7,277m).
11. Trading properties
========================= =============== =========== =====
Development
land and
infrastructure Residential Total
GBPm GBPm GBPm
------------------------- --------------- ----------- -----
At 1 April 2018 21 3 24
Acquisitions - 4 4
Capital expenditure 2 - 2
Disposals - (7) (7)
------------------------- --------------- ----------- -----
31 March 2019 23 - 23
------------------------- --------------- ----------- -----
Capital expenditure 1 - 1
At 31 March 2020 24 - 24
------------------------- --------------- ----------- -----
There were no cumulative impairment provisions in respect of
either Development land and infrastructure or Residential at 31
March 2020 and 31 March 2019.
12. Joint arrangements
========================
The Group's principal joint arrangements are described
below:
Joint ventures Percentage Business Year end Joint venture partner
owned & segment date(1)
voting
rights
----------------------------- ---------- --------------- ----------- ------------------------------
Held at 31 March 2020
Nova, Victoria(2) 50% Office, Retail, 31 March Canada Pension Plan Investment
Specialist Board
Southside Limited Partnership 50% Retail 31 March Invesco Real Estate European
Fund
St. David's Limited 50% Retail 31 December Intu Properties plc
Partnership
Westgate Oxford Alliance 50% Retail 31 March The Crown Estate Commissioners
Limited Partnership
Harvest(3)(4) 50% Retail 31 March J Sainsbury plc
The Ebbsfleet Limited 50% Specialist 31 March Ebbsfleet Property Limited
Partnership(3)(5)
West India Quay Unit 50% Specialist 31 March Schroder Exempt Property
Trust(3)(6) Unit Trust
----------------------------- ---------- --------------- ----------- ------------------------------
Joint operation Ownership Business Year end Joint operation partners
interest segment date(1)
----------------------------- ---------- --------------- ----------- ------------------------------
Held at 31 March 2020
Bluewater, Kent 30% Retail 31 March M&G Real Estate and GIC
Lendlease Retail LP
Royal London Asset Management
Aberdeen Standard Investments
----------------------------- ---------- --------------- ----------- ------------------------------
1. The year end date shown is the accounting reference date of
the joint arrangement. In all cases, the Group's accounting is
performed using financial information for the Group's own reporting
year and reporting date.
2. Nova, Victoria includes the Victoria Circle Limited
Partnership, Nova Residential Limited Partnership, Victoria Circle
Developer Limited, Victoria Circle GP Limited, LS Victoria Circle
GP Investments Limited, LS Victoria Circle Development Management
Limited, Victoria Circle Business Manager Limited, Nova Residential
(GP) Limited and Nova Developer Limited.
3. Included within Other in subsequent tables.
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. On 15 October 2019, The Ebbsfleet Limited Partnership
disposed of its interest in development land for GBP17m.
6. West India Quay Unit Trust is held in the X-Leisure Unit
Trust (X-Leisure). Until 5 December 2019 the Group held a 95% share
in X-Leisure, but settled the redemption liability on that date.
The Group owned 100% of X-Leisure at 31 March 2020.
All of the Group's joint arrangements have their principal place
of business in the United Kingdom. All of the Group's joint
arrangements own and operate investment property, with the
exception of The Ebbsfleet Limited Partnership which held
development land as a trading property and Harvest which is engaged
in long-term development contracts. Nova, Victoria is also engaged
in the development of investment properties. The activities of all
the Group's joint arrangements are therefore strategically
important to the business activities of the Group.
All joint ventures are registered in England and Wales with the
exception of Southside Limited Partnership and West India Quay Unit
Trust which are registered in Jersey.
Joint ventures Year ended 31 March 2020
Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total Total
Group
Comprehensive income statement 100% 100% 100% 100% 100% 100% share
-----------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Revenue(1) 55 12 42 37 43 189 95
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Gross rental income (after
rents payable) 36 12 33 28 4 113 57
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Net rental income 32 7 22 19 3 83 41
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Revenue profit before
interest 28 7 21 18 3 77 38
Finance expense (27) (6) - - - (33) (16)
--------- ------------ ------------ ------------ ----- ----- ------
Net finance expense (27) (6) - - - (33) (16)
Revenue profit 1 1 21 18 3 44 22
Capital and other items
Net deficit on revaluation
of investment properties (12) (72) (139) (135) (3) (361) (181)
Movement in impairment
of trading properties 1 - - - - 1 -
Profit on disposal of
trading properties 1 - - - 12 13 7
Profit on long-term development
contracts - - - - 5 5 3
(Loss)/profit before tax (9) (71) (118) (117) 17 (298) (149)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Taxation - - - - (3) (3) (2)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Post-tax (loss)/profit (9) (71) (118) (117) 14 (301) (151)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total comprehensive (loss)/income (9) (71) (118) (117) 14 (301) (151)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
50% 50% 50% 50% 50% 50%
Group share of (loss)/profit
before tax (5) (35) (59) (59) 9 (149) (149)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Group share of post-tax
(loss)/profit (5) (35) (59) (59) 7 (151) (151)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Group share of total comprehensive
(loss)/income (5) (35) (59) (59) 7 (151) (151)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
1. Revenue includes gross rental income (before rents payable),
service charge income, other property related income, trading
properties disposal proceeds and income from long-term development
contracts.
Joint ventures Year ended 31 March 2019
Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total Total
Group
Comprehensive income statement 100% 100% 100% 100% 100% 100% share
-----------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Revenue(1) 97 13 44 38 66 258 129
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Gross rental income (after
rents payable) 32 13 35 26 3 109 54
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Net rental income 28 10 26 20 3 87 43
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Revenue profit before
interest 25 10 26 19 3 83 41
Finance expense (33) (6) - - - (39) (19)
Net finance expense (33) (6) - - - (39) (19)
Revenue (loss)/profit (8) 4 26 19 3 44 22
Capital and other items
Net deficit on revaluation
of investment properties (25) (32) (101) (74) (1) (233) (117)
Movement in impairment
of trading properties (1) - - - - (1) -
Loss on disposal of investment
properties - - - - (4) (4) (2)
Fair value movement prior
to acquisition of non-owned
element of a joint venture - - - - 17 17 9
(Loss)/profit on disposal
of trading properties (3) - - 1 3 1 -
Profit on long-term development
contracts - - - - 7 7 3
(Loss)/profit before tax (37) (28) (75) (54) 25 (169) (85)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Post-tax (loss)/profit (37) (28) (75) (54) 25 (169) (85)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total comprehensive (loss)/income (37) (28) (75) (54) 25 (169) (85)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
50% 50% 50% 50% 50% 50%
Group share of (loss)/profit
before tax (19) (14) (38) (27) 13 (85) (85)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Group share of post-tax
(loss)/profit (19) (14) (38) (27) 13 (85) (85)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Group share of total comprehensive
(loss)/income (19) (14) (38) (27) 13 (85) (85)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
1. Revenue includes gross rental income (before rents payable),
service charge income, other property related income, trading
properties disposal proceeds and income from long-term development
contracts.
Joint ventures 2020
Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total Total
Group
Balance sheet 100% 100% 100% 100% 100% 100% share
---------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Investment properties(1) 849 192 425 358 67 1,891 946
--------- ------------ ------------ ------------ ----- ----- ------
Non-current assets 849 192 425 358 67 1,891 946
Cash and cash equivalents 17 2 12 10 6 47 23
Other current assets 75 3 13 19 - 110 55
--------- ------------ ------------ ------------ ----- ----- ------
Current assets 92 5 25 29 6 157 78
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total assets 941 197 450 387 73 2,048 1,024
Trade and other payables
and provisions (33) (4) (12) (12) (1) (62) (31)
--------- ------------ ------------ ------------ ----- ----- ------
Current liabilities (33) (4) (12) (12) (1) (62) (31)
Non-current liabilities (179) (144) (16) - - (339) (169)
--------- ------------ ------------ ------------ ----- ----- ------
Non-current liabilities (179) (144) (16) - - (339) (169)
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total liabilities (212) (148) (28) (12) (1) (401) (200)
Net assets 729 49 422 375 72 1,647 824
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Market value of investment
properties(1) 908 193 417 372 68 1,958 979
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Net cash/(debt) 17 2 (4) 10 6 31 15
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Joint ventures 2019
Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total Total
Group
Balance sheet 100% 100% 100% 100% 100% 100% share
---------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Investment properties(1) 843 263 562 495 71 2,234 1,117
--------- ------------ ------------ ------------ ----- ----- ------
Non-current assets 843 263 562 495 71 2,234 1,117
Cash and cash equivalents 10 4 1 13 4 32 16
Other current assets 68 4 17 22 161 272 136
--------- ------------ ------------ ------------ ----- ----- ------
Current assets 78 8 18 35 165 304 152
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total assets 921 271 580 530 236 2,538 1,269
Trade and other payables
and provisions (26) (6) (11) (13) (85) (141) (70)
--------- ------------ ------------ ------------ ----- ----- ------
Current liabilities (26) (6) (11) (13) (85) (141) (70)
Non-current liabilities (178) (142) (16) - - (336) (168)
--------- ------------ ------------ ------------ ----- ----- ------
Non-current liabilities (178) (142) (16) - - (336) (168)
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total liabilities (204) (148) (27) (13) (85) (477) (238)
Net assets 717 123 553 517 151 2,061 1,031
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Market value of investment
properties(1) 893 265 557 511 72 2,298 1,149
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Net cash/(debt) 11 4 (13) 14 4 20 10
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
1. The difference between the book value and the market value of
investment properties is the amount recognised in respect of lease
incentives, head leases capitalised, and properties treated as
finance leases, where applicable.
