TIDMLAND
RNS Number : 7486E
Land Securities Group PLC
10 November 2020
Forward-looking statements
These half-yearly results, the latest Annual Report and
Landsec's website may contain certain 'forward-looking statements'
with respect to Land Securities Group PLC (the Company) and the
Group's financial condition, results of its operations and
business, and certain plans, strategies, objectives, goals and
expectations with respect to these items and the economies and
markets in which the Group operates.
Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
'anticipates', 'aims', 'due', 'could', 'may', 'should', 'expects',
'believes', 'intends', 'plans', 'targets', 'goal' or 'estimates'
or, in each case, their negative or other variations or comparable
terminology. Forward-looking statements are not guarantees of
future performance. By their very nature forward-looking statements
are inherently unpredictable, speculative and involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. Many of these
assumptions, risks and uncertainties relate to factors that are
beyond the Group's ability to control or estimate precisely. There
are a number of such factors that could cause actual results and
developments to differ materially from those expressed or implied
by these forward-looking statements. These factors include, but are
not limited to, changes in the political conditions, economies and
markets in which the Group operates; changes in the legal,
regulatory and competition frameworks in which the Group operates;
changes in the markets from which the Group raises finance; the
impact of legal or other proceedings against or which affect the
Group; changes in accounting practices and interpretation of
accounting standards under IFRS, and changes in interest and
exchange rates.
Any forward-looking statements made in these half-yearly
results, the latest Annual Report or Landsec's website, or made
subsequently, which are attributable to the Company or any other
member of the Group, or persons acting on their behalf, are
expressly qualified in their entirety by the factors referred to
above. Each forward-looking statement speaks only as of the date it
is made. Except as required by its legal or statutory obligations,
the Company does not intend to update any forward-looking
statements.
Nothing contained in these half-yearly results, the latest
Annual Report or Landsec's website should be construed as a profit
forecast or an invitation to deal in the securities of the
Company.
Half-yearly results for the six months ended 30 September
2020
10 November 2020
Strong balance sheet and new growth strategy ensure Landsec is
well placed despite Covid-19 impact
Chief Executive Mark Allan said:
"While today's results clearly show the impact of the pandemic
on our business, Landsec remains in a fundamentally strong
position. Together, the high quality of our portfolio and low
leverage of our balance sheet provide a solid foundation for
executing our growth strategy and creating value for all
stakeholders. This strength also means we have been able to take a
proactive and responsible approach to the challenges of Covid-19,
supporting our communities and customers.
"As we begin to look beyond Covid-19, I am confident the
business is well placed to capitalise on opportunities as they
emerge. The investment market for high-quality London office
assets, such as those owned by Landsec, has remained robust
throughout the pandemic and there is little sign of that interest
waning. Access to this liquidity, coupled with the acquisition and
development opportunities that are likely to arise as a result of
increased obsolescence of older office stock, as well as the
long-term need for urban mixed use regeneration, mean there will be
ample opportunity for Landsec to create significant value. We look
ahead with a clear strategic direction and are optimistic about the
future."
Financial results
3/4 Revenue profit(1)(2) down 48.9% to GBP115m
3/4 Loss before tax for the period of GBP835m (2019: loss of GBP147m)
3/4 Adjusted diluted earnings per share(1)(2) down 49.0% to 15.5p
3/4 Reinstated dividend of 12.0p per share (2019: 23.2p)
3/4 Combined Portfolio(1)(2) valued at GBP11.8bn, with a
valuation deficit(1)(2) of GBP945m or 7.7%(3)
3/4 EPRA net tangible assets per share(1) down 9.5% to 1,079p
3/4 Ungeared total property return(4) of -5.9%
3/4 Total business return(1) of -9.5%
3/4 Like-for-like net rental income, excluding provisions for
bad and doubtful debts, down GBP31m or 10.3%
Strong financial position
3/4 Resilient central London portfolio consisting of high-quality assets with good liquidity
3/4 Low leverage with a Group LTV ratio(1)(2) at 33.2% (31 March 2020: 30.7%)
3/4 Adjusted net debt(1)(2) of GBP3.9bn (31 March 2020: GBP3.9bn)
3/4 Weighted average cost of debt at 2.1% (31 March 2020: 1.8%)
3/4 Weighted average maturity of debt at 10.9 years (31 March 2020: 9.6 years)
3/4 Cash and available facilities(2) of GBP1.2bn
Responsible and proactive approach to Covid-19
3/4 GBP80m support fund launched for retail, leisure and
hospitality customers impacted by the pandemic
3/4 Measured approach to existing development pipeline,
progressing schemes with the best risk adjusted returns
3/4 Operational changes delivered quickly and efficiently to
keep staff, customers and consumers safe across the portfolio,
strengthening relationships with customers through
collaboration
3/4 GBP500,000 financial assistance made available for existing charity partners
Opportunities beyond Covid-19
3/4 Investor interest in the London office market remains high,
offering opportunities to recycle capital, as evidenced by the sale
of 7 Soho Square in September ahead of March book value
3/4 Increased occupier demand for high-quality office space with
a focus on health and wellbeing is likely to further polarise the
market, underpinning demand and values for Landsec's core office
product and meaning secondary, outdated stock in the market will be
ripe for redevelopment
New strategy, positioning Landsec for growth
3/4 Core pillars of strategy focus on:
3/4 Optimising central London portfolio; aligning portfolio to
growth sectors and locations through targeted recycling and
development
3/4 Reimagining retail; based on sustainable rents, appropriate
leasing models and a customer-centric approach
3/4 Growing urban opportunities; applying our proven skillset to
deliver urban mixed use schemes
3/4 Realising capital; exiting subscale sectors over the medium term
3/4 Emphasis on total return and value creation, recycling
GBP4bn of capital over the coming years
Continued ESG leadership
3/4 Delivered a 46% reduction in carbon emissions compared with
2013/14 baseline, keeping us on track to achieve our science-based
target aligned with a 1.5(o) C scenario to reduce emissions by 70%
by 2030
3/4 Ranked 3rd among FTSE 100 companies by EcoAct for our
ambitious net zero strategy and transparency of our sustainability
reporting, improving from 5th last year
3/4 Delivered over GBP3.6m of social value through our community
programme in the first half of the financial year
Results summary
Six months ended Six months ended
30 September 30 September
2020 2019 Change
Revenue profit(1)(2) GBP115m GBP225m Down 48.9%
================ ================ ============
Valuation deficit(1)(2) GBP(945)m GBP(368)m Down 7.7%(3)
================ ================ ============
Loss before tax GBP(835)m GBP(147)m
================ ================ ============
Basic loss per share (112.8)p (19.6)p
================ ================ ============
Adjusted diluted earnings
per share(1)(2) 15.5p 30.4p Down 49.0%
================ ================ ============
Dividend per share 12.0p 23.2p Down 48.3%
================ ================ ============
30 September
2020 31 March 2020
================ ================ ============
Net assets per share 1,068p 1,182p Down 9.6%
================ ================ ============
EPRA net tangible assets
per share(1) 1,079p 1,192p Down 9.5%
================ ================ ============
Group LTV ratio(1)(2) 33.2% 30.7%
================ ================ ============
1. An alternative performance measure. The Group uses a number
of financial measures to assess and explain its performance, some
of which are considered to be alternative performance measures as
they are not defined under IFRS. For further details, see the
Financial review and table 15 in the Business analysis section.
2. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Financial review.
3. The % change for the valuation deficit represents the fall in
value of the Combined Portfolio over the period, adjusted for net
investment.
4. For further details, see the Business analysis section.
Chief Executive's statement
Overview
We have had two main areas of focus during the first half of our
2020/21 financial year. Firstly, proactively addressing the
challenges presented by the Covid-19 pandemic and, secondly,
undertaking a wide-ranging review of our portfolio, markets and
organisation to determine the longer-term strategic direction of
the business.
The impact of Covid-19 has been felt throughout the period and
that will continue to be the case for the remainder of the
financial year as evidenced by the recent introduction of a second
national lockdown. Our retail, leisure and hotel portfolios have
been particularly affected, both operationally and from a valuation
perspective, and while occupancy and footfall has also fallen
significantly in central London, the valuation impact on that part
of our portfolio has been much less marked, underlining its quality
and resilience. We are, however, fortunate that we entered the year
in a strong financial position, in terms of both low leverage and
good liquidity, enabling us to withstand the impact of the pandemic
effectively, and we remain in a similarly strong position midway
through the year.
Results and dividend
EPRA NTA per share was 1,079p at 30 September, a fall of 9.5%
over the six months attributable primarily to the effects of the
global Covid-19 pandemic. Net debt was largely neutral over the
period, with capital expenditure on our development programme
offset by asset disposal proceeds and retained cash profits, which
means that our loan-to-value ratio increased modestly, to 33.2%,
largely as a result of capital value declines.
Adjusted earnings for the period were GBP115m (15.5p per share),
down 49% on the same period last year. The decline was almost
entirely attributable to Covid-19, either as a result of lower
operating income (such as rent on turnover linked leases) or as a
result of rent concessions granted and bad debt provisioning, where
we have adopted a cautious approach given the ongoing uncertain
outlook.
One of the first steps we took to manage the effects of Covid-19
was to suspend dividend payments in April in order to conserve cash
in the face of significant uncertainty. Over the subsequent six
months, we have seen trading conditions, particularly in terms of
rent collection and outlook, begin to improve and consequently we
are pleased to be reinstating our dividend alongside these interim
results. We are resuming quarterly dividends commencing with a
12.0p per share payment on 4 January 2021, representing an
aggregated payment for the first two quarters of the year.
Strategy
The outcomes of our strategy review were set out at our capital
markets day on 19 October. Our strategy seeks to position Landsec
for growth, leveraging existing areas of competitive advantage to
add value and to focus and reposition the business towards sectors
and opportunities that offer long-term, structurally supported
growth potential.
It is built around a core purpose - sustainable places,
connecting communities, realising potential - designed to ensure
that Landsec delivers value not just for its shareholders, but for
all its stakeholders. This is not intended to dilute shareholder
returns but instead to enhance the quality of those returns.
Our strategy is based on four strategic priorities - Optimise
Central London; Reimagine Regional retail; Realise capital from
Subscale sectors; and Grow through Urban opportunities - and
envisages recycling approximately GBP4bn of capital out of lower
returning assets and sectors and into growth opportunities over the
next few years. We expect both central London and urban mixed use
projects to offer good potential in this regard.
Strategic objective - Optimise Central London
Our Central London portfolio is valued at GBP7.9bn and
represents 67% of the Group's portfolio by value. It is defined by
its quality, resilience and liquidity and each of these attributes
was evident during the first half of the year.
Quality - Our Central London portfolio is characterised by
well-located, well designed, modern offices let on long leases to
financially strong occupiers. As a result, despite the challenges
associated with Covid-19, valuations were robust, down only 3.8%,
with the decline largely attributed to the complementary retail and
F&B elements of the portfolio that are such a vital element of
our overall proposition.
Resilience - Physical occupancy across the office estate was
very low as a result of social distancing and work from home
guidelines, but office rent collection was largely unaffected. 99%
of rents due for the period have been collected, which falls
slightly to 94% when non-office rent collection rates are taken
into account.
Liquidity - Transaction volumes across the London office
investment market have been very low by historical standards as a
result of pandemic related restrictions but they have improved
recently and investor demand for modern, long let offices remains
healthy, as evidenced by our recent sale of 7 Soho Square for
GBP78m, 4% above March book value.
The main elements of our optimise objective involve value
creation through greater levels of portfolio recycling, increasing
medium-term optionality in the portfolio and offering a wider range
of propositions to our customers through asset management and
development activity.
Over the next six months, we intend to take advantage of
investor interest for high quality, long let assets through further
asset disposals. At Dashwood, adjacent to Liverpool Street
Crossrail Station, we are refurbishing space to offer a combination
of our Myo, Customised and Blank Canvas products and we will also
be continuing to progress key aspects of our development
programme.
On development, we have been careful to preserve optionality on
our speculative programme, retaining the ability to pause at any of
our schemes. We are now progressing the speculative schemes that
offer the best risk adjusted returns - Lucent and The Forge - in
addition to our pre-let development, whilst retaining the remainder
of our pipeline in a state of readiness to resume as and when the
medium-term outlook for the market becomes clearer. This means our
office development programme that we are progressing has a total
development cost of GBP957m, and extends to 848,000 sq ft of which
67% is pre-let.
Longer term we remain confident in London's status and prospects
as a global gateway city. While Covid-19 has instilled a fear of
densely populated areas in the near term, it is also increasingly
highlighting people's desire to come together, the challenges and
limitations that emerge when they can't and the significant network
effects of mixing commerce, arts, science and power in one place.
Cities, and London in particular, have bounced back from many such
crises in the past and will do so again.
As we emerge from the pandemic, the way employers and people
seek to use office space will change as greater levels of remote
working become the norm. Many of the trends of recent years - the
importance of sustainability, greater levels of flexibility, the
role of the workplace in a health and wellbeing context - will
accelerate. Others, particularly the shift to higher occupational
densities will slow or reverse. We believe this is likely to lead
to a bifurcation in the market - demand for modern, adaptable, high
quality space will increase; obsolescence of older, secondary stock
is likely to accelerate. These are the sort of market conditions
that should present opportunities for Landsec to create real
value.
Strategic objective - Reimagine retail
Our reimagine objective refers to our Regional retail portfolio,
comprising outlets (GBP0.8bn value, 7% of our portfolio) and
regional shopping centres and shops (GBP1.3bn value, 11% of our
portfolio). Outlets remain an attractive asset class with good
growth prospects underpinned by a compelling consumer offer, but
have been disrupted in the near term by Covid-19. Regional shopping
centres are more challenged and the structural changes driven by
the growth in online retail have been accelerated by Covid-19.
During the period, both our outlets and regional shopping
centres were significantly impacted by Covid-19. All non-essential
retail units were closed for the first ten weeks, until 15 June,
and F&B for a further three weeks, until 4 July. These enforced
closures placed significant pressure on our customers' businesses
and we took a proactive approach to offer support through rent
concessions and deferrals, launching an GBP80m customer support
fund in April.
After re-opening, our outlets recovered particularly strongly
and, in September, like-for-like sales across the portfolio were
less than 10% down on last year despite ongoing capacity
constraints. The performance in our regional shopping centres has
been more varied, with the decline in like-for-like sales in
September ranging from below 10% to almost 40% in areas where
recently enhanced local Covid-19 restrictions were in place prior
to the second national lockdown.
The outlets portfolio declined in value by 8.8%, largely as a
result of the near-term impact of Covid-19, and we expect values to
recover in due course, in line with strong trading. Regional
shopping centre valuations were down 20.4%, exacerbated by Covid-19
but reflecting a structural shift to a lower rent model. We believe
shopping centre ERVs across our estate will need to fall 35-40%
from their 2017/18 peaks in order to reach a sustainable level with
retailer total occupancy costs in the low teens. This would imply a
further decline of around 15% from September ERVs.
The investment market for regional shopping centres remains
difficult, which is likely to contribute to further valuation
weakness across the remainder of the year. However, these assets
only comprise 11% of our portfolio. Various asset sales are likely
across the market, particularly following the administration of
intu properties plc, and the ongoing sale of intu Trafford Centre
by the administrator is being watched particularly closely.
Our reimagine agenda has five key elements; (i) understanding
and monitoring sustainable rents, which will form a more effective
basis for decision making; (ii) elevating the consumer experience,
involving initiatives to increase footfall and dwell times; (iii)
operational excellence and new leasing models, working
collaboratively with our occupiers and focusing on delivering value
where it matters most for them; (iv) maximising our vibrant
outlets, leveraging the strong working relationship we enjoy with
our occupiers; and (v) repurposing space to reduce the retail
footprint and improve the mix. We have plenty of initiatives
underway and expect to show clear progress in each area over the
next six months.
Strategic objective - Realise capital from Subscale sectors
As part of our recent strategy review we identified three parts
of our portfolio as subscale; areas that are not currently, and are
unlikely to become, large enough to materially impact Group
performance and where we have little or no competitive advantage.
The areas concerned are hotels, leisure and retail parks, valued at
a combined GBP1.4bn and comprising 12% of our total portfolio, and
we intend to exit these sectors over the medium term.
Each of these subscale sectors has been significantly impacted
by Covid-19 over the past six months, reflected in a combined fall
in valuations of 12.4%. The majority of the hotel portfolio was
shut for the first 15 weeks of our financial year and, although the
majority did re-open in the summer, levels of trade were
significantly lower than normal. Due to the turnover related
leases, this translates into significantly lower rent. Our leisure
portfolio was also closed for much of the period with trade after
re-opening hampered by social distancing regulations and the slower
recovery of leisure attractions such as cinemas. We are in close
contact with our hotels' operator, Accor, and our leisure
occupiers, and we expect trading to recover strongly as we emerge
from the pandemic.
The assets in this part of the portfolio are high quality and
the longer-term prospects of the relevant sectors are fundamentally
robust. Our divestment intention is driven simply by lack of scale
and the opportunities we see to redeploy capital into structurally
supported growth areas where we have competitive advantage. We are
under no time pressure to sell these assets and are focused on
ensuring that we secure appropriate value when we do.
Strategic objective - Grow through Urban opportunities
One of the structurally supported growth areas where we intend
to invest is Urban opportunities. The built environment is likely
to undergo significant change in the years ahead as the way we live
our lives evolves, be that as a result of technology, changing
demographics or adapting to a post Covid world. This will involve
different uses, and mix of uses, and creates a clear role for us in
helping to shape and deliver the necessary change, bringing
together development expertise and capital, leveraging reputation
and relationships and doing so in a sustainable way. Landsec has
proven expertise in delivering large, complex, mixed use
developments and is therefore ideally placed to fulfil such a role
-- a role that could apply both to London and to major regional
centres.
Not only does Landsec have the required skills and track record
in this area, it also has a pipeline of exciting opportunities in
the form of several suburban London shopping centres (value
GBP0.4bn) that are ripe for regeneration in the years ahead. This
regeneration would involve significantly increased density on these
sites and a wider range of uses, particularly residential. With up
to GBP4bn of combined investment potential, they therefore present
a significant value creation opportunity in the years ahead.
In the near term, we will be focused on progressing and securing
planning permission on these projects, with the first, at Finchley
Road, on track for late 2021, while also seeking to add to the
pipeline.
Culture, capability and organisation
The experience, expertise and capability of our people is one of
Landsec's greatest assets. With the benefit of the clear strategy
that we have set out and the framework it provides, we are now
focused on ensuring that we make the most of this prized asset
through promoting greater levels of empowerment and accountability
at all levels throughout the organisation.
Our aim is to foster a leaner, more agile organisation that
really understands how it creates value and is focused on
leveraging its competitive advantage. We have identified five key
performance drivers, strengths that will be at the heart of how we
create and protect value: our development expertise; capital
discipline; customer centricity; data driven decisions; and ESG
leadership. These are all areas where Landsec already has, or can
attain, sustainable competitive advantage and will be crucial to us
delivering against our four strategic priorities.
Over the past six months, we have had to adjust to new ways of
working whilst tackling significant, and in many cases
unprecedented, challenges. The way in which the teams within
Landsec have risen to the challenge is testament to the experience,
expertise and capability I mention above; but also to their passion
and commitment. I would like to thank them for their efforts and
congratulate them on their achievements.
Outlook
The near-term outlook for our business, as for all businesses at
the present time, is dominated by Covid-19. The path out of the
pandemic - through higher testing volumes, more effective
treatments and ultimately a vaccine - is increasingly clear,
although the length of that journey and the related economic cost
less so. The second national lockdown is clear evidence of that so,
in the meantime, we will continue to work collaboratively with our
customers to support their businesses where necessary and ensure
that our portfolio emerges in a strong position.
We will also remain focused on preserving our financial strength
- low leverage and healthy portfolio liquidity - and using that to
our advantage as opportunities emerge. Our approach to our
near-term development pipeline, progressing the two speculative
schemes that offer the best risk adjusted returns while keeping the
remainder in a state of readiness to resume, is evidence of
this.
Looking longer term, we believe there are reasons to be
positive. The investment market for high quality London office
assets, such as those owned by Landsec, has remained robust
throughout the pandemic and there is little sign of that interest
waning. Coupled with the acquisition and development opportunities
likely to emerge as a result of increased obsolescence of older
office stock, as well as the long-term need for urban mixed use
regeneration, there will be ample opportunity for Landsec to create
significant value in the years ahead.
Mark Allan
Chief Executive
Financial review
Overview
We began the new financial year with the country in lockdown,
many retail and leisure destinations closed and our offices, while
open, largely deserted as most people followed Government guidance
to work from home. While conditions have improved from the early
days of the pandemic, the effect of Covid-19 on our business and
financial performance continues to be significant.
In early April, we were quick to acknowledge the effect of
lockdown on our occupiers by setting up our GBP80m customer support
fund for those most in need. At about the same time, the Government
introduced a temporary rent collection moratorium which has
severely impacted our ability to enforce rent collection. With the
moratorium still in place, there has been little incentive for our
retail and leisure occupiers to make payments or even agree and
document rent concessions from our customer support fund when they
are able to withhold rent payments without consequences.
