REG - Land Sec. Group PLC - Final Results
17/05/2024 07:00
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RNS Number : 8167O Land Securities Group PLC 17 May 2024
17 May 2024
LAND SECURITIES GROUP PLC ("Landsec")
Results for the year ended 31 March 2024
Continued operational strength, as values for best assets begin to stabilise
Mark Allan, Chief Executive of Landsec, commented:
"Our continued operational outperformance, with rising occupancy and positive
rental uplifts in retail and London, is driving robust like-for-like rental
income growth and demonstrates the importance of owning and operating the
best-in-class real estate. Around 80% of our portfolio is now invested in
twelve places with significant scarcity value, where our competitive
advantages in shaping and curating these places mean we expect like-for-like
rents to continue to grow.
"Following a reset of values over the past two years driven by rising interest
rates, the stabilisation in rates and evidence of continued rental growth is
starting to attract increased investor interest for the best assets. Around
60% of our portfolio already showed stable values in the second half and
overall yields were largely stable in the final quarter, pointing to a
positive outlook for our overall return on equity.
"The quality and return prospects of our portfolio are further bolstered by
our strong balance sheet. After a period of proactive capital recycling, most
recently with over £600m of non-core assets sold in the past seven months, we
have meaningful capacity to invest in high quality assets that add to our
best-in-class portfolio at what we believe to be an attractive point in the
cycle."
Financial highlights
2024 2023 2024 2023
EPRA earnings (£m)(1)(2) 371 393(3) Loss before tax (£m) (341) (622)
EPRA EPS (pence)(1)(2) 50.1 53.1(3) Basic EPS (pence) (43.0) (83.6)
EPRA NTA per share (pence)(1)(2) 859 936 Net assets per share (pence) 863 945
Total return on equity (%)(1)(2) (4.0) (8.3) Dividend per share (pence) 39.6 38.6
Group LTV ratio (%)(1)(2) 35.0 31.7 Net debt (£m) 3,517 3,348
¾ EPRA EPS(1)(2) stable vs prior year's underlying level((3)) of 50.1p, in
line with guidance, as occupancy growth and 2.8% LFL income growth offset rise
in interest costs and impact of asset disposals
¾ Total dividend up 2.6% to 39.6p per share, in line with guidance of low
single digit percentage growth
¾ Loss before tax moderated to £341m, reflecting a £625m or -6.0%
adjustment in portfolio valuation weighted to first half of the year, as c.
60% of portfolio was effectively stable in value in second half
¾ Total return on equity improved to -4.0%, with 8.2% reduction in EPRA NTA
per share(1) (2) to 859p, as outlook for return on equity turns more positive
as values begin to stabilise
¾ Maintained strong balance sheet with, pro-forma for disposals post
year-end, 7.0x net debt/EBITDA and a 32.3% Group LTV(1)(2) - down 2.1ppt over
past two years despite adjustment in values
¾ FY25 EPRA EPS, post £572m net sales since H1, expected to be slightly
below 50.1 pence in FY24 before any reinvestment of sales proceeds; FY26
currently expected to be slightly ahead of FY24
Operational highlights: high quality of portfolio underpins positive outlook
for returns
Delivered continued outperformance in a market increasingly focused on
best-in-class space, reflected in 8% uplifts on relettings/renewals and 130bps
occupancy growth across London and major retail, driving 2.8% like-for-like
net rental income growth. Values for best assets starting to stabilise, as
interest rate outlook is more balanced and investor interest starts to return,
which with c. 5.7% income return plus expectation of continued rental growth
supports positive outlook for overall return on equity.
Central London: further growth in occupancy as property values begin to
stabilise
¾ Delivered 1.4% LFL net income growth in offices, with overall occupancy
+140bps to 97.3%, £35m of lettings signed or in solicitors' hands 6% above
ERV and relettings/renewals 15% above previous rent
¾ Registered consistent upwards trend in office utilisation throughout the
year, with unique daily entries across our buildings up 18% vs prior year, and
81% of lettings in year resulting in customers taking more or same space, as
demand remains firmly focused on high-quality space in the best locations
¾ West End values (72% of our London portfolio, up from 48% three years
ago) virtually stable in second half, with overall change in Central London
values moderating to -2.4% vs -4.5% in first half. Yields remain stable in
final quarter, as successful leasing drives 5.0% ERV growth, in line with top
end of guidance, with further low to mid single digit percentage growth
expected for current year
¾ Started two net zero carbon developments in Victoria and Southbank, with
expected 7.2% gross yield on total cost and c. 12% yield on capex, as recently
completed schemes are now 89% let or in solicitors' hands, with rents 12%
ahead of initial assumptions
Major retail: strong income growth, as rental reversions reach inflection
point and turn positive
¾ Delivered 6.9% LFL net income growth, with occupancy + 130bps to 95.4%,
and £37m of lettings signed or in solicitors' hands 6% above ERV and 2% ahead
of previous rent for relettings/renewals, marking inflection point in rental
reversions
¾ Further focusing investment in best-in-class destinations, with the sale
of our two smallest outlets and accretive investment of c. £100m in existing
destinations over next c. 3 years
¾ Capitalised on clear focus from brands on fewer, bigger, better stores,
with the attraction our locations offer reflected in above-market 4.1% YoY
sales growth, resulting in growing competition for space
¾ Attraction of high and growing cashflow reflected in 0.2% increase in
asset values in second half (FY-1.1%), even though valuers' assumed 1.4% ERV
growth continues to trail operational performance, with low to mid single
digit percentage growth in ERVs expected for current year
Mixed-use: starting first on-site preparations in London whilst optimising
rest of pipeline
¾ Secured planning consent for 1,800-homes Finchley Road scheme and
detailed consent for first phase, with site enabling works starting later this
year, ahead of potential start of main project in 2025
¾ Progressing optimisation of plans for Mayfield and rest of portfolio to
enhance risk/return profile
Underpinning our strategy: strong capital base following pro-active capital
recycling
¾ Sold £625m of subscale and non-core assets since March 2023 including
£400m post year-end, on average in line with March 2023 book value,
materially exceeding acquisitions of £136m
¾ Maintained strong capital base, with long 9.5-year average debt maturity,
£1.9bn cash and undrawn facilities, and pro-forma for disposals since
year-end, a low 7.0x net debt/EBITDA and low 32.3% LTV, creating significant
balance sheet capacity to become net investor at attractive point in time
¾ Capitalised on sector-leading access to credit, with AA/AA- ratings, via
£300m bond issue at 4.75%
1. An alternative performance measure. The Group uses a number of financial
measures to assess and explain its performance, some of which are considered
to be alternative performance measures as they are not defined under IFRS. For
further details, see the Financial review and table 14 in the Business
analysis section.
2. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Financial review. The condensed consolidated preliminary
financial information is prepared under UK adopted international accounting
standards (IFRSs and IFRICs) where the Group's interests in joint ventures are
shown collectively in the income statement and balance sheet, and all
subsidiaries are consolidated at 100%. Internally, management reviews the
Group's results on a basis that adjusts for these forms of ownership to
present a proportionate share. These metrics, including the Combined
Portfolio, are examples of this approach, reflecting our economic interest in
our properties regardless of our ownership structure. For further details, see
table 14 in the Business analysis section.
3. Including the benefit of £22m year-on-year increase in surrender premiums;
adjusted for this, underlying EPRA earnings and EPS were £371m and 50.1 pence
respectively.
A live video webcast of the presentation will be available at 9.00am BST. A
downloadable copy of the webcast will then be available by the end of the day.
We will also be offering an audio conference call line, details are available
in the link below. Due to the large volume of callers expected, we recommend
that you dial into the call 10 minutes before the start of the presentation.
Please note that there will be an interactive Q&A facility on both the
webcast and conference call line.
Webcast link: https://webcast.landsec.com/2024-full-year-results
(https://webcast.landsec.com/2024-full-year-results)
Call title: Landsec Annual Results 2024
Conference call:
https://webcast.landsec.com/2024-full-year-results/vip_connect
(https://webcast.landsec.com/2024-full-year-results/vip_connect)
Forward-looking statements
These full year results, the latest Annual Report and Landsec's website may
contain certain 'forward-looking statements' with respect to Land Securities
Group PLC (the Company) and the Group's financial condition, results of its
operations and business, and certain plans, strategies, objectives, goals and
expectations with respect to these items and the economies and markets in
which the Group operates.
Forward-looking statements are sometimes, but not always, identified by their
use of a date in the future or such words as 'anticipates', 'aims', 'due',
'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans',
'targets', 'goal' or 'estimates' or, in each case, their negative or other
variations or comparable terminology. Forward-looking statements are not
guarantees of future performance. By their very nature forward-looking
statements are inherently unpredictable, speculative and involve risk and
uncertainty because they relate to events and depend on circumstances that
will occur in the future. Many of these assumptions, risks and uncertainties
relate to factors that are beyond the Group's ability to control or estimate
precisely. There are a number of such factors that could cause actual results
and developments to differ materially from those expressed or implied by these
forward-looking statements. These factors include, but are not limited to,
changes in the political conditions, economies and markets in which the Group
operates; changes in the legal, regulatory and competition frameworks in which
the Group operates; changes in the markets from which the Group raises
finance; the impact of legal or other proceedings against or which affect the
Group; changes in accounting practices and interpretation of accounting
standards under IFRS, and changes in interest and exchange rates.
Any forward-looking statements made in these full year results, the latest
Annual Report or Landsec's website, or made subsequently, which are
attributable to the Company or any other member of the Group, or persons
acting on their behalf, are expressly qualified in their entirety by the
factors referred to above. Each forward-looking statement speaks only as of
the date it is made. Except as required by its legal or statutory obligations,
the Company does not intend to update any forward-looking statements.
Nothing contained in these full year results, the latest Annual Report or
Landsec's website should be construed as a profit forecast or an invitation to
deal in the securities of the Company.
Chief Executive's statement
Successful execution on strategy. Focus on driving growth.
Over the last three years, our focus has been two-fold: firstly, on increasing
our investments in best-in-class assets where our competitive advantages can
drive long-term growth, and secondly on preserving balance sheet strength. The
success of this is reflected in our continued like-for-like income growth and
rising occupancy, significantly outperforming market averages. And despite the
adjustment in property values over the past two years following the sharp rise
in global interest rates, our pro-active capital recycling means that
pro-forma for our recent hotels disposal, our 32.3% LTV is now lower than it
was two years ago, and our net debt is down £1.1bn, creating balance sheet
capacity to grow.
Owning the right real estate has never been more important, as the
normalisation in cost of capital means value drivers in real estate have
fundamentally changed compared to much of the 2010s decade, when ultra-cheap
money and sector themes were key drivers of performance. Irrespective of
sector, there is now a growing distinction between those assets that really
fulfil customers' future expectations and hence deliver like-for-like income
growth and those that do not. This means future performance across the entire
sector will be much more driven by asset quality than generic themes.
The successful execution of our strategy over the last few years means Landsec
is well positioned in this context. Customer demand for our high-quality
product has remained robust despite the unsettled political/economic backdrop,
concerns about hybrid working and cost of living pressures for consumers. In
London, our £6.2bn West End-focused portfolio is almost full, with occupancy
up to 97.3%, so rents are rising. In retail, our £1.8bn portfolio of nine
major destinations has seen occupancy rise to 95.4% and we have started to
drive positive reversionary uplifts on lettings and renewals. As a result, our
like-for-like net rental income increased by 2.8% last year and, following a
period of interest rate-driven asset repricing, the valuation of c. 60% of our
portfolio was effectively stable in the second half of last year.
Looking forward, we expect high demand for best-in-class space to persist and,
as supply of this space remains limited, this will continue to drive
like-for-like income growth. Meanwhile, as the interest rate outlook today
appears more balanced than at any point in the last couple of years, yields
and values for the best assets are starting to stabilise. Having sold early
when values were higher, we now have balance sheet capacity to invest at an
attractive point in time. As a result, Landsec is well-placed for growth.
Continued strength in operational performance
Our financial results reflect the quality of our portfolio, the strong
operational performance of our platform and our resilient capital base. Our
FY23 earnings included the benefit of a £22m increase in surrender premiums,
which we adjusted for in our 50.1 pence underlying EPRA EPS. Our EPRA EPS last
year was stable vs this underlying level, in line with our guidance, as the
2.8% growth in like-for-like income we delivered, and the completion of our
successful developments fully offset the impact of our significant disposals
during the past two years and a rise in finance costs. Our dividend for the
year is up 2.6% to 39.6 pence per share, again in line with our guidance,
reflecting a healthy dividend cover of 1.27 times.
During the first half of the year, the marked rise in interest rates across
the globe resulted in upwards pressure on valuation yields, but this eased in
the second half and throughout the year the impact of this has been partly
offset by our 3.2% ERV growth. This meant that our portfolio value was down
6.0%, or £625m, for the year, driving a £341m loss and a 8.2% reduction in
EPRA NTA per share for the year. However, the impact of this was weighted
towards the first half, as yields remained stable in the final quarter and our
total return on equity for the year improved to -4.0% from -8.3% in the prior
year.
Table 1: Highlights
Mar 2024 Mar 2023 Change %
EPRA earnings (£m)(1,2) 371 393 (5.6)
Loss before tax (£m) (341) (622) (45.2)
Total return on equity (%) (4.0) (8.3) (51.8)
Basic (loss)/earnings per share (pence) (43.0) (83.6) (48.6)
EPRA earnings per share (pence)(1,2) 50.1 53.1 (5.6)
Underlying EPRA earnings per share (pence) (1,2) 50.1 50.1 -
Dividend per share (pence) 39.6 38.6 2.6
Combined portfolio (£m)(1) 9,963 10,239 (2.7)
IFRS net assets (£m) 6,447 7,072 (8.8)
EPRA Net Tangible Assets per share (pence)(1) 859 936 (8.2)
Adjusted net debt (£m)(1) 3,517 3,287 7.0
Group LTV ratio (%)(1) 35.0 31.7 10.4
Proportion of portfolio rated EPC A - B (%) 49 36
Average upfront embodied carbon reduction development pipeline (%) 40 36
Energy intensity reduction vs 2020 (%) 18 17
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information in the Financial
Review.
2. FY23 EPRA earnings and EPRA EPS include the benefit of £22m increase in
surrender premiums; underlying EPRA EPS excludes this.
Our strategy
Since we launched our strategy in late 2020, our focus has consistently been
on our two key principles of sustainable value creation: focusing our
resources on where we have a genuine competitive advantage and maintaining a
strong balance sheet. We have increased our investment in best-in-class assets
where our skillset allows us to enhance returns and drive long-term growth.
This has supported our like-for-like income growth and operational
outperformance thus far and should continue to do so in the future. At the
same time, our pro-active capital recycling means that, despite the rise in
interest rates and adjustment in property values, pro-forma for our recent
disposals, our 32.3% LTV and 7.0x net debt/EBITDA are low.
For much of the decade leading up to 2022, creating value in real estate was
often about leveraging up a spread between rental yields and ultra-low
borrowing costs or picking high-level sector themes. The significant rise in
cost of capital across the globe has not only changed the former but also the
latter, as shown by the challenges faced by low-margin online retail models
and the shift back to physical retail. As such, irrespective of sector,
quality has become a much more important driver of future performance, which
means it can be misleading to look at market averages. Indeed, even though
market-wide vacancy is elevated, with London offices at 8.8%, retail at 12%
and even logistics at 7.8% now, the best assets in each of these sectors have
little vacancy and so continue to show good rental growth.
The successful execution of our strategy means we are well placed to benefit
from this. Since late 2020, we have sold around 40 standalone assets,
including the 21 hotels we sold since the year-end. We reinvested principally
in our key places, be it through development in Victoria, at Piccadilly Lights
and in Southwark, or by buying out JV partners in our retail destinations at
Bluewater and in Cardiff, such that c. 80% of our portfolio is now invested in
twelve key locations with significant scarcity value. We expect each of these
unique, multi-let places to drive superior income returns and growth over
time.
This provides a critical underpin for capital values. The outlook for interest
rates is more balanced now than it has been for a couple of years, but we
remain of the view that it is unlikely that rates will come down sharply from
current levels. In what will therefore likely remain a higher nominal rate
environment, we think yields for assets which have inherent income growth and
therefore provide a real income stream look attractive, yet for most assets
which lack this growth, we think the risk to values remains down.
In today's more normalised rate environment, we continue to target to deliver
a total return on equity of 8-10% p.a. over time, comprising a mix of income
and capital returns, driven by rental growth and selective development upside.
Short term movements in valuation yields are outside of our control and mean
our return on equity will not be exactly in this range each individual year,
as we have seen over the past twelve months. However, with an income return on
our March 2024 NTA of c. 5.7%, an expectation of further rental growth and
yields starting to stabilise, the outlook for this is encouraging.