Joint ventures Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total
Group
Net investment 50% 50% 50% 50% 50% share
----------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- --------- ------------ ------------ ------------ ----- ------
At 1 April 2018 393 78 328 282 70 1,151
Total comprehensive (loss)/income (19) (14) (38) (27) 13 (85)
Cash contributed 13 - - 14 2 29
Cash distributions (28) (3) (13) (11) (7) (62)
Disposal of investment - - - - (2) (2)
---------------------------------- --------- ------------ ------------ ------------ ----- ------
At 31 March 2019 359 61 277 258 76 1,031
---------------------------------- --------- ------------ ------------ ------------ ----- ------
Total comprehensive (loss)/income (5) (35) (59) (59) 7 (151)
Cash contributed 13 - - - - 13
Cash distributions (2) (1) (7) (12) (47) (69)
At 31 March 2020 365 25 211 187 36 824
---------------------------------- --------- ------------ ------------ ------------ ----- ------
13. Capital structure
======================= ============================================== =============================================
2020 2019
Adjustment Adjustment
for non-wholly for non-wholly
Joint owned Joint owned
Group ventures subsidiaries(1) Combined Group ventures subsidiaries(1) Combined
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------- --------- ---------------- -------- ------ --------- ---------------- --------
Property portfolio
Market value of
investment
properties 11,802 979 - 12,781 12,637 1,149 (36) 13,750
Trading properties and
long-term contracts 24 3 - 27 23 18 - 41
Total property
portfolio
(a) 11,826 982 - 12,808 12,660 1,167 (36) 13,791
----------------------- ------- --------- ---------------- -------- ------ --------- ---------------- --------
Net debt
Borrowings 5,332 8 - 5,340 3,781 8 - 3,789
Monies held in
restricted
accounts and deposits (9) - - (9) (36) (2) - (38)
Cash and cash
equivalents (1,345) (23) - (1,368) (14) (16) - (30)
Fair value of
interest-rate
swaps 1 - - 1 - - - -
Fair value of foreign
exchange
swaps and forwards (37) - - (37) 16 - - 16
----------------------- ------- --------- ---------------- -------- ------ --------- ---------------- --------
Net debt (b) 3,942 (15) - 3,927 3,747 (10) - 3,737
Less: Fair value of
interest-rate
swaps (1) - - (1) - - - -
Adjusted net debt (c) 3,941 (15) - 3,926 3,747 (10) - 3,737
----------------------- ------- --------- ---------------- -------- ------ --------- ---------------- --------
Adjusted total equity
Total equity (d) 8,750 - - 8,750 9,920 - - 9,920
Fair value of interest
rate swaps 1 - - 1 - - - -
Adjusted total equity
(e) 8,751 - - 8,751 9,920 - - 9,920
----------------------- ------- --------- ---------------- -------- ------ --------- ---------------- --------
Gearing (b/d) 45.1% 44.9% 37.8% 37.7%
Adjusted gearing (c/e) 45.0% 44.9% 37.8% 37.7%
Group LTV (c/a) 33.3% 30.7% 29.6% 27.1%
Security Group LTV 32.5% 28.6%
Weighted average cost
of
debt 1.8% 1.8% 2.7% 2.7%
----------------------- ------- --------- ---------------- -------- ------ --------- ---------------- --------
1. This represents the interest in X-Leisure which we did not
own, but which is consolidated in the Group numbers. In December
2019, the Group settled the redemption liability which represented
this interest resulting in 100% ownership.
14. Borrowings
=================================================================================================== ================
2020 2019
Effective Nominal/ Nominal/
interest notional Fair Book notional Fair Book
Secured/ Fixed/ rate value value value value value value
unsecured floating % GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- ---------- --------- --------- ------ ------ --------- ------ ------
Current borrowings
Commercial paper
LIBOR +
Sterling Unsecured Floating margin 4 4 4 - - -
LIBOR +
Euro Unsecured Floating margin 796 796 796 729 729 729
LIBOR +
US Dollar Unsecured Floating margin 177 177 177 205 205 205
------------------------- ----------- ---------- --------- --------- ------ ------ --------- ------ ------
Total current borrowings 977 977 977 934 934 934
-------------------------------------------------- --------- --------- ------ ------ --------- ------ ------
Non-current borrowings
Medium term notes
(MTN)
--------- ------ ------ --------- ------ ------
A3 5.425% MTN due
2022 Secured Fixed 5.5 - - - 46 48 46
A10 4.875% MTN due
2025 Secured Fixed 5.0 10 11 10 14 15 14
A12 1.974% MTN due
2026 Secured Fixed 2.0 400 406 399 400 405 399
A4 5.391% MTN due
2026 Secured Fixed 5.4 17 20 17 25 30 25
A5 5.391% MTN due
2027 Secured Fixed 5.4 95 113 94 186 224 186
A6 5.376% MTN due
2029 Secured Fixed 5.4 65 84 65 78 97 77
A16 2.375% MTN due
2029 Secured Fixed 2.5 350 366 347 350 362 347
A13 2.399% MTN due
2031 Secured Fixed 2.4 300 314 299 300 310 299
A7 5.396% MTN due
2032 Secured Fixed 5.4 81 111 80 156 209 156
A11 5.125% MTN due
2036 Secured Fixed 5.1 50 71 50 56 76 56
A14 2.625% MTN due
2039 Secured Fixed 2.6 500 521 494 500 508 493
A15 2.750% MTN due
2059 Secured Fixed 2.7 500 542 495 500 515 494
2,368 2,559 2,350 2,611 2,799 2,592
Syndicated and bilateral LIBOR +
bank debt Secured Floating margin 1,944 1,944 1,944 225 225 225
Amounts payable under
head leases Unsecured Fixed 4.6 61 126 61 30 62 30
------------------------- ----------- ---------- --------- --------- ------ ------ --------- ------ ------
Total non-current
borrowings 4,373 4,629 4,355 2,866 3,086 2,847
-------------------------------------------------- --------- --------- ------ ------ --------- ------ ------
Total borrowings 5,350 5,606 5,332 3,800 4,020 3,781
-------------------------------------------------- --------- --------- ------ ------ --------- ------ ------
Reconciliation of the movement in borrowings 2020 2019
GBPm GBPm
--------------------------------------------- ----- -----
At the beginning of the year 3,781 3,730
Proceeds from new borrowings 1,701 84
Repayment of MTNs (47) -
Redemption of MTNs (196) (8)
Foreign exchange movement on non-Sterling
borrowings 60 (25)
Other 33 -
At the end of the year 5,332 3,781
--------------------------------------------- ----- -----
Reconciliation of movements in liabilities
arising from financing activities 2020
--------------------------------------------- ------ ---------- -------- -------- ------
Non-cash changes
At the
At the Other end
beginning Foreign changes of
of the Cash exchange in fair Other the
year flows movements values changes year
--------------------------------- ---------- ------ ------
GBPm GBPm GBPm GBPm GBPm GBPm
Borrowings 3,781 1,458 60 - 33 5,332
Derivative financial instruments 16 1 (60) 7 - (36)
--------------------------------- ---------- ------ ---------- -------- -------- ------
3,797 1,459 - 7 33 5,296
--------------------------------- ---------- ------ ---------- -------- -------- ------
2019
--------------------------------- ---------- ------ --------------------------------------
Borrowings 3,730 76 (25) - - 3,781
Derivative financial instruments 1 (15) 25 5 - 16
--------------------------------- ---------- ------ ---------- -------- -------- ------
3,731 61 - 5 - 3,797
--------------------------------- ---------- ------ ---------- -------- -------- ------
Medium term notes
The MTNs are secured on the fixed and floating pool of assets of
the Security Group. The Security Group includes investment
properties, development properties, the X-Leisure fund, and the
Group's investment in Westgate Oxford Alliance Limited Partnership,
Nova, Victoria, St. David's Limited Partnership and Southside
Limited Partnership, in total valued at GBP12.1bn at 31 March 2020
(31 March 2019: GBP13.2bn). 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 are less than 65% and more than 1.45x respectively. If
these limits are exceeded, the operating environment becomes more
restrictive with provisions to encourage a reduction in gearing.
The interest rate of each MTN is fixed until the expected maturity,
being two years before the legal maturity date of the MTN. The
interest rate for the last two years may either become floating on
a LIBOR basis plus an increased margin (relative to that at the
time of issue), or subject to a fixed coupon uplift, depending on
the terms and conditions of the specific notes.
The effective interest rate is based on the coupon paid and
includes the amortisation of issue costs. The MTNs are listed on
the Irish Stock Exchange and their fair values are based on their
respective market prices.
During the year, the Group purchased GBP196m (2019: GBP8m) of
MTNs for a total premium of GBP59m (2019: GBP2m). Details of the
purchases and associated premium by series are as follows:
MTN purchases 2020 2019
Purchases Premium Purchases Premium
GBPm GBPm GBPm GBPm
------------------------ --------- ------- --------- -------
A10 4.875% MTN due 2025 4 1 - -
A4 5.391% MTN due 2026 8 1 - -
A5 5.391% MTN due 2027 91 20 - -
A6 5.376% MTN due 2029 12 3 7 2
A7 5.396% MTN due 2032 75 31 1 -
A11 5.125% MTN due 2036 6 3 - -
196 59 8 2
------------------------ --------- ------- --------- -------
Syndicated and bilateral
bank debt Authorised Drawn Undrawn
Maturity
as at 31
March 2020 2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------------ ----- ----- ----- ---- ---- -----
Syndicated debt 2024-25 2,490 2,490 1,797 100 693 2,390
Bilateral debt 2023-24 225 225 147 125 78 100
------------------------- ------------ ----- ----- ----- ---- ---- -----
2,715 2,715 1,944 225 771 2,490
-------------------------------------- ----- ----- ----- ---- ---- -----
At 31 March 2020, the Group's committed revolving facilities
totalled GBP2,715m (31 March 2019: GBP2,715m).