The impact on our results from unpaid rent and service charges
has been significant. In the six months, we have made bad debt
provisions of GBP87m on top of the GBP23m we provided in last
year's results against quarterly rent due on 25 March. This is
based on a cautious assessment of the impact of concessions, CVAs
and business failures on how much rent we will collect. In total,
we have provided for approximately 45% of the retail and leisure
rent for the period. Covid-19 and lockdown has also led to a sharp
decline in turnover-related income from our hotels, car parks and
outlets. The impact of reduced income and higher bad debt
provisions is behind the decline in revenue profit to GBP115m
(2019: GBP225m).
The decline in asset values we saw in our retail and leisure
assets last year has continued while our London offices have been
resilient with only a small reduction in values. While our external
valuer, CBRE, has removed the material uncertainty clause that they
included at the year end (except for our hotel portfolio), the
valuation decline in regional shopping centres is more driven by
sentiment than transactional activity. This is not true of the
London office investment market which continues to demonstrate
liquidity, with good investment appetite and transactions
completing.
We have made a change to the segmental financial information we
disclose. During the six months, we undertook a comprehensive
review of our strategy and where our capital is allocated. As a
result, we have changed the way we manage assets and the segments
we report internally. Our external reporting has also been amended
to reflect our four new segments (Central London, Regional retail,
Urban opportunities and Subscale sectors).
Table 1: Highlights
Six months Six months
ended ended
30 September 30 September
2020 2019
------------- -------------
Revenue profit(1) GBP115m GBP225m
Valuation deficit(1) GBP(945)m GBP(368)m
Loss before tax GBP(835)m GBP(147)m
Basic loss per share (112.8)p (19.6)p
Adjusted diluted earnings per share(1) 15.5p 30.4p
Dividend per share 12.0p 23.2p
30 September
2020 31 March 2020
------------- -------------
Combined Portfolio(1) GBP11.8bn GBP12.8bn
Net assets per share 1,068p 1,182p
EPRA net tangible assets per share(2) 1,079p 1,192p
Adjusted net debt(1) GBP3.9bn GBP3.9bn
Group LTV ratio(1) 33.2% 30.7%
--------------------------------------- ------------- -------------
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 16 in the
Business analysis section.
Revenue profit for the six months to 30 September 2020 was
GBP115m, down 48.9% from GBP225m as a result of the impact of
Covid-19 across the portfolio. Adjusted diluted earnings per share
were down 49.0% at 15.5p due to the reduction in revenue profit.
Over the period, our assets declined in value by 7.7% or GBP945m
(including our proportionate share of subsidiaries and joint
ventures) compared with a GBP368m decline in the same period last
year. This decline in the value of our assets is behind our loss
before tax of GBP835m (2019: GBP147m loss) and the reduction in our
EPRA net tangible assets per share in the period, down 9.5% to
1,079p.
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 GBP11.8bn, is an example of this approach,
reflecting the economic interest we have in our properties
regardless of our ownership structure. We consider this
presentation provides additional information to stakeholders on the
activities and performance of the Group, as it aggregates the
results of all the Group's property interests which under IFRS are
required to be presented across a number of line items in the
statutory financial statements.
The same approach is applied to many of the other measures we
discuss and, accordingly, a number of our financial measures
include the results of our joint ventures and subsidiaries on a
proportionate basis. Measures that are described as being presented
on a proportionate basis include the Group's share of joint
ventures on a line-by-line basis but exclude the non-owned elements
of our subsidiaries. This is in contrast to the Group's statutory
financial statements, where the Group's interest in joint ventures
is presented as one line on the income statement and balance sheet,
and all subsidiaries are consolidated at 100% with any non-owned
element being adjusted as a non-controlling interest or redemption
liability, as appropriate. Our joint operations are presented on a
proportionate basis in all financial measures.
Measures presented on a proportionate basis are alternative
performance measures as they are not defined under IFRS. Where
appropriate, the measures we use are based on best practice
reporting recommendations published by EPRA. For further details
see table 15 in the Business analysis section.
Last year, we merged our London Portfolio and Retail Portfolio
and amended our segmental reporting to reflect the predominant use
class of our assets. These were grouped into Office, Retail and
Specialist which are the segments reported at 30 September 2019 and
31 March 2020. Earlier this year, following the initial stages of
the strategy review, we changed how we report financial information
to better reflect the way we manage our assets. Assets have been
reallocated by strategic priority into one of four new segments:
Central London, Regional retail, Urban opportunities and Subscale
sectors.
The sector breakdown within our Combined Portfolio Analysis
disclosure has been re-ordered to reflect the new segments and the
level of detail reported in the CPA for the office assets has been
reduced to reflect the fact that all the London office assets are
managed in a consistent manner irrespective of their location. The
prior year has been restated in the new format and a reconciliation
to the previous presentation has been provided on our website.
Income statement
Our income statement has two key components: the income we
generate from leasing our investment properties net of associated
costs (including finance expense), which we refer to as revenue
profit, and items not directly related to the underlying rental
business, principally valuation changes, profits or losses on the
disposal of properties and finance charges related to bond
repurchases, which we call Capital and other items.
We present two measures of earnings per share: the IFRS measure
of basic earnings per share, which is derived from the total profit
or loss for the period 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
Six months Six months
ended ended
30 September 30 September
2020 2019
Table GBPm GBPm
---------------------------------- ----- ------------- -------------
Revenue profit 3 115 225
Capital and other items 8 (950) (372)
------------- -------------
Loss before tax (835) (147)
Taxation - 2
---------------------------------- ----- ------------- -------------
Loss attributable to shareholders (835) (145)
Basic loss per share (112.8)p (19.6)p
Adjusted diluted earnings per
share 15.5p 30.4p
---------------------------------- ----- ------------- -------------
Our loss before tax was GBP835m, compared with a loss of GBP147m
for the same period in the prior year, due to a greater fall in the
value of our assets this period (down GBP945m, compared with
GBP368m last year) as well as a GBP110m reduction in revenue
profit. The loss per share this period was 112.8p, compared with a
loss per share of 19.6p in the prior period. Adjusted diluted
earnings per share decreased by 49.0%, from 30.4p to 15.5p this six
months, as a result of the decrease in revenue profit from GBP225m
to GBP115m. 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 Central London,
Regional retail, Urban opportunities and Subscale sectors are
presented in the table below.
Table 3: Revenue profit
Six months ended Six months ended
30 September 2020 30 September 2019
Central Regional Urban Subscale Central Regional Urban Subscale
London retail opps sectors Total London retail opps sectors Total Change
Table GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ----- ------- -------- ----- -------- ----- ------- -------- ----- -------- ----- ------
Gross rental
income(1) 156 82 13 42 293 163 96 14 59 332 (39)
Net service
charge expense - (2) - - (2) - (1) - (1) (2) -
Net direct
property
expenditure (1) (7) (2) (3) (13) (6) (9) (2) (2) (19) 6
Bad and
doubtful
debts
expense(2) (8) (44) (6) (29) (87) (1) (1) - - (2) (85)
Segment net
rental income 4 147 29 5 10 191 156 85 12 56 309 (118)
------- -------- ----- -------- ------- -------- ----- --------
Net indirect
expenses (37) (35) (2)
Revenue profit
before
interest 154 274 (120)
Net finance
expense 7 (39) (49) 10
Revenue profit 115 225 (110)
--------------- ----- ------- -------- ----- -------- ----- ------- -------- ----- -------- ----- ------
1. Includes finance lease interest, after rents payable.
2. Includes GBP16m (2019: GBPnil) of provisions related to
future rent. An additional GBP23m of bad and doubtful debts expense
relating to rental income for the period was recognised in the year
ended 31 March 2020.
Revenue profit decreased by GBP110m to GBP115m for the six
months ended 30 September 2020 (2019: GBP225m). This was the result
of a GBP118m decrease in net rental income for the period and a
GBP2m increase in net indirect expenses, partly offset by a GBP10m
reduction in net finance expense. The decrease in net rental income
was driven by a GBP39m reduction in gross rental income and an
GBP85m increase in bad and doubtful debt provisions reflecting the
impact of Covid-19 on turnover rents and cash collections. The
movements are explained in more detail below.
Net rental income
Table 4: Net rental income(1)
GBPm
----------------------------------------------------------- -----
Net rental income for the six months ended 30 September
2019 309
Net rental income movement in the period:
-----
Like-for-like investment properties (31)
Like-for-like investment properties - bad and doubtful
debts expense (85)
Proposed developments (4)
Development programme -
Completed developments -
Acquisitions since 1 April 2019 -
Disposals since 1 April 2019 (2)
Non-property related income 4
-----
(118)
----------------------------------------------------------- -----
Net rental income for the six months ended 30 September
2020 191
------------------------------------------------------------ -----
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Net rental income decreased by GBP118m in the six months ended
30 September 2020 compared with the prior period. Like-for-like net
rental income was down GBP116m, with increased bad and doubtful
debts accounting for GBP85m of the decline. Further information on
our rent collections and bad debt provisions is set out below.
Like-for-like net rental income before bad debt provisions was down
GBP31m largely due to a reduction in short-term and
turnover-related income of GBP28m, partly offset by a GBP6m
reduction in direct property expenditure. Income from our Accor
hotel portfolio, which is all linked to turnover, was down GBP13m,
while car park income reduced by GBP7m. Turnover-related top ups,
principally in our outlet portfolio, declined by GBP5m and
Piccadilly Lights saw a GBP3m reduction from short-term advertising
campaigns. CVAs and administrations reduced rental income this
period by GBP7m.
Outside the like-for-like portfolio, there was a GBP4m reduction
in net rental income from proposed developments, driven by Portland
House, SW1, which reached vacant possession of the office space in
March ahead of development. There was also a GBP2m reduction in net
rental income following the disposal of Poole retail park in
October 2019. The GBP4m increase in non-property related income
largely reflects the release of a provision following an agreement
which ended our obligations under one of our last remaining
Landflex leases.
Recent rent collection and related provisions
In early April, soon after the start of the first national
lockdown, we established a customer support fund of GBP80m for
occupiers who most need our help to survive. During the period, we
have worked with our occupiers to agree rent concessions out of the
fund and the payment of any outstanding balance. We also agreed
with some occupiers for rents to be paid on a monthly basis, or to
be deferred to later quarters to assist with cash flow management.
GBP120m of rent was due on the 29 September quarter day, including
the Group's share of joint venture debtors. The table below shows
the amount and percentage of this rent collected to date after
adjusting for the impact of customers having entered CVAs and
administrations, concessions agreed out of the fund and agreed
monthly and deferred payment terms. A similar analysis is shown for
the rents which were due between 25 March and 28 September.
Table 5: Rent collections
29 September 2020 quarter(1)(2)
Agreed changes in
payment terms
Day 10
Amounts Amounts amounts
received received received
Gross
amounts Impact Monthly Net amounts
due 29 of CVAs payment Deferred due 29 Sept
September and admins Concessions terms payments September to date to date 19
GBPm GBPm GBPm GBPm GBPm GBPm GBPm % %
-------------- ---------- ----------- ------------ -------- --------- ------------ --------- --------- --------
Offices 72 - - (2) (1) 69 66 96% 99%
Rest of
Central
London 8 - - - - 8 4 50% 89%
Regional
retail 17 (1) - (1) (1) 14 7 50% 92%
Urban
opportunities 5 - - - - 5 3 60% 92%
Subscale
sectors 18 (1) (1) - (1) 15 7 47% 90%
120 (2) (1) (3) (3) 111 87 78% 96%
-------------- ---------- ----------- ------------ -------- --------- ------------ --------- --------- --------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
2. All amounts are shown gross of VAT. Where an amount billed
remains uncollected and is subsequently written off, the VAT
component will be recovered by the Group.
For the period ended 30 September 2020(1)(2)
Agreed changes
in payment terms
Gross
amounts Impact Net amounts Amounts Amounts
due for of CVAs Deferred due for received received
the period(3) and admins Concessions payments the period(3) to date to date
GBPm GBPm GBPm GBPm GBPm GBPm %
-------------------- --------------- ------------ ------------ ---------- --------------- ---------- ----------
Offices 150 - - (2) 148 147 99%
Rest of Central
London 47 (1) (4) - 42 31 74%
Regional retail 105 (1) (9) (1) 94 48 51%
Urban opportunities 16 - (2) (1) 13 7 54%
Subscale sectors 68 (2) (4) (1) 61 42 69%
Total 386 (4) (19) (5) 358 275 77%
-------------------- --------------- ------------ ------------ ---------- --------------- ---------- ----------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
2. All amounts are shown gross of VAT. Where an amount billed
remains uncollected and is subsequently written off, the VAT
component will be recovered by the Group.
3. Due dates from 25 March 2020 to 28 September 2020. Does not
include 29 September 2020 quarter day rents.
Of the GBP111m of net rent billed for the 29 September quarter,
GBP24m remains outstanding with GBP83m outstanding from rents due
between 25 March 2020 and 28 September 2020. Following legislation
introduced as a result of the pandemic, the options available to
landlords to recover outstanding amounts have been significantly
reduced. As a result, there is limited incentive for those who can
afford to pay rent to do so and for those who are in difficulty to
agree and document concessions.
Given this situation, we have assessed the outstanding debtors
for recoverability and provided GBP87m for bad debts in the period.
The provision includes GBP20m for occupiers where we have agreed
concessions out of our customer support fund and GBP10m against
tenant lease incentive balances. More detail on the amounts
provided, including the impact on revenue profit for the period, is
included in the table below.
Table 6: Provisions for doubtful debts(1)
Joint
Group ventures Total
GBPm GBPm GBPm
-------------------------------------------- ----- --------- -----
Provisions related to customer support fund
concessions 18 2 20
Other provisions for rents receivable 40 5 45
Provisions for service charge receivables 10 2 12
Tenant lease incentive provisions 9 1 10
Bad debt expense charged to revenue profit
in the period 77 10 87
-------------------------------------------- ----- --------- -----
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
As we work to agree and document rent concessions with
individual retail and leisure occupiers, we expect this to result
in the payment of the balance of their outstanding amounts.
Nevertheless, we have taken what we believe to be a cautious view
on provisions as we recognise the challenge of a new lockdown, and
the risk of further CVAs and administrations. Of the total amount
of rent which remains outstanding, around 75% is covered by a
doubtful debt provision.
Net indirect expenses
Net indirect expenses represent the indirect costs of the Group
including joint ventures. In total, net indirect expenses were
GBP37m (2019: GBP35m). The GBP2m increase is primarily the result
of higher staff costs as the prior period benefitted from higher
provision releases.
Net finance expense (included in revenue profit)
Table 7: Net finance expense(1)
GBPm
---------------------------------------------------------- ----
Net finance expense for the six months ended 30 September
2019 49
Impact of:
Interest costs (8)
Capitalised interest (2)
Net finance expense for the six months ended 30 September
2020 39
---------------------------------------------------------- ----
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 GBP10m to GBP39m due to
reductions in interest payable following debt management exercises
carried out last year and an increase in interest capitalised on
our developments in the period.
Capital and other items
Table 8: Capital and other items(1)
Six months Six months
ended ended
30 September 30 September
2020 2019
Table GBPm GBPm
-------------------------------------- ----- ------------- -------------
Valuation and profit on disposals
Valuation deficit 9 (945) (368)
(Loss)/profit on disposals (1) 1
Net finance expense 10 (4) (4)
Other items
Profit from long-term development
contracts - 2
Other - (3)
Capital and other items (950) (372)
-------------------------------------- ----- ------------- -------------
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 7.7% or GBP945m over
the six months compared with a decrease in the prior period of
GBP368m. A breakdown of valuation movements by category is shown in
table 9.
Table 9: Valuation analysis
Market
value Rental Movement
30 September Valuation value Net initial Equivalent in equivalent
2020 movement change(1) yield yield yield
GBPm % % % % bps
------------------------------------ ------------- --------- ---------- ----------- ---------- ---------------
Offices 5,817 -1.9 -1.0 4.4 4.6 2
London retail 728 -16.8 -16.5 4.4 4.4 12
Other central London 426 - - 2.7 4.3 -
Regional shopping centres and shops 1,339 -20.4 -14.4 7.0 6.6 42
Outlets 805 -8.8 -1.3 4.8 6.3 38
Urban opportunities 423 -9.8 -5.8 5.0 5.3 15
Leisure 528 -15.3 -3.9 6.3 7.1 70
Hotels 408 -13.1 -13.2 3.5 5.4 27
Retail parks 411 -7.3 -6.1 7.4 7.6 16
Total like-for-like
portfolio 10,885 -8.0 -5.7 4.9 5.2 11
Proposed developments 276 -9.4 n/a - n/a n/a
Development programme 630 -1.2 n/a - 4.3 n/a
Acquisitions 52 -17.0 n/a 4.1 4.6 n/a
------------------------------------ ------------- --------- ---------- ----------- ---------- ---------------
Total Combined Portfolio 11,843 -7.7 -5.7 4.5 5.2 11
------------------------------------ ------------- --------- ---------- ----------- ---------- ---------------
1. Rental value change excludes units materially altered during the period.
The 7.7% decline in the value of our Combined Portfolio is
almost entirely due to a fall in the value of our retail and
leisure assets, driven by reductions in rental values and expanding
equivalent yields. Within the like-for-like portfolio, regional
shopping centres and shops saw the largest reduction in values,
down 20.4% overall but with similar declines at all our centres as
rental values reduced by 14.4% and yields moved out 42bps. London
retail reduced in value by 16.8% as rental values declined by 16.5%
and yields moved out by 12bps. Our leisure assets declined in value
by 15.3% with rental values 3.9% lower and yields expanding by
70bps, while hotels were down by 13.1% largely due to the impact of
Covid-19 on rental values. Our office assets saw a modest decrease
in value of 1.9% as rental values declined by 1.0% and yields moved
out slightly. The values of our other central London assets,
principally Piccadilly Lights, were broadly unchanged.
Outside the like-for-like portfolio, values in the development
programme were down 1.2% due mainly to increased costs and lower
rental values at Lucent, W1 and n2, SW1, partly offset by an
increase in the value of 21 Moorfields, EC2 as construction at this
pre-let scheme progresses. The 9.4% decline in the value of our
proposed developments is due mainly to Portland House, SW1 where
expected rental values have reduced and anticipated rent free
periods have been extended. Our acquisitions fell in value by
17.0%, driven by a decline in value of the X-Leisure portfolio,
where we acquired the remaining 5% in December 2019 and increased
costs on n2 where we acquired the outstanding 50% in the
period.
Profit/(loss) on disposals
The net loss on disposals of GBP1m in the period (2019: GBP1m
profit) relates to the sale of both investment and trading
properties. We made a GBP2m profit on disposal of 7 Soho Square,
W1, which was recognised as a sale on unconditional exchange on 22
September 2020. Off-setting this profit was our GBP2m share of the
Nova joint venture's loss on disposal of Nova Place and n2 which
were acquired by the Group in the period, and a GBP1m loss on the
sale of the one remaining apartment at Nova, SW1.
Net finance expense (included in Capital and other items)
In the six months ended 30 September 2020, we incurred GBP4m of
net finance expense which is excluded from revenue profit
principally due to losses on our interest-rate swaps as a result of
fluctuations in market interest rates in the period.
Table 10: Net finance expense(1)
Six months Six months
ended ended
30 September 30 September
2020 2019
GBPm GBPm
------------------------------------------- ------------- -------------
Fair value movement on interest-rate swaps (5) (5)
Premium and fees on redemption of medium
term notes (MTNs) - (1)
Other net finance income 1 2
Total (4) (4)
------------------------------------------- ------------- -------------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Taxation
In the six months ended 30 September 2020, there was no tax
charge in the income statement (2019: credit of GBP2m).
Balance sheet
Table 11: Balance sheet
30 September 31 March 2020
2020
GBPm GBPm
----------------------------------------- ------------ -------------
Combined Portfolio 11,843 12,781
Adjusted net debt (3,940) (3,926)
Other net assets/(liabilities) 92 (21)
----------------------------------------- ------------ -------------
EPRA net tangible assets 7,995 8,834
Excess of fair value over net investment
in finance leases book value (92) (90)
Other intangible assets 7 7
Fair value of interest-rate swaps (6) (1)
----------------------------------------- ------------ -------------
Net assets 7,904 8,750
----------------------------------------- ------------ -------------
Net assets per share 1,068p 1,182p
EPRA net tangible assets per share(1) 1,079p 1,192p
----------------------------------------- ------------ -------------
1. EPRA net tangible assets per share is a diluted measure.
Our net assets principally comprise the Combined Portfolio less
net debt. Both IFRS net assets and EPRA net tangible assets
declined over the six months ended 30 September 2020 primarily due
to the reduction in the value of our investment properties.
At 30 September 2020, our net assets per share were 1,068p, a
decrease of 114p or 9.6% from 31 March 2020. EPRA net tangible
assets per share were 1,079p, a decrease of 113p or 9.5%.
Table 12 summarises the key components of the GBP839m decrease
in our EPRA net tangible assets over the six month period.