As part of this, it is important that we operate efficiently. We reduced our
overhead costs by 9% during the year and expect further savings over the next
2-3 years, driven partly by our investments in data and technology. Although
our EPRA cost ratio has remained stable at 25%, this solely reflects the
impact of capital allocation decisions: since late 2020, we have sold £2.2bn
of mature, low-yielding offices which incurred minimal operating costs, but
equally had little room to add further value and a mid-single digit forward
IRR, whereas we acquired more operational assets that come with higher
operating cost, but also a materially higher net income return and much higher
forward IRR.
As borrowing costs and our cost of capital have increased, it is also critical
we continue to think carefully about our capital allocation decisions.
Including our £400m of disposals since the year-end, we have now sold £3.1bn
of assets since late 2020, which means most of the c. £4bn disposal target we
set out at that time is done. Looking ahead, we have three principal
opportunities to invest in: acquiring major retail; our Central London
pipeline; and our mixed-use pipeline. We also have three main sources of
funding: our balance sheet headroom towards a slightly higher LTV now that
rates and values are starting to stabilise; further capital recycling; or
attracting other, complementary sources of capital which can enhance our
overall growth, capitalise on our platform value, and grow our overall return
on equity.
In terms of opportunities, the right major retail destinations offer
attractive high single digit income returns with income now starting to grow,
as seen across our own portfolio. Alongside our two committed office
developments in London, where the yield on the overall capex we are investing
is high at c. 12%, this is our key focus for investment at the moment and
where we plan to apply most of our existing balance sheet capacity too.
Following a period of limited transaction activity in this sector, we are now
seeing signs of activity levels around the work-out of broken ownership
structures starting to pick up. Further capital recycling out of our residual
retail parks will add to our investment capacity in this space and, overall,
this is expected to enhance our income growth and return on equity.
Given the significant size of our medium term London and mixed-use pipelines
and our desire to maintain a sustainable level of development exposure, it is
unlikely that we will fund all of this on our own balance sheet. Rents for
highly sustainable, best-in-class space continue to grow and construction cost
inflation has normalised, yet returns on future commitments will of course
have to compensate for higher cost and higher exit yields. We continue to
optimise costs, planning consents and delivery programmes in London and
mixed-use to ensure any future commitments deliver an appropriate return and
risk premium vs the return on any assets we choose to sell to fund our
investment in these. We will progress the schemes that deliver this, adjust
plans for others, or sell those where the holding cost of maintaining
optionality does not outweigh the future upside. Overall, this will enhance
our overall return on equity through development upside and longer term rental
growth, reflecting the quality of our pipeline.
Creating value through our competitive advantages
In executing our strategy, we continue to focus on our three key competitive
advantages: our high quality portfolio; the strength of our customer
relationships; and our ability to unlock complex opportunities. Customer
demand continues to polarise, as demand for modern, sustainable space in areas
with exciting amenities in London remains strong, even though overall leasing
across the market was down during the year. In retail, brands continue to
focus on fewer, but bigger and better stores in key locations. Supply of both
is constrained, which is driving income and rental value growth across our
assets.
In London, 77% of our portfolio is now located in the vibrant West End and
Southwark markets, up from 58% in 2020. Our recently completed schemes are 89%
let or in solicitors' hands, up from 60% a year ago, with rents 12% above
initial expectations. Office utilisation is up 18% for the year and 81% of our
lettings over the year have seen customers grow or keep the same space. Across
our existing portfolio we signed or are in solicitors' hands on £35m of
leases, on average 6% above ERV, whilst occupancy is up 140bps to 97.3%. With
15% uplifts on relettings/renewals, our offices saw 1.4% LFL rental income
growth and overall ERVs were up 5.0%, at the top end of our guidance of low to
mid single digit growth.
Across our major retail destinations, we completed or are in solicitors' hands
on £37m of lettings, on average 6% above ERV. Reflecting the marked
turnaround of the best assets in this space, we have started to capture
positive reversionary potential during the year, with relettings and renewals
on average 2% above previous passing rent, whilst occupancy increased by a
further 130bps to 95.4%. Combined with strong turnover growth, this meant we
delivered 6.9% growth in LFL net rental income. Valuers' assumed ERVs continue
to trail operational performance, up 1.4%, albeit in line with our guided
range.
Our strong operational performance is supplemented by our ability to unlock
complex opportunities, such as in London, where we completed three projects
over live Underground stations featuring highly bespoke engineering solutions,
combined creating c. £215m of value, or in mixed-use, where we secured
planning consent for our 1,800 homes-scheme at Finchley Road, including
detailed consent for the first phase. This ability is expected to serve us
well when it comes to new opportunities in the year ahead.
Delivering sustainably
We continue to make progress against our carbon reduction targets, which are
aligned with the Science Based Targets Initiative's (SBTi) Net-Zero Standard.
Our near-term target is to reduce our direct and indirect greenhouse gas
emissions by 47% by 2030 from a 2019/20 baseline and to reach net zero by 2040
from the same baseline year. So far, emissions have already reduced by 24% vs
this baseline. During the year we updated our target to reduce our energy
intensity by 52% by 2030 from a 2019/20 baseline, to align this with our
carbon reduction target. We are already tracking a 18% reduction, having
achieved an energy intensity reduction across our portfolio of 3.7% during the
year vs the prior year.
To make sure we meet our carbon reduction target and stay ahead of the
proposed Minimum Energy Efficiency Standard Regulations requiring a minimum
EPC 'B' rating by 2030, we have continued to progress our net zero transition
investment plan. 49% of our overall portfolio is already rated B or higher, up
from 36% a year ago. We have started air source heat pump retrofits at two
sites and expect to start a further three this year, which will result in
improved EPC ratings from 2025 onwards when these become operational. We also
continue to focus on reducing upfront embodied carbon from our development
schemes and improving energy efficiency across our operational assets, and
have been expanding the work with our largest customers to help them identify
ways to save energy.
In its first year, our Landsec Futures fund, which is aimed at improving
social mobility in the real estate industry and will see us invest £20m over
2023-2033, has already made a significant contribution to our target to create
£200m in social value and empower 30,000 people towards the world of work by
2030. Since 2019/20, we have now created £54m of social value and empowered
10,249 people to work.
Outlook
The UK macro outlook has improved over the past year, with a sharp reduction
in inflation and a return to real wage growth for consumers, even though
economic growth is expected to remain modest in the short term. Combined with
the more normalised interest rate environment, this means it has never been
more important to own the very best assets in the right locations that cater
for customers' future needs and can therefore deliver positive like-for-like
income growth.
In late 2022, we said that we expected property values would continue to
adjust for some time after a decade of ultra-low interest rates. This has
proven to be the case but there are increasingly signs that this is now coming
to an end. The relative stabilisation of long-term rates is a clear positive
and reflecting the historically attractive pricing of good quality income in
London and major retail, we are starting to see interest emerge from investors
who have not been active in these markets for some time. As such, we expect
activity levels to pick up from here. The refinancing of cheap debt issued
before 2022 remains a challenge for parts of the sector, yet absent any
further macro shocks, we think the value of high-quality assets has largely
bottomed out and will start to grow in the foreseeable future as rents rise.
Against this backdrop, our actions over the past three years leave us well
placed:
¾ we increased our focus on high-quality places where customer demand is
demonstrably strong;
¾ we preserved our balance sheet strength, providing room to grow at an
attractive time in the cycle;
¾ we have a built pipeline of attractive opportunities with flexibility on
future commitments.
As customer demand for the best space remains robust, we expect our Central
London and major retail assets to again see ERVs grow by a low to mid single
digit percentage this year. We are now capturing positive leasing reversion
across all main parts of our portfolio, which delivered 2.8% growth in
like-for-like net rental income last year, and we expect like-for-like growth
to be similar for the year ahead.
Determining how this continued operational growth will then translate into EPS
growth will depend on the quantum and timing of net investment from here,
where we remain disciplined on quality and price. We have created meaningful
balance sheet capacity through our significant asset disposals but our recent
sales activity does reduce annualised earnings by c. 4%, all else equal. This
means that, before reflecting the impact of any reinvestment of these sales
proceeds, EPS for the year to March 2025 would likely be slightly below the
50.1 pence for 2024. For March 2026, we currently expect EPS to be slightly
above this level, reflecting the combined effect of continued like-for-like
income growth and accretive capital recycling. As a result, we continue to
expect our dividend to grow by a low single digit percentage this year, as our
dividend cover remains towards the high end of our 1.2-1.3x target range.
As macro-economic signals look more encouraging than they have for a while,
with long-term interest rates stabilising and customer demand for the best
assets remaining robust, the outlook for capital values of the best assets
and, as a result, our overall return on equity is positive. With capacity to
grow at an attractive point in time, we are positive about the future.
Operating and portfolio review
Overview
Our combined portfolio was valued at £10.0bn as of March, comprising the
following segments:
¾ Central London (62%): our well-connected, high-quality office (84%) and
retail and other commercial space (16%), located in the West End (69%), City
(23%) and Southwark (8%).
¾ Major retail destinations (18%): our focused investments in six shopping
centres and three retail outlets, which are amongst the highest selling
locations for retailers in the UK.
¾ Mixed-use urban neighbourhoods (7%): our investments in mixed-use urban
places in London and a small number of other major growth cities, with
medium-term repositioning or development potential.
¾ Subscale (12%): assets in sectors where we have limited scale or
competitive advantage and which we therefore plan to divest over time, split
broadly equally between retail parks, leisure and hotels, the last of which we
have sold since the year-end.
Investment activity
During the financial year we sold £225m of assets, including our two smallest
retail outlets, a retail park in Romford, and two small leisure assets and two
mixed-use development assets in London, on average at a 1% discount to March
2023 book value. Since the year-end we have sold our hotel portfolio for
£400m, slightly ahead of the March 2023 book value. This crystallised the
strong recovery in performance post Covid yet as the income on this portfolio
was 100% turnover linked on long-term leases to Accor, there was no
opportunity for us to influence or enhance its future operational performance.
During the year we made £136m of acquisitions and spent £220m on development
capex. We acquired an 89,000 sq ft office in Kings Cross for £90m which we
plan to reposition to Myo for an opening in 2025, with an expected IRR in the
mid-teens. In addition, we bought a £30m site adjacent to our Timber Square
development for an implied price of c. £100 per sq ft. This could almost
double the size of the combined site and create a significant c. 670,000 sq ft
estate across four buildings. We also spent £16m on a small number of site
amalgamation opportunities adjacent to existing assets. Whilst these
acquisitions do not produce income in the short term and therefore create a c.
£6m earnings drag in the current year because of finance costs, they unlock
substantial near-term upside potential at a low in-price.
With the sale of our hotel portfolio, we have now sold £3.1bn of the c. £4bn
assets we said we intended to sell over a period of c. 6 years when we
launched our updated strategy in late 2020. We will continue to recycle
capital where assets do not meet our return requirements or fit our strategic
focus, but this means we are now through the vast majority of our disposal
programme. As such, our focus for the rest of the year is now on acquisitions,
as we aim to recycle the proceeds of our hotels disposal into additional
opportunities in major retail. In London and mixed-use, our own investment in
new development commitments is likely to be funded principally through future
disposals of mature or standalone assets, alongside other, complementary
sources of capital.
Portfolio valuation
The marked increase in interest rates during the first half of the year meant
that transaction activity across global property markets has been subdued. As
a result, valuation yields softened so despite the fact that our successful
leasing delivered 3.2% ERV growth, our portfolio value reduced by 6.0%. The
impact of rising rates principally affected the first half of the year, as
yields remained flat in the final quarter and c. 60% of our portfolio was
effectively stable in value in the second half.
Our Central London portfolio was down 6.9% for the year, as upside from 5.0%
ERV growth was offset by a 46bps increase in yields to 5.4%. The value of our
West End office (-3.6%) and retail and other assets (-4.7%), which make up 77%
of our London investment portfolio following our significant City disposals
over the last three years, again proved more resilient than City values
(-13.9%). This reflects strong ERV growth, driven by our successful leasing in
Victoria, which means West End office values were stable in the second half.
Development values were down 9.9% given the early stage these projects are in,
but we are confident these will deliver attractive returns once these are
completed and let.
Major retail valuations were virtually stable for the year, down just 1.1%,
following a minor increase in the second half (+0.2%), reflecting their high
income return and improving operational performance, with LFL net income up
6.9%. Valuers' assumed ERVs continue to trail operational performance and
leasing, up just 1.4%, but despite this, major retail again was the best
performing part of our core portfolio with a 7.1% total return over the year,
ahead of Central London (-2.9%) and mixed-use (-8.9%).
In mixed-use, values were down 14.0%, mostly driven by outward yield shift at
MediaCity and a softening of yields and a reduction in income at our three
existing retail assets in Glasgow and London, as these have so far been
managed for short-term income to maximise flexibility for future development.
Across our subscale portfolio, the value of our hotels was up slightly (0.6%),
whilst retail park values were relatively resilient (-1.8%). The value of our
leisure assets was down 8.2% as investor sentiment towards cinemas remains
subdued, even though our largest leisure customer, Cineworld, successfully
recapitalised during the year and operational performance and ERV growth
remains positive.
Table 2: Valuation analysis
Market value 31 March 2024 (Deficit)/Surplus FY valuation change H2 valuation change LFL rental value change(1) Net initial Topped up net initial Equivalent LFL equivalent yield change
yield
yield
yield
£m £m % % % % % % bps
West End offices 3,109 (111) (3.6) (0.5) 6.9 4.2 5.5 5.3 37
City offices 1,192 (188) (13.9) (4.6) 1.3 3.9 5.4 6.0 78
Retail and other 991 (48) (4.7) (3.3) 5.0 4.6 4.8 4.9 30
Developments 926 (102) (9.9) (4.1) n/a 0.0 0.1 5.4 n/a
Total Central London 6,218 (449) (6.9) (2.4) 5.0 4.2((2)) 5.3((2)) 5.4 46
Shopping centres 1,226 1 0.1 - 1.5 8.1 8.7 8.1 23
Outlets 605 (21) (3.3) 0.5 1.3 6.3 6.5 7.0 17
Total Major retail 1,831 (20) (1.1) 0.2 1.4 7.5 8.0 7.8 22
London 191 (23) (10.3) (8.7) 2.0 4.2 4.2 6.6 22
Major regional cities 510 (93) (15.3) (6.6) (1.2) 6.7 6.7 7.7 106
Total Mixed-use urban((3)) 701 (116) (14.0) (7.8) (0.3) 6.1((2)) 6.1((2)) 7.3 85
Leisure 423 (35) (8.2) (5.5) 1.5 8.7 8.9 8.8 26
Hotels 400 2 0.6 (1.1) 5.7 7.3 7.3 7.2 54
Retail parks 390 (7) (1.8) (1.2) 1.4 6.0 6.8 6.8 38
Total Subscale sectors 1,213 (40) (3.2) (2.6) 2.7 7.4 7.7 7.6 38
Total Combined Portfolio 9,963 (625) (6.0) (2.4) 3.2 5.4((2)) 6.2((2)) 6.2 45
1. Rental value change excludes units materially altered during the period.
2. Excluding developments / land.
3. Previous Mixed-use urban sub-segments have been changed to a classification
based on geographical location, which is better aligned to how these assets
are managed internally and our revised approach to a number of assets.
Looking ahead, we expect that the relative stability in long-term rates and
improvement in availability and pricing of credit will support a pick-up in
investment activity. We are seeing investor interest emerge in London and
shopping centres from parties who have not been active in these markets for
years, but who are now attracted by historically attractive yields and clear
evidence of rental growth for best-in-class assets. The refinancing of cheap
debt issued pre-2022 remains a challenge for parts of the sector, yet the risk
of disorderly sales substantially driving down the value of high-quality
assets seems low. Markets remain sensitive to rates, yet values for the best
assets have begun to stabilise, even though secondary likely has further to
fall. Whilst we are principally focused on driving like-for-like income, we
expect ERVs for our London and major retail assets to grow by a low to mid
single digit percentage this year.
Leasing and operational performance
Central London
Customer demand remains firmly focused on buildings with the best
sustainability credentials, transport connectivity and local amenities. The
amount of space which meets these criteria remains limited, so pricing of this
continues to go up, whereas space which does not meet these criteria is at
risk of becoming obsolete, almost regardless of price. We continue to see the
evidence of this strong demand across our portfolio, for example in the new
record rents we achieved in Victoria.