All syndicated and bilateral facilities are committed and
secured on the assets of the Security Group. During the year ended
31 March 2020, the amounts drawn under the Group's facilities
increased by GBP1,719m.
The terms of the Security Group funding arrangements require
undrawn facilities to be reserved where syndicated and bilateral
facilities mature within one year, or when commercial paper is
issued. The total amount of cash and available facilities at 31
March 2020 were GBP1,139m (2019: GBP1,570m).
15. Monies held in restricted accounts and deposits
==========================================================
2020 2019
GBPm GBPm
----------------------------------------- ------- ------
Cash at bank and in hand 4 29
Short-term deposits 5 7
----------------------------------------- ------- ------
9 36
----------------------------------------- ------- ------
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.
2020 2019
GBPm GBPm
-------------------------------------------- ---- ----
Counterparties with external credit ratings
A+ 5 32
A 3 4
BBB+ 1 -
-------------------------------------------- ---- ----
9 36
-------------------------------------------- ---- ----
16. Cash and cash equivalents
======================================
2020 2019
GBPm GBPm
------------------------- ----- ----
Cash at bank and in hand 1,345 14
1,345 14
------------------------- ----- ----
As a result of the uncertainty created by Covid-19, the Group
drew down on its facilities in March 2020 in order to cover the
short-term commercial paper in issue at 31 March 2020 and to
provide additional liquid funds.
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.
2020 2019
GBPm GBPm
-------------------------------------------- ----- ----
Counterparties with external credit ratings
A+ 1,345 14
1,345 14
-------------------------------------------- ----- ----
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.
2020 2019
Net amounts Net amounts
Gross Gross recognised Gross Gross recognised
amounts amounts in the amounts amounts in the
of financial of financial balance of financial of financial balance
assets liabilities sheet assets liabilities sheet
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------- ------------- ----------- ------------- ------------- -----------
Assets
Cash and cash equivalents 1,363 (18) 1,345 63 (49) 14
1,363 (18) 1,345 63 (49) 14
-------------------------- ------------- ------------- ----------- ------------- ------------- -----------
17. Changes in accounting policies
====================================
IFRS 16 Leases
The Group has adopted IFRS 16 Leases on 1 April 2019. As a
result of adopting this standard, the Group now reports separately
service charge income for leases where a single payment is received
to cover both rent and service charge. The total payment received
was previously included within rental income, but the service
charge component has now been separated and reported as service
charge income in the notes to the financial statements.
Comparatives have been restated accordingly. In the year ended 31
March 2019, the amount previously reported in rental income which
has now been separated and reported as service charge income was
GBP6m. There has been no net impact on the Group's income statement
or balance sheet. The Group's revised accounting policies are set
out below.
Accounting policies
Revenue
Rental income, including fixed rental uplifts, is recognised in
the income statement on a straight-line basis over the term of the
lease. Lease incentives being offered to occupiers to enter into a
lease, such as an initial rent-free period or a cash contribution
to fit out or similar costs, are an integral part of the net
consideration for the use of the property and are therefore
recognised on the same straight-line basis. Contingent rents, being
lease payments that are not fixed at the inception of a lease, for
example turnover rents, are variable consideration and are recorded
as income in the period in which they are earned. Where a single
payment is received from a tenant to cover both rent and service
charge, the service charge component is separated and reported as
service charge income.
Service charge income and management fees are recorded as income
over time in the period in which the services are rendered. Revenue
is recognised over time because the tenants benefit from the
services as soon as they are rendered by the Group. The actual
service provided during each reporting period is determined using
cost incurred as the input method.
Costs
Rents payable reflect amounts due under head leases. Where rents
payable are variable, the payments are recognised in the income
statement as incurred. Where these rents are fixed, or in-substance
fixed, at the inception of the agreement, or become fixed or
in-substance fixed at some point over the life of the agreement, an
asset representing the right to use the underlying land and a
corresponding liability for the present value of the minimum future
lease payments are reflected on the Group's balance sheet within
investment properties and borrowings respectively.
18. Events after the reporting period
=====================================
There were no significant events occurring after the reporting
year, but before the financial statements were authorised for
issue.
Alternative performance measures
Table 17: Alternative performance measures
The Group has applied the European Securities and Markets
Authority (ESMA) 'Guidelines on Alternative Performance Measures'
in these results. In the context of these results, an alternative
performance measure (APM) is a financial measure of historical or
future financial performance, position or cash flows of the Group
which is not a measure defined or specified in IFRS.
The table below summarises the APMs included in these results,
where the definitions and reconciliations of these measures can be
found and where further discussion is included. The definitions of
all APMs are included in the Glossary and further discussion of
these measures can be found in the Financial review.
Alternative performance Nearest IFRS measure Reconciliation
measure
------------------------- -------------------------- ---------------
Revenue profit Profit before tax Note 3
------------------------- -------------------------- ---------------
Adjusted earnings Profit attributable to Note 4
shareholders
------------------------- -------------------------- ---------------
Adjusted earnings per Basic earnings per share Note 4
share
------------------------- -------------------------- ---------------
Adjusted diluted earnings Diluted earnings per share Note 4
per share
------------------------- -------------------------- ---------------
EPRA net tangible assets Net assets attributable Note 4
to shareholders
------------------------- -------------------------- ---------------
EPRA net tangible assets Net assets attributable Note 4
per share to shareholders
------------------------- -------------------------- ---------------
Total business return n/a Note 4
------------------------- -------------------------- ---------------
Combined Portfolio Investment properties Note 10
------------------------- -------------------------- ---------------
Adjusted net debt Borrowings Note 13
------------------------- -------------------------- ---------------
Group LTV n/a Note 13
------------------------- -------------------------- ---------------
EPRA disclosures
In October 2019, the European Public Real Estate Association
('EPRA') published new best practice recommendations (BPR) for
financial disclosures by public real estate companies. The Group
supports this reporting standardisation approach designed to
improve the quality and comparability of information for
investors.
The BPR introduced three new measures of net asset value: EPRA
net tangible assets (NTA), EPRA net reinvestment value (NRV) and
EPRA net disposal value (NDV). The Group has adopted these new
guidelines early and applies them in our 2020 Annual Report. EPRA
NTA is considered to be the most relevant measure for our business
and therefore now acts as our primary measure of net asset value.
Total business return is now calculated based on EPRA NTA. The
previously reported EPRA measures of net assets are also included
below for comparative purposes.
Table 18: EPRA net asset measures
EPRA net asset measures 31 March 2020
Previously
Current measures reported measures
---------------------- ------------------------
EPRA
EPRA EPRA EPRA EPRA triple
NRV NTA NDV net assets net assets
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ------ ------ ------ ----------- -----------
Net assets attributable to shareholders 8,750 8,750 8,750 8,750 8,750
Excess of fair value over net investment
in finance lease book value(1) 90 90 90 - -
Deferred tax liability on intangible asset 1 1 - 1 -
Goodwill on deferred tax liability (1) (1) (1) (1) (1)
Other intangible assets - (7) - - -
Fair value of interest-rate swaps 1 1 - 1 -
Excess of fair value of debt over book
value (note 14) - - (274) - (274)
Purchasers' costs (2) 768 - - - -
------------------------------------------- ------ ------ ------ ----------- -----------
Net assets used in per share calculation 9,609 8,834 8,565 8,751 8,475
------------------------------------------- ------ ------ ------ ----------- -----------
EPRA EPRA EPRA EPRA EPRA
NRV NTA NDV net assets triple
net assets
------------------------------------------- ------ ------ ------ ----------- -----------
Diluted net assets per share 1,297p 1,192p 1,156p 1,181p 1,144p
------------------------------------------- ------ ------ ------ ----------- -----------
31 March 2019
Previously
Current measures reported measures
---------------------- ------------------------
EPRA
EPRA EPRA EPRA EPRA triple
NRV NTA NDV net assets net assets
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ------ ------ ------ ----------- -----------
Net assets attributable to shareholders 9,920 9,920 9,920 9,920 9,920
Excess of fair value over net investment
in finance lease book value(1) 80 80 80 - -
Deferred tax liability on intangible asset 2 2 - 2 -
Goodwill on deferred tax liability (2) (2) (2) (2) (2)
Other intangible assets - (11) - - -
Excess of fair value of debt over book
value (note 14) - - (239) - (239)
Purchasers' costs(2) 829 - - - -
------------------------------------------- ------ ------ ------ ----------- -----------
Net assets used in per share calculation 10,829 9,989 9,759 9,920 9,679
------------------------------------------- ------ ------ ------ ----------- -----------
EPRA EPRA EPRA EPRA EPRA
NRV NTA NDV net assets triple
net assets
------------------------------------------- ------ ------ ------ ----------- -----------
Diluted net assets per share 1,461p 1,348p 1,317p 1,339p 1,306p
------------------------------------------- ------ ------ ------ ----------- -----------
1. While the previous definition of EPRA net assets included
this adjustment, it has historically not been considered material
to adjust. As the value of this difference has grown in recent
years, the adjustment will now be included when calculating EPRA
NTA.
2. EPRA NTA and EPRA NDV reflect IFRS values which are net of
purchasers' costs. Purchasers' costs are added back when
calculating EPRA NRV.