Table 12: Movement in EPRA net tangible assets(1)
Diluted per
share
GBPm pence
------------------------------------------ ----------- -----------
EPRA net tangible assets at 31 March 2020 8,834 1,192
Revenue profit 115 16
Valuation deficit (945) (128)
Other (9) (1)
------------------------------------------ ----------- -----------
EPRA net tangible assets at 30 September
2020 7,995 1,079
------------------------------------------ ----------- -----------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Net debt and gearing
Table 13: Net debt and gearing
30 September 31 March 2020
2020
--------------------------------- ------------ -------------
Net debt GBP3,963m GBP3,942m
Adjusted net debt(1) GBP3,940m GBP3,926m
--------------------------------- ------------ -------------
Group LTV(1) 33.2% 30.7%
Security Group LTV 35.0% 32.5%
Weighted average cost of debt(1) 2.1% 1.8%
--------------------------------- ------------ -------------
1. Including our proportionate share of subsidiaries and joint
ventures, as explained in the Presentation of financial information
above.
Over the period, our net debt increased by GBP21m to GBP3,963m.
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 GBP14m to GBP3,940m, with the main
movements outlined in table 14 below. At 30 September, 7 Soho
Square was recognised as a disposal following unconditional
exchange but the proceeds were not received until 14 October.
Taking into account these proceeds, pro forma adjusted net debt at
30 September was GBP3,862m. For a reconciliation of net debt to
adjusted net debt, see note 13 to the financial statements.
Table 14: Movement in adjusted net debt(1)
GBPm
--------------------------------------- -----
Adjusted net debt at 31 March 2020 3,926
Net cash generated from operations (87)
Development/other capital expenditure 93
Acquisitions 9
Disposals (4)
Other 3
--------------------------------------- -----
Adjusted net debt at 30 September 2020 3,940
--------------------------------------- -----
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 GBP87m. Capital
expenditure on investment properties was GBP93m, largely related to
our development programme, with a further GBP9m spent on acquiring
investment properties. Net cash flow from disposals totalled GBP4m
from the sale of trading properties.
The most widely used gearing measure in our industry is
loan-to-value (LTV). We focus most on Group LTV, presented on a
proportionate basis, which increased from 30.7% at 31 March 2020 to
33.2% at 30 September 2020, largely due to the decline in the value
of our assets. Our Security Group LTV increased from 32.5% to 35.0%
for the same reason.
Financing
At 30 September 2020, our committed revolving facilities
totalled GBP2,715m (31 March 2020: GBP2,715m). The pricing of our
facilities which fall due in more than one year range from LIBOR
+65 basis points to LIBOR +75 basis points. Borrowings under our
commercial paper programme typically have a maturity of less than
three months, currently carry a weighted average interest rate of
LIBOR +18 basis points and are unsecured.
The total amount drawn under the bank debt was GBP476m (31 March
2020: GBP1,944m) with GBP1,079m of commercial paper in issue (31
March 2020: GBP977m). At 30 September 2020, we had net bank
overdrafts of GBP2m (31 March 2020: cash balances of GBP1,345m).
During the period, the sterling bond and commercial paper markets
began to normalise, having been effectively closed to new issuance
at March 2020. As a result, during the period, we repaid the cash
balances we were holding as a liquidity buffer. At 30 September
2020, we had GBP1.2bn of cash and available facilities, net of our
outstanding commercial paper.
The weighted average maturity of our debt has increased to 10.9
years following a reduction at 31 March 2020 to 9.6 years after we
drew down on our facilities. The weighted average cost of our debt
at 30 September 2020 was 2.1% (31 March 2020: 1.8%). The weighted
average cost of our net debt at 30 September 2020, which recognises
the minimal interest income on cash deposits, was also 2.1% (31
March 2020: 2.4%).
Dividend
As we indicated in July, we are reinstating quarterly dividends
with these half-yearly results. We will be paying a second
quarterly dividend of 12.0p per share on 4 January 2021 to
shareholders registered at the close of business on 27 November
2020. This will be paid wholly as a Property Income Distribution.
Following the suspension of dividends due to the pandemic, we did
not declare a first quarterly dividend. As a result, this second
quarterly dividend should be viewed as a combined first and second
quarterly dividend at a level of 6.0p per quarter. Our first half
dividend of 12.0p per ordinary share (six months ended 30 September
2019: 23.2p per share) represents a decrease of 48.3% and a total
payment of GBP89m (six months ended 30 September 2019: GBP172m). It
is our intention to pay a third quarterly dividend at the end of
March 2021. The amount and precise timing will be announced in due
course.
Martin Greenslade
Chief Financial Officer
Portfolio review
At a glance
3/4 Valuation deficit of 7.7%(1)
3/4 Ungeared total property return of -5.9%
3/4 GBP5m of investment lettings, with a further GBP19m in solicitors' hands
3/4 Like-for-like voids: 3.4% (31 March 2020: 2.5%)
Central London
3/4 Valuation deficit of 3.8%(1)
3/4 Ungeared total property return of -1.8%
3/4 GBP1m of investment lettings with a further GBP6m in solicitors' hands
3/4 Like-for-like voids: 1.9% (31 March 2020: 1.2%) and units in
administration: 0.4% (31 March 2020: nil)
Regional retail
3/4 Valuation deficit of 16.4%(1)
3/4 Ungeared total property return of -14.9%
3/4 GBP2m of investment lettings, with a further GBP10m in solicitors' hands
3/4 Like-for-like voids: 6.5% (31 March 2020: 4.7%) and units in
administration: 5.1% (31 March 2020: 2.1%)
3/4 Footfall for 1 July to 30 September (post initial reopening)
down 39.2% (ShopperTrak national benchmark down 39.9%)
3/4 Same centre sales (excluding automotive), taking into
account new lettings and occupier changes, down 28.3% (BRC national
benchmark down 12.3%)
Urban opportunities
3/4 Valuation deficit of 9.8%(1)
3/4 Ungeared total property return of -8.8%
3/4 GBP1m of investment lettings in solicitors' hands
3/4 Like-for-like voids: 6.6% (31 March 2020: 4.8%) and units in
administration: 0.9% (31 March 2020: 0.4%)
Subscale sectors
3/4 Valuation deficit of 12.4%(1)
3/4 Ungeared total property return of -11.4%
3/4 GBP1m of investment lettings, with a further GBP2m in solicitors' hands
3/4 Like-for-like voids: 2.4% (31 March 2020: 2.0%) and units in
administration: 2.5% (31 March 2020: 0.9%)
Overview
The London office occupational market has slowed over the last
six months, as occupiers delay making significant decisions in
response to the Covid-19 pandemic. Take up was 2.2 million sq ft,
67% below the long-term average and availability has increased to
19.9 million sq ft, significantly above the long-term 10-year
average of 14.0 million sq ft. Continuing the trend from before
March, the increase in availability has been driven by second-hand
space, as some occupiers look to sub-let excess office capacity.
Despite this, there continues to be demand for high-quality office
space, with 48% of total take up being of new space, ahead of the
long-term average.
The London office investment market slowed significantly in Q2
this calendar year as an immediate response to the Covid-19 crisis,
with investment volumes totalling GBP0.8bn, 79% below the long-term
average. While Q3 investment volumes still remained c.75% below the
long-term average at GBP0.9bn, the increase on Q2 demonstrated
renewed confidence in the market and investor appetite for long
income assets in a low gilt environment. Q4 investment volumes show
momentum with GBP1.4bn completed or exchanged to date. There have
been a number of trophy asset transactions in October, including
the sale of CPPIB's 50% interest in our Nova joint venture. As well
as long income assets, there is also evidence of strong investor
interest in value-add opportunities, evidenced by our sale of 7
Soho Square, W1, ahead of the March book value. The quality of our
London office portfolio, and the strength of our customer base
gives us confidence in the liquidity of our assets and our ability
to effectively recycle capital to fund growth opportunities.
The occupational challenges across the retail and leisure
industries have been well documented over the last six months. The
initial lockdown period created immediate cash flow challenges for
many occupiers, and the continued and ever-changing landscape of
local, and now national, restrictions continues to significantly
impact both current trade and the outlook.
Covid-19 has simply served to accelerate many of the trends that
were already impacting the retail industry, most notably consumer
appetite for online retail. In the F&B market, many occupiers
are anticipating a prolonged period of reduced trade. As a result,
the number of CVAs and administrations over the last six months has
increased significantly, as occupiers seek to accelerate cost
reductions. In the last six months, 45 customers have entered into
either a CVA or administration, impacting 281 of our units and
equating to a reduction in annualised rent of GBP18m. The quality
of our destinations and their ability to drive footfall mean that
the majority of units subject to these insolvency procedures remain
open and trading, but we are clearly impacted by rent reductions.
We are alive to the pressures on our customers' profitability and
cashflow, and the ability for an insolvency to provide immediate
and blanket rent reductions. However, our preference remains to
engage in constructive dialogue and work in partnership with our
customers ahead of this point where possible.
Our customer support fund, announced in April, was set up to
help our retail and leisure customers through the Covid-19
pandemic. Over the last six months, we have had a significant
number of conversations across our customer base around the support
we can provide through the fund. To date, we have granted GBP20m of
concessions to customers with an annualised rent of GBP97m and we
continue discussions with many more.
The retail investment market for shopping centres remains at a
virtual standstill, with no comparable arm's length shopping centre
investment transaction for two years. The potential sale of intu
Trafford Centre in Manchester as a result of the administration of
intu properties plc will be watched closely by the market. Other
assets in the market are primarily repurposing opportunities, or
those being marketed by distressed sellers. There continues to be
activity in the retail parks market, with GBP291m of transactions
in Q3 compared with GBP101m in Q2. This continued activity is
positive, as we look to exit from our retail parks over the medium
term.
Optimise our Central London portfolio
Our Central London portfolio comprises GBP7.9bn of high-quality
offices (85%), associated ground level retail (9%) and other assets
(6%), the most significant of which is Piccadilly Lights, W1. Our
strategy is to optimise our Central London business, evolving a
broader range of propositions for our customers, continued
deployment of our development expertise and targeted recycling to
fund long-term growth.
Our offices remain almost fully-let, although occupancy and the
day-to-day operations have been significantly impacted by Covid-19.
Despite this, our office collections remain strong (March and June
99%, September 96%), reflecting the strength of our occupier
base.
We have been working closely with occupiers across the portfolio
to ensure our spaces are Covid-secure and to allow them to use
their office space as best suits their business. However, following
a period of higher utilisation, occupancy in October was on average
only 15% of pre-Covid levels as occupiers respond to government
guidance to continue working from home where possible.
We have been able to accommodate the short-term space
requirements of a number of customers arising as a result of the
pandemic. Some customers are choosing to delay long-term space
decisions, and others have been impacted by the delayed completion
of new space. We have re-negotiated six leases extending terms by
an average of nine months, covering 58,000 sq ft, as well as
securing GBP3m of income. We have also seen breaks being exercised
in respect of 65,000 sq ft of space as some customers have taken
the opportunity to reduce their office footprint.
We have also had a very active dialogue with customers on the
role that offices will play in their businesses in the longer term.
It is clear most of our customers consider that the office will
continue to be a fundamental part of their business going forward.
But the space needs to be the right space. It needs to be high
quality, flexible and healthy - space which can facilitate
collaboration and creativity, and attract and retain talent. We
developed the majority of our office portfolio ourselves, and did
so with flexibility in mind. This now works to our advantage as we
can more easily adapt our space to meet our customers' needs. We
are also seeing an increased focus on sustainability, and we are
working towards securing a WELL certified office portfolio.
We are fitting out our second Myo offering at Liverpool Street,
and the 35,000 sq ft space will be ready to occupy from March 2021.
Myo Liverpool Street will be in Dashwood, EC2, where 124,000 sq ft
of lease expiries gives us the opportunity to trial the optimal mix
of Blank Canvas, Customised and Myo in one building.
Low office occupancy had a significant impact on trading at our
central London retail assets, where footfall in September was 72%
lower than last year. These assets represent only 6% of our
Combined Portfolio, but the blend of amenity and services is vital
to the living and working eco-system in London. In the short term,
we are working with our customers to support them where we can, but
also thinking about how we evolve these spaces in the future.
At 31 March, we had a development pipeline of over 1.4 million
sq ft central London office development opportunities across five
schemes, with potential delivery between March 2022 and February
2023. All of these schemes are speculative, with the exception of
21 Moorfields, EC2.
Over the last six months, we have assessed all of our
development schemes in light of the current economic situation, the
occupational market we might deliver these schemes into and
therefore the amount of capital we consider it appropriate to
commit. We always design our schemes with programme flexibility,
which gives us the ability to pause activity. We have confidence in
the long-term prospects of the London office market and are
progressing 848,000 sq ft across three office-led schemes. These
schemes are 21 Moorfields, Lucent, W1 and The Forge, SE1
(previously 105 Sumner Street). We are also committed to delivering
88 pre-sold affordable housing units at Castle Lane, SW1.
We currently remain on site at two of our other speculative
schemes, but expect to pause activity once the current phase of
work is complete. Pausing these schemes will allow us to time
delivery into the best occupational market, and also ensure we can
manage capital recycling and gearing appropriately.
Work has continued on all of our sites over the six months, but
has inevitably slowed as we have worked with our contractors to
make sure our sites are Covid-secure. At 21 Moorfields, our 564,000
sq ft scheme which is pre-let in its entirety to Deutsche Bank, we
are making good progress and productivity is at around 75% of
pre-Covid levels. We now expect to reach practical completion in
June 2022, four months later than the original programme. We are
working with the main contractor to ensure onsite productivity
improves to mitigate any further delay, and we continue to be in
close dialogue with Deutsche Bank, who are finalising their fit-out
modifications.
At Lucent, our 144,000 sq ft scheme in the heart of the West
End, we have completed the sub-structure and remain on programme to
hand over to the main contractor in February 2021. At our 140,000
sq ft site at The Forge, we are on schedule to complete basement
and piling works in December, after which we will start trialling
our new modern methods of construction approach to manufacture with
a 'kit of parts' frame.
During the period, we acquired the remaining undeveloped land on
the Nova island site from our joint venture for consideration of
GBP13m. This means we now own 100% of the undeveloped land, which
comprises our potential n2 and Nova Place developments. At n2, we
are completing the core at the 166,000 sq ft office scheme. Once
this phase of works is complete we expect to pause, but will
continue with procurement and finalising design.
At Castle Lane, we have agreed a forward-sale agreement for 88
affordable housing units, and construction will commence in July
2021.
At Portland House, where we have planning permission to add a
14-storey extension to the existing building, creating 400,000 sq
ft of new or refurbished space, the building is now empty and we
are on site completing strip-out works. We intend to pause on-site
activity by the end of the financial year.
We continue with pre-development activity at our 380,000 sq ft
Timber Square, SE1 development (previously known as Lavington
Street). The building remains occupied and we hope to secure
planning permission before the end of the year.
At Red Lion Court, SE1, following lengthy planning negotiations,
we are working towards submission of a planning application in Q1
2021. The building remains fully occupied, on a lease which expires
in 2022.
Reimagine our Regional retail portfolio
Our GBP2.1bn Regional retail portfolio primarily comprises our
six shopping centres and five outlets. Structural shifts are
putting retail rents under pressure, but not all parts of the
sector are affected in the same way. Our outlets have good sales
growth potential, and there is opportunity for a significant
reimagining of the model within our six shopping centres.
After the initial restrictions were lifted, footfall across our
shopping centres and outlets was broadly in line with the national
benchmark, down 39.2% year-on-year. Same centre sales (excluding
automotive) for the same period were down 26.3% year-on-year, lower
than the national benchmark of 12.3%. Within this, there is
significant variation between individual assets and, in general, a
much stronger sales performance at the outlets.
Footfall was down 40.8% at our shopping centres, with sales down
31.8%. The performance of individual centres varied significantly
depending on geographic location. In the July to September period,
two of our six shopping centres were operating under tighter local
restrictions. At our outlets, footfall was down 33.8%,
outperforming the benchmark, whilst sales were only down 16.6%
year-on-year. Their outdoor design has contributed to their
popularity in recent months, and the outlet discounting model means
they are less challenged by online retail.
In October we set out our five main strategic objectives for our
reimagine portfolio, as below.
Determine sustainable rents
Across our shopping centres we have formed a view on the
long-term sustainable ERV, which are on average 15% below September
2020 ERVs, which represents an average of 35-40% declines peak to
trough. Taking this realistic view will not only help us to make
informed leasing decisions in the short to medium term, but it also
provides a foundation from which we can assess the best use and
occupier mix for our destinations going forward.
Elevate the consumer experience
In the last six months we have had engagements at a senior level
with over 30 retail and F&B occupiers. From these conversations
it is clear that for our shopping centres to remain attractive to
consumers, and therefore occupiers, we need to ensure we have the
best retail, F&B and leisure mix. The mix needs to be balanced
towards growing sectors and include convenience retail, and reflect
catchment demographics. This will create an approach to traditional
asset management and occupier engagement more in line with the
outlet model, with active brand churn responding to consumer
demand. We can use our outlet experience and relationships to build
a similar approach to consumer experience at our shopping centres.
Our first step is to segment our customer base by relevancy and
growth potential, which we are on track to complete by December. We
will then use this data to inform targeted leasing strategies for
each of our shopping centres.
Create operational excellence and new leasing models
Another clear theme emerging from our conversations with
customers is the need to move away from a common leasing model. We
are looking at a variety of potential structures for new retail
leases, creating different structures to suit our different
customer segments. Due to our current lease expiry profile, we do
not expect to be able to roll out new lease structures on a
widescale basis in the short term, but we are working towards
trialling some ideas the second half of the financial year.
We are on track to achieve a 4% saving in our service charge
costs this year, in addition to the 8% saving we have made as a
result of Covid-19, and we continue to target further savings for
next year. As well as these immediate savings, we are looking at a
wide range of options for how we can deliver service at our
shopping centres and outlets more efficiently, to help reduce
occupational costs for our customers.
Maximise our vibrant outlets
Our outlets have performed well in a difficult market,
demonstrating their ongoing appeal to customers and resilience to
greater online penetration. We have continued to develop the
customer mix, completing GBP1m of letting to new brands such as
Under Armour, Fiorelli and the Perfume Shop. We have made good
progress on our enhancement works at Braintree Village and Clarks
Village, Street, where we have spent GBP3m in the period on
enhancements to the public areas to create a more appealing
environment and also in store work to make it easier to rotate
brands.
Repurpose retail space
We have created a master planning framework to ensure we have a
consistent approach to determining the repurposing potential of
each asset, drawing on macro-economic, consumer, sector and market
specific data to make our decisions. We are on track to have new
master plans for each of our six shopping centres by the end of the
financial year.
Realise capital from our Subscale sectors
Subscale sectors comprises GBP1.4bn of hotels, leisure parks and
retail parks, which we intend to divest over the medium term.
All of the hotel portfolio reopened over the summer, with the
exception of two locations where Accor do not consider there to be
sufficient demand. The portfolio is let on turnover-based leases,
resulting in significantly lower income in the period. We will
continue to work with Accor on their plans across the portfolio,
and remain confident in our ability to realise capital from this
sector in the medium term.
Our leisure portfolio comprises 18 sites, predominantly
out-of-town leisure parks anchored by cinemas, or other leisure
attractions. Both the leisure and F&B industries have been
significantly impacted by social distancing measures, leading to a
mixed trading performance since reopening. Despite the current
uncertainty on when restrictions will be lifted, we have agreed
GBP0.2m of lease re-gears during the period, and have a further
GBP2.0m in solicitors' hands.
Retail parks have proved popular with consumers in recent
months. This is in part due to their outdoor design, but also
increased spend in home and leisure and furniture categories. We
have completed GBP0.8m of lettings in the period, and re-geared
GBP0.2m of income, and have a further GBP0.4m in solicitors' hands,
in line with our strategy to maximise value ahead of sale.
Grow through Urban opportunities
Our GBP0.4bn Urban opportunities portfolio comprises our five
suburban assets with redevelopment potential over 1.6 million sq
ft, with the potential to extend to 8.0 million sq ft. All of these
assets are existing retail or leisure assets, with the potential to
convert into large-scale, mixed use developments.
At Finchley Road, NW3, we continue to work on master planning
and design, and are targeting submission of a planning application
in 2021. At Lewisham, SE13, we also continue to work on master
planning and are working towards submission of a planning
application in 2022.
At Shepherd's Bush, W12, we continue to be in dialogue with the
local council, and are working towards agreement on which
masterplan to take forward in early 2021.
Principal risks and uncertainties
The principal risks of the business are set out on pages 51 - 55
of the 2020 Annual Report that was published in June. By that
stage, Covid-19 was impacting most businesses across the UK
including our own. In addition to describing the nature and
potential impact of our principal risks, we took the decision in
the Annual Report to explain the impact of Covid-19 on each of the
principal risks and the related mitigations. These principal risks
fall into eight categories: customers; market cyclicality;
disruption; people and skills; major health, safety and security
incident; information security and cyber threat; climate change;
and investment and development strategy.