Reflecting the appeal of our buildings and locations to people, we have seen
an increase in daily turnstile tap-ins of 18%, significantly ahead of the
growth in TFL public transport data. Across our leasing deals, we have also
seen customers plan for, on average, c. 30% more square foot per person than
they did before the pandemic in 2019, to create more space for collaboration,
focus work or wellbeing. As such, of our £40m of office lettings over the
past year, 47% saw customers increasing floorspace, whilst only 19% reflected
customers downsizing. This is in line with market data which shows that only
one-fifth of active tenant requirements is for less space.
We have consistently said that we felt that large HQ space and areas which
lack the amenities to make people want to spend time there are most at risk as
a result of more flexible ways of working. Virtually all of the £2.2bn
offices we sold since late 2020 were large, single-let HQ buildings where our
ability to add further value was limited, whilst we increased our focus on
multi-let clusters in the lively, well-connected West End and Southbank
markets. These now make up 77% of our London portfolio vs 58% in 2020.
In a world where demand is concentrated in the best part of the market, market
averages become rather meaningless. This is illustrated by the fact that,
whereas overall office vacancy in London is elevated, at 8.8%, 90% of all
vacant space sits in 10% of all buildings and close to 40% of vacant space
sits in just 1% of all offices in London. This shows vacancy is mostly a
building issue, not a market-wide issue. It also shows offices are different
than retail 5+ years ago, as in retail even the best locations saw vacancy
rise and, as a result, rents fall, whereas in offices Grade A availability
remains low, so rents continue to rise.
Even though take-up across the overall London market slowed, demand for space
across our standing portfolio remained resilient. We signed lettings during
the year totalling £30m of rent, on average 5% above valuers' assumptions,
with a further £5m in solicitors' hands, 9% above valuers' estimates.
Overall, relettings and renewals reflected a 15% uplift vs previous passing
rent and occupancy increased 140bps to 97.3% - substantially outperforming the
Central London market, where occupancy fell by 100bps. Our two existing Myo
locations saw average occupancy for the year rise to 93%, up from 86%.
Major retail destinations
We have continued to see a further shift back from online to physical sales,
with negative online non-food sales growth for the last two years. The exact
split between online and offline is becoming less of a factor for the best
locations as for most major brands online and physical channels are firmly
interconnected. The increase in cost of capital and cost of doing business
online is keeping pressure on low-margin online sales. This principally
affects pure-play online models, which in response have shifted their focus to
improving profitability rather than growing market share, increasing the cost
for consumers to buy online.
Reflecting this, we continue to see growing demand from brands for physical
space in the best locations. There is a clear focus on 'fewer, bigger, better'
stores, as leading brands such as Inditex and H&M have announced
significant investments in their best stores, even though they often continue
to close the tail ends of their portfolio. Supported by the fact that for many
key brands, including JD, Zara, Boots and Next sales growth in our centres is
outperforming their overall sales growth, this explains the strong demand for
our space. Across our portfolio, total sales grew 4.1% and like-for-like sales
were up 1.5%. Footfall increased 3.9% and is now at c. 93% of pre-pandemic
levels.
On the back of this, we delivered 6.9% like-for-like income growth and a
130bps increase in occupancy to 95.4% - effectively back to pre-pandemic
levels. As a result, we are seeing improved pricing tension and selective
competition for space. A year ago we said we expected the last large
over-rented leases to reset during the year, which has happened. Despite this,
for the first time in years we have started capturing positive uplifts on
renewals and relettings. This was still modest at 1% for the year, but is up
to 6% for deals in solicitors' hands. In total, we completed 219 lettings
totalling £27m of rent, on average 5% ahead of ERV, with a further £10m in
solicitors' hands, 7% above ERV.
Mixed-use urban neighbourhoods & subscale sectors
In mixed-use, the increase in vacancy partly reflects the fact that we have so
far managed part of the existing income for maximum development flexibility.
We expect this to reverse with our revised approach to these assets, which
involves retaining more of the existing built stock to reduce embodied carbon
and build on the existing income, rather than working towards a wholesale
redevelopment in one go. The operational performance of our retail parks and
leisure remains strong, with £7m of lettings on average 5% ahead of valuers'
assumptions plus a further £3m in solicitors' hands at a 3% premium, whilst
occupancy was up 30bps to 98.0%. We agreed a restructure of a number of leases
with Cineworld following its recapitalisation during the first half resulting
in an annual rent reduction of less than £1m, but all our units continue to
trade. Our hotels, which are fully let to Accor, saw occupancy rise from 94%
to 98% of pre-Covid levels, driving an increase in RevPAR, which supported our
disposal post the year-end.
Table 3: Operational performance analysis
Annualised rental income Net estimated rental value EPRA occupancy(1) LFL occupancy change(1) WAULT(1)
£m £m % ppt Years
West End offices 160 186 99.6 0.1 6.5
City offices 70 93 93.7 3.2 7.8
Retail and other 43 55 97.2 1.9 5.7
Developments 8 93 n/a n/a n/a
Total Central London 281 427 97.3 1.4 6.8
Shopping centres 121 122 95.1 1.0 4.3
Outlets 48 49 96.0 2.0 3.0
Total Major retail 169 171 95.4 1.3 3.9
London 11 16 90.2 (3.5) 9.0
Major regional cities 37 38 93.5 (4.1) 6.8
Total Mixed-use urban((2)) 48 54 92.6 (4.0) 7.2
Leisure 46 42 96.9 1.6 10.2
Hotels 35 29 n/a n/a 7.1
Retail parks 27 29 97.5 (1.1) 5.9
Total Subscale sectors 108 100 98.0 0.3 8.0
Total Combined Portfolio 606 752 96.5 0.8 6.2
1. Excluding developments.
2. Previous Mixed-use urban sub-segments have been changed to a classification
based on geographical location, which is better aligned to how these assets
are managed internally and our revised approach to a number of assets.
Development pipeline
Central London
We continue to see good demand for the high-quality space we develop. During
the year, we completed our n2 development in Victoria and Lucent behind
Piccadilly Lights, both of which were effectively fully let within four months
post completion, with rents on average 14% ahead of initial assumptions. At
The Forge in Southwark, Myo opened in the Phosphor building just before
Christmas, whilst the Bronze building is 42% let or in solicitors' hands. We
also completed the development of 21 Moorfields, which we sold in September
2022 for £809m, crystallising a 25% profit on cost.
Aside from The Forge, we also opened two Myo locations at One New Change and
New Street Square just before Christmas and in February, combined making up
138,000 sq ft, so all three of these are currently in lease-up. We are opening
a new Myo at Lucent shortly and plan to open a seventh location in Kings Cross
in 2025, which will bring our total Myo space to c. 300,000 sq ft. Rents are
broadly in line with our underwriting assumptions, representing net margins of
c. 20% over standard office space.
Whilst the sharp increase in interest rates over the past two years has
naturally impacted property values, the flipside is that it is limiting new
supply. Compared to a year ago, total space under construction has increased
from 12m to 13m sq ft yet 42% of this is already pre-let. This means that
speculative office space under construction which is expected to complete over
2024-26 is roughly half of the long-term average new-build office take-up in
London. As demand remains focused on the best, most sustainable space, we
expect this will drive further rental growth for the best quality assets.
As such, during the year we started the major refurbishment of Thirty High
(formerly Portland House) in Victoria and the development of Timber Square in
Southwark. Reflecting our positive outlook for rental values, we expect these
to deliver a gross yield on cost of 7.2% and be highly earnings accretive,
with an expected ERV of £59m once fully let vs £434m residual cost to
complete.
Table 4: Committed pipeline
Property Sector Size Estimated completion Net income/ ERV Market value Costs to complete TDC Gross yield on TDC
date
£m
sq ft £m £m £m %
'000
Thirty High, SW1 Office 299 Aug-25 30 238 183 412 7.3%
Timber Square, SE1 Office 381 Dec-25 29 137 251 411 7.1%
Total 680 59 375 434 823 7.2%
Table 5: Future Central London development pipeline
Property Sector Proposed Indicative TDC Indicative ERV Gross yield on TDC Potential start
date
sq ft £m £m % Planning status
'000
Near-term
Red Lion Court, SE1 Office 250 335 24 7.2 H2 2024 Consented
Liberty of Southwark, SE1 Office/resi 225 260 17 7.4(1) H1 2025 Consented
Total near-term 475 595 41 7.3
Medium-term
Old Broad Street, EC2 Office 285 2025 Consented
Hill House, EC4 Office 380 2026 Consented
Nova Place, SW1 Office 60 2025 Design
Southwark Bridge Road, SE1 Office 150 2025 Design
Timber Square Phase 2, SE1 Office 290 2026 Design
Total medium-term 1,165
Total future pipeline 1,640
1. Gross yield on cost adjusted for residential TDC.
In terms of future pipeline, we have started the deconstruction of the
existing building at Red Lion Court to prepare this for a potential start late
this year. We also secured planning consents for the development of 55 Old
Broad Street and Hill House, at our New Street Square estate, and a
significant increase in scale of our planning consent at Liberty of Southwark.
Combined, this brings our consented pipeline to 1.1m sq ft. We also acquired a
site adjacent to Timber Square for a low implied land value of c. £100 per sq
ft, which unlocks the opportunity to create a significant c. 670,000 sq ft
estate across two phases, with significant public realm incorporating the
site's historic Victorian railway arches.
Mixed-use urban neighbourhoods
Landsec has a long history of creating thriving urban places, such as in
Victoria, Oxford, Leeds or Cardiff. These places are scarce and their enduring
attraction underpins their longer-term growth, even though the exact mix of
uses of space differs by location. As consumer expectations on how we live,
work and spend our leisure time continue to change, we have a number of
opportunities in some of the fastest growing areas in the UK to create and
curate the next generation of such places.
At Finchley Road, in zone two London, we received unconditional planning
consent for our 1,800 homes masterplan including detailed consent for the
first 600 homes during the year. We have started offsite utility upgrades with
site preparatory and enabling works to follow in autumn this year. We
anticipate spending c. £10m on these works over the next 18 months. This will
put us in a position where we can commit to the development of the first 600
homes by late 2025. The investment for this would be roughly £300m, with a
target IRR in the low double-digits. At the same time, we will look to rebuild
the income in the existing retail asset ahead of its potential longer term
redevelopment.
At Mayfield, adjacent to Manchester's main train station, we have been working
with our JV partners on optimising the development strategy for this site.
Building on the successful place we have created with the new 6-acre park, we
have the option to start the first c. £140m office block late this year,
which would then also unlock the future residential phases of this new
mixed-use neighbourhood.
At Lewisham, south-east London, and Glasgow we are evolving our plans to focus
more on masterplans that can be delivered in discrete incremental phases.
Alongside this we will seek to embrace opportunities to retain and reinvent
existing buildings in our ambition to reduce embodied carbon. This new
approach will improve overall returns by retaining more of the existing income
and growing this, alongside discrete development interventions. We are still
finalising our plans, but this will likely result in less embodied carbon,
lower risk and less capital intensive routes to realising the potential of
these mixed-use estates.
Table 6: Mixed-use urban neighbourhoods pipeline
Property Landsec share Proposed Earliest start on site Number of blocks Estimated first/total scheme completion Indicative TDC Target yield on cost Planning status
% sq ft £m %
'000
Near-term
Mayfield, Manchester 50-100 2,500 2024 18 2027/2034 800-950 7 - 8 Consented
Finchley Road, NW3 100 1,400 2025 10 2028/2035 950-1,050 6 - 7 Consented
Medium-term
MediaCity, Greater Manchester 75 2026 Consented
Buchanan Galleries, Glasgow 100 2026 Design
Lewisham, SE13 100 2026 Design
Rents for the highly sustainable, best-in-class space we can deliver in London
and across our mixed-use pipeline continue to grow and construction cost
inflation has normalised, although returns on any future commitments will need
to compensate for higher costs and higher exit yields. We will therefore
continue to optimise designs, planning and delivery programmes to ensure our
future developments deliver an attractive return and sufficient risk premium
vs the return on assets we sell to fund our investment in these. The
significant size of our medium-term London and mixed-use pipelines means it is
unlikely that we will fund all of this on our own balance sheet, so we will
explore opportunities to access other, complementary sources of capital to
help accelerate the delivery of these opportunities.
Delivering in a sustainable way
Aligned to the Science Based Targets Initiative's (SBTi) new Net-Zero
Standard, we have committed to a target to reduce direct and indirect
greenhouse gas emissions by 47% by 2030 vs a 2019/20 base year and to reach
net zero by 2040 from the same base year. This includes emissions from all
sources, including all of our reported Scope 3 emissions such as the emissions
from our development pipeline, supply chain and customers. So far, our
emissions have already reduced by 24% compared to this baseline. To align with
our revised carbon reduction target, we have updated our energy intensity
target to reduce energy intensity by 52% by 2030 from a 2019/20 baseline. We
are currently tracking a 18% reduction, having achieved an energy intensity
reduction across our portfolio of 3.7% vs the prior year.
We continue to progress our net zero carbon transition plan, which will ensure
we deliver our near-term science-based target and meet the proposed Minimum
Energy Efficiency Standard of EPC 'B' by 2030. The expected cost to deliver
this plan is already reflected in our current portfolio valuation. 49% of our
portfolio is already rated 'B' or higher, including 44% of our office
portfolio, up from 36% a year ago. We expect this to increase from 2025
onwards, as the benefits from our net zero investments come through.
We have now started the retrofit of air source heat pumps at two office
locations. We expect to start a further three retrofit projects in the current
year and progressing detailed designs for another one. During the year, we
have expanded the work with our customers on energy audits from 25 to 38 of
our largest customers. These cover 56% of the energy used by our customers in
our office portfolio and so far this work has identified potential annual
carbon and energy savings of 10-40% for the majority of customers.
With respect to our target to reduce upfront embodied carbon by 50% vs a
typical development by 2030, to below 500kgCO(2)e/sqm for offices and
400kgCO(2)e/sqm for residential, our future pipeline is currently tracking at
an average 40% reduction. The two schemes we started this year are already
close to, or ahead of our 2030 reduction target. At Timber Square, we achieved
a reduction to 522kgCO(2)e/sqm due to retention of part of the existing
structure, a highly optimised design and the use of low carbon cross laminated
timber, whilst at Thirty High, retaining the original structure and upgrading
the existing façade resulted in an upfront embodied carbon intensity of just
347kgCO(2)e/sqm.
In March, we launched our new nature strategy, Let nature in, which recognises
the interdependency between the climate and biodiversity crises and aims to
consistently enhance nature across our portfolio to improve biodiversity in
the built environment; promote health, wellbeing, and community engagement;
and create nature-based solutions to mitigate and adapt to climate change.
Our Landsec Futures fund, which will see us invest £20m over 2023-2033, aimed
at improving social mobility in real estate and tackling issues local to our
assets, continues to support the delivery of our 2030 target to create £200m
of social value and empower 30,000 people towards the world of work. From our
2019/20 baseline, we have so far created £54m of social value and empowered
10,249 people.
Financial review
Overview
External market conditions improved as the year progressed. The relative
stability in interest rates of late, after the significant rise in the first
half of the year, material reduction in inflation and return to real wage
growth for consumers are all supportive for the outlook. Even though we do not
anticipate a sharp reduction in rates, our high-quality portfolio, strong
operational performance and robust capital base provide an attractive base for
future growth.
Reflecting the continued strength in customer demand, like-for-like gross
rental income was up 3.0%, or 2.8% on a net rental income basis, driven by a
further increase in occupancy, positive uplifts on relettings and renewals,
and growth in turnover income. Combined with a reduction in overhead costs,
this offset the impact of higher finance costs and disposals. As a result, our
EPRA earnings were in line with the prior year's underlying level of £371m
and, in line with our guidance, EPRA EPS was stable at 50.1p pence. Our total
dividend for the year of 39.6p pence is up 2.6%, in line with our guidance of
low single digit percentage growth. Our dividend cover of 1.27x remains
comfortably within our target range of 1.2-1.3x on an annual basis.
Our successful leasing activity increased overall occupancy and drove 3.2%
growth in ERVs but as investment volumes across the wider market remained
subdued, the valuation of our portfolio was down £625m, or 6.0%. This was
driven by an increase in valuation yields in the first half of the year in
particular, as c. 60% of our portfolio was stable in value in the second half.
This yield movement primarily drove an overall IFRS loss before tax of £341m
and basic EPS of -43.0 pence, compared with a loss of £622m for the prior
year, and a reduction in EPRA NTA per share of 8.2% to 859 pence. Including
dividends paid, our total return on equity was -4.0%, reflecting a 5.3% income
return and 4.2% upside from ERV growth and developments, offset by -13.5% on
account of yield shift.
Our balance sheet remains strong and comfortably within our operating
guidelines. Net debt increased slightly by £0.2bn to £3.5bn during the year,
which combined with the valuation movement of our portfolio resulted in an LTV
of 35.0% at the end of March. More importantly, at a time when investment
activity is low and the approach to valuations varies widely in different
markets, as a cash measure, our net debt/EBITDA at the year-end remained low
at 7.4x vs 7.0x a year ago, in line with our target to keep this below 8x.