Table 19: EPRA performance measures
31 March 2020
Definition for EPRA measure Landsec EPRA
Measure Note measure Measure
--------------------- ----------------------------------------- ------ ---------- ----------
Adjusted earnings Recurring earnings from core 4 GBP414m GBP414m
operational activity
Adjusted earnings Adjusted earnings per weighted
per share number of ordinary shares 4 55.9p 55.9p
Adjusted diluted earnings per
Adjusted diluted weighted number of ordinary
earnings per share shares 4 55.9p 55.9p
EPRA net tangible Net assets adjusted to exclude 4 GBP8,834m GBP8,834m
assets (NTA) the fair value of interest-rate
swaps, intangible assets and
excess of fair value over net
investment in finance lease
book value
EPRA net tangible Diluted net tangible assets
assets per share per share 4 1,192p 1,192p
EPRA net disposal Net assets adjusted to exclude 4 GBP8,565m GBP8,565m
value (NDV) the fair value of debt and
goodwill on deferred tax and
to include excess of fair value
over net investment in finance
lease book value
EPRA net disposal Diluted net disposal value
value per share per share 4 1,156p 1,156p
Table
--------------------- ----------------------------------------- ------ ---------- ----------
ERV of vacant space as a %
of ERV of Combined Portfolio
Voids/vacancy rate excluding the development programme(1) 20 2.4% 2.4%
Annualised rental income less
non-recoverable costs as a
Net initial yield % of market value plus assumed
(NIY) purchasers' costs(2) 22 4.8% 4.7%
NIY adjusted for rent free
Topped-up NIY periods(2) 22 5.0% 4.9%
Total costs as a percentage
of gross rental income (including
Cost ratio direct vacancy costs)(3) 23 18.6% 22.5%
Total costs as a percentage
of gross rental income (excluding
direct vacancy costs)(3) 23 n/a 20.5%
--------------------------------------------------------------- ------ ---------- ----------
1. Our measure reflects voids in our like-for-like portfolio
only. The EPRA measure reflects voids in the Combined Portfolio
excluding only properties under development.
2. Our NIY and Topped-up NIY relate to the Combined Portfolio,
excluding properties in the development programme that have not yet
reached practical completion, and are calculated by our external
valuer. EPRA NIY and EPRA Topped-up NIY calculations are consistent
with ours but exclude only properties currently under development.
Topped-up NIY reflects adjustments of GBP21m and GBP21m for rent
free periods and other incentives for the Landsec measure and EPRA
measure, respectively.
3. The EPRA cost ratio is calculated based on gross rental
income after rents payable and excluding costs recovered through
rents but not separately invoiced, whereas our measure is based on
gross rental income before rents payable and costs recovered
through rents but not separately invoiced. We do not calculate a
cost ratio excluding direct vacancy costs as we do not consider
this to be helpful.
Table 20: 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.
2020
GBPm
----------------------------------------------------------------- ----
ERV of vacant properties 17
ERV of Combined Portfolio excluding properties under development 699
----------------------------------------------------------------- ----
EPRA vacancy rate (%) 2.4%
----------------------------------------------------------------- ----
Table 21: Change in net rental income from the like-for-like
portfolio (before provisions related to 2020/21 rent)
2020 2019 Change
----------
GBPm GBPm GBPm %
----------- ---- ---- ---- ----
Office 250 243 7 2.9
Retail 246 256 (10) -3.9
Specialist 83 84 (1) -1.2
----------- ---- ---- ---- ----
579 583 (4) -0.7
----------- ---- ---- ---- ----
Table 22: EPRA Net initial yield (NIY) and topped up NIY
2020
GBPm
-------------------------------------------------------------------- ------
Combined Portfolio 12,781
Trading properties at market value 29
Less: Properties under development, trading properties under
development and land (583)
-------------------------------------------------------------------- ------
Like-for-like investment property portfolio, proposed and completed
developments, and completed trading properties 12,227
Plus: Allowance for estimated purchasers' costs 735
-------------------------------------------------------------------- ------
Grossed-up completed property portfolio valuation (b) 12,962
-------------------------------------------------------------------- ------
Annualised cash passing rental income(1) 654
Net service charge expense(2) (10)
Other irrecoverable property costs (33)
-------------------------------------------------------------------- ------
Annualised net rents (a) 611
Plus: Rent-free periods and other lease incentives 21
Topped-up annualised net rents (c) 632
-------------------------------------------------------------------- ------
EPRA Net initial yield (a/b) 4.7%
-------------------------------------------------------------------- ------
EPRA Topped-up initial yield (c/b) 4.9%
-------------------------------------------------------------------- ------
1. Annualised cash passing rental income as calculated by the Group's external valuer.
2. Including costs recovered through rents but not separately invoiced.
Table 23: Cost analysis
2020 2019(1)
Total Cost Total Cost
GBPm ratio GBPm ratio
%(2) %(2)
------------------------ ---- -------------- ------------ ------------------- ----- ------ ----- ---------
Gross rental
income (before
rents payable) 678 683
------------------- ----- ------ ----- ---------
Costs recovered
through rents
but not separately
invoiced (6) (7)
------------------- ----- ------ ----- ---------
Adjusted gross
rental income 672 676
------------------- ----- ------ ----- ---------
GBPm Rents payable (15) (13)
------------------------ ---- ------------------- ----- ------ ----- ---------
Gross rental income EPRA gross
(before rents payable) 678 rental income 657 663
------------------------ ---- ------------------- ----- ------ ----- ---------
Rents payable (15)
------------------------ ---- ------------ ------------------- ----- ------ ----- ---------
Gross rental income
(after rents payable) 663 Direct Managed operations 10 1.5 10 1.5
------------------------ ---- ------------------- ----- ------ ----- -------
Net service charge
expense (4) property Tenant default 10 1.5 10 1.5
------------------------ ---- ------------------- ----- ------ ----- -------
Net direct property Tenant default
expenditure (53) costs - 2020/21 rent 23 3.4 - -
------------------------ ---- ------------------- ----- ------ ----- -------
Provisions related Void related
to 2020/21 rent (23) GBP80m costs 13 1.9 13 1.9
------------------------ ---- ------------ ------------------- ----- ------ ----- -------
Segment net rental Other direct
income 583 property costs 19 2.8 16 2.4
------------------------ ---- ------------ ------------------- ----- ------ ----- -------
Development
Net indirect expenses (74) Net indirect expenditure 9 1.3 12 1.8
------------------------ ----
Segment profit before expenses(3)
finance expense 509
------------------------ ---- ------------------- ----- ------ ----- -------
Net finance expense
- Group (79) GBP74m Asset management, 70 10.4 69 10.2
------------
Net finance expense administration
- joint ventures (16) and
------------------------ ----
Revenue profit 414 compliance
------------------------ ---- ------------------- ----- ------ ----- -------
Total (incl.
direct vacancy
costs) 154 22.9 130 19.2
------------------- ----- ------ ----- -------
Costs recovered
through rents (6) (7)
Tenant default
- 2020/21 rent (23) -
------------ ------------------- ----- ------ ----- -------
Total Adjusted total
cost ratio(2) 18.6% costs 125 18.6 123 18.2
------------ ------------------- ----- ------ ----- -------
Tenant default
- 2020/21 rent 23 -
------------------- ----- ------ ----- -------
EPRA costs
(incl. direct
vacancy costs) 148 22.5 123 18.6
------------------- ----- ------ ----- -------
Less: Direct
vacancy costs (13) (13)
------------------- ----- ------ ----- -------
EPRA (excl.
direct vacancy
costs) 135 20.5 110 16.6
------------------------ ---- -------------- ------------ ------------------- ----- ------ ----- -------
1. Restated for changes in accounting policies (see note 17 of the financial statements).
2. Percentages represent costs divided by Adjusted gross rental
income, except for EPRA measures which represent costs divided by
EPRA gross rental income.
3. Net indirect expenses amounting to GBP7m (2019: GBP5m) have
been capitalised as development costs and are excluded from table
23.
Table 24: Acquisitions, disposals and capital expenditure
Year ended Year ended
31 March 31 March
2020 2019
Investment properties Group
(excl. Adjustment
joint Joint for proportionate Combined Combined
ventures) ventures share(1) Portfolio Portfolio
GBPm GBPm GBPm GBPm GBPm
------------------------------------------ ---------- --------- ------------------ ----------- -----------
Net book value at the beginning of
the year 12,094 1,117 (34) 13,177 13,536
Acquisitions 16 - 32 48 136
Capital expenditure 199 8 - 207 117
Capitalised interest 7 1 - 8 5
Net movement in head leases capitalised 30 1 - 31 -
Disposals (49) - - (49) (60)
Net deficit on revaluation of investment
properties (1,000) (181) 2 (1,179) (557)
------------------------------------------ ---------- --------- ------------------ ----------- -----------
Net book value at the end of the
year 11,297 946 - 12,243 13,177
------------------------------------------ ---------- --------- ------------------ ----------- -----------
Loss on disposal of investment properties (6) - - (6) (2)
------------------------------------------ ---------- --------- ------------------ ----------- -----------
Trading properties GBPm GBPm GBPm GBPm GBPm
------------------------------------------ ---------- --------- ------------------ ----------- -----------
Net book value at the beginning of
the year 23 18 - 41 74
Acquisitions - - - - 4
Capital expenditure 1 - - 1 2
Disposals - (15) - (15) (39)
Net book value at the end of the
year 24 3 - 27 41
------------------------------------------ ---------- --------- ------------------ ----------- -----------
Profit on disposal of trading properties - 7 - 7 -
------------------------------------------ ---------- --------- ------------------ ----------- -----------
Acquisitions, development and other Investment Trading Combined Combined
capital expenditure properties(2) properties Portfolio Portfolio
GBPm GBPm GBPm GBPm
------------------------------------
Acquisitions(3) 48 - 48 140
Development capital expenditure(4) 165 - 165 52
Other capital expenditure 42 1 43 67
Capitalised interest 8 - 8 5
-------------------------------------
Acquisitions, development and other
capital expenditure 263 1 264 264
-------------------------------------
Disposals GBPm GBPm
---------- ----------
Net book value - investment property disposals 49 60
Net book value - trading property disposals 15 39
Loss on disposal - investment properties (6) (2)
Profit on disposal - trading properties 7 -
Total disposal proceeds 65 97
----------
1. This represents the interest in X-Leisure which we did not
own, but which is consolidated in the Group numbers. In December
2019, the Group settled the redemption liability which represented
this interest resulting in 100% ownership.