The Board has reviewed the principal risks in the context of the
second half of the current financial year, the ongoing impact of
Covid and the risks associated with Brexit. The Board believes
there has been no material change to the risk categories (as
opposed to the level of risk) outlined in the 2020 Annual Report
and that the existing mitigating actions remain appropriate to
manage them.
However, the Board notes an increase in the market cyclicality
and disruption risks. The market cyclicality risk has increased due
to (a) forecasts of a deeper and longer UK recession from the
impact of the ongoing pandemic; and (b) renewed uncertainty of
achieving a trade deal with the EU for after the Brexit transition
period. We continue to focus carefully on managing our liquidity
and protecting the strength of our balance sheet in order to
mitigate the increased market cyclicality risk. Going forward, as
we outlined at our capital markets day on 19 October 2020, we
expect to fund investment and capital expenditure (including
development activity) through asset disposals over time.
The disruption risk has increased due to heightened uncertainty
in both the retail and office market as a consequence of the impact
of the pandemic. We have seen a notable increase in the switch to
online shopping from physical stores as people stay at home to
comply with government guidelines, and some of this change is
unlikely to reverse. The larger number of employees working from
home during the pandemic has prompted greater uncertainty about how
companies will use the office going forward, although again we do
not know how much of this change will be permanent.
The key drivers for the increase in these risks are Covid-19 and
Brexit. We have set out more context for the risks and what we are
doing to manage them below.
Covid-19
The long-term implications of Covid-19 are unclear and our
strategy will continue to adapt to ensure we are managing near-term
challenges proactively and focused on positioning the business for
post-pandemic opportunities.
Structural shifts continue to put retail rents under pressure
and Covid-19 has accelerated some of the trends driving this,
including the balance between physical shops and online shopping.
Our shopping centres have been impacted more severely by this trend
than outlets, which have been relatively shielded from online
competition and are performing well.
Reimagine retail is one of our four strategic priorities and
includes several key objectives to ensure we maximise the
performance of our Regional retail. These include determining
long-term sustainable rent levels for our customers as the basis
for effective decision making as we work collaboratively with
customers to introduce new leasing models. Another objective of the
Reimagine retail priority is to repurpose space to reduce our
retail footprint and enhance the mix. The activities under this
strategic priority will be key to managing the disruption risk and
structural changes within the retail sector, particularly shopping
centres.
Brexit
We have continued to assess the risks to the business and our
supply chain that may result from the end of the Brexit transition
period, including the increasing likelihood of no meaningful trade
deal with the EU. Our assessment of the risks is divided into three
distinct workstreams: construction, operations and portfolio
management.
In construction, the risks identified include the potential
impact of tariffs on imported goods, workforce labour and skills
shortages, delayed delivery of products and foreign exchange
exposure.
In operations, the risks include the availability of imported
goods and spares, which are critical for us to keep our buildings
open with a safe and secure environment for our customers.
The portfolio management risks are more general and assessed as
having limited impact on the Group. In consultation with our
customers and suppliers, we are well prepared with contingency
plans to mitigate the risks identified within each workstream.
Across all three workstreams, we are focused on managing the
risk of operating effectively with trading partners who are based
in the EU and ensuring we have robust processes in place to
mitigate regulations around the movement of goods across borders.
We have been aware of this threat now for several years.
The Board recognises the health of our business is closely
linked to the health of the UK economy. We are actively monitoring
events and will continue to assess the broader economic
uncertainties, and any consequential impact on the Group, that may
result from leaving the EU without a trade deal.
Statement of Directors' Responsibilities
Each of the Directors, whose names and functions appear below,
confirm to the best of their knowledge that the condensed
consolidated interim financial statements have been prepared in
accordance with IAS 34, 'Interim Financial Reporting', as issued by
the IASB and adopted by the European Union and that the interim
management report herein includes a fair review of the information
required by the Disclosure and Transparency Rules (DTR),
namely:
3/4 DTR 4.2.7 (R): an indication of important events that have
occurred during the six month period ended 30 September 2020 and
their impact on the condensed interim financial statements, and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
3/4 DTR 4.2.8 (R): any related party transactions in the six
month period ended 30 September 2020 that have materially affected,
and any changes in the related party transactions described in the
2020 Annual Report that could materially affect, the financial
position or performance of the enterprise during that period.
The Directors of Land Securities Group PLC as at the date of
this announcement are as set out below:
3/4 Cressida Hogg, Chairman*
3/4 Mark Allan, Chief Executive
3/4 Martin Greenslade, Chief Financial Officer
3/4 Colette O'Shea, Managing Director, Portfolio
3/4 Edward Bonham Carter, Senior Independent Director*
3/4 Nicholas Cadbury*
3/4 Madeleine Cosgrave*
3/4 Christophe Evain*
3/4 Stacey Rauch*
*Non-executive Directors
A list of the current Directors is maintained on the Land
Securities Group PLC website at landsec.com.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial information differs from
legislation in other jurisdictions.
By order of the Board
Tim Ashby
Group General Counsel and Company Secretary
9 November 2020
Independent review report to Land Securities Group PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2020 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated statement of cash flows and
the related notes to the financial statements 1 to 17. We have read
the other information contained in the half-yearly financial report
and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRS as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
9 November 2020
Financial statements
Unaudited income statement Six months ended Six months ended
30 September 2020 30 September 2019
Capital Capital
Revenue and other Revenue and other
profit items Total profit items Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
Revenue 5 327 - 327 368 1 369
Costs 6 (182) - (182) (116) - (116)
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
145 - 145 252 1 253
Share of post-tax profit/(loss)
from joint ventures 12 1 (124) (123) 15 (65) (50)
Profit on disposal of investment
properties - 2 2 - - -
Net deficit on revaluation of
investment properties 10 - (824) (824) - (304) (304)
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
Operating profit/(loss) 146 (946) (800) 267 (368) (101)
Finance income 7 8 1 9 7 2 9
Finance expense 7 (39) (5) (44) (49) (6) (55)
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
Profit/(loss) before tax 115 (950) (835) 225 (372) (147)
Taxation - 2
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
Loss attributable to shareholders (835) (145)
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
Loss per share attributable
to shareholders:
Basic loss per share 4 (112.8)p (19.6)p
Diluted loss per share 4 (112.8)p (19.6)p
---------------------------------- ----- ------- ----------- -------- ------- ---------- -------
Unaudited statement of comprehensive Six months
income ended
30 September Six months ended
2020 30 September 2019
Total Total
GBPm GBPm
---------------------------------------------------- ------------- ------------------
Loss attributable to shareholders (835) (145)
------------------------------------------------------ ------------- ------------------
Items that will not be subsequently reclassified
to the income statement:
Movement in the fair value of other investments (1) (1)
Net re-measurement loss on defined benefit
pension scheme (11) -
Deferred tax charge on re-measurement
above 2 -
Other comprehensive loss attributable
to shareholders (10) (1)
------------------------------------------------------ ------------- ------------------
Total comprehensive loss attributable
to shareholders (845) (146)
------------------------------------------------------ ------------- ------------------
Unaudited balance sheet
30 September 31 March
2020 2020
Notes GBPm GBPm
-------------------------------------------------- ----- ------------ --------
Non-current assets
Investment properties 10 10,525 11,297
Intangible assets 13 14
Net investment in finance leases 154 156
Investments in joint ventures 12 702 824
Trade and other receivables 165 178
Other non-current assets 21 32
-------------------------------------------------- ----- ------------ --------
Total non-current assets 11,580 12,501
-------------------------------------------------- ----- ------------ --------
Current assets
Trading properties 11 35 24
Trade and other receivables 542 433
Monies held in restricted accounts and deposits 9 9
Cash and cash equivalents - 1,345
Other current assets 12 48
-------------------------------------------------- ----- ------------ --------
Total current assets 598 1,859
-------------------------------------------------- ----- ------------ --------
Total assets 12,178 14,360
-------------------------------------------------- ----- ------------ --------
Current liabilities
Borrowings 14 (1,079) (977)
Trade and other payables (291) (270)
Other current liabilities (4) (2)
Bank overdraft (2) -
-------------------------------------------------- ----- ------------ --------
Total current liabilities (1,376) (1,249)
-------------------------------------------------- ----- ------------ --------
Non-current liabilities
Borrowings 14 (2,887) (4,355)
Trade and other payables (3) (1)
Other non-current liabilities (8) (5)
Total non-current liabilities (2,898) (4,361)
-------------------------------------------------- ----- ------------ --------
Total liabilities (4,274) (5,610)
-------------------------------------------------- ----- ------------ --------
Net assets 7,904 8,750
-------------------------------------------------- ----- ------------ --------
Equity
Capital and reserves attributable to shareholders
Ordinary shares 80 80
Share premium 317 317
Other reserves 26 27
Retained earnings 7,481 8,326
-------------------------------------------------- ----- ------------ --------
Total equity 7,904 8,750
-------------------------------------------------- ----- ------------ --------
The financial statements on pages 31 to 50 were approved by the
Board of Directors on 9 November 2020 and were signed on its behalf
by:
M C Allan M F Greenslade
Directors
Unaudited statement of changes in equity Attributable
to shareholders
Ordinary Share Other Retained Total
shares premium reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- --------- --------- -------
At 1 April 2019 80 317 26 9,497 9,920
Total comprehensive loss for
the financial period - - - (146) (146)
Transactions with shareholders:
-------- -------- --------- --------- -------
Share-based payments - - - 1 1
Dividends paid to shareholders - - - (170) (170)
Total transactions with shareholders - - - (169) (169)
At 30 September 2019 80 317 26 9,182 9,605
Total comprehensive loss for
the financial period - - - (685) (685)
Transactions with shareholders:
-------- -------- --------- --------- -------
Share-based payments - - 1 1 2
Dividends paid to shareholders - - - (172) (172)
-------- -------- --------- --------- -------
Total transactions with shareholders - - 1 (171) (170)
At 31 March 2020 80 317 27 8,326 8,750
--------------------------------------- -------- -------- --------- --------- -------
Total comprehensive loss for
the financial period - - - (845) (845)
Transactions with shareholders:
-------- -------- --------- --------- -------
Share-based payments - - 2 - 2
Acquisition of own shares - - (3) - (3)
Total transactions with shareholders - - (1) - (1)
At 30 September 2020 80 317 26 7,481 7,904
--------------------------------------- -------- -------- --------- --------- -------
Unaudited statement of cash flows Six months
ended
30 September
2020 2019
Notes GBPm GBPm
------------------------------------------------------ ----- -------- -----
Cash flows from operating activities
Net cash generated from operations 9 133 233
Interest received - 14
Interest paid (47) (57)
Rents paid (3) (5)
Capital expenditure on trading properties - (1)
Other operating cash flows 1 -
------------------------------------------------------ ----- -------- -----
Net cash inflow from operating activities 84 184
------------------------------------------------------ ----- -------- -----
Cash flows from investing activities
Investment property development expenditure (77) (82)
Other investment property related expenditure (20) (21)
Acquisition of investment properties (8) -
Cash contributed to joint ventures 12 - (13)
Cash distributions from joint ventures 12 7 38
Other investing cash flows (2) 1
------------------------------------------------------ ----- -------- -----
Net cash outflow from investing activities (100) (77)
------------------------------------------------------ ----- -------- -----
Cash flows from financing activities
Proceeds from new borrowings (net of finance fees) 14 102 95
Repayment of bank debt 14 (1,468) (110)
Redemption of medium term notes - (4)
Premium paid on redemption of medium term notes - (1)
Net cash inflow from derivative financial instruments 38 38
Dividends paid to shareholders 8 - (170)
Decrease in monies held in restricted accounts and
deposits - 25
Other financing cash flows (3) -
------------------------------------------------------ ----- -------- -----
Net cash outflow from financing activities (1,331) (127)
------------------------------------------------------ ----- -------- -----
Decrease in cash and cash equivalents for the period (1,347) (20)
Cash and cash equivalents at the beginning of the
period 1,345 14
------------------------------------------------------ ----- -------- -----
Bank overdraft at the end of the period (2) (6)
------------------------------------------------------ ----- -------- -----
Notes to the financial statements
1. Basis of preparation and consolidation
===========================================
Basis of preparation
This condensed consolidated interim financial information
(financial statements) for the six months ended 30 September 2020
has been prepared on a going concern basis and in accordance with
the Disclosure and Transparency Rules of the Financial Conduct
Authority and IAS 34 'Interim Financial Reporting' as adopted by
the European Union (EU).
The condensed consolidated interim financial information does
not comprise statutory accounts within the meaning of section 434
of the Companies Act 2006. Statutory accounts for the year ended 31
March 2020, presented in accordance with International Financial
Reporting Standards as adopted by the EU (IFRS), were approved by
the Board of Directors on 11 May 2020 and delivered to the
Registrar of Companies. The report of the auditor on those accounts
was unqualified, did not contain an emphasis of matter paragraph
and did not contain any statement under section 498 of the
Companies Act 2006. The condensed consolidated interim financial
information has been reviewed, not audited, and should be read in
conjunction with the Group's annual financial statements for the
year ended 31 March 2020.
This condensed consolidated interim financial information was
approved for issue by the Directors on 9 November 2020.
Going concern
As the impact of Covid-19 on the Group continues to be
significant, particularly on our ability to collect rent and
service charge from customers, the Directors have continued to
place additional focus on the appropriateness of adopting the going
concern assumption in preparing the financial statements for the
period ended 30 September 2020. The Group's going concern
assessment considers changes in the Group's principal risks (see
page 27) and is dependent on a number of factors, including our
financial performance and continued access to borrowing facilities.
Access to our borrowing facilities is dependent on our ability to
continue to operate the Group's secured debt structure within its
financial covenants, which are described in note 14.
In order to satisfy themselves that the Group has adequate
resources to continue as a going concern for the foreseeable
future, the Directors have reviewed a cash flow model which,
consistent with the approach taken at 31 March 2020, considers the
impact of pessimistic assumptions on the Group's operating
environment (the 'Viability scenario'). This cash flow model
reflects management's experience over the six months ended 30
September 2020 of cash collection levels for rent and service
charge, where performance has been favourable when compared with
that assumed in the 31 March 2020 Viability scenario.
This experience has then been used to forecast future
anticipated rent collection levels in the cash flow model for the
period to November 2021, which forms the basis of the going concern
assessment. The anticipated movements in the valuation of our
Combined Portfolio have also been updated to reflect recent
experience and anticipated future changes over this period. The
Group's key metrics from the Viability scenario included in the
Group's Annual Report for the year ended 31 March 2020 and the
latest Viability scenario, both as at the end of the going concern
assessment period, are shown below alongside the actual position at
30 September 2020.
Key metrics 30 September 31 March 2020
2020 Viability scenario
Latest Viability
scenario
30 September November 2021 November 2021
2020
----------------------------- ------------ ----------------- -------------------
Loan-to-value ratio 33.2% 39.9% 36.8%
Adjusted net debt GBP3,940m GBP4,390m GBP4,688m
EPRA Net tangible assets GBP7,995m GBP6,594m GBP7,551m
Available financial headroom GBP1,184m GBP701m GBP405m
----------------------------- ------------ ----------------- -------------------
In our latest Viability scenario, the Group has sufficient cash
reserves, with our loan-to-value ratio remaining less than 65% and
interest cover above 1.45x, for a period of at least 12 months from
the date of authorisation of these financial statements. The value
of our assets would need to fall by a further 39% from the level
assumed in the Viability scenario at November 2021 for LTV to reach
65%. The Security Group requires earnings of at least GBP74m in the
year ending 30 September 2021 for interest cover to remain above
1.45x in the Viability scenario.
Despite the challenging trading conditions, Security Group
earnings for the six month period ended 30 September 2020 are above
the level required to meet the interest cover covenant for the full
year ending 30 September 2021. As the earnings run rate is
currently more than double that required, the Directors do not
anticipate a reduction in Security Group earnings over the year
ending 30 September 2021 to a level that would result in a breach
of the interest cover covenant, even if the recently introduced
lockdown periods result in similar trading conditions to those seen
at the beginning of the financial year.
The Directors have also considered an extreme downside scenario,
consistent with that reviewed in preparing the financial statements
for the year ended 31 March 2020, 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 these financial statements for
the period ended 30 September 2020.
Presentation of results
The Group income statement is presented in a columnar format,
split into those items that relate to revenue profit and Capital
and other items. The Total column represents the Group's results
presented in accordance with IFRS; the other columns provide
additional information. This is intended to reflect the way in
which the Group's senior management review the results of the
business and to aid reconciliation to the segmental
information.
A number of the financial measures used internally by the Group
to measure performance include the results of partly-owned
subsidiaries and joint ventures on a proportionate basis. Measures
that are described as being on a proportionate basis include the
Group's share of joint ventures on a line-by-line basis and are
adjusted to exclude the non-owned elements of our subsidiaries.
These measures are non-GAAP measures and therefore not presented in
accordance with IFRS. This is in contrast to the condensed
consolidated interim financial information presented in these
half-yearly results, where the Group applies equity accounting to
its interest in joint ventures, presenting its interest as one line
on the income statement and balance sheet, and consolidating all
subsidiaries at 100% with any non-owned element being adjusted as a
non-controlling interest or redemption liability, as appropriate.
Our joint operations are presented on a proportionate basis in all
financial measures used internally by the Group.
Revenue profit is the Group's measure of underlying pre-tax
profit. It excludes all items of a capital nature, such as
valuation movements and profits and losses on the disposal of
investment properties, as well as exceptional items. The Group
believes that revenue profit better represents the results of the
Group's operational performance to shareholders and other
stakeholder groups. A full definition of revenue profit is given in
the Glossary. The components of revenue profit are presented on a
proportionate basis in note 3. Revenue profit is a non-GAAP
measure.
2. Significant accounting policies
====================================
The condensed consolidated interim financial information has
been prepared on the basis of the accounting policies, significant
judgements and estimates as set out in the notes to the Group's
annual financial statements for the year ended 31 March 2020, as
amended where relevant to reflect the new standards, amendments and
interpretations which became effective in the period. There has
been no material impact on the financial statements of adopting
these new standards, amendments and interpretations.
Significant accounting estimate - Impairment of trade
receivables
As set out in the Group's annual financial statements for the
year ended 31 March 2020, the Group's assessment of expected credit
losses is inherently subjective due to the forward-looking nature
of the assessments. At 30 September 2020, trade receivable balances
have increased as a result of unpaid rent and service charge
reflecting the impact of Covid-19 on our customers and the
Government's ongoing rent collections moratorium. Provisions for
expected credit losses have therefore also increased, with a charge
of GBP87m (Group and share of joint ventures) recognised in the
income statement in the period.
The Group's approach to determining expected credit losses
remains consistent with that described in the annual financial
statements for the year ended 31 March 2020 and assessments
continue to be made on a customer by customer basis. As such, any
changes in individual customer credit ratings, payment behaviours,
actual or expected insolvency filings or company voluntary
arrangements, as well as any agreements reached in allocating our
customer support fund, could result in a change in the appropriate
level of provisioning. A 10% increase/decrease in the charge in the
period would result in a GBP9m decrease/increase in revenue profit
and an equivalent increase/reduction in the Group's loss after
tax.
3. Segmental information
==========================
The Group's operations are managed across four operating
segments, being Central London, Regional retail, Urban
opportunities and Subscale sectors.
The Central London segment includes all assets geographically
located within central London. Regional retail includes all
regional shopping centres and shops outside London and our outlets.
The Urban opportunities segment includes those assets where we see
the most potential for capital investment. Subscale sectors mainly
includes assets that will not be a focus for capital investment and
consists of leisure and hotel assets and retail parks.
In the year ended 31 March 2020, we merged our London Portfolio
and Retail Portfolio and amended our reporting to the Executive
Committee (ExecCom) to reflect the predominant use class of our
assets, grouped into Office, Retail and Specialist. Subsequently,
during the six months ended 30 September 2020, we have merged these
three segments into four new reporting segments to support our new
strategy and better reflect the way the business is now being
managed. The comparative year has been presented in the new format
and a reconciliation to the previous presentation has been provided
on our website.
Management has determined the Group's operating segments based
on the information reviewed by Senior Management to make strategic
decisions. During the year, the chief operating decision maker was
ExecCom, which comprised the Executive Directors, the Group General
Counsel and Company Secretary and the Group HR 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.
The Group's primary measure of underlying profit before tax is
revenue profit. However, Segment net rental income is the lowest
level to which the profit arising from the ongoing operations of
the Group is analysed between the four segments. The indirect
costs, which are predominantly staff costs, are all treated as
indirect expenses and are not allocated to individual segments.
The Group manages its financing structure, with the exception of
joint ventures, on a pooled basis. Individual joint ventures may
have specific financing arrangements in place. Debt facilities and
finance expenses, including those of joint ventures, are managed
centrally and are therefore not attributed to a particular segment.
Unallocated income and expenses are items incurred centrally which
are not directly attributable to one of the segments.
All items in the segmental information note are presented on a
proportionate basis. A reconciliation from the Group income
statement to the information presented in the segmental information
note is included in table 29.