Moreover, pro-forma for our £0.4bn of disposals since the year-end, our net
debt/EBITDA is down to 7.0x whilst our 32.3% LTV is lower than it was in March
2022, before the correction in values, and net debt is £1.1bn down since
then. Combined with our average debt maturity of 9.5 years and £1.9bn of cash
and undrawn facilities, this provides substantial capacity to invest in
growth.
Presentation of financial information
The condensed consolidated preliminary financial information is prepared under
UK adopted international accounting standards (IFRSs and IFRICs) where the
Group's interests in joint ventures are shown collectively in the income
statement and balance sheet, and all subsidiaries are consolidated at 100%.
Internally, management reviews the Group's results on a basis that adjusts for
these forms of ownership to present a proportionate share. The Combined
Portfolio, with assets totalling £10.0bn, is an example of this approach,
reflecting our economic interest in our properties regardless of our ownership
structure.
Our key measure of underlying earnings performance is EPRA earnings, which
represents the underlying financial performance of the Group's property rental
business, which is our core operating activity. A full definition of EPRA
earnings is given in the Glossary. This measure is based on the Best Practices
Recommendations of the European Public Real Estate Association (EPRA) which
are metrics widely used across the industry to aid comparability and includes
our proportionate share of joint ventures' earnings. Similarly, EPRA Net
Tangible Assets per share is our primary measure of net asset value.
Measures presented on a proportionate basis are alternative performance
measures as they are not defined under IFRS. This presentation provides
additional information to stakeholders on the activities and performance of
the Group, as it aggregates the results of all the Group's property interests
which under IFRS are required to be presented across a number of line items in
the statutory financial statements. For further details see table 14 in the
Business analysis section.
Income statement
Our strong leasing performance continues to underpin the growth of our
high-quality income. Our pro-active disposals over the past two years have
created room for future growth, even though this came at a modest cost to
income during the year. Finance costs increased due to a rise in interest
rates and lower capitalised interest following our recent development
completions, but this has been offset by our positive like-for-like income
growth, income from our successful developments and a reduction in
administrative expenses.
Headline EPRA earnings in the prior year benefitted from a £22m year-on-year
increase in surrender premiums received, which we adjusted for in the
underlying earnings we reported a year ago. As such, EPRA earnings of £371m
are in line with the prior year's underlying level.
Table 7: Income statement(1)
Year ended Year ended
31 March 2024
31 March 2023
Central London Major retail Mixed-use urban Subscale sectors Total Central London Major retail Mixed-use urban Subscale sectors Total Change
£m £m £m £m £m £m £m £m £m £m £m
Gross rental income(2) 291 181 57 112 641 310 171 57 109 647 (6)
Net service charge expense (4) (7) (3) (2) (16) (1) (8) (2) (1) (12) (4)
Net direct property expenditure (24) (23) (12) (16) (75) (20) (31) (10) (13) (74) (1)
Segment net rental income 263 151 42 94 550 289 132 45 95 561 (11)
Net administrative expenses (77) (84) 7
EPRA earnings before interest 473 477 (4)
Net finance expense (102) (84) (18)
EPRA earnings 371 393((3)) (22)
Capital/other items
Valuation deficit (625) (848) 223
Loss on changes in finance leases - (6) 6
Loss on disposals (16) (144) 128
Impairment charges (12) (24) 12
Fair value movement on interest rate swaps (17) 22 (39)
Other (20) (12) (8)
Loss before tax attributable to shareholders of the parent (319) (619) 300
Non-controlling interests (22) (3) (19)
Loss before tax (341) (622) 281
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
2. Includes finance lease interest, after rents payable.
3. Underlying EPRA earnings of £371m excluding £22m year-on-year increase in
surrender premiums
Net rental income
Reported gross rental income was down £6m to £641m, but up £16m adjusted
for the aforementioned £22m year-on-year increase in surrender premiums in
the prior year and up 3.0% on a like-for-like basis excluding the impact of
these movements. Surrender premiums over the last twelve months were £2m
higher than the underlying level over the previous two years, at £18m, part
of which relates to income foregone during the year. We expect surrender
receipts going forward to be lower than the levels in recent years, as a
result of lower levels of customer rightsizing or repurposing activity across
our portfolio.
Net rental income was up £11m on an underlying basis. Direct property costs
increased by £1m and net service charge expenses were up £4m, primarily
driven by the costs associated with the initial lease-up phase of our recent
London office developments. The impact from the repurposing of conventional
office space to introduce two Myos reduced net rental income by £2m, but
given the c. 20% premium on Myo rent we achieve, we expect this to more than
reverse as we lease up this space. Investment activity reduced income by £9m,
reflecting our significant deleveraging. On a like-for-like basis, our net
rental income was up £13m, or 2.8%. Reflecting continued demand for our
space, we expect like-for-like growth for the current year to be broadly
similar.
In line with our guidance, our gross to net margin for the year reduced
slightly to 85.8% from 86.7% in the prior year due to the start-up costs of
opening three new Myo locations and our completed developments. The sale of
our hotel portfolio will reduce our overall margin but on a like-for-like
basis we expect our gross to net margin to improve so we expect our overall
margin to be broadly stable this year. Overall, insolvencies remain low, with
rent from customers in administration at 0.4%, in line with the prior year.
Table 8: Net rental income(1)
£m
Net rental income for the year ended 31 March 2023 561
Gross rental income like-for-like movement in the period(2):
Increase in variable and turnover-based rents 8
Other movements 8
Total like-for-like gross rental income 16
Like-for-like net service charge expense -
Like-for-like net direct property expenditure (3)
Decrease in surrender premiums received (20)
Developments(2) 5
Acquisitions since 1 April 2022(2) 12
Disposals since 1 April 2022(2) (21)
Net rental income for the year ended 31 March 2024 550
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
2. Gross rental income on a like-for-like basis and the impact of
developments, acquisitions and disposals exclude surrender premiums received.
Net administrative expenses
Net administrative expenses were down £7m to £77m, as the cost savings from
the organisational review we undertook in late 2022 and our continued focus on
ensuring our cost base is efficient more than offset inflation. For the
current year, we expect continued efficiency improvements to offset inflation
and we anticipate further savings from our investments in data and technology
over time.
Our EPRA cost ratio was virtually stable at 25.0% vs 25.2% in the prior year,
which reflects our capital allocation decisions. Naturally, assets with long
leases to a single tenant often have lower operating costs than more
operational sectors such as flexible office, shopping centres, or for example
residential, yet this does not mean they generate a better overall return.
Illustrating this, over the last three years we have sold £2.2bn of virtually
triple-net offices with a 17-year lease term where our ability to add further
value was limited and which had an expected mid-single digit forward IRR. We
invested in more operational assets with a higher net income yield and much
higher IRR, which clearly improved our overall returns, even though the
combined impact of this increased our EPRA cost ratio by almost 3ppt.
Net finance expenses
Net interest costs increased by £18m to £102m, which reflected an increase
in our weighted average cost of debt and a reduction in capitalised interest
following the completion of our recent London developments, partly offset by
our deleveraging through disposals. All else equal, we expect net interest
costs for this year to be up slightly, as the reduction in debt following our
recent disposals is offset by an increase in average borrowing costs
reflecting our recent £300m bond issue and the higher average floating rate
compared to last year, with 94% of our debt fixed or hedged at the end of
March.
Non-cash finance income, which includes the fair value movements on
derivatives, caps and hedging and which is not included in EPRA earnings,
decreased from a net income of £23m during the prior year to a net expense of
£24m. This is predominantly due to the fair value movements of our
interest-rate swaps as a result of the increase in interest rates over the
period.
Valuation of investment properties
The independent external valuation of our Combined Portfolio showed a
reduction in value of £625m. Our strong leasing activity resulted in 3.2% ERV
growth, yet the upside of this was more than offset by a 45bps increase in
valuation yields driven by the sharp increase in bond yields during the first
half of the year. This upwards pressure on yields reduced during the second
half, as our valuers indicated yields were broadly stable in the final quarter
of the year.
IFRS loss after tax
Substantially all our activity during the year was covered by UK REIT
legislation, which means our tax charge for the period remained minimal. The
IFRS loss after tax primarily as a result of the above fair value adjustment
of our investment portfolio moderated to £341m, compared to £622m for the
prior year.
Net assets and return on equity
Our total return on equity for the year was -4.0%, compared with -8.3% for the
prior year. Our income return at NTA is an attractive 5.3%, whilst ERV growth
and development upside drove a capital return of 4.2%. The combination of
these two factors therefore yielded a return of 9.5%, with the remaining
negative impact driven by an increase in valuations yields. As yields for the
best assets begin to stabilise, this shows we are inherently well placed to
deliver the 8-10% return on equity we target over time.
After the £291m of dividends paid, EPRA Net Tangible Assets, which reflects
the value of our Combined Portfolio less adjusted net debt, reduced to
£6,398m, or 859 pence per share. This represents a 8.2% reduction versus the
prior year, half of which was made up for by dividends.
Table 9: Balance sheet(1)
31 March 2024 31 March 2023
£m £m
Combined Portfolio 9,963 10,239
Adjusted net debt (3,517) (3,287)
Other net assets (48) 15
EPRA Net Tangible Assets 6,398 6,967
Shortfall of fair value over net investment in finance leases book value 5 6
Other intangible asset 2 2
Excess of fair value over trading properties book value (25) (12)
Fair value of interest-rate swaps 22 42
Net assets, excluding amounts due to non-controlling interests 6,402 7,005
Net assets per share 863p 945p
EPRA Net Tangible Assets per share (diluted) 859p 936p
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Table 10: Movement in EPRA Net Tangible Assets(1)
Diluted per share
£m pence
EPRA Net Tangible Assets at 31 March 2023 6,967 936
EPRA earnings 371 50
Like-for-like valuation movement (460) (62)
Development valuation movement (102) (14)
Impact of acquisitions/disposals (63) (8)
Total valuation deficit (625) (84)
Dividends (291) (39)
Loss on disposals (16) (3)
Other (8) (1)
EPRA Net Tangible Assets at 31 March 2024 6,398 859
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Net debt and leverage
Adjusted net debt, which includes our share of JV borrowings, increased by
£230m to £3,517m during the year. We spent £137m on acquisitions and
invested £328m in capex, largely on London office developments, the
preparation of future developments and the investment in our existing assets.
This was partly offset by the sale of investment properties generating
receipts of £176m during the period.
Since the year-end we have sold £400m of assets, which would reduce adjusted
net debt to £3,117m on a pro-forma basis. Following the completion of our
recent London pipeline, we have £399m committed capex to spend over the next
two years on our two new projects in Victoria and Southbank.
The other key elements behind the decrease in net debt are set out in our
statement of cash flows and note 9 to the financial statements, with the main
movements in adjusted net debt shown below. A reconciliation between net debt
and adjusted net debt is shown in note 13 of the financial statements.
Table 11: Movement in adjusted net debt(1)
£m
Adjusted net debt at 31 March 2023 3,287
Adjusted net cash inflow from operating activities (353)
Dividends paid 291
Capital expenditure 328
Acquisitions 137
Disposals (176)
Other 3
Adjusted net debt at 31 March 2024 3,517
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Due to the modest increase in borrowings, net debt/EBITDA increased slightly
to 7.4x based on our net debt at the end of March 2024, or 7.3x based on our
weighted-average net debt for the period. We target net debt/EBITDA to remain
below 8x over time. Group LTV which includes our share of JVs, increased from
31.7% to 35.0%. This reduces to 32.3% pro-forma for the hotels disposal post
the year-end, which is 2.1ppt lower than it was in March 2022, before the
sharp rise in interest rates and resulting correction in property values. We
expect our LTV to increase slightly from this level as we will look to invest
at an attractive point in the cycle, but to remain within our target range of
25% to 40%.
Table 12: Net debt and leverage
31 March 2024 31 March 2023
Net debt £3,594m £3,348m
Adjusted net debt(1) £3,517m £3,287m
Interest cover ratio 3.9x 4.5x
Net debt/EBITDA (period-end) 7.4x 7.0x
Net debt/EBITDA (weighted average) 7.3x 8.0x
Group LTV(1) 35.0% 31.7%
Security Group LTV 37.0% 33.0%
1. Including our proportionate share of subsidiaries and joint ventures, as
explained in the Presentation of financial information above.
Financing
Our gross borrowings of £3,703m are diversified across various sources,
including £2,607m of Medium Term Notes (MTNs), £415m of syndicated and
bilateral bank loans and £681m of commercial paper. Our MTNs and the majority
of bank loans form part of our Security Group, which provides security on a
floating pool of assets valued at £9.2bn. This structure provides flexibility
to include or exclude assets, and an attractive cost of funding, with our MTNs
currently rated AA and AA- with a stable outlook respectively by S&P and
Fitch.
Our Security Group has a number of tiered covenants, yet below 65% LTV and
above 1.45x ICR, these involve very limited operational restrictions. A
default only occurs when LTV is more than 100% or the ICR falls below 1.0x.
Our portfolio could withstand a c. 43% fall in value before we reach the 65%
LTV threshold and c. 63% before reaching 100% LTV, whilst our EBITDA could
fall by c. 63% before we reach the 1.45x ICR threshold and c. 74% before
reaching 1.0x ICR.
We had £1.9bn of cash and undrawn facilities at the end of March 2024,
providing substantial flexibility. As expected, the percentage of borrowings
which is fixed or hedged reduced slightly to 94%, reflecting our net
investment in the year. Across the year we redeemed £427m of MTNs on their
expected maturity dates. In March, we issued a £300m bond with a maturity of
7.5 years at 4.75%, representing a spread of 103bps over the reference gilt
rate. This spread shows the strength of our credit profile, and ensured our
overall debt maturity remains long, at 9.5 years, providing clear visibility
and underpinning the resilience of our attractive earnings profile. Our
average cost of debt rose to 3.3% compared with 2.7% in the prior year.
Reflecting our strong financial position, we expect this to increase only
slightly during the year ahead. At the end of March 2024, we had a limited
£306m of debt maturing in the next two years.
Table 13: Available facilities(1)
31 March 2024 31 March 2023
£m £m
Medium Term Notes 2,607 2,736
Drawn bank debt 415 383
Outstanding commercial paper 681 312
Cash and available undrawn facilities 1,889 2,353
Total committed credit facilities 2,907 3,007
Weighted average maturity of debt 9.5 years 10.3 years
Percentage of borrowings fixed or hedged((1)) 94% 98%
Weighted average cost of debt((2)) 3.3% 2.7%
1. Calculated as fixed rate debt and hedges over gross debt based on the
nominal values of debt and hedges.
2. Including amortisation and commitment fees; excluding this the weighted
average cost of debt is 3.2% at 31 March 2024.
Outlook
Looking ahead, our high-quality portfolio, strong operational performance
actions and strong capital base mean that, with an LTV and net debt-position
which is lower than it was two years ago, we are well placed to invest at an
attractive point in the cycle.
We maintain our target to deliver an 8-10% annual return on equity over time,
comprising a mix of income and capital returns, driven by rental growth and
selective development upside. Short term movements in valuation yields are
outside of our control, and mean our return on equity will not be exactly in
this range each individual year, as we have seen over the past twelve months.
However, with an income return on NTA of c. 5.7%, an expectation of further
low-to-mid single digit ERV growth in London and Major Retail this year and
yields starting to stabilise, the outlook for this is encouraging.
We are now capturing positive leasing reversion, which supported 2.8% growth
in like-for-like net rental income over the past year and we expect growth for
the current year to be similar. How this will translate into EPS growth
depends on the quantum and timing of net investment from here. We have
meaningful balance sheet capacity following our significant disposals yet our
recent sales will reduce annualised earnings by c. 4%, all else equal. This
means that, before reflecting the impact of any reinvestment of these sales
proceeds, EPS for the year to March 2025 would likely be slightly below the
50.1 pence for 2024. For March 2026, we currently expect EPS to be slightly
above this level, reflecting the combined effect of continued like-for-like
income growth and accretive capital recycling. As a result, we continue to
expect our dividend to grow by a low single digit percentage this year, as our
dividend cover remains towards the high end of our 1.2-1.3x target range.
Principal risks and uncertainties
The Board undertakes an annual assessment of the principal risks as part of
the Strategic Planning and Business Planning processes, taking account of
those that would threaten our business model, future performance, solvency or
liquidity or the Group's strategic objectives. From this, the Group has
identified ten principal risks and uncertainties and has assessed how these
are managed through a combination of strategic risk management, mitigating
controls, or insurance.