2. See EPRA analysis of capital expenditure table 25 for further details.
3. Properties acquired in the year.
4. Development capital expenditure for investment properties
comprises expenditure on the development pipeline and completed
developments.
Table 25: EPRA analysis of capital expenditure
Year ended 31 March 2020
Other capital expenditure
Total
capital
Total expenditure Total
No capital - joint capital
Development Incremental incremental expenditure ventures expenditure
capital lettable lettable Tenant Capitalised - Combined (Group -
Acquisitions(1) expenditure(2) space(3) space improvements Total interest Portfolio share) Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Office
West End - 34 - 6 - 6 1 41 9 32
City - 113 - 2 - 2 7 122 - 122
Mid-town 1 - - - - - - 1 - 1
Southwark and
other - 12 5 - - 5 - 17 - 17
Total Office 1 159 5 8 - 13 8 181 9 172
Retail
London retail 11 5 4 4 - 8 - 24 - 24
Regional
retail - - 1 3 - 4 - 4 - 4
Outlets - - 5 4 1 10 - 10 - 10
Retail parks - - - 1 - 1 - 1 - 1
Total Retail 11 5 10 12 1 23 - 39 - 39
Specialist
Leisure and
hotels - - - 4 2 6 - 6 - 6
Other 4 1 - - - - - 5 - 5
Total
Specialist 4 1 - 4 2 6 - 11 - 11
Total capital
expenditure 16 165 15 24 3 42 8 231 9 222
Conversion
from accrual
to cash
basis 6 11 (5)
Total capital
expenditure
on a cash
basis 237 20 217
1. Investment properties acquired in the year.
2. Expenditure on the development pipeline and completed developments.
3. Capital expenditure where the lettable area increases by at least 10%.
Other business analysis
Table 26 : Top 12 occupiers at 31 March 2020
% of Group
rent(1)
----------
Central Government 5.0
Deloitte 4.7
Accor 4.0
Cineworld 1.6
Mizuho Bank 1.5
Boots 1.4
Sainsbury's 1.2
Taylor Wessing 1.2
Equinix 1.1
Next 1.0
H&M 1.0
M&S 0.9
----------
24.6
----------
1. On a proportionate basis.
Table 27: Development pipeline at 31 March 2020
Total Forecast
Net development total
Ownership Letting Market income/ Estimated costs development
Description interest Size status value ERV completion to date cost
Property of use % sq ft % GBPm GBPm date(1) GBPm GBPm
Developments
approved
or in progress
------------ ------------
21 Moorfields,
EC2 Office 100 564,000 100 421 38 Mar 2022 285 576
------------ ------------
105 Sumner
Street,
SE1 Office 100 139,000 - 40 10 Mar 2022 36 140
Retail 1,000
------------ ------------
Nova East, SW1 Office 50 166,000 - 13 6 Jul 2022 16 101
Lucent, W1 Office 100 111,000 - 83 14 Oct 2022 100 239
Retail 30,000
Residential 3,000
------------ ------------
Proposed
developments
------------ ------------
Castle Lane, SW1 Residential 100 54,000 n/a n/a n/a Dec 2022 n/a n/a
Portland House,
SW1 Office 100 360,000 n/a n/a n/a Feb 2023 n/a n/a
Retail 40,000
----------------------------- --------- ------- ----------- ------------ ------------
1. The estimated completion dates shown in this table reflect
our pre-Covid-19 expectation of practical completion. It is too
early to assess the impact of Covid-19 with any certainty. However,
our current estimate is a delay to the completion dates shown of up
to two months for schemes in the development programme and up to
seven months for proposed developments.
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 2020. Trading property
development schemes are excluded from the development pipeline.
Total development cost
Refer to the Glossary for definition. Of the properties in the
development pipeline at 31 March 2020, the only property on which
interest was capitalised on the land cost was 21 Moorfields,
EC2.
Net income/ERV
Net income/ERV represents headline annual rent on let units plus
ERV at 31 March 2020 on unlet units, both after rents payable.
Table 28: Combined Portfolio value by location at 31 March
2020(1)
Office Retail Specialist Total
% % % %
------ ------------------ -----
Central, inner and outer London 53.3 10.9 6.2 70.4
South East and East - 12.2 2.8 15.0
Midlands - 0.4 0.6 1.0
Wales and South West - 2.7 0.5 3.2
North, North West, Yorkshire and Humberside 0.1 6.0 1.7 7.8
Scotland and Northern Ireland - 1.8 0.8 2.6
------ ------------------ -----
Total 53.4 34.0 12.6 100.0
1. % figures calculated by reference to the Combined Portfolio value of GBP12.8bn.
For a full list of the Group's properties please refer to our
website landsec.com.
Table 29: Combined Portfolio performance relative to MSCI
Total property return - Year ended 31 March 2020
Landsec MSCI
% %
------- ---- ---
Office 4.5 3.5 (1)
Retail -17.3 -9.8 (2)
------- ----
Specialist -3.9 n/a (3)
------- ---- ---
Combined Portfolio -4.5 -0.4 (4)
------- ---- ---
1. MSCI Central and Inner London Office benchmark.
2. MSCI All Retail benchmark.
3. No benchmark available.
4. MSCI All Property Quarterly Universe.
Table 30: Combined Portfolio analysis
Like-for-like segmental analysis
Valuation Net estimated
Market value(1) movement(1) Rental income(1) rental value(2)
31 March 31 March Surplus/ Surplus/ 31 March 31 March 31 March 31 March
2020 2019 (deficit) (deficit) 2020 2019 2020 2019
GBPm GBPm GBPm % GBPm GBPm GBPm GBPm
--------------------------- -------- -------- ---------- ---------- -------- -------- -------- --------
Office
West End 2,994 2,944 53 1.9% 132 128 144 136
City 1,247 1,221 28 2.4% 51 49 63 61
Mid-town 1,422 1,400 21 1.6% 60 60 72 69
Southwark and other 346 336 1 0.5% 15 15 21 19
Total Office 6,009 5,901 103 1.9% 258 252 300 285
Retail
London retail 1,307 1,547 (242) -15.8% 69 70 69 73
Regional retail 1,494 2,058 (562) -27.5% 124 130 108 120
Outlets 871 971 (100) -10.3% 61 61 62 62
Retail parks 444 585 (147) -25.5% 38 39 36 39
--------------------------- -------- -------- --------
Total Retail 4,116 5,161 (1,051) -20.5% 292 300 275 294
--------------------------- -------- -------- --------
Specialist
Leisure and hotels 1,153 1,288 (143) -10.9% 76 79 76 78
Other 398 377 7 1.7% 22 20 20 18
--------------------------- -------- -------- --------
Total Specialist 1,551 1,665 (136) -8.0% 98 99 96 96
--------------------------- -------- -------- --------
Like-for-like portfolio(6) 11,676 12,727 (1,084) -8.8% 648 651 671 675
--------------------------- -------- -------- --------
Proposed developments(1) 218 248 (38) -14.7% 12 13 - 22
Development programme(7) 558 374 19 3.5% - 1 68 40
Completed developments(8) 169 235 (63) -28.1% 14 13 11 13
Acquisitions(9) 160 115 (13) -9.3% 2 1 4 1
Sales(10) - 51 - - 2 4 - 4
--------------------------- -------- -------- --------
Combined Portfolio 12,781 13,750 (1,179) -8.8% 678 683 754 755
--------------------------- -------- -------- --------
Properties treated as
finance leases (9) (9)
--------------------------- -------- --------
Combined Portfolio 12,781 13,750 (1,179) -8.8% 669 674
--------------------------- -------- --------
Total portfolio analysis
Valuation Net estimated
Market value(1) movement(1) Rental income(1) rental value(2)
31 March 31 March Surplus/ Surplus/ 31 March 31 March 31 March 31 March
2020 2019 (deficit) (deficit) 2020 2019 2020 2019
GBPm GBPm GBPm % GBPm GBPm GBPm GBPm
------------------------ -------- -------- ---------- ---------- -------- -------- -------- --------
Office
West End 3,264 3,248 (10) -0.3% 144 141 160 158
City 1,668 1,491 61 3.9% 51 49 101 100
Mid-town 1,423 1,400 20 1.5% 60 60 72 69
Southwark and other 471 446 (1) -0.4% 15 15 31 19
Total Office 6,826 6,585 70 1.1% 270 265 364 346
Retail
London retail 1,370 1,591 (239) -15.0% 70 72 73 76
Regional retail 1,663 2,292 (625) -27.6% 138 142 120 133
Outlets 871 971 (100) -10.3% 61 62 62 62
Retail parks 444 636 (147) -25.5% 40 43 36 42
------------------------ -------- -------- --------
Total Retail 4,348 5,490 (1,111) -20.5% 309 319 291 313
Specialist
Leisure and hotels 1,188 1,288 (143) -10.9% 77 79 79 78
Other 419 387 5 1.3% 22 20 20 18
------------------------ -------- -------- --------
Total Specialist 1,607 1,675 (138) -8.0% 99 99 99 96
------------------------ -------- -------- --------
Combined Portfolio 12,781 13,750 (1,179) -8.8% 678 683 754 755
------------------------ -------- -------- --------
Properties treated as
finance leases (9) (9)
------------------------ -------- --------
Combined Portfolio 12,781 13,750 (1,179) -8.8% 669 674
------------------------ -------- --------