Six months ended Six months ended
30 September 2020 30 September 2019
Revenue profit Central Regional Urban Subscale Central Regional Urban Subscale
London retail opps sectors Total London retail opps sectors Total
----------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Rental income 154 84 13 42 293 161 100 14 59 334
Finance lease interest 4 - - - 4 4 - - - 4
---------------------------- ------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Gross rental income (before
rents payable) 158 84 13 42 297 165 100 14 59 338
Rents payable(1) (2) (2) - - (4) (2) (4) - - (6)
---------------------------- ------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Gross rental income (after
rents payable) 156 82 13 42 293 163 96 14 59 332
------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Service charge income 20 18 3 - 41 25 22 3 - 50
Service charge expense (20) (20) (3) - (43) (25) (23) (3) (1) (52)
------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Net service charge expense - (2) - - (2) - (1) - (1) (2)
Other property related
income 10 5 1 1 17 7 6 1 1 15
Direct property expenditure (11) (12) (3) (4) (30) (13) (15) (3) (3) (34)
Bad and doubtful debts
expense(2) (8) (44) (6) (29) (87) (1) (1) - - (2)
Segment net rental income 147 29 5 10 191 156 85 12 56 309
Other income 1 1
Indirect expense (35) (33)
Depreciation (3) (3)
---------------------------- ------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Revenue profit before
interest 154 274
Finance income 8 7
Finance expense (39) (49)
Joint venture finance
expense (8) (7)
---------------------------- ------- -------- ----- -------- ----- ------- -------- ----- -------- -----
Revenue profit 115 225
---------------------------- ------- -------- ----- -------- ----- ------- -------- ----- -------- -----
1. Included within rents payable is lease interest payable of
GBP2m (2019: GBP1m) for the Central London segment.
2. Includes GBP16m (2019: GBPnil) of provisions related to
future rent. An additional GBP23m of bad and doubtful debts expense
relating to rental income for the period was recognised in the year
ended 31 March 2020.
Reconciliation of revenue profit Six months ended Six months ended
to loss before tax 30 September 30 September 2019
2020
Total Total
GBPm GBPm
Revenue profit 115 225
Capital and other items
Valuation and profit on disposals
----- -----
Net deficit on revaluation of investment
properties (945) (368)
(Loss)/profit on disposal of trading properties (1) 1
(946) (367)
Net finance expense (excluded from revenue
profit)
----- -----
Fair value movement on interest-rate swaps (5) (5)
Premium and fees on redemption of medium
term notes (MTNs) - (1)
Other net finance income 1 2
----- -----
(4) (4)
Other
----- -----
Profit from long-term development contracts - 2
Other - (3)
----- -----
- (1)
Loss before tax (835) (147)
-------------------------------------------------------- ----- ---- ---- ---- ---- -----
4. Performance measures
=========================
In the tables below, we present earnings per share and net
assets per share calculated in accordance with IFRS, together with
our own adjusted measure and certain measures defined by the
European Public Real Estate Association (EPRA), which have been
included to assist comparison between European property companies.
Three of the Group's key financial performance measures are
adjusted diluted earnings per share, EPRA net tangible assets per
share and total business return.
Adjusted earnings, which is a tax adjusted measure of revenue
profit, is the basis for the calculation of adjusted earnings per
share. We believe adjusted earnings and adjusted earnings per share
provide further insight into the results of the Group's operational
performance to stakeholders as they focus on the rental income
performance of the business and exclude Capital and other items
which can vary significantly from period to period.
Earnings per share Six months ended Six months ended
30 September 2020 30 September 2019
Loss Loss
for the EPRA Adjusted for the EPRA Adjusted
period earnings earnings period earnings earnings
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- --------- --------- --------- -------- --------- ---------
Loss attributable to shareholders (835) (835) (835) (145) (145) (145)
Taxation - - - - (2) (2)
Valuation and profit on disposals - 946 946 - 367 367
Net finance expense (excluded from
revenue profit) - 4 4 - 4 4
Other - - - - 1 1
-------------------------------------------- --------- --------- --------- -------- --------- ---------
(Loss)/profit used in per share calculation (835) 115 115 (145) 225 225
-------------------------------------------- --------- --------- --------- -------- --------- ---------
IFRS EPRA Adjusted IFRS EPRA Adjusted
-------------------------------------------- --------- --------- --------- -------- --------- ---------
Basic (loss)/earnings per share (112.8)p 15.5p 15.5p (19.6)p 30.4p 30.4p
Diluted (loss)/earnings per share(1) (112.8)p 15.5p 15.5p (19.6)p 30.4p 30.4p
-------------------------------------------- --------- --------- --------- -------- --------- ---------
1. In the periods ended 30 September 2020 and 30 September 2019,
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 30 September 2020 31 March 2020
EPRA EPRA EPRA EPRA
Net assets NDV NTA Net assets NDV NTA
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ---------- ------- ------- ---------- ------ ------
Net assets attributable to shareholders 7,904 7,904 7,904 8,750 8,750 8,750
Excess of fair value over net investment
in finance leases book value - 92 92 - 90 90
Deferred tax liability on intangible
asset - - 1 - - 1
Goodwill on deferred tax liability - (1) (1) - (1) (1)
Other intangible assets - - (7) - - (7)
Fair value of interest-rate swaps - - 6 - - 1
Excess of fair value of debt over
book value (note 14) - (338) - - (274) -
Net assets used in per share calculation 7,904 7,657 7,995 8,750 8,565 8,834
----------------------------------------- ---------- ------- ------- ---------- ------ ------
IFRS EPRA EPRA IFRS EPRA EPRA
NDV NTA NDV NTA
Net assets per share 1,068p n/a n/a 1,182p n/a n/a
Diluted net assets per share 1,067p 1,033p 1,079p 1,181p 1,156p 1,192p
----------------------------------------- ---------- ------- ------- ---------- ------ ------
Number of shares Six months
ended Six months
30 September ended
2020 30 September
weighted 30 September 2019 weighted 31 March
average 2020 average 2020
million million million million
--------------------------------- ------------- ------------- -------------- --------
Ordinary shares 751 751 751 751
Treasury shares (10) (10) (10) (10)
Own shares (1) (1) (1) (1)
--------------------------------- ------------- ------------- -------------- --------
Number of shares - basic 740 740 740 740
Dilutive effect of share options 1 1 1 1
--------------------------------- ------------- ------------- -------------- --------
Number of shares - diluted 741 741 741 741
--------------------------------- ------------- ------------- -------------- --------
Total business return is calculated as the cash dividends per
share paid in the period plus the change in EPRA NTA per share,
divided by the opening EPRA NTA per share. We consider this to be a
useful measure for shareholders as it gives an indication of the
total return on equity over the period.
Total business return based on EPRA Six months ended Six months ended
NTA 30 September 2020 30 September 2019(1)
pence pence
-------------------------------------- ------------------ ---------------------
Decrease in EPRA NTA per share (113) (43)
Dividend paid per share in the period
(note 8) - 23
-------------------------------------- ------------------ ---------------------
Total return (a) (113) (20)
-------------------------------------- ------------------ ---------------------
EPRA NTA per share at the beginning
of the period (b) 1,192 1,348
Total business return (a/b) -9.5% -1.5%
-------------------------------------- ------------------ ---------------------
1. Restated for change in net asset metric from EPRA net assets
to EPRA NTA. Total business return at 30 September 2019 based on
EPRA net assets per share as previously reported was -1.5%.
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.
Six months ended Six months ended
30 September 2020 30 September 2019
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) 284 - 284 311 1 312
Adjustment for lease incentives (16) - (16) (7) - (7)
------------------------------------ ------- ---------- ----- ------- ---------- -----
Rental income 268 - 268 304 1 305
Service charge income 38 - 38 45 - 45
Other property related income 16 - 16 14 - 14
Finance lease interest 4 - 4 4 - 4
Other income 1 - 1 1 - 1
------------------------------------ ------- ---------- ----- ------- ---------- -----
Revenue per the income statement 327 - 327 368 1 369
------------------------------------ ------- ---------- ----- ------- ---------- -----
The following table reconciles revenue per the income statement
to the individual components of revenue presented in note 3.
Six months ended Six months ended
30 September 2020 30 September 2019
Adjustment
Adjustment for non-
for non-wholly wholly
Joint owned Joint owned
Group ventures subsidiaries(1) Total Group ventures subsidiaries(1) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----- --------- ---------------- ----- ----- --------- ---------------- -----
Rental income 268 25 - 293 305 30 (1) 334
Service charge income 38 3 - 41 45 5 - 50
Other property related
income 16 1 - 17 14 1 - 15
Trading property sales
proceeds - 4 - 4 - 4 - 4
Finance lease interest 4 - - 4 4 - - 4
Long-term development
contract income - 1 - 1 - 2 - 2
Other income 1 - - 1 1 - - 1
------------------------- ----- --------- ---------------- ----- ----- --------- ---------------- -----
Revenue in the segmental
information note 327 34 - 361 369 42 (1) 410
------------------------- ----- --------- ---------------- ----- ----- --------- ---------------- -----
1. This represents the interest in X-Leisure which we did not
own, but which is consolidated in the Group numbers. In December
2019, the Group purchased this interest thereby settling the
redemption liability.
6. Costs
==========
All costs are classified within the 'Revenue profit' column of
the income statement, with the exception of the cost of sale of
trading properties, costs arising on long-term development
contracts, amortisation and impairments of intangible assets
arising on business combinations and the non-owned element of the
Group's subsidiaries which are presented in the 'Capital and other
items' column.
Six months ended Six months ended
30 September 2020 30 September 2019
Capital Capital
Revenue and other Revenue and other
profit items Total profit items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------- ---------- ----- ------- ---------- -----
Rents payable 3 - 3 5 - 5
Service charge expense 39 - 39 46 - 46
Direct property expenditure 25 - 25 30 - 30
Bad and doubtful debts expense 77 - 77 1 - 1
Indirect expense 38 - 38 34 - 34
Costs per the income statement 182 - 182 116 - 116
------------------------------- ------- ---------- ----- ------- ---------- -----
The following table reconciles costs per the income statement to
the individual components of costs presented in note 3.
Six months ended Six months ended
30 September 2020 30 September 2019
Adjustment
Adjustment for non-
for non-wholly wholly
Joint owned Joint owned
Group ventures subsidiaries(1) Total Group ventures subsidiaries(1) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ----- --------- ---------------- ----- ----- --------- ---------------- -----
Rents payable 3 1 - 4 5 1 - 6
Service charge expense 39 4 - 43 46 6 - 52
Direct property expenditure 25 5 - 30 30 4 - 34
Bad and doubtful debts
expense(2) 77 10 - 87 1 1 - 2
Indirect expense 38 - - 38 34 2 - 36
Cost of trading property
disposals - 5 - 5 - 3 - 3
Long-term development
contract expenditure - 1 - 1 - - - -
Costs in the segmental
information note 182 26 - 208 116 17 - 133
---------------------------- ----- --------- ---------------- ----- ----- --------- ---------------- -----
1. This represents the interest in X-Leisure which we did not
own, but which was consolidated in the Group numbers. In December
2019, the Group purchased this interest thereby settling the
redemption liability.
2. Includes GBP16m (2019: GBPnil) of provisions related to
future rent. An additional GBP23m of bad and doubtful debts expense
relating to rental income for the period was recognised in the year
ended 31 March 2020.
The Group's costs include employee costs for the period of
GBP30m (2019: GBP28m), of which GBP2m (2019: GBP4m) is within
service charge expense and GBP28m (2019: GBP24m) is within indirect
expense.
7. Net finance expense
========================================= ========================== ==========================
Six months ended Six months ended
30 September 2020 30 September 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 8 - 8 7 - 7
Fair value movement on other derivatives - 1 1 - 1 1
Revaluation of redemption liabilities - - - - 1 1
8 1 9 7 2 9
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Finance expense
Bond and debenture debt (33) - (33) (41) - (41)
Bank and other short-term borrowings (11) - (11) (11) - (11)
Fair value movement on interest-rate
swaps - (5) (5) - (5) (5)
Redemption of medium term notes - - - - (1) (1)
(44) (5) (49) (52) (6) (58)
Interest capitalised in relation
to properties under development 5 - 5 3 - 3
----------------------------------------- ------- ---------- ----- ------- ---------- -----
(39) (5) (44) (49) (6) (55)
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Net finance expense (31) (4) (35) (42) (4) (46)
Joint venture net finance expense (8) (7)
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Net finance expense included in revenue
profit (39) (49)
----------------------------------------- ------- ---------- ----- ------- ---------- -----
Lease interest payable of GBP2m (2019: GBP1m) is included within
rents payable as detailed in note 3.
8. Dividends
======================================= =========================================
Dividends paid Six months ended 30 September
Pence per share 2020 2019
Payment PID Non-PID Total GBPm GBPm
date
---------------------------- --------- ------ ------- ------- ------ ---------
For the year ended 31 March
2019:
12 April
Third interim 2019 11.30 - 11.30 84
25 July
Final 2019 11.65 - 11.65 86
For the year ended 31 March
2020:
Third interim - - - - -
Final - - - - -
---------------------------- --------- ------ ------- ------- ------ ---------
Gross dividends - 170
--------------------------------------- ------ ------- ------- ------ ---------
In light of extreme market uncertainty due to Covid-19, the
Board took the decision to not pay a third interim or final
dividend for the year ended 31 March 2020 (2019: 22.95p or GBP170m
paid in total).
The Board has declared a second interim dividend of 12 .0 p per
ordinary share to be payable wholly as a PID on 4 January 2021 to
shareholders registered at the close of business on 27 November
2020. As the Board did not declare a first quarterly dividend, the
first half dividend will be 12.0 p per share (2019: 23.2p).
A Dividend Reinvestment Plan (DRIP) has been available in
respect of all dividends paid during the period. The last day for
DRIP elections for the second interim dividend is close of business
on 9 December 2020.
9. Net cash generated from operations
==================================================== ============= =============
Reconciliation of operating loss to net cash Six months Six months
generated from operations ended ended
30 September 30 September
2020 2019
GBPm GBPm
---------------------------------------------------- ------------- -------------
Operating loss (800) (101)
Adjustments for:
Net deficit on revaluation of investment properties 824 304
Profit on disposal of investment properties (2) -
Share of loss from joint ventures 123 50
Depreciation 3 3
Rents payable 3 5
Other 3 -
154 261
Changes in working capital:
Increase in receivables (24) (36)
Increase in payables and provisions 3 8
---------------------------------------------------- ------------- -------------
Net cash generated from operations 133 233
---------------------------------------------------- ------------- -------------
10. Investment properties
=========================================== ============= ============== =============
Six months Six months Six months
ended ended ended
30 September 31 March 2020 30 September
2020 2019
GBPm GBPm GBPm
Net book value at the beginning of
the period 11,297 11,851 12,094
Acquisitions 27 16 -
Capital expenditure 105 98 101
Capitalised interest 5 4 3
Net movement in head leases capitalised(1) - 30 -
Disposals (74) (49) -
Net deficit on revaluation of investment
properties (824) (696) (304)
Transfers to trading properties (11) - -
Transfer to non-current assets held
for sale - 43 (43)
------------------------------------------- ------------- -------------- -------------
Net book value at the end of the
period 10,525 11,297 11,851
------------------------------------------- ------------- -------------- -------------
1. See note 14 for details of the amounts payable under head
leases and note 6 for details of the rents payable in the income
statement.
The fair value of investment properties at 30 September 2020 was
determined by the Group's external valuer, CBRE. The valuations are
in line with RICS standards and were arrived at by reference to
market evidence of transactions for similar properties. The
valuations performed by the independent valuer are reviewed
internally by Senior Management and relevant people within the
business. This includes discussions of the assumptions used by the
external valuer, as well as a review of the resulting valuations.
Discussions about the valuation process and results are held
between Senior Management, the Audit Committee and the external
valuer on a half-yearly basis.
The Valuer's report for the six months ended 30 September 2020
contained a 'material uncertainty' clause in relation to the
valuation of the Group's hotel assets due to the continued
uncertainty in the market for those assets at that date caused by
Covid-19. The inclusion of this clause indicates that there is
substantially more uncertainty than normal and therefore a higher
likelihood that the assumptions upon which the external valuer has
based its valuations prove to be inaccurate. Sensitivities to
illustrate the changes in key unobservable inputs on the fair value
of the Group's properties have been included below.
The market value of the Group's investment properties, as
determined by the Group's external valuer, differs from the net
book value presented in the balance sheet due to the Group
presenting tenant finance leases, head leases and lease incentives
separately. The following table reconciles the net book value of
the investment properties to the market value.
30 September 2020 31 March 2020
Group Adjustment Group Adjustment
(excl. for (excl. for
joint Joint proportionate Combined joint Joint proportionate Combined
ventures) ventures(1) share(2) Portfolio ventures) ventures(1) share(2) Portfolio
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ---------- ------------ ------------- ---------- ---------- ------------ ------------- ----------
Market value 11,000 843 - 11,843 11,802 979 - 12,781
Less:
properties
treated
as finance
leases (249) - - (249) (249) - - (249)
Plus: head
leases
capitalised 61 9 - 70 60 9 - 69
Less: tenant
lease
incentives (287) (41) - (328) (316) (42) - (358)
------------ ---------- ------------ ------------- ---------- ---------- ------------ ------------- ----------
Net book
value 10,525 811 - 11,336 11,297 946 - 12,243
------------ ---------- ------------ ------------- ---------- ---------- ------------ ------------- ----------
Net deficit
on
revaluation
of
investment
properties (824) (121) - (945) (1,000) (181) 2 (1,179)
------------ ---------- ------------ ------------- ---------- ---------- ------------ ------------- ----------
1. Refer to note 12 for a breakdown of this amount by entity.
2. This represents the interest in X-Leisure which we did not
own, but which is consolidated in the Group numbers. In December
2019, the Group purchased this additional interest thereby settling
the redemption liability.
The sensitivities below illustrate the impact of changes in key
unobservable inputs (in isolation) on the fair value of the Group's
properties:
Sensitivities 30 September 2020
Impact on valuations Impact on valuations Impact on valuations
of of of
5% change in 25 bps change 5% change in
estimated rental in costs
value equivalent
yield
Market
value Increase Decrease Decrease Increase Decrease Increase
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Total Central London (excluding
developments) 6,793 266 (266) 433 (390) 23 (23)
Total Regional retail
(excluding developments) 1,853 80 (80) 81 (75) 2 (1)
Total Urban opportunities
(excluding developments) 359 16 (14) 19 (18) - -
Total Subscale sectors
(excluding developments) 1,365 52 (48) 56 (50) 1 (1)
Developments: residual
method 630 31 (32) 67 (61) 19 (21)
-------------------------------- ------- ---------- ---------- ---------- ---------- ---------- ----------
Market value at 30 September
2020 - Group 11,000 445 (440) 656 (594) 45 (46)
-------------------------------- ------- ---------- ---------- ---------- ---------- ---------- ----------
11. Trading properties
==================================== ======================== =========== =====
Development
land and infrastructure Residential Total
GBPm GBPm GBPm
------------------------------------ ------------------------ ----------- -----
At 1 April 2019 23 - 23
------------------------------------ ------------------------ ----------- -----
At 30 September 2019 23 - 23
Capital expenditure 1 - 1
------------------------------------ ------------------------ ----------- -----
At 31 March 2020 24 - 24
------------------------------------ ------------------------ ----------- -----
Transfer from investment properties - 11 11
------------------------------------ ------------------------ ----------- -----
At 30 September 2020 24 11 35
------------------------------------ ------------------------ ----------- -----
There were no cumulative impairment provisions in respect of
either Development land and infrastructure or Residential at 30
September 2020 and 31 March 2020.
12. Joint arrangements
========================
The Group's principal joint arrangements are described
below:
Joint ventures Percentage Business Year end Joint venture partner
owned & segment date(1)
voting
rights
----------------------------- ---------- ----------------- ----------- --------------------------------
Held at 30 September
2020
Nova, Victoria(2) 50% Central London 31 March Canada Pension Plan Investment
Board
Southside Limited Partnership 50% Urban 31 March Invesco Real Estate European
opportunities Fund
St. David's Limited 50% Regional 31 December Intu Properties plc
Partnership retail
Westgate Oxford Alliance 50% Regional 31 March The Crown Estate Commissioners
Limited Partnership retail, Subscale
sectors
Harvest(3)(4) 50% Subscale 31 March J Sainsbury plc
sectors
The Ebbsfleet Limited 50% Subscale 31 March Ebbsfleet Property Limited
Partnership(3) sectors
West India Quay Unit 50% Subscale 31 March Schroder Exempt Property
Trust(3)(5) sectors Unit Trust
----------------------------- ---------- ----------------- ----------- ------------------------------
Joint operation Ownership Business Year end Joint operation partners
interest segment date(1)
----------------------------- ---------- ----------------- ----------- ------------------------------
Held at 30 September
2020
Bluewater, Kent 30% Regional 31 March M&G Real Estate and GIC
retail 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
period and reporting date.