The Group's approach to the management and mitigation of these risks is
included in the 2024 Annual Report. The table below sets out our ten principal
risks, with explanations of changes in the risk profile across the year.
Changes to our principal risks from half-year have been minor, as economic
headwinds have stabilised, but not abated, especially interest rates and
inflation. Whilst these factors put upward pressure on a number of risks,
Landsec has mitigated these pressures well and positioned itself strongly to
take advantage of future opportunities.
Risk description Change in year
Macroeconomic outlook ò
Changes in the macro-economic environment result in reduction in demand for The UK economy has continued to be challenging during 2023/24, with interest
space or deferral of decisions by retail and office occupiers. Due to the rates remaining high and high inflation also having an impact through much of
length of build projects, the prevailing economic climate at initiation may be the period.
vastly different from that at completion.
Whilst the operating environment is still affected by the implications of the
recent economic environment, the outlook is considered to be positive, with
interest rates expected to start falling during 2024/25. As such, the risk
score has been reduced during the period. The risk remains within appetite.
Office occupier market ó
Structural changes in customer expectations leading to changes in demand for The outlook in respect of the office occupancy market is positive, with
office space and the consequent impact on income and asset values. Further, increased demand and social appetite for office working continuing to
the risk encompasses the inability to identify or adapt to changing markets in strengthen.
a timely manner.
Whilst the current macro-economic environment is also looking positive, it
currently continues to apply pressure in respect of the buoyancy of the market
meaning this risk is considered to have remained stable over the period.
The residual risk at year end was below appetite our 'flexible' appetite
however over the course of our Strategic Plan we expect this risk to be
brought into appetite through opportunities for stronger leasing terms.
Retail and hospitality occupier market ó
Structural changes in customer expectations leading to changes in demand for Similar to the office occupier market, the outlook in respect of the retail
retail or hospitality space and the consequent impact on income and asset and hospitality occupier market is positive but this risk is currently
values. considered to have remained stable throughout the period as the economic
environment continues to have had an impact.
Our Strategic Plan and Business Plans outline initiatives to further
commercialise the use of our assets, expand customer experience and raise
awareness of our retail centres. Whilst diversifying the offerings to our
customers acts as a risk mitigation, the risk to be taken in respect of
potential yields for these initiatives, and the onboarding of customers, will
increase the overall risk, bringing these risks into appetite.
Capital allocation ñ
Capital allocated to specific assets, sectors or locations does not yield the In line with our Strategic and Business Plans, we are anticipating increased
expected returns i.e. we are not effective in placing capital or recycling. development exposure leading to this risk to have increased.
Our strategy remains to introduce third-party capital into a number of our
projects however we continue to have flexibility to seek to resize our
development to be appropriate for our own balance sheet as required.
Development strategy ñ
We may be unable to generate expected returns as a result of changes in the The external factors that influence this risk, such as market conditions and
occupier market for a given asset during the course of the development, or inflation, have remained stable over the year.
cost or time overruns on the scheme.
However, we are expecting to invest in a number of new developments during the
upcoming year which will increase this risk to be closer to our flexible
appetite.
Information security and cyber threat ó
Data loss or disruption to business processes, corporate systems or Significant investment and operational strengthening has been made over recent
building-management systems resulting in a negative reputational, operational, years, most recently including the onboarding of a new Chief Data &
regulatory or financial impact. Technology Officer during the year.
The emphasis is now focused on continuous improvement of the processes and
controls.
The current position of this risk remains within the overall Cautious risk
appetite alignment for operational risks.
Change projects ó
Landsec is engaging in a number of important internal change programmes. These Landsec has various technology and operational change programmes underway,
projects aim to deliver important benefits, both operationally and culturally. such as the upgrade and improvement of the ERP system.
There is a risk that these projects fail to deliver the benefits identified in
a timely manner and to budget.
Whilst cultural change programmes are drawing to a close, we continue to get
deeper into the operational change programmes. As such, the overall risk has
remained stable.
The current position of this risk, remains within the overall Cautious risk
appetite alignment for operational risks.
Health and safety ó
Failure to identify, mitigate or react effectively to major health or safety During the period, the risks associated with the use of Reinforced Autoclaved
incidents, leading to: Aerated Concrete
- Serious injury, illness or loss of life (RAAC) have been assessed, with action plans in place where necessary, however
the overall implications on Landsec's Health & Safety environment are
- Criminal/civil proceedings considered immaterial.
- Loss of stakeholder confidence
- Delays to building projects and access restrictions to our properties The likelihood of a major health, safety or security incident has remained
resulting in loss of income constant throughout the year and within appetite.
- Inadequate response to regulatory changes
- Reputational impact
People and skills ó
Inability to attract, retain and develop the right people and skills to meet In recent years, this risk had increased due to a combination of attrition due
our strategic objectives, grow enterprise value and meet shareholder to ongoing transformation programmes as well as the buoyant employment market
expectations. at the time.
However, these pressures have now stabilised leading to this risk remaining
unchanged overall and within appetite over the period.
Climate-change transition ó
Climate change risk has two elements: Operational and supply chain issues are impacting the availability and cost of
sustainable resources, which are key to meeting the business's embodied carbon
- Our near and long-term science-based carbon reduction targets by 2030 and targets. This is under regular review, however the overall risk position is
2040 are not met in time or are achieved at a significantly higher cost than considered to have remained stable over the year, currently sitting just below
expected, leading to regulatory, reputational and commercial impact. the Cautious risk appetite target.
- Failure to ensure all new developments are net zero in construction and
operation, as defined by the emerging net zero standard for assets, leads to
an inability to service market demand for high-quality assets that meet the
highest environmental and wellbeing standards.
Statement of Directors' Responsibilities
The Annual Report 2024 will contain the following statements regarding
responsibility for the financial statements and business reviews included
therein.
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group and the
Company financial statements in accordance with the requirements of the
Companies Act 2006. Under the Financial Conduct Authority's Disclosure
Guidance and Transparency Rules and Company law, group financial statements
are required to be prepared in accordance with UK adopted international
accounting standards (IFRSs and IFRICs). Directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of the profit
and loss of the Group and the Company for that period.
In preparing these financial statements, the Directors are required to:
¾ select suitable accounting policies in accordance with IAS 8
'Accounting Policies, Changes in Accounting Estimates and Errors' and then
apply them consistently;
¾ make judgements and accounting estimates that are reasonable and
prudent;
¾ present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
¾ in respect of the Group financial statements, state whether
international accounting standards in conformity with the requirements of the
Companies Act 2006 (and UK adopted international accounting standards) have
been followed, subject to any material departures disclosed and explained in
the financial statements;
¾ in respect of the Company financial statements, state whether
international accounting standards in conformity with the requirements of the
Companies Act 2006 have been followed, subject to any material departures
disclosed and explained in the financial statements;
¾ provide additional disclosures when compliance with the specific
requirements of UK adopted international accounting standards is insufficient
to enable users to understand the impact of particular transactions, other
events and conditions on the Group's and Company's financial position and
performance; and
¾ prepare the Group's and Company's financial statements on a going
concern basis, unless it is inappropriate to do so.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and the Company, and to enable them to ensure that the Annual Report
complies with the Companies Act 2006 and as regards the Group financial
statements, Article 4 of the IAS regulation. They are also responsible for
safeguarding the assets of the Group and the Company and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
Directors' responsibility statement under the Disclosure and Transparency
Rules
Each of the Directors, whose names and functions appear below, confirm to the
best of their knowledge:
¾ the Group financial statements, which have been prepared in
accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 (and UK adopted international
accounting standards)
¾ give a true and fair view of the assets, liabilities, financial
position, performance and cash flows of the Company and Group as a whole; and
¾ the Strategic Report contained in the Annual Report includes a fair
review of the development and performance of the business and the position of
the Group and the Company, together with a description of the principal risks
and uncertainties faced by the Group and Company.
Directors' statement under the UK Corporate Governance Code
Each of the Directors confirm that to the best of their knowledge the Annual
Report taken as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group's and Company's
position, performance, business model and strategy.
A copy of the financial statements of the Group is placed on the Company's
website. The Directors are responsible for the maintenance and integrity of
statutory and audited information on the Company's website at landsec.com.
Information published on the internet is accessible in many countries with
different legal requirements. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors of Land Securities Group PLC as at the date of this announcement
are as set out below:
¾ Sir Ian Cheshire, Chairman*
¾ Mark Allan, Chief Executive
¾ Vanessa Simms, Chief Financial Officer
¾ Edward Bonham Carter, Senior Independent Director*
¾ James Bowling*
¾ Madeleine Cosgrave*
¾ Christophe Evain*
¾ Moni Mannings*
¾ Miles Roberts*
¾ Manjiry Tamhane*
*Non-executive Directors
The Statement of Directors' Responsibilities was approved by the Board of
Directors on 16 May 2024 and is signed on its behalf by:
Mark Allan
Vanessa Simms
Chief Executive Chief Financial
Officer
Financial statements
Income statement Year ended Year ended
31 March 2024
31 March 2023
EPRA earnings Capital and other items Total EPRA earnings Capital and other items Total
Notes £m £m £m £m £m £m
Revenue 5 766 58 824 726 65 791
Costs 6 (325) (84) (409) (289) (93) (382)
441 (26) 415 437 (28) 409
Share of post-tax profit/(loss) from joint ventures 12 21 (19) 2 29 (30) (1)
Loss on disposal of investment properties - (16) (16) - (144) (144)
Net deficit on revaluation of investment properties 10 - (628) (628) - (827) (827)
Loss on changes in finance leases - - - - (6) (6)
Operating profit/(loss) 462 (689) (227) 466 (1,035) (569)
Finance income 7 11 1 12 11 23 34
Finance expense 7 (102) (24) (126) (84) (3) (87)
Profit/(loss) before tax 371 (712) (341) 393 (1,015) (622)
Taxation - -
Loss for the year (341) (622)
Attributable to:
Shareholders of the parent (319) (619)
Non-controlling interests (22) (3)
(341) (622)
Loss per share attributable to shareholders of the parent:
Basic (loss)/earnings per share 4 (43.0)p (83.6)p
Diluted (loss)/earnings per share 4 (43.0)p (83.6)p
Statement of comprehensive income Year ended Year ended
31 March 2024
31 March 2023
Total Total
£m £m
Loss for the year (341) (622)
Items that may be subsequently reclassified to the income statement:
Movement in cash flow hedges (1) (1)
Items that will not be subsequently reclassified to the income statement:
Net re-measurement loss on defined benefit pension scheme (5) (12)
Deferred tax credit on re-measurement above 4 3
Other comprehensive loss for the year (2) (10)
Total comprehensive loss for the year (343) (632)
Attributable to:
Shareholders of the parent (321) (629)
Non-controlling interests (22) (3)
(343) (632)
Balance sheet
2024 2023
Notes £m £m
Non-current assets
Investment properties 10 9,330 9,658
Intangible assets 3 6
Net investment in finance leases 21 21
Investments in joint ventures 12 529 533
Investments in associates - 3
Trade and other receivables 159 146
Other non-current assets 48 67
Total non-current assets 10,090 10,434
Current assets
Trading properties 11 100 118
Trade and other receivables 379 365
Monies held in restricted accounts and deposits 15 6 4
Cash and cash equivalents 16 78 41
Other current assets 11 4
Total current assets 574 532
Total assets 10,664 10,966
Current liabilities
Borrowings 14 (975) (315)
Trade and other payables (348) (306)
Provisions (30) -
Other current liabilities - (24)
Total current liabilities (1,353) (645)
Non-current liabilities
Borrowings 14 (2,805) (3,223)
Trade and other payables (4) (17)
Provisions (42) -
Other non-current liabilities (13) (9)
Total non-current liabilities (2,864) (3,249)
Total liabilities (4,217) (3,894)
Net assets 6,447 7,072
Equity
Capital and reserves attributable to shareholders
Ordinary shares 80 80
Share premium 319 318
Other reserves 23 13
Retained earnings 5,980 6,594
Equity attributable to shareholders of the parent 6,402 7,005
Equity attributable to non-controlling interests 45 67
Total equity 6,447 7,072
The financial statements on pages 28 to 49 were approved by the Board of
Directors on 16 May 2024 and were signed on its behalf by:
Mark Allan Vanessa Simms
Directors
Statement of changes in equity Attributable to shareholders of the parent
Ordinary shares Share premium Other reserves Retained earnings Non-controlling interests Total
equity
Total
Notes £m £m £m £m £m £m £m
At 1 April 2022 80 317 9 7,511 7,917 74 7,991
Total comprehensive loss for the financial year - - - (629) (629) (3) (632)
Transactions with shareholders of the parent:
Share-based payments - 1 4 2 7 - 7
Dividends paid to shareholders of the parent 8 - - - (290) (290) - (290)
Total transactions with shareholders of the parent - 1 4 (288) (283) - (283)
Dividends paid to non-controlling interests - - - - - (4) (4)
Total transactions with shareholders - 1 4 (288) (283) (4) (287)
At 31 March 2023 80 318 13 6,594 7,005 67 7,072
Total comprehensive loss for the financial year - - - (321) (321) (22) (343)
Transactions with shareholders of the parent:
Share-based payments - 1 10 (2) 9 - 9
Dividends paid to shareholders of the parent 8 - - - (291) (291) - (291)
Total transactions with shareholders of the parent - 1 10 (293) (282) - (282)
At 31 March 2024 80 319 23 5,980 6,402 45 6,447
Statement of cash flows
2024 2023
Notes £m £m
Cash flows from operating activities
Net cash generated from operations 9 429 356
Interest received 24 16
Interest paid (101) (92)
Rents paid (14) (13)
Capital expenditure on trading properties (19) (6)
Disposal of trading properties 18 18
Development income proceeds received - 54
Other operating cash flows 1 9
Net cash inflow from operating activities 9 338 342
Cash flows from investing activities
Investment property development expenditure (202) (253)
Other investment property related expenditure (126) (102)
Acquisition of investment properties, net of cash acquired (137) (94)
Disposal of investment properties 176 1,269
Cash distributions from joint ventures 12 17 14
Net cash (outflow)/inflow from investing activities (272) 834
Cash flows from financing activities
Net proceeds from new borrowings (net of finance fees) 708 394
Repayment of borrowings 14 (427) (1,407)
Net cash (outflow)/inflow from derivative financial instruments 14 (18) 25
Dividends paid to shareholders of the parent 14 (291) (289)
Dividends paid to non-controlling interests 8 - (4)
Increase in monies held in restricted accounts and deposits (2) -
Other financing cash flows 1 -
Net cash outflow from financing activities (29) (1,281)
Increase/(decrease) in cash and cash equivalents for the year 37 (105)
Cash and cash equivalents at the beginning of the year 41 146
Cash and cash equivalents at the end of the year 16 78 41
Notes to the financial statements
1. Basis of preparation and consolidation
Basis of preparation
These financial statements have been prepared on a going concern basis and in
accordance with UK adopted international accounting standards (IFRSs and
IFRICs), as applied in accordance with the provisions of the Companies Act
2006. The financial statements have been prepared in Pounds Sterling (rounded
to the nearest one million), which is the presentation currency of the Group
(Land Securities Group PLC and all its subsidiary undertakings), and under the
historical cost convention as modified by the revaluation of investment
property, financial assets at fair value through profit or loss, derivative
financial instruments and pension assets.
The preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may
differ from those estimates.
On 16 May 2024, the consolidated financial statements of the Group and this
preliminary announcement were authorised for issue in accordance with a
resolution of the Directors and will be delivered to the Registrar of
Companies following the Group's Annual General Meeting. Statutory accounts for
the year ended 31 March 2023 have been filed unqualified and do not contain
any statement under Section 498(2) or Section 498(3) of the Companies Act
2006. The annual financial information presented in this preliminary
announcement for the year ended 31 March 2024 is based on, and consistent
with, the financial information in the Group's audited financial statements
for the year ended 31 March 2023. The audit report on these financial
statements is unqualified and did not contain a statement under Section 498(2)
or 498(3) of the Companies Act 2006. This preliminary announcement does not
constitute statutory financial statements of the Group within the meaning of
Section 435 of the Companies Act 2006. While the information included in this
preliminary announcement has been prepared in accordance with the recognition
and measurement criteria of IFRS, this announcement does not itself contain
sufficient information to comply with IFRS.
A copy of the Group's Annual Report for the year ended 31 March 2023 can be
found on the website at landsec.com/investors.
Going concern
The impact of international and domestic political and economic events over
the course of the year has resulted in the UK facing a prolonged period of
high inflation, rising interest rates and minimal GDP growth. Therefore, the
Directors have continued to place additional focus on the appropriateness of
adopting the going concern assumption in preparing the financial statements
for the year ended 31 March 2024. The Group's going concern assessment
considers changes in the Group's principal risks (see pages 23-25) and is
dependent on a number of factors, including our financial performance and
continued access to borrowing facilities. Access to our borrowing facilities
is dependent on our ability to continue to operate the Group's secured debt
structure within its financial covenants, which are described in note 14.