Represented by:
Investment portfolio 11,802 12,603 (998) -8.1% 610 617 688 693
Share of joint ventures 979 1,147 (181) -16.1% 59 57 66 62
------------------------ -------- -------- --------
Combined Portfolio 12,781 13,750 (1,179) -8.8% 669 674 754 755
------------------------ -------- -------- --------
Like-for-like segmental analysis
Gross estimated
rental Net initial Equivalent Voids (by
value(3) yield(4) yield(5) ERV)(1)
31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March
2020 2019 2020 2019 2020 2019 2020 2019
GBPm GBPm % % % % % %
--------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Office
West End 144 136 4.5% 4.0% 4.6% 4.5% 0.3% 1.5%
City 64 62 4.0% 4.2% 4.5% 4.5% 4.2% -
Mid-town 74 71 4.3% 3.2% 4.5% 4.5% - -
Southwark and other 21 19 4.2% 4.1% 5.0% 5.2% 2.9% 4.8%
Total Office 303 288 4.3% 3.9% 4.6% 4.5% 1.3% 1.0%
Retail
London retail 69 73 4.6% 4.1% 4.6% 4.3% 3.0% 2.3%
Regional retail 116 128 6.4% 4.9% 6.2% 5.2% 4.3% 5.2%
Outlets 62 62 5.6% 5.0% 5.9% 5.4% 4.5% 4.1%
Retail parks 36 39 7.5% 6.2% 7.4% 6.2% 3.3% 3.1%
--------------------------- -------- -------- -------- --------
Total Retail 283 302 5.8% 4.9% 5.8% 5.0% 3.9% 4.0%
Specialist
Leisure and hotels 77 78 4.3% 5.2% 5.8% 5.5% 1.4% 1.5%
Other 20 18 3.3% 3.0% 4.4% 4.2% 0.5% 1.1%
--------------------------- -------- -------- -------- --------
Total Specialist 97 96 4.1% 4.7% 5.4% 5.2% 1.2% 1.5%
--------------------------- -------- -------- -------- --------
Like-for-like portfolio(6) 683 686 4.8% 4.4% 5.1% 4.8% 2.4% 2.4%
--------------------------- -------- -------- -------- --------
Proposed developments(1) - 22 - 4.8% n/a n/a n/a n/a
Development programme(7) 70 43 - - 4.3% 4.3% n/a n/a
Completed developments(8) 12 14 6.1% 3.9% 6.0% 4.9% n/a n/a
Acquisitions(9) 4 1 2.2% 0.7% 4.8% 4.5% n/a n/a
Sales(10) - 4 - - n/a n/a n/a n/a
--------------------------- -------- -------- -------- --------
Combined Portfolio 769 770 4.5% 4.2% 5.1% 4.8% n/a n/a
--------------------------- -------- -------- -------- --------
Total portfolio analysis Notes:
Gross estimated 1. Refer to Glossary for
rental Net initial definition.
value(3) yield(4) 2. Net estimated rental value
31 March 31 March 31 March 31 March is gross estimated rental
2020 2019 2020 2019 value, as defined in the
GBPm GBPm % % Glossary, after deducting
------------------------ -------- -------- -------- -------- expected rent payable.
Office 3. Gross estimated rental
West End 161 158 4.1% 4.0% value (ERV) - refer to Glossary
City 105 103 3.0% 3.5% for definition. The figure
Mid-town 74 71 4.3% 3.2% for proposed developments
Southwark and other 30 19 3.1% 3.2% relates to the existing buildings
Total Office 370 351 3.8% 3.7% and not the schemes proposed.
Retail 4. Net initial yield - refer
London retail 74 76 4.6% 4.1% to Glossary for definition.
Regional retail 128 142 6.4% 4.8% This calculation includes
Outlets 62 62 5.6% 5.0% all properties including
Retail parks 36 43 7.5% 6.2% those sites with no income.
------------------------ -------- -------- 5. Equivalent yield - refer
Total Retail 300 323 5.8% 4.8% to Glossary for definition.
Specialist Proposed developments are
Leisure and hotels 79 78 4.3% 5.2% excluded from the calculation
Other 20 18 3.3% 3.0% of equivalent yield on the
------------------------ -------- -------- Combined Portfolio.
Total Specialist 99 96 4.1% 4.7% 6. The like-for-like portfolio
------------------------ -------- -------- - refer to Glossary for definition.
Combined Portfolio 769 770 4.5% 4.2% Capital expenditure on refurbishments,
------------------------ -------- -------- acquisitions of head leases
and similar capital expenditure
has been allocated to the
like-for-like portfolio in
Represented by: preparing this table.
Investment portfolio 702 707 4.6% 4.3% 7. The development programme
Share of joint ventures 67 63 4.4% 3.5% - refer to Glossary for definition.
------------------------ -------- -------- Net initial yield figures
Combined Portfolio 769 770 4.5% 4.2% are only calculated for properties
------------------------ -------- -------- in the development programme
that have reached practical
completion.
8. Completed developments
- refer to Glossary for definition.
Comprises Westgate Oxford.
9. Includes all properties
acquired since 1 April 2018.
10. Includes all properties
sold since 1 April 2018.
Table 31: Lease lengths
Weighted average unexpired
lease term at 31 March
2020
Like-for-like
portfolio,
Like-for-like completed developments
portfolio and acquisitions
Mean(1) Mean(1)
Years Years
------------- -----------------------
Office
West End 7.5 7.5
City 7.6 7.6
Mid-town 9.0 9.0
Southwark and other 10.7 10.5
------------- -----------------------
Total Office 8.1 8.1
------------- -----------------------
Retail
London retail 6.5 6.5
Regional retail 4.9 5.2
Outlets 3.5 3.5
Retail parks 5.6 5.6
------------- -----------------------
Total Retail 5.1 5.3
------------- -----------------------
Specialist
Leisure and hotels 11.5 11.5
Other n/a n/a
------------- -----------------------
Total Specialist 11.5 11.5
------------- -----------------------
Combined Portfolio 7.2 7.3
------------- -----------------------
1. Mean is the rent weighted average of the unexpired lease term
across all leases (excluding short-term leases). Term is defined as
the earlier of tenant break or expiry.
Table 32: Reconciliation of segmental information note to
statutory reporting
The table below reconciles the Group's income statement to the
segmental information note (note 3 to the financial statements).
The Group's income statement is prepared using the equity
accounting method for joint ventures and includes 100% of the
results of the Group's non-wholly owned subsidiaries. In contrast,
the segmental information note is prepared on a proportionately
consolidated basis and excludes the non-wholly owned share of the
Group's subsidiaries. This is consistent with the financial
information reviewed by management.
Year ended 31 March
2020
Proportionate
Group share Capital
income Joint of Revenue and other
statement ventures(1) earnings(2) Total profit items
GBPm GBPm GBPm GBPm GBPm GBPm
---------- ------------ ------------- ------- ------- ----------
Rental income 611 59 (1) 669 669 -
Finance lease interest 9 - - 9 9 -
---------- ------------ ------------- ------- ------- ----------
Gross rental income (before rents
payable) 620 59 (1) 678 678 -
Rents payable (13) (2) - (15) (15) -
---------- ------------ ------------- ------- ------- ----------
Gross rental income (after rents
payable) 607 57 (1) 663 663 -
Service charge income 88 10 - 98 98 -
Service charge expense (90) (12) - (102) (102) -
Net service charge expense (2) (2) - (4) (4) -
Other property related income 31 2 - 33 33 -
Direct property expenditure (72) (14) - (86) (86) -
Provisions related to 2020/21
rent (21) (2) - (23) (23) -
---------- ------------ ------------- ------- ------- ----------
Segment net rental income 543 41 (1) 583 583 -
Other income 2 - - 2 2 -
Indirect expense (69) (3) - (72) (72) -
Depreciation (4) - - (4) (4) -
---------- ------------ ------------- ------- ------- ----------
Revenue profit before interest 472 38 (1) 509 509 -
Share of post-tax loss from joint
ventures (151) 151 - - - -
Net deficit on revaluation of
investment properties (1,000) (181) 2 (1,179) - (1,179)
Loss on disposal of investment
properties (6) - - (6) - (6)
Profit on disposal of trading
properties - 7 - 7 - 7
Profit from long-term development
contracts - 3 - 3 - 3
Exceptional items (5) - - (5) - (5)
Other - - (1) (1) - (1)
---------- ------------ ------------- ------- ------- ----------
Operating (loss)/profit (690) 18 - (672) 509 (1,181)
Finance income 18 - - 18 17 1
Finance expense (165) (16) - (181) (112) (69)
Joint venture tax - (2) - (2) - (2)
---------- ------------ ------------- ------- ------- ----------
(Loss)/profit before tax (837) - - (837) 414 (1,251)
------- ----------
Taxation 5 - - 5
---------- ------------ ------------- -------
Loss attributable to shareholders (832) - - (832)
1. Reallocation of the share of post-tax loss from joint
ventures reported in the Group income statement to the individual
line items reported in the segmental information note.