2. Nova, Victoria includes the Nova Limited Partnership, Nova
Residential Limited Partnership, Victoria Circle Developer Limited,
Nova GP Limited, Nova Business Manager Limited, Nova Residential
(GP) Limited, Nova Developer Limited, Nova Residential Intermediate
Ltd, Nova Estate Management Company Limited, Nova Nominee 1 Limited
and Nova Nominee 2 Limited. On 19 June 2020, the Group acquired
Nova's interests in n2 and Nova Place from the joint venture.
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. 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 purchased the remaining interest thereby settling
the redemption liability on that date. The Group owned 100% of
X-Leisure at 30 September 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 holds
development land as a trading property and Harvest which is engaged
in long-term development contracts. The activities of all the
Group's joint arrangements are therefore strategically important to
the business activities of the Group.
All joint ventures are registered in England and Wales with the
exception of Southside Limited Partnership and West India Quay Unit
Trust which are registered in Jersey.
Joint ventures Six months ended 30 September 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) 29 5 16 16 3 69 34
----------------------------------- --------- ------------ ------------ ------------ ----- ------ ------
Gross rental income (after
rents payable) 18 5 12 11 2 48 24
----------------------------------- --------- ------------ ------------ ------------ ----- ------ ------
Net rental income 16 1 1 1 - 19 9
----------------------------------- --------- ------------ ------------ ------------ ----- ------ ------
Revenue profit before
interest 16 - - 1 - 17 9
Finance expense (13) (3) - - - (16) (8)
--------- ------------ ------------ ------------ ----- ------ ------
Net finance expense (13) (3) - - - (16) (8)
Revenue profit 3 (3) - 1 - 1 1
Capital and other items
Net deficit on revaluation
of investment properties (22) (38) (107) (67) (8) (242) (121)
Loss on disposal of investment
properties (4) - - - - (4) (2)
Loss on disposal of trading
properties (1) - - - - (1) (1)
Loss before tax (24) (41) (107) (66) (8) (246) (123)
----------------------------------- --------- ------------ ------------ ------------ ----- ------ ------
Post-tax loss (24) (41) (107) (66) (8) (246) (123)
----------------------------------- --------- ------------ ------------ ------------ ----- ------ ------
Total comprehensive loss (24) (41) (107) (66) (8) (246) (123)
----------------------------------- --------- ------------ ------------ ------------ ----- ------ ------
50% 50% 50% 50% 50% 50%
Group share of loss before
tax (12) (21) (53) (33) (4) (123) (123)
----------------------------------- --------- ------------ ------------ ------------ ----- ------ ------
Group share of post-tax
loss (12) (21) (53) (33) (4) (123) (123)
----------------------------------- --------- ------------ ------------ ------------ ----- ------ ------
Group share of total comprehensive
loss (12) (21) (53) (33) (4) (123) (123)
----------------------------------- --------- ------------ ------------ ------------ ----- ------ ------
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 Six months ended 30 September 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) 32 6 22 18 5 83 42
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Gross rental income (after
rents payable) 19 6 17 14 1 57 29
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Net rental income 17 5 13 11 1 47 24
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Revenue profit before
interest 16 5 12 10 1 44 22
Finance expense (11) (3) - - - (14) (7)
Net finance expense (11) (3) - - - (14) (7)
Revenue profit 5 2 12 10 1 30 15
Capital and other items
Net deficit on revaluation
of investment properties (4) (30) (52) (46) (1) (133) (66)
Movement in impairment
of trading properties 1 - - - - 1 -
Profit on disposal of
trading properties 1 - - - - 1 1
Profit on long-term development
contracts - - - - 5 5 2
Profit/(loss) before tax 3 (28) (40) (36) 5 (96) (48)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Taxation - - - - (3) (3) (2)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Post-tax profit/(loss) 3 (28) (40) (36) 2 (99) (50)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total comprehensive income/(loss) 3 (28) (40) (36) 2 (99) (50)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
50% 50% 50% 50% 50% 50%
Group share of profit/(loss)
before tax 1 (14) (20) (18) 3 (48) (48)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Group share of post-tax
profit/(loss) 1 (14) (20) (18) 1 (50) (50)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Group share of total comprehensive
income/(loss) 1 (14) (20) (18) 1 (50) (50)
----------------------------------- --------- ------------ ------------ ------------ ----- ----- ------
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 30 September
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) 799 154 320 291 59 1,623 811
--------- ------------ ------------ ------------ ----- ------ ------
Non-current assets 799 154 320 291 59 1,623 811
Cash and cash equivalents 25 2 9 13 4 53 26
Other current assets 75 5 14 17 2 113 57
--------- ------------ ------------ ------------ ----- ------ ------
Current assets 100 7 23 30 6 166 83
--------------------------- --------- ------------ ------------ ------------ ----- ------ ------
Total assets 899 161 343 321 65 1,789 894
Trade and other payables
and provisions (20) (8) (11) (12) (1) (52) (26)
--------- ------------ ------------ ------------ ----- ------ ------
Current liabilities (20) (8) (11) (12) (1) (52) (26)
Non-current liabilities (171) (145) (16) - - (332) (166)
--------- ------------ ------------ ------------ ----- ------ ------
Non-current liabilities (171) (145) (16) - - (332) (166)
--------------------------- --------- ------------ ------------ ------------ ----- ------ ------
Total liabilities (191) (153) (27) (12) (1) (384) (192)
Net assets 708 8 316 309 64 1,405 702
--------------------------- --------- ------------ ------------ ------------ ----- ------ ------
Market value of investment
properties(1) 861 154 310 302 60 1,687 843
--------------------------- --------- ------------ ------------ ------------ ----- ------ ------
Net cash/(debt) 25 - (7) 13 4 35 17
--------------------------- --------- ------------ ------------ ------------ ----- ------ ------
Joint ventures 31 March 2020
Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total Total
Group
Balance sheet 100% 100% 100% 100% 100% 100% share
---------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Investment properties(1) 849 192 425 358 67 1,891 946
--------- ------------ ------------ ------------ ----- ----- ------
Non-current assets 849 192 425 358 67 1,891 946
Cash and cash equivalents 17 2 12 10 6 47 23
Other current assets 75 3 13 19 - 110 55
--------- ------------ ------------ ------------ ----- ----- ------
Current assets 92 5 25 29 6 157 78
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total assets 941 197 450 387 73 2,048 1,024
Trade and other payables
and provisions (33) (4) (12) (12) (1) (62) (31)
--------- ------------ ------------ ------------ ----- ----- ------
Current liabilities (33) (4) (12) (12) (1) (62) (31)
Non-current liabilities (179) (144) (16) - - (339) (169)
--------- ------------ ------------ ------------ ----- ----- ------
Non-current liabilities (179) (144) (16) - - (339) (169)
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Total liabilities (212) (148) (28) (12) (1) (401) (200)
Net assets 729 49 422 375 72 1,647 824
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Market value of investment
properties(1) 908 193 417 372 68 1,958 979
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
Net cash/(debt) 17 2 (4) 10 6 31 15
--------------------------- --------- ------------ ------------ ------------ ----- ----- ------
1. The difference between the book value and the market value of
investment properties is the amount recognised in respect of lease
incentives, head leases capitalised, and properties treated as
finance leases, where applicable.
Joint ventures Westgate
Southside St. David's Oxford
Nova, Limited Limited Alliance
Victoria Partnership Partnership Partnership Other Total
Group
Net investment 50% 50% 50% 50% 50% share
----------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- --------- ------------ ------------ ------------ ----- ------
At 1 April 2019 359 61 277 258 76 1,031
Total comprehensive income/(loss) 1 (14) (20) (18) 1 (50)
Cash contributed 13 - - - - 13
Cash distributions - (1) (5) (4) (28) (38)
---------------------------------- --------- ------------ ------------ ------------ ----- ------
At 30 September 2019 373 46 252 236 49 956
---------------------------------- --------- ------------ ------------ ------------ ----- ------
Total comprehensive (loss)/income (6) (21) (39) (41) 6 (101)
Cash distributions (2) - (2) (8) (19) (31)
At 31 March 2020 365 25 211 187 36 824
---------------------------------- --------- ------------ ------------ ------------ ----- ------
Total comprehensive loss (12) (21) (53) (33) (4) (123)
Non-cash contributions 8 - - - - 8
Cash distributions (7) - - - - (7)
At 30 September 2020 354 4 158 154 32 702
---------------------------------- --------- ------------ ------------ ------------ ----- ------
13. Capital structure
30 September 2020 31 March 2020
Joint Joint
Group ventures Combined Group ventures Combined
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------ --------- -------- ------- --------- --------
Property portfolio
Market value of investment
properties 11,000 843 11,843 11,802 979 12,781
Trading properties and long-term
contracts 35 - 35 24 3 27
Total property portfolio
(a) 11,035 843 11,878 11,826 982 12,808
---------------------------------- ------ --------- -------- ------- --------- --------
Net debt
Borrowings 3,966 9 3,975 5,332 8 5,340
Monies held in restricted
accounts and deposits (9) - (9) (9) - (9)
Bank overdraft/(cash and
cash equivalents) 2 (26) (24) (1,345) (23) (1,368)
Fair value of interest-rate
swaps 6 - 6 1 - 1
Fair value of foreign exchange
swaps and forwards (2) - (2) (37) - (37)
---------------------------------- ------ --------- -------- ------- --------- --------
Net debt (b) 3,963 (17) 3,946 3,942 (15) 3,927
Less: Fair value of interest-rate
swaps (6) - (6) (1) - (1)
Adjusted net debt (c) 3,957 (17) 3,940 3,941 (15) 3,926
---------------------------------- ------ --------- -------- ------- --------- --------
Adjusted total equity
Total equity (d) 7,904 - 7,904 8,750 - 8,750
Fair value of interest-rate
swaps 6 - 6 1 - 1
Adjusted total equity (e) 7,910 - 7,910 8,751 - 8,751
---------------------------------- ------ --------- -------- ------- --------- --------
Gearing (b/d) 50.1% 49.9% 45.1% 44.9%
Adjusted gearing (c/e) 50.0% 49.8% 45.0% 44.9%
Group LTV (c/a) 35.9% 33.2% 33.3% 30.7%
Security Group LTV 35.0% 32.5%
Weighted average cost of
debt 2.1% 2.1% 1.8% 1.8%
---------------------------------- ------ --------- -------- ------- --------- --------
14. Borrowings
=================================================================================================== ================
30 September 2020 31 March 2020
Effective Nominal/ Nominal/
interest notional Fair Book notional Fair Book
Secured/ Fixed/ rate value value value value value value
unsecured floating % GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- ---------- --------- --------- ------ ------ --------- ------ ------
Current borrowings
Commercial paper
LIBOR +
Sterling Unsecured Floating margin 14 14 14 4 4 4
LIBOR +
Euro Unsecured Floating margin 832 832 832 796 796 796
LIBOR +
US Dollar Unsecured Floating margin 233 233 233 177 177 177
------------------------- ----------- ---------- --------- --------- ------ ------ --------- ------ ------
Total current borrowings 1,079 1,079 1,079 977 977 977
-------------------------------------------------- --------- --------- ------ ------ --------- ------ ------
Non-current borrowings
Medium term notes
(MTN)
--------- ------ ------ --------- ------ ------
A10 4.875% MTN due
2025 Secured Fixed 5.0 10 11 10 10 11 10
A12 1.974% MTN due
2026 Secured Fixed 2.0 400 411 399 400 406 399
A4 5.391% MTN due
2026 Secured Fixed 5.4 17 20 17 17 20 17
A5 5.391% MTN due
2027 Secured Fixed 5.4 95 113 94 95 113 94
A6 5.376% MTN due
2029 Secured Fixed 5.4 65 84 65 65 84 65
A16 2.375% MTN due
2029 Secured Fixed 2.5 350 372 347 350 366 347
A13 2.399% MTN due
2031 Secured Fixed 2.4 300 322 299 300 314 299
A7 5.396% MTN due
2032 Secured Fixed 5.4 81 112 80 81 111 80
A11 5.125% MTN due
2036 Secured Fixed 5.1 50 71 50 50 71 50
A14 2.625% MTN due
2039 Secured Fixed 2.6 500 549 494 500 521 494
A15 2.750% MTN due
2059 Secured Fixed 2.7 500 574 495 500 542 495
--------- ------ ------ --------- ------ ------
2,368 2,639 2,350 2,368 2,559 2,350
Syndicated and bilateral LIBOR +
bank debt Secured Floating margin 476 476 476 1,944 1,944 1,944
Amounts payable under
head leases Unsecured Fixed 4.6 61 110 61 61 126 61
------------------------- ----------- ---------- --------- --------- ------ ------ --------- ------ ------
Total non-current
borrowings 2,905 3,225 2,887 4,373 4,629 4,355
-------------------------------------------------- --------- --------- ------ ------ --------- ------ ------
Total borrowings 3,984 4,304 3,966 5,350 5,606 5,332
-------------------------------------------------- --------- --------- ------ ------ --------- ------ ------
Reconciliation of the movement in borrowings Six months ended
30 September Year ended
2020 31 March 2020
GBPm GBPm
--------------------------------------------- ---------------- --------------
At the beginning of the period 5,332 3,781
Proceeds from new borrowings 102 1,701
Repayment of bank debt (1,468) -
Repayment of MTNs - (47)
Redemption of MTNs - (196)
Foreign exchange movement on non-Sterling
borrowings - 60
Other - 33
At the end of the period 3,966 5,332
--------------------------------------------- ---------------- --------------
Reconciliation of movements in liabilities Six months ended 30
arising from financing activities September 2020
Non-cash changes
At the
At the Other end
beginning Foreign changes of
of the Cash exchange in fair Other the
period flows movements values changes period
GBPm GBPm GBPm GBPm GBPm GBPm
Borrowings 5,332 (1,366) - - - 3,966
Derivative financial instruments (36) 38 (3) 5 - 4
--------------------------------- ---------- ------- ---------- -------- -------- -------
5,296 (1,328) (3) 5 - 3,970
--------------------------------- ---------- ------- ---------- -------- -------- -------
Year ended 31 March
2020
--------------------------------- ---------- ------- ---------------------------------------
Borrowings 3,781 1,458 60 - 33 5,332
Derivative financial instruments 16 1 (60) 7 - (36)
--------------------------------- ---------- ------- ---------- -------- -------- -------
3,797 1,459 - 7 33 5,296
--------------------------------- ---------- ------- ---------- -------- -------- -------
Medium term notes
The MTNs are secured on the fixed and floating pool of assets of
the Security Group. The Security Group includes investment
properties, development properties, the X-Leisure fund, and the
Group's investment in Westgate Oxford Alliance Limited Partnership,
Nova, Victoria, St. David's Limited Partnership and Southside
Limited Partnership, in total valued at GBP11.2bn at 30 September
2020 (31 March 2020: GBP12.1bn). The secured debt structure has a
tiered operating covenant regime which gives the Group substantial
flexibility when the loan-to-value and interest cover in the
Security Group are less than 65% and more than 1.45x respectively.
If these limits are exceeded, the operating environment becomes
more restrictive with provisions to encourage a reduction in
gearing. The interest rate of each MTN is fixed until the expected
maturity, being two years before the legal maturity date of the
MTN. The interest rate for the last two years may either become
floating on a LIBOR basis plus an increased margin (relative to
that at the time of issue), or subject to a fixed coupon uplift,
depending on the terms and conditions of the specific notes.
The effective interest rate is based on the coupon paid and
includes the amortisation of issue costs. The MTNs are listed on
the Irish Stock Exchange and their fair values are based on their
respective market prices.
During the period, the Group did not purchase any MTNs (31 March 2020: GBP196m).
Syndicated and bilateral
bank debt Authorised Drawn Undrawn
Maturity
as at 30
September 30 Sept 31 March 30 Sept 31 March 30 Sept 31 March
2020 2020 2020 2020 2020 2020 2020
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- ------- -------- ------- -------- ------- --------
Syndicated debt 2025 2,490 2,490 415 1,797 2,075 693
Bilateral debt 2024-25 225 225 61 147 164 78
------------------------- ----------- ------- -------- ------- -------- ------- --------
2,715 2,715 476 1,944 2,239 771
------------------------------------- ------- -------- ------- -------- ------- --------
At 30 September 2020, the Group's committed revolving facilities
totalled GBP2,715m (31 March 2020: GBP2,715m).
All syndicated and bilateral facilities are committed and
secured on the assets of the Security Group. During the period
ended 30 September 2020, the amounts drawn under the Group's
facilities decreased by GBP1,468 m.
The terms of the Security Group funding arrangements require
undrawn facilities to be reserved where syndicated and bilateral
facilities mature within one year, or when commercial paper is
issued. The total amount of cash and available facilities at 30
September 2020 was GBP1,158m (31 March 2020: GBP1,139m).
Fair values
The fair value of the amounts payable under the Group's lease
obligations, using a discount rate of 2.1% (31 March 2020: 1.8%),
is GBP110m (31 March 2020: GBP126m). The fair value of the Group's
net investment in tenant finance leases, calculated by the Group's
external valuer by applying a weighted average equivalent yield of
4.7% (31 March 2020: discount rate of 1.8%), is GBP249m (31 March
2020: GBP247m).
The fair values of any floating rate financial liabilities are
assumed to be equal to their nominal value. The fair values of the
MTNs fall within Level 1 of the fair value hierarchy, the
syndicated and bilateral facilities, commercial paper,
interest-rate swaps and foreign exchange swaps fall within Level 2,
and the amounts payable and receivable under leases fall within
Level 3.
The fair values of the financial instruments have been
determined by reference to relevant market prices, where available.
The fair values of the Group's outstanding interest-rate swaps have
been estimated by calculating the present value of future cash
flows, using appropriate market discount rates. These valuation
techniques fall within Level 2.
The fair value of the other investments is calculated by
reference to the net assets of the underlying entity. The valuation
is not based on observable market data and therefore the other
investments are considered to fall within Level 3.
15. Contingencies
===================
The Group has contingent liabilities in respect of legal claims,
guarantees, and warranties arising in the ordinary course of
business. It is not anticipated that any material liabilities will
arise from the contingent liabilities.
16. Related party transactions
================================
There have been no related party transactions during the period
that require disclosure under Section 4.2.8 (R) of the Disclosure
and Transparency Rules or under IAS 34 Interim Financial
Reporting.
17. Events after the reporting period
=======================================
There were no significant events occurring after the reporting
period, but before the financial statements were authorised for
issue.
Alternative performance measures
Table 15: Alternative performance measures
The Group has applied the European Securities and Markets
Authority (ESMA) 'Guidelines on Alternative Performance Measures'
in these results. In the context of these results, an alternative
performance measure (APM) is a financial measure of historical or
future financial performance, position or cash flows of the Group
which is not a measure defined or specified in IFRS.
The table below summarises the APMs included in these results,
where the definitions and reconciliations of these measures can be
found and where further discussion is included. The definitions of
all APMs are included in the Glossary and further discussion of
these measures can be found in the Financial review.
Alternative performance 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
Table 16: EPRA net asset measures
EPRA net asset measures 30 September
2020
EPRA NRV EPRA NTA EPRA NDV
GBPm GBPm GBPm
--------------------------------------------- -------- -------- -------------
Net assets attributable to shareholders 7,904 7,904 7,904
Excess of fair value over net investment
in finance lease book value 92 92 92
Deferred tax liability on intangible asset 1 1 -
Goodwill on deferred tax liability (1) (1) (1)
Other intangible assets - (7) -
Fair value of interest-rate swaps 6 6 -
Excess of fair value of debt over book value
(note 14) - - (338)
Purchasers' costs(1) 712 - -
--------------------------------------------- -------- -------- -------------
Net assets used in per share calculation 8,714 7,995 7,657
--------------------------------------------- -------- -------- -------------
EPRA NRV EPRA NTA EPRA NDV
--------------------------------------------- -------- -------- -------------
Diluted net assets per share 1,176p 1,079p 1,033p
--------------------------------------------- -------- -------- ---------------
31 March
2020
EPRA NRV EPRA NTA EPRA NDV
GBPm GBPm GBPm
--------------------------------------------- -------- -------- --------
Net assets attributable to shareholders 8,750 8,750 8,750
Excess of fair value over net investment
in finance lease book value 90 90 90
Deferred tax liability on intangible asset 1 1 -
Goodwill on deferred tax liability (1) (1) (1)
Other intangible assets - (7) -
Fair value of interest-rate swaps 1 1 -
Excess of fair value of debt over book value
(note 14) - - (274)
Purchasers' costs(1) 768 - -
--------------------------------------------- -------- -------- --------
Net assets used in per share calculation 9,609 8,834 8,565
--------------------------------------------- -------- -------- --------
EPRA NRV EPRA NTA EPRA NDV
--------------------------------------------- -------- -------- --------
Diluted net assets per share 1,297p 1,192p 1,156p
--------------------------------------------- -------- -------- --------
1. EPRA NTA and EPRA NDV reflect IFRS values which are net of
purchasers' costs. Purchasers' costs are added back when
calculating EPRA NRV.