In order to satisfy themselves that the Group has adequate resources to
continue as a going concern for the foreseeable future, the Directors have
reviewed base case, downside and reverse stress test models, as well as a cash
flow model which considers the impact of pessimistic assumptions on the
Group's operating environment (the 'mitigated downside scenario'). This
mitigated downside scenario reflects unfavourable macro-economic conditions, a
deterioration in our ability to collect rent and service charge from our
customers and removes uncommitted capital expenditure, acquisitions, disposals
and developments.
The Group's key metrics from the mitigated downside scenario as at the end of
the going concern assessment period, which covers the 16 months to 30
September 2025, are shown below alongside the actual position at 31 March
2024.
Key metrics Mitigated downside scenario
31 March 2024 30 September 2025
Security Group LTV 37.0% 42.8%
Adjusted net debt £3,517m £3,885m
EPRA net tangible assets £6,398m £5,559m
Available financial headroom £1.9bn £0.9bn
In our mitigated downside scenario, the Group has sufficient cash reserves,
with our Security Group LTV ratio remaining less than 65% and interest cover
above 1.45x, for a period of 16 months from the date of authorisation of these
financial statements. Under this scenario, the Security Group's asset values
would need to fall by a further 34% from the sensitised values forecasted at
30 September 2025 to be non-compliant with the LTV covenant. This equates to a
43% fall in the value of the Security Group's assets from the 31 March 2024
values for the LTV to reach 65%. The Directors consider the likelihood of this
occurring over the going concern assessment period to be remote.
The Security Group also requires earnings before interest of at least £198m
in the full year ending 31 March 2025 and at least £232m in the full year
ending 31 March 2026 for interest cover to remain above 1.45x in the mitigated
downside scenario, which would ensure compliance with the Group's covenant
through to the end of the going concern assessment period. Security Group
earnings post year end 31 March 2024 are above the level required to meet the
interest cover covenant for the year ended 31 March 2025. The Directors do not
anticipate a reduction in Security Group earnings over the period ending 30
September 2025 to a level that would result in a breach of the interest cover
covenant.
The Directors have also considered a reverse stress-test scenario which
assumes no further rent will be received, to determine when our available cash
resources would be exhausted. Even under this extreme scenario, although
breaching the interest cover covenant, the Group continues to have sufficient
cash reserves to continue in operation throughout the going concern assessment
period.
Based on these considerations, together with available market information and
the Directors' knowledge and experience of the Group's property portfolio and
markets, the Directors have adopted the going concern basis in preparing the
financial statements of the Group and parent for the year ended 31 March 2024.
Basis of consolidation and presentation of results
The consolidated financial statements for the year ended 31 March 2024
incorporate the financial statements of the Company and all its subsidiary
undertakings. Subsidiary undertakings are those entities controlled by the
Company. Control exists where an entity is exposed to variable returns and has
the ability to affect those returns through its power over the investee.
The results of subsidiaries and joint ventures acquired or disposed of during
the year are included from the effective date of acquisition or to the
effective date of disposal. Accounting policies of subsidiaries and joint
ventures which differ from Group accounting policies are adjusted on
consolidation.
Where instruments in a subsidiary held by third parties are redeemable at the
option of the holder, these interests are classified as a financial liability,
called the redemption liability. The liability is carried at fair value; the
value is reassessed at the balance sheet date and movements are recognised in
the income statement.
Where equity in a subsidiary is not attributable, directly or indirectly, to
the shareholders of the parent, this is classified as a non-controlling
interest. Total comprehensive income or loss and the total equity of the Group
are attributed to the shareholders of the parent and to the non-controlling
interests according to their respective ownership percentages.
Intra-group balances and any unrealised gains and losses arising from
intra-group transactions are eliminated in preparing the consolidated
financial statements. Unrealised gains arising from transactions with joint
ventures are eliminated to the extent of the Group's interest in the joint
venture concerned. Unrealised losses are eliminated in the same way, but only
to the extent that there is no evidence of impairment.
Our property portfolio is a combination of properties that are wholly owned by
the Group, part owned through joint arrangements and properties owned by the
Group but where a third party holds a non-controlling interest. Internally,
management review the results of the Group on a basis that adjusts for these
different forms of ownership to present a proportionate share. The Combined
Portfolio, with assets totalling £10.0bn, is an example of this approach,
reflecting the economic interest we have in our properties regardless of our
ownership structure. The Combined Portfolio comprises the investment
properties of the Group's subsidiaries, on a proportionately consolidated
basis when not wholly owned, together with our share of investment properties
held in our joint ventures (see note 10). We consider this presentation
provides further understanding to stakeholders of the activities and
performance of the Group, as it aggregates the results of all of the Group's
property interests which under IFRS are required to be presented across a
number of line items in the statutory financial statements.
The same principle is applied to many of the other measures we discuss and,
accordingly, a number of our financial measures include the results of our
joint ventures and subsidiaries on a proportionate basis. Measures that are
described as being presented on a proportionate basis include the Group's
share of joint ventures on a line-by-line basis and are adjusted to exclude
the non-owned elements of our subsidiaries. This is in contrast to the Group's
statutory financial statements, where the Group's interest in joint ventures
is presented as one line on the income statement and balance sheet, and all
subsidiaries are consolidated at 100% with any non-owned element being
adjusted as a non-controlling interest or redemption liability, as
appropriate. Our joint operations are presented on a proportionate basis in
all financial measures.
EPRA earnings is the Group's measure of the underlying pre-tax profit of the
property rental business. EPRA earnings excludes all items of a capital
nature, such as valuation movements and profits and losses on the disposal of
investment properties, as well as exceptional items. The Group believes that
EPRA earnings provides additional understanding of the Group's operational
performance to shareholders and other stakeholder groups. A full definition of
EPRA earnings is given in the Glossary. The components of EPRA earnings are
presented on a proportionate basis in note 3. EPRA earnings is an alternative
performance measure.
2. Changes in accounting policies and standards
The accounting policies used in these financial statements are consistent with
those applied in the last annual financial statements, as amended where
relevant to reflect the adoption of new standards, amendments and
interpretations which became effective in the year as listed below:
- Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of
accounting policies
- Amendments to IAS 8 - Definition of Accounting Estimates
- Amendments to IAS 12 - Deferred tax related to assets and liabilities
arising from a single transaction
- Amendments to IAS 12 - International tax reform - Pillar Two model
rules
- IFRS 17 - Insurance Contracts
There has been no material impact on the financial statements of adopting any
new standards, amendments and interpretations.
Amendments to IFRS
A number of new standards, amendments to standards and interpretations have
been issued but are not yet effective for the Group as listed below:
- Amendments to IAS 1 - Classification of liabilities as current or non
current
- Amendments to IAS 1 - Non-current Liabilities with Covenants
- Amendments to IAS 7 and IFRS 7 - Disclosures: Supplier finance
arrangements
- Amendments to IFRS 10 and IAS 28 - Sale or contribution of assets
between an investor and its associate or joint venture
- Amendments to IFRS 16 - Lease liability in a sale and leaseback
- Amendments to IAS 21 - Lack of exchangeability
- IFRS 18 - Presentation and Disclosure in Financial Statements
-
The Group has yet to assess the full outcome of these new standards,
amendments and interpretations, however with the exception of IFRS 18 these
new standards, amendments and interpretations are not expected to have a
significant impact on the Group's financial statements.
3. Segmental information
The Group's operations are all in the UK and are managed across four operating
segments, being Central London, Major retail destinations (Major retail),
Mixed-use urban neighbourhoods (Mixed-use urban) and Subscale sectors.
The Central London segment includes all assets geographically located within
central London. Major retail destinations includes all regional shopping
centres and shops outside London and our outlets. The Mixed-use urban segment
includes those assets where we see the most potential for capital investment.
Subscale sectors mainly includes assets that will not be a focus for capital
investment and consists of leisure and hotel assets and retail parks.
Management has determined the Group's operating segments based on the
information reviewed by Senior Management to make strategic decisions. The
chief operating decision maker is the Executive Leadership Team (ELT),
comprising the Executive Directors and the Managing Directors. The information
presented to ELT includes reports from all functions of the business as well
as strategy, financial planning, succession planning, organisational
development and Group-wide policies.
The Group's primary measure of underlying profit before tax is EPRA earnings.
However, Segment net rental income is the lowest level to which the profit
arising from the ongoing operations of the Group is analysed between the four
segments. The administrative costs, which are predominantly staff costs for
centralised functions, are all treated as administrative expenses and are not
allocated to individual segments.
The Group manages its financing structure, with the exception of joint
ventures and non-wholly owned subsidiaries, on a pooled basis. Individual
joint ventures and non-wholly owned subsidiaries may have specific financing
arrangements in place. Debt facilities and finance expenses, including those
of joint ventures, are managed centrally and are therefore not attributed to a
particular segment. Unallocated income and expenses are items incurred
centrally which are not directly attributable to one of the segments.
All items in the segmental information note are presented on a proportionate
basis.
Segmental results
2024 2023(2)
EPRA earnings Central London Major retail Mixed-use urban Subscale sectors Total Central London Major Mixed-use urban Subscale sectors Total
retail
£m £m £m £m £m £m £m £m £m £m
Rental income 294 188 58 112 652 313 179 58 107 657
Finance lease interest - - - 1 1 - - - 2 2
Gross rental income (before rents payable) 294 188 58 113 653 313 179 58 109 659
Rents payable(1) (3) (7) (1) (1) (12) (3) (8) (1) - (12)
Gross rental income (after rents payable) 291 181 57 112 641 310 171 57 109 647
Service charge income 59 53 11 - 123 46 42 10 - 98
Service charge expense (63) (60) (14) (2) (139) (47) (50) (12) (1) (110)
Net service charge expense (4) (7) (3) (2) (16) (1) (8) (2) (1) (12)
Other property related income 20 11 4 3 38 15 10 3 3 31
Direct property expenditure (43) (42) (16) (18) (119) (34) (44) (14) (16) (108)
Movement in bad and doubtful debts provision (1) 8 - (1) 6 (1) 3 1 - 3
Segment net rental income 263 151 42 94 550 289 132 45 95 561
Other income 1 3
Administrative expense (74) (82)
Depreciation (4) (5)
EPRA earnings before interest 473 477
Finance income 11 11
Finance expense (102) (84)
Joint venture net finance expense (11) (11)
EPRA earnings attributable to shareholders of the parent 371 393
1. Included within rents payable is lease interest payable of £4m (2023:
£4m) across the four segments.
2. A reconciliation from the Group income statement to the information
presented in the segmental results table for the year ended 31 March 2023 is
included in table 27.
The following table reconciles the Group's income statement to the segmental
results.
Reconciliation of segmental information note to statutory reporting
Year ended 31 March 2024
Group income statement Joint Adjustment for non-wholly owned subsidiaries(2) Total EPRA earnings Capital and other items
£m ventures(1) £m £m £m £m
£m
Rental income 622 38 (8) 652 652 -
Finance lease interest 1 - - 1 1 -
Gross rental income (before rents payable) 623 38 (8) 653 653 -
Rents payable (11) (1) - (12) (12) -
Gross rental income (after rents payable) 612 37 (8) 641 641 -
Service charge income 117 8 (2) 123 123 -
Service charge expense (133) (9) 3 (139) (139) -
Net service charge expense (16) (1) 1 (16) (16) -
Other property related income 35 3 - 38 38 -
Direct property expenditure (114) (6) 1 (119) (119) -
Movement in bad and doubtful debts provision 6 - - 6 6 -
Segment net rental income 523 33 (6) 550 550 -
Other income 1 - - 1 1 -
Administrative expenses (73) (1) - (74) (74) -
Depreciation, including amortisation of software (4) - - (4) (4) -
EPRA earnings before interest 447 32 (6) 473 473 -
Share of post-tax profit/(loss) from joint ventures 2 (2) - - - -
Loss on disposal of investment properties((3)) (16) - - (16) - (16)
Net deficit on revaluation of investment properties (628) (19) 22 (625) - (625)
Net development contract and transaction expenditure (18) - - (18) - (18)
Fair value gain on remeasurement of investment 3 - - 3 - 3
Impairment of amounts due from joint ventures (2) - - (2) - (2)
Impairment of goodwill (1) - - (1) - (1)
Impairment of trading properties (11) - - (11) - (11)
Depreciation (2) - - (2) - (2)
Other costs (1) - - (1) - (1)
Operating (loss)/profit (227) 11 16 (200) 473 (673)
Finance income 12 - - 12 11 1
Finance expense (126) (11) 6 (131) (113) (18)
(Loss)/profit before tax (341) - 22 (319) 371 (690)
Taxation - - - -
(Loss)/profit for the year (341) - 22 (319)
1. Reallocation of the share of post-tax profit from joint ventures reported
in the Group income statement to the individual line items reported in the
segmental results table.
2. Removal of the non-wholly owned share of results of the Group's
subsidiaries. The non-wholly owned subsidiaries are consolidated at 100% in
the Group's income statement, but only the Group's share is included in EPRA
earnings reported in the segmental results table. The non-owned element of the
Group's subsidiaries are included in the 'Capital and other items' column
presented in the Group's income statement, together with items not directly
related to the underlying rental business such as investment properties
valuation changes, profits or losses on the disposal of investment properties,
the proceeds from, and costs of, the sale of trading properties, income from
and costs associated with development contracts, amortisation and impairment
of intangibles, and other attributable costs, arising on business
combinations.
3. Included in the loss on disposal of investment properties is a £2m charge
(2023: £9m charge) related to the provision for fire safety remediation works
on properties no longer owned by the Group but for which the Group is
responsible for remediating under the Building Safety Act 2022.
4. Performance measures
In the tables below, we present earnings per share attributable to
shareholders of the parent, calculated in accordance with IFRS, and net assets
per share attributable to shareholders of the parent together with certain
measures defined by the European Public Real Estate Association (EPRA), which
have been included to assist comparison between European property companies.
Three of the Group's key financial performance measures are EPRA earnings per
share, EPRA Net Tangible Assets per share and Total return on equity. Refer to
table 14 in the Business Analysis section for further details on these
alternative performance measures.
EPRA earnings, which is a tax adjusted measure of underlying earnings, is the
basis for the calculation of EPRA earnings per share. We believe EPRA earnings
and EPRA earnings per share provide further insight into the results of the
Group's operational performance to stakeholders as they focus on the rental
income performance of the business and exclude Capital and other items which
can vary significantly from year to year.
Earnings per share Year ended Year ended
31 March 2024
31 March 2023
Loss for the year EPRA earnings Loss for the year EPRA earnings
£m £m £m £m
Loss attributable to shareholders of the parent (319) (319) (619) (619)
Valuation and loss on disposals - 650 - 1,016
Net finance expense/(income) (excluded from EPRA earnings) - 20 - (21)
Impairment of goodwill - 1 - 5
Other - 19 - 12
(Loss)/profit used in per share calculation (319) 371 (619) 393
IFRS EPRA IFRS EPRA((2))
Basic (loss)/earnings per share (43.0)p 50.1p (83.6)p 53.1p
Diluted (loss)/earnings per share(1) (43.0)p 50.1p (83.6)p 53.1p
1. In the year ended 31 March 2024, share options are excluded from the
weighted average diluted number of shares when calculating IFRS and EPRA
diluted (loss)/earnings per share because they are not dilutive.
2. Underlying EPRA EPS excluding the benefit of increased surrender premiums
in the prior year was 50.1p.
Net assets per share 31 March 2024 31 March 2023
Net assets EPRA NDV EPRA NTA Net assets EPRA NDV EPRA NTA
£m £m £m £m £m £m
Net assets attributable to shareholders of the parent 6,402 6,402 6,402 7,005 7,005 7,005
Shortfall of fair value over net investment in finance leases book value - (5) (5) - (6) (6)
Deferred tax liability on intangible asset - - - - - 1
Goodwill on deferred tax liability - - - - (1) (1)
Other intangible asset - - (2) - - (2)
Fair value of interest-rate swaps - - (22) - - (42)
Excess of fair value of trading properties over book value - 25 25 - 12 12
Shortfall of fair value of debt over book value (note 14) - 313 - - 324 -
Net assets used in per share calculation 6,402 6,735 6,398 7,005 7,334 6,967
IFRS EPRA NDV EPRA NTA IFRS EPRA NDV EPRA NTA
Net assets per share 863p n/a n/a 945p n/a n/a
Diluted net assets per share 859p 904p 859p 942p 986p 936p
Number of shares 2024 2023
Weighted average 31 March Weighted average 31 March
million million million million
Ordinary shares 751 752 751 751
Treasury shares (7) (7) (7) (7)
Own shares (3) (3) (4) (3)
Number of shares - basic 741 742 740 741
Dilutive effect of share options 3 3 4 3
Number of shares - diluted 744 745 744 744
Total return on equity is calculated as the cash dividends per share paid in
the year plus the change in EPRA NTA per share, divided by the opening EPRA
NTA per share. We consider this to be a useful measure for shareholders as it
gives an indication of the total return on equity over the year.