2. Removal of the non-wholly owned share of results of the
Group's subsidiaries. The non-wholly owned subsidiaries are
consolidated at 100% in the Group's income statement, but only the
Group's share is included in revenue profit reported in the
segmental information note.
Year ended 31 March
2019(1)
Proportionate
Group share Capital
income Joint of Revenue and other
statement ventures(2) earnings(3) Total profit items
GBPm GBPm GBPm GBPm GBPm GBPm
---------- ------------ ------------- ----- ------- ----------
Rental income 619 57 (2) 674 674 -
Finance lease interest 9 - - 9 9 -
---------- ------------ ------------- ----- ------- ----------
Gross rental income (before rents
payable) 628 57 (2) 683 683 -
Rents payable (10) (3) - (13) (13) -
---------- ------------ ------------- ----- ------- ----------
Gross rental income (after rents
payable) 618 54 (2) 670 670 -
Service charge income 86 9 - 95 95 -
Service charge expense (88) (10) - (98) (98) -
Net service charge expense (2) (1) - (3) (3) -
Other property related income 33 1 - 34 34 -
Direct property expenditure (72) (11) - (83) (83) -
---------- ------------ ------------- ----- ------- ----------
Net rental income 577 43 (2) 618 618 -
Indirect property expenditure (79) (2) - (81) (81) -
Other income 3 - - 3 3 -
---------- ------------ ------------- ----- ------- ----------
501 41 (2) 540 540 -
Share of post-tax loss from joint
ventures (85) 85 - - - -
Net deficit on revaluation of
investment properties (441) (117) 1 (557) - (557)
Loss on disposal of investment
properties - (2) - (2) - (2)
Fair value movement prior to
acquisition of non-owned element
of a joint venture - 9 - 9 - 9
Profit from long-term development
contracts - 3 - 3 - 3
Exceptional items (14) - - (14) - (14)
Other (1) - 1 - - -
---------- ------------ ------------- ----- ------- ----------
Operating (loss)/profit (40) 19 - (21) 540 (561)
Finance income 26 - - 26 20 6
Finance expense (109) (19) - (128) (118) (10)
---------- ------------ ------------- ----- ------- ----------
(Loss)/profit before tax (123) - - (123) 442 (565)
------- ----------
Taxation 4 - - 4
---------- ------------ ------------- -----
Loss attributable to shareholders (119) - - (119)
1. Restated for changes in accounting policies. See note 17 of
the financial statements for details.
2. 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.
3. Removal of the non-wholly owned share of results of the
Group's subsidiaries. The non-wholly owned subsidiaries are
consolidated at 100% in the Group's income statement, but only the
Group's share is included in revenue profit reported in the
segmental information note.
Table 33: Property Income Distribution (PID) calculation
Year ended Year ended
31 March 2020 31 March 2019
GBPm GBPm
Loss before tax per income statement (837) (123)
Accounting loss/(profit) on residual operations 5 (20)
Accounting loss on residual operations - prior
year adjustment - 23
------------------------------------------------ -------------- --------------
Loss attributable to tax-exempt operations (832) (120)
Adjustments
Capital allowances (47) (57)
Capitalised interest (5) (5)
Revaluation deficit 1,179 557
Tax exempt disposals 7 (13)
Capital expenditure 4 (2)
Other tax adjustments 2 2
Goodwill amortisation 5 15
-------------- --------------
Estimated tax-exempt income for the year 313 377
------------------------------------------------ -------------- --------------
PID thereon (90%) 282 339
------------------------------------------------ -------------- --------------
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 2020 and 31 March 2019:
PID allocation Ordinary Total dividend
dividend
Year ended Year ended
31 March 31 March Pre-31 March
2020 2019 2019
GBPm GBPm GBPm GBPm GBPm
Dividends paid in year
to 31 March 2019 n/a 202 147 - 349
Dividends paid in year
to 31 March 2020 204 138 - - 342
Minimum PID to be paid
by 31 March 2021 78 - n/a n/a n/a
Total PID required 282 340
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. Please note, due to Covid-19,
the hours have reduced in line with market opening and are
currently 08:00 to 16:30.
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. Please note, due to
Covid-19, the hours have reduced in line with market opening and
are currently 08:00 to 16:30.
5. Dividends
The Board is not proposing a final dividend for the year ended
31 March 2020. The total dividend paid and payable in respect of
the year ended 31 March 2020 is 23.2p (2019: 45.55p).
6. Dividend related services
Dividend payments to UK shareholders - Dividend mandates
From October 2020, dividend payments will no longer be paid by
cheque. Shareholders whose dividends are currently 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)
From October 2020, dividend payments will no longer be paid by
cheque. Shareholders will 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 www.shareview.co.uk .
Dividend Reinvestment Plan (DRIP)
A DRIP is available from Equiniti. This facility provides an
opportunity by which shareholders can conveniently and easily
increase their holding in the Company by using their cash dividends
to buy more shares. Participation in the DRIP will mean that your
dividend payments will be reinvested in the Company's shares and
these will be purchased on your behalf in the market on, or as soon
as practical after, the dividend payment date.
You may only participate in the DRIP if you are resident in the
European Economic Area, Channel Islands or Isle of Man.
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
2020
Annual Report and AGM Notice mailed to shareholders 8 June
Annual General Meeting 9 July
Half-yearly results announcement 10 November
2021
Financial year end 31 March
Preliminary results announcement 11 May*
* Provisional date only
8. Investor relations enquiries
For investor relations enquiries, please contact Edward Thacker,
Head of Investor Relations at Landsec, by telephone on +44 (0)20
7413 9000 or by email at enquiries@landsec.com.
Glossary
Adjusted earnings per share (Adjusted EPS)
Earnings per share based on revenue profit after related
tax.
Adjusted net debt
Net debt excluding cumulative fair value movements on
interest-rate swaps and amounts payable under head leases. It
generally includes the net debt of subsidiaries and joint ventures
on a proportionate basis.
Book value
The amount at which assets and liabilities are reported in the
financial statements.
BREEAM
Building Research Establishment's Environmental Assessment
Method.
Combined Portfolio
The Combined Portfolio comprises the investment properties of
the Group's subsidiaries, on a proportionately consolidated basis
when not wholly owned, together with our share of investment
properties held in our joint ventures.
Completed developments
Completed developments consist of those properties previously
included in the development programme, which have been transferred
from the development programme since 1 April 2018.
Development pipeline
The development programme together with proposed
developments.
Development programme
The development programme consists of committed developments
(Board approved projects), projects under construction and
developments which have reached practical completion within the
last two years but are not yet 95% let.
Diluted figures
Reported results adjusted to include the effects of potentially
dilutive shares issuable under employee share schemes.
Dividend Reinvestment Plan (DRIP)
The DRIP provides shareholders with the opportunity to use cash
dividends received to purchase additional ordinary shares in the
Company immediately after the relevant dividend payment date. Full
details appear on the Company's website.
Earnings per share
Profit after taxation attributable to owners divided by the
weighted average number of ordinary shares in issue during the
year.
EPRA
European Public Real Estate Association.
EPRA net disposal value (NDV) per share
Diluted net assets per share adjusted to remove the impact of
goodwill arising as a result of deferred tax, and to include the
difference between the fair value and the book value of the net
investment in tenant finance leases and fixed interest rate
debt.
EPRA net initial yield
EPRA net initial yield is defined within EPRA's Best Practice
Recommendations as the annualised rental income based on the cash
rents passing at the balance sheet date, less non-recoverable
property operating expenses, divided by the gross market value of
the property. It is consistent with the net initial yield
calculated by the Group's external valuer.
EPRA net tangible assets (NTA) per share
Diluted net assets per share adjusted to remove the cumulative
fair value movements on interest-rate swaps and similar
instruments, the carrying value of goodwill arising as a result of
deferred tax and other intangible assets, deferred tax on
intangible assets and to include the difference between the fair
value and the book value of the net investment in tenant finance
leases.
Equivalent yield
Calculated by the Group's external valuer, equivalent yield is
the internal rate of return from an investment property, based on
the gross outlays for the purchase of a property (including
purchase costs), reflecting reversions to current market rent and
such items as voids and non-recoverable expenditure but ignoring
future changes in capital value. The calculation assumes rent is
received annually in arrears.
ERV - Gross estimated rental value
The estimated market rental value of lettable space as
determined biannually by the Group's external valuer. For
investment properties in the development programme, which have not
yet reached practical completion, the ERV represents management's
view of market rents.
Fair value movement
An accounting adjustment to change the book value of an asset or
liability to its market value (see also mark-to-market
adjustment).
Finance lease
A lease that transfers substantially all the risks and rewards
of ownership from the Group as lessor to the lessee.
Gearing
Total borrowings, including bank overdrafts, less short-term
deposits, corporate bonds and cash, at book value, plus cumulative
fair value movements on financial derivatives as a percentage of
total equity. For adjusted gearing, see note 13.
Gross market value
Market value plus assumed usual purchaser's costs at the
reporting date.
Head lease
A lease under which the Group holds an investment property.
Interest Cover Ratio (ICR)
A calculation of a company's ability to meet its interest
payments on outstanding debt. It is calculated using revenue profit
before interest, divided by net interest (excluding the
mark-to-market movement on interest-rate swaps, foreign exchange
swaps, capitalised interest and interest on the pension scheme
assets and liabilities). The calculation excludes joint
ventures.