Table 17: EPRA performance measures
30 September 2020
Definition for EPRA measure Landsec EPRA
Measure Notes measure Measure
--------------------- ----------------------------------------- ------ ---------- ----------
Adjusted earnings Recurring earnings from core 4 GBP115m GBP115m
operational activity
Adjusted earnings Adjusted earnings per weighted
per share number of ordinary shares 4 15.5p 15.5p
Adjusted diluted earnings per
Adjusted diluted weighted number of ordinary
earnings per share shares 4 15.5p 15.5p
EPRA net tangible Net assets adjusted to exclude 4 GBP7,995m GBP7,995m
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 1,079p 1,079p
EPRA net disposal Net assets adjusted to exclude 4 GBP7,657m GBP7,657m
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 1,033p 1,033p
Table
--------------------- ----------------------------------------- ------ ---------- ----------
ERV of vacant space as a %
of ERV of Combined Portfolio
Voids/vacancy rate excluding the development programme(1) 18 3.4% 3.3%
Annualised rental income less
non-recoverable costs as a
Net initial yield % of market value plus assumed
(NIY) purchasers' costs(2) 20 4.9% 4.8%
NIY adjusted for rent free
Topped-up NIY periods(2) 20 5.0% 4.9%
Total costs as a percentage
of gross rental income (including
Cost ratio direct vacancy costs)(3) 16.8% 46.9%
Total costs as a percentage
of gross rental income (excluding
direct vacancy costs)(3) n/a 44.8%
--------------------------------------------------------------- ------ ---------- ----------
1. Our measure reflects voids in our like-for-like portfolio
only. The EPRA measure reflects voids in the Combined Portfolio
excluding only properties under development.
2. Our NIY and Topped-up NIY relate to the Combined Portfolio,
excluding properties in the development programme that have not yet
reached practical completion, and are calculated by our external
valuer. EPRA NIY and EPRA Topped-up NIY calculations are consistent
with ours but exclude only properties currently under development.
Topped-up NIY reflects adjustments of GBP14m and GBP14m for rent
free periods and other incentives for the Landsec measure and EPRA
measure, respectively.
3. The EPRA cost ratio is calculated based on gross rental
income after rents payable and excluding costs recovered through
rents but not separately invoiced of GBP3m, whereas our measure is
based on gross rental income before rents payable and costs
recovered through rents but not separately invoiced. We do not
calculate a cost ratio excluding direct vacancy costs as we do not
consider this to be helpful. Provisions for bad and doubtful debts
have been excluded from our cost ratio.
Table 18: EPRA vacancy rate
The EPRA vacancy rate is based on the ratio of the estimated
market rent for vacant properties versus total estimated market
rent, for the Combined Portfolio excluding properties under
development. There are no significant distorting factors
influencing the EPRA vacancy rate.
30 September
2020
GBPm
ERV of vacant properties 22
ERV of Combined Portfolio excluding properties under development 664
----------------------------------------------------------------- ------------
EPRA vacancy rate (%) 3.3%
----------------------------------------------------------------- ------------
Table 19: Change in net rental income from the like-for-like
portfolio (before provisions for bad and doubtful debts)
2020 2019 Change
-----------
GBPm GBPm GBPm %
-------------------- ---- ---- ---- -----
Central London 150 152 (2) -1.3
Regional retail 71 84 (13) -15.5
Urban opportunities 11 12 (1) -8.3
Subscale sectors 39 54 (15) -27.8
-------------------- ---- ---- ---- -----
271 302 (31) -10.3
-------------------- ---- ---- ---- -----
Table 20: EPRA Net initial yield (NIY) and Topped-up NIY
30 September
2020
GBPm
Combined Portfolio 11,843
Trading properties 36
Less: Properties under development, trading properties under
development and land (678)
-------------------------------------------------------------------- ------------
Like-for-like investment property portfolio, proposed and completed
developments, and completed trading properties 11,201
Plus: Allowance for estimated purchasers' costs 675
-------------------------------------------------------------------- ------------
Grossed-up completed property portfolio valuation (b) 11,876
-------------------------------------------------------------------- ------------
EPRA Annualised cash passing rental income(1) 590
Net service charge expense(2) (4)
Void costs and other deductions (18)
EPRA Annualised net rent(1) (a) 568
Plus: Rent-free periods and other lease incentives 14
Topped-up annualised net rents (c) 582
-------------------------------------------------------------------- ------------
EPRA NIY (a/b) 4.8%
-------------------------------------------------------------------- ------------
EPRA Topped-up NIY (c/b) 4.9%
-------------------------------------------------------------------- ------------
1. EPRA Annualised cash passing rental income and EPRA
Annualised net rent as calculated by the Group's external
valuer.
2. Including costs recovered through rents but not separately invoiced.
Table 21: Acquisitions, disposals and capital expenditure
Six months Six months
ended ended
30 September 30 September
2020 2019
Investment properties Group
(excl.
joint Joint Combined Combined
ventures) ventures Portfolio Portfolio
GBPm GBPm GBPm GBPm
------------------------------------------------ ---------- --------- ------------- -------------
Net book value at the beginning of the period 11,297 946 12,243 13,177
Acquisitions 27 - 27 -
Capital expenditure 105 1 106 103
Capitalised interest 5 - 5 3
Disposals (74) (15) (89) -
Transfers to trading property (11) - (11) -
Net deficit on revaluation of investment
properties (824) (121) (945) (368)
Transfer of non-current assets held for
sale - - - (43)
------------------------------------------------ ---------- --------- ------------- -------------
Net book value at the end of the period 10,525 811 11,336 12,872
------------------------------------------------ ---------- --------- ------------- -------------
Profit/(loss) on disposal of investment
properties 2 (2) - -
------------------------------------------------ ---------- --------- ------------- -------------
Trading properties GBPm GBPm GBPm GBPm
------------------------------------------------ ---------- --------- ------------- -------------
Net book value at the beginning of the period 24 3 27 41
Transfers from investment property 11 - 11 -
Disposals - (3) (3) (3)
Net book value at the end of the period 35 - 35 38
------------------------------------------------ ---------- --------- ------------- -------------
(Loss)/profit on disposal of trading properties - (1) (1) 1
------------------------------------------------ ---------- --------- ------------- -------------
Acquisitions, development and other Investment Trading Combined Combined
capital expenditure properties(1) properties Portfolio Portfolio
GBPm GBPm GBPm GBPm
------------------------------------ -------------- ----------- ---------- ----------
Acquisitions(2) 27 - 27 -
Development capital expenditure(3) 85 - 85 85
Other capital expenditure 21 - 21 18
Capitalised interest 5 - 5 3
------------------------------------- -------------- ----------- ---------- ----------
Acquisitions, development and other
capital expenditure 138 - 138 106
------------------------------------- -------------- ----------- ---------- ----------
Disposals GBPm GBPm
----------------------------------------------------- ----------- ---------- ----------
Net book value - investment property disposals 89 -
Net book value - trading property disposals 3 3
(Loss)/profit on disposal - trading properties (1) 1
Total disposal proceeds 91 4
----------------------------------------------------- ----------- ---------- ----------
1. See EPRA analysis of capital expenditure table 22 for further details.
2. Properties acquired in the period.
3. Development capital expenditure for investment properties
comprises expenditure on the development pipeline and completed
developments.
Table 22: EPRA analysis of capital expenditure
Six months ended 30 September 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
----------------------- -------- --------------- -------------- ----------- --------------- ---------------- ------ ----------- ----------- ----------- -----------
Central London
Offices 27 83 - 9 - 9 5 124 1 123
London retail - 1 - 1 - 1 - 2 - 2
Other central London - 1 - - - - - 1 - 1
Total Central London 27 85 - 10 - 10 5 127 1 126
--------------------------------- --------------- -------------- ----------- --------------- ---------------- ------ ----------- ----------- ----------- -----------
Regional retail
Regional shopping centres
and shops - - - 4 - 4 - 4 - 4
Outlets - - - 2 - 2 - 2 - 2
Total Regional retail - - - 6 - 6 - 6 - 6
--------------------------------- --------------- -------------- ----------- --------------- ---------------- ------ ----------- ----------- ----------- -----------
Urban opportunities - - 1 - - 1 - 1 - 1
--------------------------------- --------------- -------------- ----------- --------------- ---------------- ------ ----------- ----------- ----------- -----------
Subscale sectors
Leisure - - - - 1 1 - 1 - 1
Hotels - - - 2 - 2 - 2 - 2
Retail parks - - - 1 - 1 - 1 - 1
Total Subscale sectors - - - 3 1 4 - 4 - 4
--------------------------------- --------------- -------------- ----------- --------------- ---------------- ------ ----------- ----------- ----------- -----------
Total capital expenditure 27 85 1 19 1 21 5 138 1 137
Conversion from accrual
to cash basis (36) (4) (32)
--------------------------------- -------------- --------------- ----------- ----------- -----------
Total capital expenditure
on a cash basis 102 (3) 105
1. Investment properties acquired in the period.
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 23: Top 12 occupiers at 30 September 2020
% of Group
rent(1)
----------
Central Government 5.9
Deloitte 5.8
Cineworld 1.9
Mizuho Bank 1.8
Boots 1.7
Sainsbury's 1.5
Taylor Wessing 1.4
Equinix 1.3
Lloyds Banking 1.1
Next 1.1
M&S 1.1
H&M 1.0
----------
25.6
----------
1. On a proportionate basis.
Table 24: Development pipeline and trading property development
schemes at 30 September 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 GBPm GBPm
Developments
approved
or in progress
21 Moorfields,
EC2 Office 100 564,000 100 471 38 Jun 2022 326 576
The Forge, SE1 Office 100 139,000 - 51 10 Jun 2022 48 140
(formerly 105 Sumner
Street) Retail 1,000
Wardour Street,
W1(1) Residential 100 5,000 - 6 n/a Jul 2022 8 11
Lucent, W1 Office 100 111,000 - 89 14 Dec 2022 115 241
Retail 30,000
Residential 3,000
n2, SW1 Office 100 166,000 - 26 13 Jan 2024 40 206
Proposed
developments
Timber Square,
SE1 Office 100 363,000 n/a n/a n/a Nov 2023 n/a n/a
(formerly Lavington
Street) Retail 17,000
Portland House,
SW1 Office 100 360,000 n/a n/a n/a Nov 2024 n/a n/a
Retail 40,000
1. Affordable housing component of the Lucent development.
Total Forecast
Sales development total
Ownership exchanged Estimated costs development
Description interest Size Number by unit completion to date cost
Property of use % sq ft of units % date GBPm GBPm
Trading property
development
schemes
----------
Castle Lane, SW1 Residential 100 55,000 89 99 Apr 2023 10 46
----------
Where the property is not 100% owned, floor areas and letting
status shown above represent the full scheme whereas all other
figures represent our proportionate share. Letting % is measured by
ERV and shows letting status at 30 September 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 30 September 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 30 September 2020 on unlet units, both after rents
payable.
Table 25: Combined Portfolio value by location at 30 September
2020(1)
Central Regional Subscale
London retail Urban opportunities sectors Total
% % % % %
Central, inner, and outer London 66.6 - 2.6 3.7 72.9
South East and East - 9.2 4.8 - 14.0
Midlands - - 1.0 - 1.0
Wales and South West - 2.4 0.5 - 2.9
North, North West, Yorkshire,
and Humberside - 4.9 2.0 - 6.9
Scotland and Northern Ireland - 1.6 0.7 - 2.3
Total 66.6 18.1 11.6 3.7 100.0
1. % figures calculated by reference to the Combined Portfolio value of GBP11.8bn.
For a full list of the Group's properties please refer to our
website: landsec.com.
Table 26: Combined Portfolio performance relative to MSCI
Total property return - six months ended 30 September 2020
Landsec MSCI
% %
------- ----- ---
Central London -1.8 -1.3 (1)
Regional retail -14.9 -12.3 (2)
Urban opportunities -8.8 -9.1 (3)
------- ----- ---
Subscale sectors -11.4 n/a (4)
------- ----- ---
Combined Portfolio -5.9 -1.6 (5)
------- ----- ---
1. MSCI Central and Inner London Office benchmark / Central
London Retail weighted by Landsec exposure.
2. MSCI All Shopping Centres benchmark.
3. MSCI Rest of London Shopping Centres benchmark.
4. No benchmark available.
5. MSCI All Property Quarterly Universe.
Table 27: Lease lengths
Weighted average unexpired
lease term at 30 September
2020
Like-for-like
portfolio,
Like-for-like completed developments
portfolio and acquisitions
Mean(1) Mean(1)
Years Years
---------------------------------------- ------------- -----------------------
Central London
Offices 7.9 7.9
London retail 5.6 5.6
Other central London 54.0 54.0
Total Central London 7.8 7.8
Regional retail
Regional shopping centres and shops 5.0 5.0
Outlets 3.3 3.3
Total Regional retail 4.5 4.5
Urban opportunities 6.3 6.2
---------------------------------------- ------------- -----------------------
Subscale sectors
Leisure 10.3 10.3
Hotels 11.7 11.7
Retail parks 5.5 5.5
Total Subscale sectors 8.2 8.2
Combined Portfolio 6.9 7.0
---------------------------------------- ------------- -----------------------
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 28: Combined Portfolio analysis
Like-for-like segmental analysis
Annualised Annualised
Valuation rental net Net estimated
Market value(1) movement(1) Rental income(1) income(2) rent(3) rental value(4)
30 30 30 30 30 30
September 31 March Surplus/ Surplus/ September September September September September 31 March
2020 2020 (deficit) (deficit) 2020 2019 2020 2020 2020 2020
GBPm GBPm GBPm % GBPm GBPm GBPm GBPm GBPm GBPm
Central London
Offices 5,817 5,931 (106) -1.9% 129 125 258 277 292 294
London retail 728 876 (145) -16.8% 20 20 37 37 34 41
Other central
London 426 427 - - 7 11 13 13 21 21
Total Central
London 6,971 7,234 (251) -3.7% 156 156 308 327 347 356
Regional retail
Regional shopping
centres and
shops 1,339 1,679 (338) -20.4% 61 70 111 107 104 122
Outlets 805 881 (77) -8.8% 23 31 47 48 62 63
Total Regional
retail 2,144 2,560 (415) -16.4% 84 101 158 155 166 185
Urban
opportunities 423 469 (46) -9.8% 13 14 24 25 28 29
Subscale sectors
Leisure 528 615 (91) -15.3% 21 23 39 38 42 43
Hotels 408 469 (62) -13.1% 2 15 6 6 26 30
Retail parks 411 444 (32) -7.3% 18 19 34 35 33 36
Total Subscale
sectors 1,347 1,528 (185) -12.3% 41 57 79 79 101 109
Like-for-like
portfolio(8) 10,885 11,791 (897) -8.0% 294 328 569 586 642 679
Proposed
developments(1) 276 303 (29) -9.4% 1 6 1 1 - -
Development
programme(9) 630 557 (8) -1.2% - - - - 67 68
Acquisitions(10) 52 55 (11) -17.0% 1 - 3 3 10 3
Sales(11) - 75 - - 1 2 - - - 4
Combined
Portfolio 11,843 12,781 (945) -7.7% 297 336 573 590 719 754
Non-current
assets
held for sale - - - - - 2
Properties
treated
as finance
leases (4) (4)
Combined
Portfolio 11,843 12,781 (945) -7.7% 293 334
Total portfolio analysis
Annualised Annualised
Valuation rental net Net estimated
Market value(1) movement(1) Rental income(1) income(2) rent(3) rental value(4)
30 30 30 30 30 30
September 31 March Surplus/ Surplus/ September September September September September 31 March
2020 2020 (deficit) (deficit) 2020 2019 2020 2020 2020 2020
GBPm GBPm GBPm % GBPm GBPm GBPm GBPm GBPm GBPm
Central London
Offices 6,721 6,810 (146) -2.3% 131 133 258 277 363 362
London retail 744 928 (148) -16.7% 20 21 38 39 38 45
Other central
London 426 437 1 0.2% 7 11 13 13 21 21
Total Central
London 7,891 8,175 (293) -3.8% 158 165 309 329 422 428
Regional
retail
Regional
shopping
centres and
shops 1,339 1,679 (338) -20.4% 61 69 111 107 104 122
Outlets 805 881 (77) -8.8% 23 31 47 48 62 63
Total Regional
retail 2,144 2,560 (415) -16.4% 84 100 158 155 166 185
Urban
opportunities 436 484 (47) -9.8% 13 14 25 25 28 30
Subscale
sectors
Leisure 553 649 (96) -15.3% 22 23 41 40 44 45
Hotels 408 469 (62) -13.1% 2 15 6 6 26 30
Retail parks 411 444 (32) -7.3% 18 19 34 35 33 36
Total Subscale
sectors 1,372 1,562 (190) -12.4% 42 57 81 81 103 111
Combined
Portfolio 11,843 12,781 (945) -7.7% 297 336 573 590 719 754
Non-current
assets
held for sale - - - - - 2
Properties
treated
as finance
leases (4) (4)
Combined
Portfolio 11,843 12,781 (945) -7.7% 293 334
Represented
by:
Investment
portfolio 11,000 11,802 (824) -7.3% 268 304 524 543 660 688
Share of joint
ventures 843 979 (121) -13.0% 25 30 49 47 59 66
Combined
Portfolio 11,843 12,781 (945) -7.7% 293 334 573 590 719 754
Analysis by
asset
use:
Offices 6,736 6,826 (146) -2.3% 131 133 260 279 366 364
Retail 3,672 4,348 (637) -14.9% 133 154 251 250 261 291
Leisure,
hotels
and other 1,435 1,607 (162) -10.3% 33 49 62 61 92 99
Combined
Portfolio 11,843 12,781 (945) -7.7% 297 336 573 590 719 754
Table 28: Combined Portfolio analysis continued
Like-for-like segmental analysis
Gross estimated
rental Net initial Equivalent Voids (by
value(5) yield(6) yield(7) ERV)(1)
30 September 31 March 30 September 31 March 30 September 31 March 30 September 31 March
2020 2020 2020 2020 2020 2020 2020 2020
GBPm GBPm % % % % % %
Central London
Offices 295 298 4.4% 4.3% 4.6% 4.6% 1.8% 1.1%
London retail 35 42 4.4% 4.4% 4.4% 4.2% 3.2% 2.4%
Other central London 21 21 2.7% 3.4% 4.3% 4.3% - 0.5%
Total Central London 351 361 4.3% 4.3% 4.6% 4.5% 1.9% 1.2%
Regional retail
Regional shopping
centres
and shops 112 130 7.0% 6.4% 6.6% 6.2% 6.7% 4.8%
Outlets 62 63 4.8% 5.6% 6.3% 5.9% 6.1% 4.4%
Total Regional retail 174 193 6.2% 6.1% 6.5% 6.1% 6.5% 4.7%
Urban opportunities 27 29 5.0% 4.9% 5.3% 5.2% 6.6% 4.8%
Subscale sectors
Leisure 42 44 6.3% 5.8% 7.1% 6.4% 3.1% 2.3%
Hotels 26 30 3.5% 2.3% 5.4% 5.2% - -
Retail parks 34 36 7.4% 7.6% 7.6% 7.4% 3.2% 3.3%
Total Subscale sectors 102 110 5.8% 5.2% 6.7% 6.3% 2.4% 2.0%
Like-for-like
portfolio(8) 654 693 4.9% 4.8% 5.2% 5.1% 3.4% 2.5%
---------------------- ------------ -------- ------------ -------- ------------ -------- ------------ --------
Proposed - - - - n/a n/a n/a n/a
developments(1)
Development
programme(9) 70 70 - - 4.3% 4.3% n/a n/a
Acquisitions(10) 10 3 4.1% 5.5% 4.6% 5.8% n/a n/a
Sales(11) - 3 - 2.0% n/a n/a n/a n/a
---------------------- ------------ -------- ------------ -------- ------------ -------- ------------ --------
Combined Portfolio 734 769 4.5% 4.5% 5.2% 5.1% n/a n/a
---------------------- -------- -------- -------- --------
Total portfolio analysis Notes:
Gross estimated 1. Refer to Glossary for
rental Net initial definition.
value(5) yield(6) 2. Annualised rental income
30 September 31 March 30 September 31 March is annual 'rental income'
2020 2020 2020 2020 (as defined in the Glossary)
GBPm GBPm % % at the balance sheet date,
-------------------------- ------------ -------- ------------ -------- except that car park and
Central London commercialisation income
Offices 369 367 3.8% 3.8% are included on a net basis
London retail 38 46 4.4% 4.3% (after deduction for operational
Other central London 21 21 2.7% 3.3% outgoings). Annualised rental
Total Central London 428 434 3.8% 3.8% income includes temporary
Regional retail lettings.
Regional shopping centres 3. Annualised net rent is
and shops 112 130 7.0% 6.4% annual cash rent, after the
Outlets 62 63 4.8% 5.6% deduction of rent payable,
Total Regional retail 174 193 6.2% 6.1% as at the balance sheet date.
Urban opportunities 28 30 4.9% 4.9% It is calculated using the
Subscale sectors same methodology as annualised
Leisure 44 46 6.3% 5.8% rental income but is stated
Hotels 26 30 3.5% 2.3% net of rent payable and before
Retail parks 34 36 7.4% 7.6% tenant lease incentive adjustments.