Total return on equity based on EPRA NTA Year ended Year ended
31 March 2024
31 March 2023
pence pence
Decrease in EPRA NTA per share (77) (127)
Dividend paid per share in the year (note 8) 39 39
Total return (a) (38) (88)
EPRA NTA per share at the beginning of the year (b) 936 1,063
Total return on equity (a/b) (4.0)% (8.3)%
5. Revenue
All revenue is classified within the 'EPRA earnings' column of the income
statement, with the exception of proceeds from the sale of trading properties,
income from development contracts or transactions and the non-owned element of
the Group's subsidiaries which are presented in the 'Capital and other items'
column.
2024 2023
EPRA earnings Capital and other items Total EPRA earnings Capital and other items Total
£m £m £m £m £m £m
Rental income (excluding adjustment for lease incentives) 598 8 606 606 8 614
Adjustment for lease incentives 16 - 16 (2) - (2)
Rental income 614 8 622 604 8 612
Service charge income 115 2 117 88 3 91
Trading property sales proceeds - 26 26 - 22 22
Other property related income 35 - 35 29 - 29
Finance lease interest 1 - 1 2 - 2
Development contract and transaction income - 22 22 - 32 32
Other income 1 - 1 3 - 3
Revenue per the income statement 766 58 824 726 65 791
The following table reconciles revenue per the income statement to the
individual components of revenue presented in note 3.
2024 2023
Group Joint ventures Adjustment for non-wholly owned subsidiaries Total Group Joint Adjustment Total
ventures
for non- wholly owned subsidiaries
£m £m £m £m £m £m £m £m
Rental income 622 38 (8) 652 612 53 (8) 657
Service charge income 117 8 (2) 123 91 10 (3) 98
Other property related income 35 3 - 38 29 2 - 31
Finance lease interest 1 - - 1 2 - - 2
Other income 1 - - 1 3 - - 3
Revenue in the segmental information note 776 49 (10) 815 737 65 (11) 791
Development contract and transaction income 22 - - 22 32 - - 32
Trading property sales proceeds 26 - - 26 22 - - 22
Revenue including Capital and other items 824 49 (10) 863 791 65 (11) 845
6. Costs
All costs are classified within the 'EPRA earnings' column of the income
statement, with the exception of the cost of sale of trading properties, costs
arising on development contracts or transactions, amortisation and impairments
of intangible assets, and other attributable costs, arising on business
combinations and the non-owned element of the Group's subsidiaries which are
presented in the 'Capital and other items' column.
2024 2023
EPRA earnings Capital and other items Total EPRA earnings Capital and other items Total
£m £m £m £m £m £m
Rents payable 11 - 11 10 - 10
Service charge expense 130 3 133 98 2 100
Direct property expenditure 113 1 114 98 2 100
Movement in bad and doubtful debts provision (6) - (6) (2) - (2)
Administrative expenses 73 - 73 80 - 80
Impairment of trading properties - 11 11 - 19 19
Cost of trading property disposals - 26 26 - 21 21
Development contract and transaction expenditure - 40 40 - 41 41
Depreciation, including amortisation of software 4 2 6 5 3 8
Impairment of amounts due from joint ventures - 2 2 - - -
Impairment of goodwill - 1 1 - 5 5
Fair value gain on remeasurement of investment - (3) (3) - - -
Other costs - 1 1 - - -
Total costs per the income statement 325 84 409 289 93 382
The following table reconciles costs per the income statement to the
individual components of costs presented in note 3.
2024 2023
Group Joint ventures Adjustment for non-wholly owned subsidiaries Total Group Joint Adjustment Total
ventures
for non-wholly owned subsidiaries
£m £m £m £m £m £m £m £m
Rents payable 11 1 - 12 10 2 - 12
Service charge expense 133 9 (3) 139 100 12 (2) 110
Direct property expenditure 114 6 (1) 119 100 10 (2) 108
Administrative expenses 73 1 - 74 80 2 - 82
Depreciation, including amortisation of software 4 - - 4 5 - - 5
Movement in bad and doubtful debts provision (6) - - (6) (2) (1) - (3)
Costs in the segmental information note 329 17 (4) 342 293 25 (4) 314
Impairment of trading properties 11 - - 11 19 - - 19
Cost of trading property disposals 26 - - 26 21 - - 21
Development contract and transaction expenditure 40 - - 40 41 - - 41
Depreciation 2 - - 2 3 - - 3
Impairment of amounts due from joint ventures 2 - - 2 - - - -
Impairment of goodwill 1 - - 1 5 - - 5
Fair value gain on remeasurement of investment (3) - - (3) - - - -
Other costs 1 - - 1 - - - -
Costs including Capital and other items 409 17 (4) 422 382 25 (4) 403
7. Net finance expense
2024 2023
EPRA earnings Capital and other items Total EPRA earnings Capital and other items Total
£m £m £m £m £m £m
Finance income
Interest receivable from joint ventures 11 - 11 11 - 11
Fair value movement on interest-rate swaps - - - - 23 23
Other interest receivable - 1 1 - - -
11 1 12 11 23 34
Finance expense
Bond and debenture debt (85) - (85) (68) - (68)
Bank and other short-term borrowings (35) (2) (37) (38) (2) (40)
Fair value movement on interest-rate swaps - (22) (22) - - -
Other interest payable (1) - (1) - (1) (1)
(121) (24) (145) (106) (3) (109)
Interest capitalised in relation to properties under development 19 - 19 22 - 22
(102) (24) (126) (84) (3) (87)
Net finance (expense)/income (91) (23) (114) (73) 20 (53)
Joint venture net finance expense (11) - - (11) - -
Net finance expense included in EPRA earnings (102) - - (84) - -
Lease interest payable of £4m (2023: £4m) is included within rents payable
as detailed in note 3.
8. Dividends
Dividends paid Year ended 31 March
Pence per share 2024 2023
Payment date PID Non-PID Total £m £m
For the year ended 31 March 2022:
Third interim 7 April 2022 8.50 - 8.50 63
Final 22 July 2022 13.00 - 13.00 96
For the year ended 31 March 2023:
First interim 7 October 2022 8.60 - 8.60 64
Second interim 3 January 2023 9.00 - 9.00 67
Third interim 6 April 2023 9.00 - 9.00 67
Final 21 July 2023 12.00 - 12.00 89
For the year ended 31 March 2024:
First interim 6 October 2023 9.00 - 9.00 67
Second interim 2 January 2024 9.20 - 9.20 68
Gross dividends 291 290
Dividends in the statement of changes in equity 291 290
Timing difference on payment of withholding tax - (1)
Dividends in the statement of cash flows 291 289
The third quarterly interim dividend of 9.3p per ordinary share, or £69m in
total (2023: 9.0p or £67m in total), was paid on 12 April 2024 as a Property
Income Distribution (PID). The Board has recommended a final dividend for the
year ended 31 March 2024 of 12.1p per ordinary share (2023: 12.0p) to be paid
as a PID. This final dividend will result in a further estimated distribution
of £90m (2023: £90m). Subject to shareholders' approval at the Annual
General Meeting, the final dividend will be paid on 26 July 2024 to
shareholders registered at the close of business on 14 June 2024.
The total dividend paid and recommended in respect of the year ended 31 March
2024 is 39.6p per ordinary share (2023: 38.6p) resulting in a total estimated
distribution of £294m (2023: £288m).
The first quarterly dividend for the year ending 31 March 2025 will be paid in
October 2024 and will be announced in due course.
A Dividend Reinvestment Plan (DRIP) has been available in respect of all
dividends paid during the year. The last day for DRIP elections for the final
dividend is close of business on 28 June 2024.
9. Net cash generated from operations
Reconciliation of operating loss to net cash generated from operations
2024 2023
£m £m
Operating loss (227) (569)
Adjustments for:
Net deficit on revaluation of investment properties 628 827
Loss on changes in finance leases - 6
Profit on disposal of trading properties - (1)
Loss on disposal of investment properties 16 144
Share of (profit)/loss from joint ventures (2) 1
Share-based payment charge 8 6
Impairment of goodwill 1 5
Impairment of amounts due from joint ventures 2 -
Fair value gain on remeasurement of investment (3) -
Non-cash development contract and transaction expenditure 26 -
Rents payable 11 10
Depreciation and amortisation 4 5
Impairment of trading properties 11 19
475 453
Changes in working capital:
Increase in receivables (32) (17)
Decrease in payables and provisions (14) (80)
Net cash generated from operations 429 356
Reconciliation to adjusted net cash inflow from operating activities 2024 2023
£m £m
Net cash inflow from operating activities 338 342
Joint ventures net cash inflow from operating activities 15 17
Adjusted net cash inflow from operating activities(1) 353 359
1. Includes cash flows relating to the interest in MediaCity which is not
owned by the Group but is consolidated in the Group numbers.
10. Investment properties
2024 2023
£m £m
Net book value at the beginning of the year 9,658 11,207
Transfer from joint venture - 23
Acquisitions of investment properties 144 218
Capital expenditure 374 356
Capitalised interest 19 22
Net movement in head leases capitalised(1) (30) (16)
Disposals(2) (207) (1,319)
Net deficit on revaluation of investment properties (628) (827)
Transfers to trading properties - (6)
Net book value at the end of the year 9,330 9,658
1. See note 14 for details of the amounts payable under head leases and note 3
for details of the rents payable in the income statement.
2. Includes impact of disposals of finance leases.
The market value of the Group's investment properties, as determined by the
Group's external valuers, differs from the net book value presented in the
balance sheet due to the Group presenting tenant finance leases, head leases
and lease incentives separately. The following table reconciles the net book
value of the investment properties to the market value.
2024 2023
Group Joint ventures(1) Adjustment for non-wholly owned subsidiaries Combined Portfolio Group Joint Adjustment Combined Portfolio
(excl. joint ventures)
(excl. joint ventures)
ventures(1)
for non-
wholly owned subsidiaries
£m £m £m £m £m £m £m £m
Market value 9,465 616 (118) 9,963 9,743 635 (139) 10,239
Less: properties treated as finance leases (18) - - (18) (17) - - (17)
Plus: head leases capitalised 77 1 - 78 107 1 - 108
Less: tenant lease incentives (194) (32) - (226) (175) (35) - (210)
Net book value 9,330 585 (118) 9,797 9,658 601 (139) 10,120
Net (deficit)/surplus on revaluation of investment properties (628) (19) 22 (625) (827) (30) 9 (848)
1. Refer to note 12 for a breakdown of this amount by entity.
The net book value of leasehold properties where head leases have been
capitalised is £1,604m (2023: £1,723m).
Investment properties include capitalised interest of £290m (2023: £271m).
The average rate of interest capitalisation for the year is 4.8% (2023: 3.0%).
The gross historical cost of investment properties is £8,502m (2023:
£8,280m).
11. Trading properties
Development land and infrastructure Residential Total
£m £m £m
At 1 April 2022 128 17 145
Transfer from investment properties 6 - 6
Capital expenditure 6 (3) 3
Disposals (17) - (17)
(Impairment)/reversal of impairment (25) 6 (19)
At 31 March 2023 98 20 118
Capital expenditure 6 7 13
Capitalised interest - 1 1
Disposals (21) - (21)
Impairment (11) - (11)
At 31 March 2024 72 28 100
The cumulative impairment provision at 31 March 2024 in respect of Development
land and infrastructure was £36m (2023: £25m); and in respect of Residential
was £nil (2023: £nil).
12. Joint arrangements
The Group's principal joint arrangements are described below:
Joint ventures Percentage owned & voting rights(1) Business Year end date(2) Joint venture partner
segment
Held at 31 March 2024
Nova, Victoria((3)) 50% Central London 31 March Suntec Real Estate Investment Trust
Southside Limited Partnership 50% Major retail 31 March Invesco Real Estate European Fund
Westgate Oxford Alliance Limited Partnership 50% Major retail, Subscale sectors 31 March The Crown Estate Commissioners
Harvest((4)) 50% Subscale sectors 31 March J Sainsbury plc
The Ebbsfleet Limited Partnership((6)) 50% Subscale sectors 31 March Ebbsfleet Property Limited
West India Quay Unit Trust((6)) 50% Subscale sectors 31 March Schroder UK Real Estate Fund
Mayfield((5)(6)) 50% Mixed-use urban 31 March LCR Limited, Manchester City Council, Transport for Greater Manchester
Curzon Park Limited((6)) 50% Subscale sectors 31 March Derwent Developments (Curzon) Limited
Plus X Holdings Limited((6)) 50% Subscale sectors 31 March Paul David Rostas, Matthew Edmund Hunter
Landmark Court Partnership Limited((6)) 51% Central London 31 March TTL Landmark Court Properties Limited
Opportunities for Sittingbourne Limited((6)) 50% Mixed-use urban 31 March Swale Borough Council
Cathedral (Movement, Greenwich) LLP((6)) 52% Mixed-use urban 31 March Mr Richard Upton
Circus Street Developments Limited((6)) 50% Mixed-use urban 31 March High Wire Brighton Limited
Joint operation Ownership interest Business Year end date(3) Joint operation partners
segment
Held at 31 March 2023
Bluewater, Kent 48.75% Major retail 31 March M&G Real Estate and GIC
Royal London Asset Management
Aberdeen Standard Investments
1. Investments under joint arrangements are not always represented by an equal
percentage holding by each partner. In a number of joint ventures that are not
considered principal joint ventures and therefore not included in the table
above, the Group holds a majority shareholding but has joint control and
therefore the arrangement is accounted for as a joint venture.
2. The year end date shown is the accounting reference date of the joint
arrangement. In all cases, the Group's accounting is performed using financial
information for the Group's own reporting year and reporting date.
3. Nova, Victoria includes the Nova Limited Partnership, Nova Residential
Limited Partnership, Nova GP Limited, Nova Business Manager Limited, Nova
Residential (GP) Limited, Nova Residential Intermediate Limited, Nova Estate
Management Company Limited, Nova Nominee 1 Limited and Nova Nominee 2 Limited.
4. Harvest includes Harvest 2 Limited Partnership, Harvest Development
Management Limited, Harvest 2 Selly Oak Limited, Harvest 2 GP Limited and
Harvest GP Limited.
5. Mayfield includes Mayfield Development Partnership LP and Mayfield
Development (General Partner) Limited.
6. Included within Other in subsequent tables.
All of the Group's joint arrangements listed above have their principal place
of business in the United Kingdom. All of the Group's principal joint
arrangements own and operate investment property, with the exception of:
- The Ebbsfleet Limited Partnership and Plus X Holdings Limited, which
are holding companies;
- Harvest, which is engaged in long-term development contracts; and
- Curzon Park Limited, Landmark Court Partnership Limited, Opportunities
for Sittingbourne Limited and Circus Street Developments Limited, which are
companies continuing their business of property development.
The activities of all the Group's principal joint arrangements are therefore
strategically important to the business activities of the Group.
All joint ventures listed above are registered in England and Wales with the
exception of Southside Limited Partnership and West India Quay Unit Trust
which are registered in Jersey.