Interest-rate swap
A financial instrument where two parties agree to exchange an
interest rate obligation for a predetermined amount of time. These
are generally used by the Group to convert floating-rate debt or
investments to fixed rates.
Investment portfolio
The investment portfolio comprises the investment properties of
the Group's subsidiaries on a proportionately consolidated basis
where not wholly owned.
Joint venture
An arrangement in which the Group holds an interest and which is
jointly controlled by the Group and one or more partners under a
contractual arrangement. Decisions on the activities of the joint
venture that significantly affect the joint venture's returns,
including decisions on financial and operating policies and the
performance and financial position of the operation, require the
unanimous consent of the partners sharing control.
Lease incentives
Any incentive offered to occupiers to enter into a lease.
Typically, the incentive will be an initial rent-free year, or a
cash contribution to fit-out or similar costs. For accounting
purposes, the value of the incentive is spread over the
non-cancellable life of the lease.
LIBOR
The London Interbank Offered Rate, the interest rate charged by
one bank to another for lending money, often used as a reference
rate in bank facilities.
Like-for-like portfolio
The like-for-like portfolio includes all properties which have
been in the portfolio since 1 April 2018 but excluding those which
are acquired or sold since that date. Properties in the development
pipeline and completed developments are also excluded.
Loan-to-value (LTV)
Group LTV is the ratio of adjusted net debt, including
subsidiaries and joint ventures, to the sum of the market value of
investment properties and the book value of trading properties of
the Group, its subsidiaries and joint ventures, all on a
proportionate basis, expressed as a percentage. For the Security
Group, LTV is the ratio of net debt lent to the Security Group
divided by the value of secured assets.
Market value
Market value is determined by the Group's external valuer, in
accordance with the RICS Valuation Standards, as an opinion of the
estimated amount for which a property should exchange on the date
of valuation between a willing buyer and a willing seller in an
arm's-length transaction after proper marketing.
Mark-to-market adjustment
An accounting adjustment to change the book value of an asset or
liability to its market value (see also fair value movement).
MSCI
Refers to the MSCI Direct Property indexes which measure the
property level investment returns in the UK.
Net assets per share
Equity attributable to owners divided by the number of ordinary
shares in issue at the year end. Net assets per share is also
commonly known as net asset value per share (NAV per share).
Net initial yield
Net initial yield is a calculation by the Group's external
valuer of the yield that would be received by a purchaser, based on
the Estimated Net Rental Income expressed as a percentage of the
acquisition cost, being the market value plus assumed usual
purchasers' costs at the reporting date. The calculation is in line
with EPRA guidance. Estimated Net Rental Income is determined by
the valuer and is based on the passing cash rent less rent payable
at the balance sheet date, estimated non-recoverable outgoings and
void costs including service charges, insurance costs and void
rates.
Net rental income
Net rental income is the net operational income arising from
properties, on an accruals basis, including rental income, finance
lease interest, rents payable, service charge income and expense,
other property related income, direct property expenditure and bad
debts. Net rental income is presented on a proportionate basis.
Net zero carbon building
A building for which an overall balance has been achieved
between carbon emissions produced and those taken out of the
atmosphere, including via offset arrangements. This relates to
operational emissions for all buildings while, for a new building,
it also includes supply-chain emissions associated with its
construction.
Over-rented
Space where the passing rent is above the ERV.
Passing 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.
Passing cash rent
Passing cash rent is passing rent excluding units that are in a
rent free year at the reporting date.
Planning permission
There are two common types of planning permission: full planning
permission and outline planning permission. A full planning
permission results in a decision on the detailed proposals on how
the site can be developed. The grant of a full planning permission
will, subject to satisfaction of any conditions, mean no further
engagement with the local planning authority will be required to
build the consented development. An outline planning permission
approves general principles of how a site can be developed. Outline
planning permission is granted subject to conditions known as
'reserved matters'. Consent must be sought and achieved for
discharge of all reserved matters within a specified time-limit,
normally three years from the date outline planning permission was
granted, before building can begin. In both the case of full and
outline planning permission, the local planning authority will
'resolve to grant permission'. At this stage, the planning
permission is granted subject to agreement of legal documents, in
particular the s106 agreement. On execution of the s106 agreement,
the planning permission will be issued. Work can begin on
satisfaction of any 'pre-commencement' planning conditions.
Pre-let
A lease signed with an occupier prior to completion of a
development.
Pre-development properties
Pre-development properties are those properties within the
like-for-like portfolio which are being managed to align vacant
possession within a three-year horizon with a view to
redevelopment.
Property Income Distribution (PID)
A PID is a distribution by a REIT to its shareholders paid out
of qualifying profits. A REIT is required to distribute at least
90% of its qualifying profits as a PID to its shareholders.
Proposed developments
Proposed developments are properties which have not yet received
Board approval or are still subject to main planning conditions
being satisfied, but which are more likely to proceed than not.
Qualifying activities/Qualifying assets
The ownership (activity) of property (assets) which is held to
earn rental income and qualifies for tax-exempt treatment (income
and capital gains) under UK REIT legislation.
Real Estate Investment Trust (REIT)
A REIT must be a publicly quoted company with at least
three-quarters of its profits and assets derived from a qualifying
property rental business. Income and capital gains from the
property rental business are exempt from tax but the REIT is
required to distribute at least 90% of those profits to
shareholders. Corporation tax is payable on non-qualifying
activities in the normal way.
Rental value change
Increase or decrease in the current rental value, as determined
by the Group's external valuer, over the reporting year on a
like-for-like basis.
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.
Return on average capital employed
Group profit before net finance expense, plus joint venture
profit before net finance expense, divided by the average capital
employed (defined as shareholders' funds plus adjusted net
debt).
Return on average equity
Group profit before tax plus joint venture tax divided by the
average equity shareholders' funds.
Revenue profit
Profit before tax, excluding profits on the sale of non-current
assets and trading properties, profits on long-term development
contracts, valuation movements, fair value movements on
interest-rate swaps and similar instruments used for hedging
purposes, debt restructuring charges, and any other items of an
exceptional nature.
Reversionary or under-rented
Space where the passing rent is below the ERV.
Reversionary yield
The anticipated yield to which the initial yield will rise (or
fall) once the rent reaches the ERV.
Security Group
Security Group is the principal funding vehicle for the Group
and properties held in the Security Group are mortgaged for the
benefit of lenders. It has the flexibility to raise a variety of
different forms of finance.
Temporary lettings
Lettings for a period of one year or less. These are included
within voids.
Topped-up net initial yield
Topped-up net initial yield is a calculation by the Group's
external valuer. It is calculated by making an adjustment to net
initial yield in respect of the annualised cash rent foregone
through unexpired rent-free years and other lease incentives. The
calculation is consistent with EPRA guidance.
Total business return
Dividend paid per share in the year plus the change in EPRA net
tangible assets per share, divided by EPRA net tangible assets per
share at the beginning of the year.
Total cost ratio
Total cost ratio represents all costs included within revenue
profit, other than rents payable, financing costs and provisions
related to 2020/21 rent, expressed as a percentage of gross rental
income before rents payable adjusted for costs recovered through
rents but not separately invoiced.
Total development cost (TDC)
Total development cost refers to the book value of the site at
the commencement of the project, the estimated capital expenditure
required to develop the scheme from the start of the financial year
in which the property is added to our development programme,
together with capitalised interest, being the Group's borrowing
costs associated with direct expenditure on the property under
development. Interest is also capitalised on the purchase cost of
land or property where it is acquired specifically for
redevelopment. The TDC for trading property development schemes
excludes any estimated tax on disposal.
Total property return (TPR)
The change in market value, adjusted for net investment, plus
the net rental income of our investment properties expressed as a
percentage of opening market value plus the time weighted capital
expenditure incurred during the year.
Total Shareholder Return (TSR)
The growth in value of a shareholding over a specified year,
assuming that dividends are reinvested to purchase additional units
of the stock.
Trading properties
Properties held for trading purposes and shown as current assets
in the balance sheet.
Turnover rent
Rental income which is related to an occupier's turnover.
Valuation surplus/deficit
The valuation surplus/deficit represents the increase or
decrease in the market value of the Combined Portfolio, adjusted
for net investment and the effect of accounting for lease
incentives under IFRS 16 (previously SIC-15). The market value of
the Combined Portfolio is determined by the Group's external
valuer.
Voids
Voids are expressed as a percentage of ERV and represent all
unlet space, including voids where refurbishment work is being
carried out and voids in respect of pre-development properties.
Temporary lettings for a year of one year or less are also treated
as voids. The screen at Piccadilly Lights, W1 is excluded from the
void calculation as it will always carry advertising although the
number and duration of our agreements with advertisers will vary.
Commercialisation lettings are also excluded from the void
calculation.
Weighted average cost of capital (WACC)
Weighted average cost of debt and notional cost of equity, used
as a benchmark to assess investment returns.
Weighted average unexpired lease term
The weighted average of the unexpired term of all leases other
than short-term lettings such as car parks and advertising
hoardings, temporary lettings of less than one year, residential
leases and long ground leases.
Yield shift
A movement (negative or positive) in the equivalent yield of a
property asset.
Zone A
A means of analysing and comparing the rental value of retail
space by dividing it into zones parallel with the main frontage.
The most valuable zone, Zone A, is at the front of the unit. Each
successive zone is valued at half the rate of the zone in front of
it.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR BIGDUSSBDGGB
(END) Dow Jones Newswires
May 12, 2020 02:00 ET (06:00 GMT)
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