Total Subscale sectors 104 112 5.8% 5.2% 4. Net estimated rental value
Combined Portfolio 734 769 4.5% 4.5% is gross estimated rental
-------------------------- value, as defined in the
Glossary, after deducting
expected rent payable.
5. Gross estimated rental
Represented by: value (ERV) - refer to Glossary
Investment portfolio 673 702 4.6% 4.6% for definition. The figure
Share of joint ventures 61 67 4.4% 4.4% for proposed developments
-------------------------- -------- -------- relates to the existing buildings
Combined Portfolio 734 769 4.5% 4.5% and not the schemes proposed.
-------------------------- 6. Net initial yield - refer
to Glossary for definition.
Analysis by use type: This calculation includes
Offices 372 370 3.8% 3.8% all properties including
Retail 269 300 5.6% 5.8% those sites with no income.
Leisure, hotels and other 93 99 5.0% 4.1% 7. Equivalent yield - refer
-------------------------- -------- -------- to Glossary for definition.
Combined Portfolio 734 769 4.5% 4.5% Proposed developments are
-------------------------- excluded from the calculation
of equivalent yield on the
Combined Portfolio.
8. The like-for-like portfolio
- refer to Glossary for definition.
Capital expenditure on refurbishments,
acquisitions of head leases
and similar capital expenditure
has been allocated to the
like-for-like portfolio in
preparing this table.
9. The development programme
- refer to Glossary for definition.
Net initial yield figures
are only calculated for properties
in the development programme
that have reached practical
completion.
10. Includes all properties
acquired since 1 April 2019.
11. Includes all properties
sold since 1 April 2019.
Table 29: 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.
Six months ended 30
September 2020
Group Capital
income Joint Revenue and other
statement ventures(1) Total profit items
GBPm GBPm GBPm GBPm GBPm
Rental income 268 25 293 293 -
Finance lease interest 4 - 4 4 -
-----
Gross rental income (before rents payable) 272 25 297 297 -
Rents payable (3) (1) (4) (4) -
-----
Gross rental income (after rents payable) 269 24 293 293 -
Service charge income 38 3 41 41 -
Service charge expense (39) (4) (43) (43) -
Net service charge expense (1) (1) (2) (2) -
Other property related income 16 1 17 17 -
Direct property expenditure (25) (5) (30) (30) -
Bad and doubtful debts expense(2) (77) (10) (87) (87) -
Segment net rental income 182 9 191 191 -
Other income 1 - 1 1 -
Indirect expense (35) - (35) (35) -
Depreciation (3) - (3) (3) -
-----
Revenue profit before interest 145 9 154 154 -
Share of post-tax loss from joint ventures (123) 123 - - -
Net deficit on revaluation of investment
properties (824) (121) (945) - (945)
Profit/(loss) on disposal of investment
properties 2 (2) - - -
Loss on disposal of trading properties - (1) (1) - (1)
Operating (loss)/profit (800) 8 (792) 154 (946)
Finance income 9 - 9 8 1
Finance expense (44) (8) (52) (47) (5)
(Loss)/profit before tax (835) - (835) 115 (950)
Taxation - - -
-----
Loss attributable to shareholders (835) - (835)
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. Includes GBP16m of provisions related to future rent. An
additional GBP23m of bad and doubtful debts expense relating to
rental income for the period was recognised in the year ended 31
March 2020.
Six months ended 30
September 2019
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 305 30 (1) 334 334 -
Finance lease interest 4 - - 4 4 -
---------------------------------- -----
Gross rental income (before rents
payable) 309 30 (1) 338 338 -
Rents payable (5) (1) - (6) (6) -
---------------------------------- -----
Gross rental income (after rents
payable) 304 29 (1) 332 332 -
Service charge income 45 5 - 50 50 -
Service charge expense (46) (6) - (52) (52) -
Net service charge expense (1) (1) - (2) (2) -
Other property related income 14 1 - 15 15 -
Direct property expenditure (30) (4) - (34) (34) -
Bad and doubtful debts expense (1) (1) - (2) (2) -
---------------------------------- -----
Segment net rental income 286 24 (1) 309 309 -
Other income 1 - - 1 1 -
Indirect expense (31) (2) - (33) (33) -
Depreciation (3) - - (3) (3) -
---------------------------------- -----
Revenue profit before interest 253 22 (1) 274 274 -
Share of post-tax loss from joint
ventures (50) 50 - - - -
Net deficit on revaluation of
investment properties (304) (66) 2 (368) - (368)
Profit on disposal of trading
properties - 1 - 1 - 1
Profit from long-term development
contracts - 2 - 2 - 2
Other - - (1) (1) - (1)
-----
Operating (loss)/profit (101) 9 - (92) 274 (366)
Finance income 9 - - 9 7 2
Finance expense (55) (7) - (62) (56) (6)
Joint venture tax - (2) - (2) - (2)
---------------------------------- -----
(Loss)/profit before tax (147) - - (147) 225 (372)
Taxation 2 - - 2
---------------------------------- -----
Loss attributable to shareholders (145) - - (145)
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.
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. Due to Covid-19, the hours
are currently reduced to 09:00 to 17:00.
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. Due to Covid-19, the hours
are currently reduced in to 09:00 to 17:00.
5. 2020/21 second quarterly dividend
The Board has declared a second quarterly dividend for the year
ending 31 March 2021 of 12.0p per ordinary share which will be paid
on
4 January 2021 to shareholders registered at the close of
business on 27 November 2020. This will be paid wholly as a
Property Income Distribution (PID). As the Board did not declare a
first quarterly dividend, the first half dividend will be 12.0p per
ordinary share (six months ended 30 September 2019: 23.2p).
6. Dividend related services
Dividend payments to UK shareholders - Dividend mandates
Dividends are no longer paid by cheque. Shareholders whose
dividends have previously been paid by cheque will need to have
their dividends paid directly into their personal bank or building
society account or alternatively participate in our Dividend
Reinvestment Plan (see below) to receive dividends in the form of
additional shares. To facilitate this, please contact Equiniti or
complete a mandate instruction available on our website:
landsec.com /investors and return it to Equiniti.
Dividend payments to overseas shareholders - Overseas Payment
Service (OPS)
Dividends are no longer paid by cheque. Shareholders need to
request that their dividends be paid directly to a personal bank
account overseas. For more information, please contact Equiniti or
download an application form online at https:// shareview.co.uk
.
Dividend Reinvestment Plan (DRIP)
A DRIP is available from Equiniti. This facility provides an
opportunity by which shareholders can conveniently and easily
increase their holding in the Company by using their cash dividends
to buy more shares. Participation in the DRIP will mean that your
dividend payments will be reinvested in the Company's shares and
these will be purchased on your behalf in the market on, or as soon
as practical after, the dividend payment date.
You may only participate in the DRIP if you are resident in the
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
2021
Financial year end 31 March
Preliminary results announcement 11 May*
Half-yearly results announcement 9 November*
* Provisional date only
8. Investor relations enquiries
For investor relations enquiries, please contact Edward Thacker,
Head of Investor Relations at Landsec, by telephone on +44 (0)20
7413 9000 or by email at enquiries@landsec.com.
Glossary
Adjusted earnings per share (Adjusted EPS)
Earnings per share based on revenue profit after related
tax.
Adjusted net debt
Net debt excluding cumulative fair value movements on
interest-rate swaps and amounts payable under head leases. It
generally includes the net debt of subsidiaries and joint ventures
on a proportionate basis.
Book value
The amount at which assets and liabilities are reported in the
financial statements.
BREEAM
Building Research Establishment's Environmental Assessment
Method.
Combined Portfolio
The Combined Portfolio comprises the investment properties of
the Group's subsidiaries, on a proportionately consolidated basis
when not wholly owned, together with our share of investment
properties held in our joint ventures.
Completed developments
Completed developments consist of those properties previously
included in the development programme, which have been transferred
from the development programme since 1 April 2019.
Development pipeline
The development programme together with proposed
developments.
Development programme
The development programme consists of committed developments
(Board approved projects), projects under construction and
developments which have reached practical completion within the
last two years but are not yet 95% let.
Diluted figures
Reported results adjusted to include the effects of potentially
dilutive shares issuable under employee share schemes.
Dividend Reinvestment Plan (DRIP)
The DRIP provides shareholders with the opportunity to use cash
dividends received to purchase additional ordinary shares in the
Company immediately after the relevant dividend payment date. Full
details appear on the Company's website.
Earnings per share
Profit after taxation attributable to owners divided by the
weighted average number of ordinary shares in issue during the
period.
EPRA
European Public Real Estate Association.
EPRA net disposal value (NDV) per share
Diluted net assets per share adjusted to remove the impact of
goodwill arising as a result of deferred tax, and to include the
difference between the fair value and the book value of the net
investment in tenant finance leases and fixed interest rate
debt.
EPRA net initial yield
EPRA net initial yield is defined within EPRA's Best Practice
Recommendations as the annualised rental income based on the cash
rents passing at the balance sheet date, less non-recoverable
property operating expenses, divided by the gross market value of
the property. It is consistent with the net initial yield
calculated by the Group's external valuer.
EPRA net tangible assets (NTA) per share
Diluted net assets per share adjusted to remove the cumulative
fair value movements on interest-rate swaps and similar
instruments, the carrying value of goodwill arising as a result of
deferred tax and other intangible assets, deferred tax on
intangible assets and to include the difference between the fair
value and the book value of the net investment in tenant finance
leases.
Equivalent yield
Calculated by the Group's external valuer, equivalent yield is
the internal rate of return from an investment property, based on
the gross outlays for the purchase of a property (including
purchase costs), reflecting reversions to current market rent and
such items as voids and non-recoverable expenditure but ignoring
future changes in capital value. The calculation assumes rent is
received annually in arrears.
ERV - Gross estimated rental value
The estimated market rental value of lettable space as
determined biannually by the Group's external valuer. For
investment properties in the development programme, which have not
yet reached practical completion, the ERV represents management's
view of market rents.
Fair value movement
An accounting adjustment to change the book value of an asset or
liability to its market value (see also mark-to-market
adjustment).
Finance lease
A lease that transfers substantially all the risks and rewards
of ownership from the Group as lessor to the lessee.
F&B
Food and beverage.
Gearing
Total borrowings, including bank overdrafts, less short-term
deposits, corporate bonds and cash, at book value, plus cumulative
fair value movements on financial derivatives as a percentage of
total equity. For adjusted gearing, see note 13.
Gross market value
Market value plus assumed usual purchaser's costs at the
reporting date.
Head lease
A lease under which the Group holds an investment property.
Interest Cover Ratio (ICR)
A calculation of a company's ability to meet its interest
payments on outstanding debt. It is calculated using revenue profit
before interest, divided by net interest (excluding the
mark-to-market movement on interest-rate swaps, foreign exchange
swaps, capitalised interest and interest on the pension scheme
assets and liabilities). The calculation excludes joint
ventures.
Interest-rate swap
A financial instrument where two parties agree to exchange an
interest rate obligation for a predetermined amount of time. These
are generally used by the Group to convert floating-rate debt or
investments to fixed rates.
Investment portfolio
The investment portfolio comprises the investment properties of
the Group's subsidiaries on a proportionately consolidated basis
where not wholly owned.
Joint venture
An arrangement in which the Group holds an interest and which is
jointly controlled by the Group and one or more partners under a
contractual arrangement. Decisions on the activities of the joint
venture that significantly affect the joint venture's returns,
including decisions on financial and operating policies and the
performance and financial position of the operation, require the
unanimous consent of the partners sharing control.
Lease incentives
Any incentive offered to occupiers to enter into a lease.
Typically, the incentive will be an initial rent-free period, or a
cash contribution to fit-out or similar costs. For accounting
purposes, the value of the incentive is spread over the
non-cancellable life of the lease.
LIBOR
The London Interbank Offered Rate, the interest rate charged by
one bank to another for lending money, often used as a reference
rate in bank facilities.
Like-for-like portfolio
The like-for-like portfolio includes all properties which have
been in the portfolio since 1 April 2019 but excluding those which
are acquired or sold since that date. Properties in the development
pipeline and completed developments are also excluded.
Loan-to-value (LTV)
Group LTV is the ratio of adjusted net debt, including
subsidiaries and joint ventures, to the sum of the market value of
investment properties and the book value of trading properties of
the Group, its subsidiaries and joint ventures, all on a
proportionate basis, expressed as a percentage. For the Security
Group, LTV is the ratio of net debt lent to the Security Group
divided by the value of secured assets.
Market value
Market value is determined by the Group's external valuer, in
accordance with the RICS Valuation Standards, as an opinion of the
estimated amount for which a property should exchange on the date
of valuation between a willing buyer and a willing seller in an
arm's-length transaction after proper marketing.
Mark-to-market adjustment
An accounting adjustment to change the book value of an asset or
liability to its market value (see also fair value movement).
MSCI
Refers to the MSCI Direct Property indexes which measure the
property level investment returns in the UK.
Net assets per share
Equity attributable to owners divided by the number of ordinary
shares in issue at the end of the period. Net assets per share is
also commonly known as net asset value per share (NAV per
share).
Net initial yield
Net initial yield is a calculation by the Group's external
valuer of the yield that would be received by a purchaser, based on
the Estimated Net Rental Income expressed as a percentage of the
acquisition cost, being the market value plus assumed usual
purchasers' costs at the reporting date. The calculation is in line
with EPRA guidance. Estimated Net Rental Income is determined by
the valuer and is based on the passing cash rent less rent payable
at the balance sheet date, estimated non-recoverable outgoings and
void costs including service charges, insurance costs and void
rates.
Net rental income
Net rental income is the net operational income arising from
properties, on an accruals basis, including rental income, finance
lease interest, rents payable, service charge income and expense,
other property related income, direct property expenditure and bad
debts. Net rental income is presented on a proportionate basis.
Net zero carbon building
A building for which an overall balance has been achieved
between carbon emissions produced and those taken out of the
atmosphere, including via offset arrangements. This relates to
operational emissions for all buildings while, for a new building,
it also includes supply-chain emissions associated with its
construction.
Over-rented
Space where the passing rent is above the ERV.
Passing cash rent
Passing cash rent is passing rent excluding units that are in a
rent free period at the reporting date.
Passing rent
The estimated annual rent receivable as at the reporting date
which includes estimates of turnover rent and estimates of rent to
be agreed in respect of outstanding rent review or lease renewal
negotiations. Passing rent may be more or less than the ERV (see
over-rented, reversionary and ERV). Passing rent excludes annual
rent receivable from units in administration save to the extent
that rents are expected to be received. Void units at the reporting
date are deemed to have no passing rent. Although temporary lets of
less than 12 months are treated as void, income from temporary lets
is included in passing rents.
Planning permission
There are two common types of planning permission: full planning
permission and outline planning permission. A full planning
permission results in a decision on the detailed proposals on how
the site can be developed. The grant of a full planning permission
will, subject to satisfaction of any conditions, mean no further
engagement with the local planning authority will be required to
build the consented development. An outline planning permission
approves general principles of how a site can be developed. Outline
planning permission is granted subject to conditions known as
'reserved matters'. Consent must be sought and achieved for
discharge of all reserved matters within a specified time-limit,
normally three years from the date outline planning permission was
granted, before building can begin. In both the case of full and
outline planning permission, the local planning authority will
'resolve to grant permission'. At this stage, the planning
permission is granted subject to agreement of legal documents, in
particular the s106 agreement. On execution of the s106 agreement,
the planning permission will be issued. Work can begin on
satisfaction of any 'pre-commencement' planning conditions.
Pre-development properties
Pre-development properties are those properties within the
like-for-like portfolio which are being managed to align vacant
possession within a three-year horizon with a view to
redevelopment.
Pre-let
A lease signed with an occupier prior to completion of a
development.
Property Income Distribution (PID)
A PID is a distribution by a REIT to its shareholders paid out
of qualifying profits. A REIT is required to distribute at least
90% of its qualifying profits as a PID to its shareholders.
Proposed developments
Proposed developments are properties which have not yet received
Board approval or are still subject to main planning conditions
being satisfied, but which are more likely to proceed than not.
Qualifying activities/Qualifying assets
The ownership (activity) of property (assets) which is held to
earn rental income and qualifies for tax-exempt treatment (income
and capital gains) under UK REIT legislation.
Real Estate Investment Trust (REIT)
A REIT must be a publicly quoted company with at least
three-quarters of its profits and assets derived from a qualifying
property rental business. Income and capital gains from the
property rental business are exempt from tax but the REIT is
required to distribute at least 90% of those profits to
shareholders. Corporation tax is payable on non-qualifying
activities in the normal way.
Rental income
Rental income is as reported in the income statement, on an
accruals basis, and adjusted for the spreading of lease incentives
over the term certain of the lease in accordance with IFRS 16
(previously, SIC-15). It is stated gross, prior to the deduction of
ground rents and without deduction for operational outgoings on car
park and commercialisation activities.
Rental value change
Increase or decrease in the current rental value, as determined
by the Group's external valuer, over the reporting period on a
like-for-like basis.
Return on average capital employed
Group profit before net finance expense, plus joint venture
profit before net finance expense, divided by the average capital
employed (defined as shareholders' funds plus adjusted net
debt).
Return on average equity
Group profit before tax plus joint venture tax divided by the
average equity shareholders' funds.
Revenue profit
Profit before tax, excluding profits on the sale of non-current
assets and trading properties, profits on long-term development
contracts, valuation movements, fair value movements on
interest-rate swaps and similar instruments used for hedging
purposes, debt restructuring charges, and any other items of an
exceptional nature.
Reversionary or under-rented
Space where the passing rent is below the ERV.
Reversionary yield
The anticipated yield to which the initial yield will rise (or
fall) once the rent reaches the ERV.
Security Group
Security Group is the principal funding vehicle for the Group
and properties held in the Security Group are mortgaged for the
benefit of lenders. It has the flexibility to raise a variety of
different forms of finance.
Temporary lettings
Lettings for a period of one year or less. These are included
within voids.
Topped-up net initial yield
Topped-up net initial yield is a calculation by the Group's
external valuer. It is calculated by making an adjustment to net
initial yield in respect of the annualised cash rent foregone
through unexpired rent-free periods and other lease incentives. The
calculation is consistent with EPRA guidance.
Total business return
Dividend paid per share in the period plus the change in EPRA
net tangible assets per share, divided by EPRA net tangible assets
per share at the beginning of the period.
Total cost ratio
Total cost ratio represents all costs included within revenue
profit, other than rents payable, financing costs and provisions
for bad and doubtful debts, expressed as a percentage of gross
rental income before rents payable adjusted for costs recovered
through rents but not separately invoiced.
Total development cost (TDC)
Total development cost refers to the book value of the site at
the commencement of the project, the estimated capital expenditure
required to develop the scheme from the start of the financial year
in which the property is added to our development programme,
together with capitalised interest, being the Group's borrowing
costs associated with direct expenditure on the property under
development. Interest is also capitalised on the purchase cost of
land or property where it is acquired specifically for
redevelopment. The TDC for trading property development schemes
excludes any estimated tax on disposal.
Total property return (TPR)
The change in market value, adjusted for net investment, plus
the net rental income of our investment properties expressed as a
percentage of opening market value plus the time weighted capital
expenditure incurred during the period.
Total Shareholder Return (TSR)
The growth in value of a shareholding over a specified period,
assuming that dividends are reinvested to purchase additional units
of the stock.
Trading properties
Properties held for trading purposes and shown as current assets
in the balance sheet.
Turnover rent
Rental income which is related to an occupier's turnover.
Valuation surplus/deficit
The valuation surplus/deficit represents the increase or
decrease in the market value of the Combined Portfolio, adjusted
for net investment and the effect of accounting for lease
incentives under IFRS 16 (previously SIC-15). The market value of
the Combined Portfolio is determined by the Group's external
valuer.
Voids
Voids are expressed as a percentage of ERV and represent all
unlet space, including voids where refurbishment work is being
carried out and voids in respect of pre-development properties.
Temporary lettings for a period of one year or less are also
treated as voids. The screen at Piccadilly Lights, W1 is excluded
from the void calculation as it will always carry advertising
although the number and duration of our agreements with advertisers
will vary. Commercialisation lettings are also excluded from the
void calculation.
Weighted average cost of capital (WACC)
Weighted average cost of debt and notional cost of equity, used
as a benchmark to assess investment returns.
Weighted average unexpired lease term
The weighted average of the unexpired term of all leases other
than short-term lettings such as car parks and advertising
hoardings, temporary lettings of less than one year, residential
leases and long ground leases.
Yield shift
A movement (negative or positive) in the equivalent yield of a
property asset.
Zone A
A means of analysing and comparing the rental value of retail
space by dividing it into zones parallel with the main frontage.
The most valuable zone, Zone A, is at the front of the unit. Each
successive zone is valued at half the rate of the zone in front of
it.
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END
IR BCBDBXXGDGGC
(END) Dow Jones Newswires
November 10, 2020 02:00 ET (07:00 GMT)
Land Securities (LSE:LAND)
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