Joint ventures Year ended 31 March 2024
Nova, Southside Limited Partnership Westgate Oxford Other Total Total
Victoria Alliance Partnership
Comprehensive income statement 100% 100% 100% 100% 100% Group share
£m £m £m £m £m £m
Revenue(1) 49 11 35 5 100 49
Gross rental income (after rents payable) 34 11 26 5 76 37
Net rental income 34 10 22 1 67 33
EPRA earnings before interest 32 9 21 1 63 32
Finance expense (16) (6) - - (22) (11)
Net finance expense (16) (6) - - (22) (11)
EPRA earnings 16 3 21 1 41 21
Capital and other items
Net deficit on revaluation of investment properties (24) (3) (1) (9) (37) (19)
(Loss)/profit before tax (8) - 20 (8) 4 2
Post-tax (loss)/profit (8) - 20 (8) 4 2
Total comprehensive (loss)/income (8) - 20 (8) 4 2
Group share of (loss)/profit before tax (4) - 10 (4) 2
Group share of post-tax (loss)/profit (4) - 10 (4) 2
Group share of total comprehensive (loss)/income (4) - 10 (4) 2
Joint ventures Year ended 31 March 2023
Nova, Southside Limited Partnership St. David's Limited Partnership Westgate Other Total Total
Victoria Oxford
Alliance Partnership
Comprehensive income statement 100% 100% 100% 100% 100% 100% Group share
£m £m £m £m £m £m £m
Revenue(1) 49 10 33 34 4 130 65
Gross rental income (after rents payable) 36 10 25 27 4 102 51
Net rental income 36 7 16 22 2 83 42
EPRA earnings before interest 35 6 15 22 2 80 40
Finance expense (17) (6) - - - (23) (11)
Net finance expense (17) (6) - - - (23) (11)
EPRA earnings 18 - 15 22 2 57 29
Capital and other items
Net (deficit)/surplus on revaluation of investment properties(2) (67) 1 6 (8) 8 (60) (30)
(Loss)/profit before tax(2) (49) 1 21 14 10 (3) (1)
Post-tax (loss)/profit(2) (49) 1 21 14 10 (3) (1)
Total comprehensive (loss)/income(2) (49) 1 21 14 10 (3) (1)
Group share of (loss)/profit before tax(2) (24) - 10 7 6 (1)
Group share of post-tax (loss)/profit(2) (24) - 10 7 6 (1)
Group share of total comprehensive (loss)/income(2) (24) - 10 7 6 (1)
1. Revenue includes gross rental income (before rents payable), service charge
income, other property related income, trading properties disposal proceeds
and income from long-term development contracts.
2. On 24 March 2023 the Group acquired the remaining 50% interest in St
David's Limited Partnership. Results from its operations prior to that date
are included as share of profit or loss from joint ventures.
Joint ventures 31 March 2024
Nova, Victoria Southside Westgate Other Total Total
Limited Oxford
Partnership Alliance
Partnership
Balance sheet 100% 100% 100% 100% 100% Group share
£m £m £m £m £m £m
Investment properties(1) 727 130 223 91 1,171 585
Non-current assets 727 130 223 91 1,171 585
Cash and cash equivalents 32 4 21 4 61 31
Other current assets 58 7 11 85 161 80
Current assets 90 11 32 89 222 111
Total assets 817 141 255 180 1,393 696
Trade and other payables and provisions (23) (6) (16) (35) (80) (40)
Current liabilities (23) (6) (16) (35) (80) (40)
Non-current liabilities (104) (147) - (19) (270) (135)
Non-current liabilities (104) (147) - (19) (270) (135)
Total liabilities (127) (153) (16) (54) (350) (175)
Net assets/(liabilities) 690 (12) 239 126 1,043 521
Comprised of:
Net assets 690 - 239 130 1,059 529
Accumulated losses recognised as net liabilities(2) - (12) - (4) (16) (8)
Market value of investment properties(1) 780 131 230 91 1,232 616
Net cash/(debt) (3) 32 4 21 4 61 31
Joint ventures 31 March 2023
Nova, Victoria Southside St. David's Westgate Other Total Total
Limited Limited Oxford
Partnership Partnership Alliance
Partnership
Balance sheet 100% 100% 100% 100% 100% 100% Group share
£m £m £m £m £m £m £m
Investment properties(1) 748 134 - 225 98 1,205 601
Non-current assets 748 134 - 225 98 1,205 601
Cash and cash equivalents 36 3 - 23 7 69 35
Other current assets 64 9 - 13 68 154 78
Current assets 100 12 - 36 75 223 113
Total assets 848 146 - 261 173 1,428 714
Trade and other payables and provisions (22) (10) - (14) (48) (94) (48)
Current liabilities (22) (10) - (14) (48) (94) (48)
Non-current liabilities (131) (145) - - - (276) (138)
Non-current liabilities (131) (145) - - - (276) (138)
Total liabilities (153) (155) - (14) (48) (370) (186)
Net assets/(liabilities) 695 (9) - 247 125 1,058 528
Comprised of:
Net assets 695 - - 247 125 1,067 533
Accumulated losses recognised as net liabilities(2) - (9) - - - (9) (5)
Market value of investment properties(1) 807 134 - 233 98 1,272 635
Net cash/(debt) (3) 36 3 - 23 7 69 35
1. The difference between the book value and the market value of investment
properties is the amount recognised in respect of lease incentives, head
leases capitalised and properties treated as finance leases, where applicable.
2. The Group's share of accumulated losses of a joint venture interest are
recognised as net liabilities where there is an obligation to provide for
these losses.
3. Excludes funding provided by the Group and its joint venture partners.
Joint ventures
Nova, Southside St. David's Westgate Other Total
Limited Partnership
Victoria Limited Partnership Oxford
Alliance Partnership
Net investment Group share Group share Group share Group share Group share Group share
£m £m £m £m £ £
m m
At 1 April 2022 372 (5) 113 125 90 695
Total comprehensive (loss)/income (24) - 10 7 6 (1)
Cash distributions - - (4) (8) (2) (14)
Other distributions - - - - (7) (7)
Disposals and transfers from joint arrangements - - (119) - (25) (144)
Other non-cash movements - - - - (1) (1)
At 31 March 2023 348 (5) - 124 61 528
Total comprehensive (loss)/income (4) - - 10 (3) 3
Cash and other distributions - - - (12) (5) (17)
Other non-cash movements - - - (1) 8 7
At 31 March 2024 344 (5) - 121 61 521
Comprised of:
At 31 March 2023
Non-current assets 348 - - 124 61 533
Non-current liabilities(1) - (5) - - - (5)
At 31 March 2024
Non-current assets 344 - - 121 64 529
Non-current liabilities(1) - (5) - - (3) (8)
1. The Group's share of accumulated losses of a joint venture interest are
recognised as net liabilities where there is an obligation to provide for
these losses.
13. Capital structure
2024 2023
Group Joint ventures Adjustment for non-wholly owned subsidiaries Combined Group Joint ventures Adjustment for non-wholly owned subsidiaries Combined
£m £m £m £m £m £m £m £m
Property portfolio
Market value of investment properties 9,465 616 (118) 9,963 9,743 635 (139) 10,239
Trading properties and long-term contracts 100 - - 100 118 - - 118
Total property portfolio (a) 9,565 616 (118) 10,063 9,861 635 (139) 10,357
Net debt
Borrowings 3,703 - (73) 3,630 3,431 - (73) 3,358
Monies held in restricted accounts and deposits (6) - - (6) (4) - 1 (3)
Cash and cash equivalents (78) (31) 4 (105) (41) (35) 2 (74)
Fair value of interest-rate swaps (23) - 2 (21) (44) - 2 (42)
Fair value of foreign exchange swaps and forwards (2) - (2) 6 - - 6
Net debt (b) 3,594 (31) (67) 3,496 3,348 (35) (68) 3,245
Add/(less): Fair value of interest-rate swaps 23 - (2) 21 44 - (2) 42
Adjusted net debt (c) 3,617 (31) (69) 3,517 3,392 (35) (70) 3,287
Adjusted total equity
Total equity (d) 6,447 - (45) 6,402 7,072 - (67) 7,005
Fair value of interest-rate swaps (23) - 2 (21) (44) - 2 (42)
Adjusted total equity (e) 6,624 - (43) 6,381 7,028 - (65) 6,963
Gearing (b/d) 55.7% 54.6% 47.3% 46.3%
Adjusted gearing (c/e) 56.3% 55.1% 48.3% 47.2%
Group LTV (c/a) 37.8% 35.0% 34.4% 31.7%
EPRA LTV(1) 36.3% 33.2%
Security Group LTV 37.0% 33.0%
Weighted average cost of debt 3.3% 3.3% 2.7% 2.7%
1. EPRA LTV differs from Group LTV as it includes net payables and
receivables, and includes trading properties at fair value and debt
instruments at nominal value rather than book value.
14. Borrowings
2024 2023
Secured/ Fixed/ Effective Nominal/ notional value Fair Book value Nominal/ notional value Fair Book value
unsecured
floating
interest rate
value
value
£m
£m £m
£m
% £m £m
Current borrowings
Commercial paper
Sterling Unsecured Floating Various((1)) 15 15 15 - - -
Euro Unsecured Floating Various((1)) 518 518 518 167 167 167
US Dollar Unsecured Floating Various((1)) 148 148 148 145 145 145
Syndicated and bilateral bank debt Secured Floating SONIA + margin 292 292 292 - - -
Total current borrowings 973 973 973 312 312 312
Amounts payable under head leases 2 2 2 3 3 3
Tot current borrowings including amounts payable under head leases
975 975 975 315 315 315
Non-current borrowings
Medium term notes (MTN)
A10 4.875% MTN due 2025 Secured Fixed 0.0 - - - 10 10 10
A12 1.974% MTN due 2026 Secured Fixed 0.0 - - - 400 389 400
A4 5.391% MTN due 2026 Secured Fixed 0.0 - - - 17 17 17
A5 5.391% MTN due 2027 Secured Fixed 5.4 87 86 87 87 87 87
A16 2.375% MTN due 2027 Secured Fixed 2.5 350 325 349 350 317 348
A6 5.376% MTN due 2029 Secured Fixed 5.4 65 66 65 65 66 65
A13 2.399% MTN due 2031 Secured Fixed 2.4 300 270 299 300 263 299
A18 4.750% MTN due 2031 Secured Fixed 4.9 300 299 297 - - -
A7 5.396% MTN due 2032 Secured Fixed 5.4 77 78 77 77 79 77
A17 4.875% MTN due 2034 Secured Fixed 5.0 400 403 393 400 406 394
A11 5.125% MTN due 2036 Secured Fixed 5.1 50 48 50 50 50 50
A14 2.625% MTN due 2039 Secured Fixed 2.6 500 387 495 500 378 494
A15 2.750% MTN due 2059 Secured Fixed 2.7 500 309 495 500 312 495
2,629 2,271 2,607 2,756 2,374 2,736
Syndicated and bilateral bank debt Secured Floating SONIA + margin 123 123 123 383 383 383
Total non-current borrowings 2,752 2,394 2,730 3,139 2,757 3,119
Amounts payable under head leases Unsecured Fixed 4.0 75 98 75 104 142 104
Total non-current borrowings including amounts payable under head leases
2,827 2,492 2,805 3,243 2,899 3,223
Total borrowing including amounts payable under head leases
3,802 3,467 3,780 3,558 3,214 3,538
Total borrowings excluding amounts payable under head leases
3,725 3,367 3,703 3,451 3,069 3,431
1. Non-Sterling commercial paper is immediately swapped into Sterling. The
interest rate is fixed at the time of the issuance for the duration (1 to 3
months) and tracks SONIA swap rates.
Reconciliation of the movement in borrowings 2024 2023
£m £m
At the beginning of the year 3,538 4,553
Net proceeds from ECP issuance 378 -
Net proceeds from bank debt 33 -
Repayment of bank debt - (1,407)
Repayment of MTNs (427) -
Issue of MTNs (net of finance fees) 297 394
Foreign exchange movement on non-Sterling borrowings (9) 14
Movement in amounts payable under head leases (30) (16)
At 31 March 3,780 3,538
Reconciliation of movements in liabilities arising from financing activities 2024
Non-cash changes
At the beginning of the year Cash flows Foreign exchange movements Other changes in fair values Other changes At the end
of the year
£m £m £m £m £m £m
Borrowings 3,538 281 (9) - (30) 3,780
Derivative financial instruments (38) (18) 10 21 - (25)
3,500 263 1 21 (30) 3,755
2023
Borrowings 4,553 (1,013) 14 - (16) 3,538
Derivative financial instruments (26) 25 (14) (23) - (38)
4,527 (988) - (23) (16) 3,500
Medium term notes
The MTNs are secured on the fixed and floating pool of assets of the Security
Group. The Security Group includes wholly owned investment properties,
development properties, and a number of the Group's investment in other
assets, in total valued at £9.2bn at 31 March 2024 (31 March 2023: £9.6bn).
The secured debt structure has a tiered operating covenant regime which gives
the Group substantial flexibility when the loan-to-value and interest cover in
the Security Group are less than 65% and more than 1.45x respectively. If
these limits are exceeded, the operating environment becomes more restrictive
with provisions to encourage a reduction in gearing. The interest rate of each
MTN is fixed until the expected maturity, being two years before the legal
maturity date of the MTN. The interest rate for the last two years may either
become floating on a SONIA basis plus an increased margin (relative to that at
the time of issue), or subject to a fixed coupon uplift, depending on the
terms and conditions of the specific notes.
The effective interest rate is based on the coupon paid and includes the
amortisation of issue costs and discount to redemption value. The MTNs are
listed on the Irish Stock Exchange and their fair values are based on their
respective market prices.
During the year, the Group purchased £nil of MTNs (2023: £nil) for a total
premium of £nil (2023: £nil).
At 31 March 2024, the Group's committed facilities totalled £2,907m (31 March
2023: £3,007m).
Syndicated and bilateral bank debt Authorised Drawn Undrawn
Maturity as at 2024 2023 2024 2023 2024 2023
31 March 2024
£m £m £m £m £m £m
Syndicated debt 2024-27 2,682 2,782 415 383 2,267 2,399
Bilateral debt 2026 225 225 - - 225 225
2,907 3,007 415 383 2,492 2,624
All syndicated and bilateral facilities are committed and secured on the
assets of the Security Group, with the exception of facilities secured on the
assets at MediaCity (of which £292m was drawn at 31 March 2024 and £292m
drawn at 31 March 2023). During the year ended 31 March 2024, the amounts
drawn under the Group's facilities decreased by £32m.
The terms of the Security Group funding arrangements require undrawn
facilities to be reserved where syndicated and bilateral facilities mature
within one year, or when commercial paper is issued. Commercial paper in
issuance at 31 March 2024 was £681m (31 March 2023: £312m). The total amount
of cash and available undrawn facilities, net of commercial paper, at 31 March
2024 was £1,889m (31 March 2023: £2,353m).
15. Monies held in restricted accounts and deposits
2024 2023
£m £m
Short-term deposits 6 4
6 4
The credit quality of monies held in restricted accounts and deposits can be
assessed by reference to external credit ratings of the counterparty where the
account or deposit is placed.
2024 2023
£m £m
Counterparties with external credit ratings
A+ 6 4
6 4
16. Cash and cash equivalents
2024 2023
£m £m
Cash at bank and in hand 78 41
78 41
The credit quality of cash and cash equivalents can be assessed by reference
to external credit ratings of the counterparty where the account or deposit is
placed.
2024 2023
£m £m
Counterparties with external credit ratings
A+ 78 34
A - 6
A- - 1
78 41
The Group's cash and cash equivalents and bank overdrafts are subject to cash
pooling arrangements. The following table provides details of cash balances
and bank overdrafts which are subject to offsetting agreements.
2024 2023
Gross amounts of financial assets Gross amounts of financial liabilities Net amounts recognised in the balance sheet Gross amounts of financial assets Gross amounts of financial liabilities Net amounts recognised in the balance sheet
£m £m £m £m £m £m
Assets
Cash and cash equivalents 230 (152) 78 101 (60) 41
230 (152) 78 101 (60) 41
17. Events after the reporting period
On 8 May 2024, the Group sold its interest in LS Hotels Limited for a headline
price of £400m.
No other significant events occurred after the reporting period but before the
financial statements were authorised for issue.
Alternative performance measures
Table 14: Alternative performance measures
The Group has applied the European Securities and Markets Authority (ESMA)
'Guidelines on Alternative Performance Measures' in these results. In the
context of these results, an alternative performance measure (APM) is a
financial measure of historical or future financial performance, position or
cash flows of the Group which is not a measure defined or specified in IFRS.
The table below summarises the APMs included in these results and where the
reconciliations of these measures can be found. The definitions of APMs are
included in the Glossary.
Alternative performance measure Nearest IFRS measure Reconciliation
EPRA earnings Profit/loss before tax Note 3
EPRA earnings per share Basic earnings/loss per share Note 4
EPRA diluted earnings per share Diluted earnings/loss per share Note 4
EPRA Net Tangible Assets Net assets attributable to shareholders Note 4
EPRA Net Tangible Assets per share Net assets attributable to shareholders Note 4
Total return on equity n/a Note 4
Adjusted net cash inflow from operating activities Net cash inflow from operating activities Note 9
Combined Portfolio Investment properties Note 10
Adjusted net debt Borrowings Note 13
Group LTV n/a Note 13
EPRA LTV n/a Note 13
EPRA disclosures
Table 15: EPRA net asset measures
EPRA net asset measures 31 March 2024
EPRA NRV EPRA NTA EPRA NDV
£m £m £m
Net assets attributable to shareholders 6,402 6,402 6,402
Shortfall of fair value over net investment in finance lease book value (5) (5) (5)
Deferred tax liability on intangible asset - - -
Goodwill on deferred tax liability - - -
Other intangible asset - (2) -
Fair value of interest-rate swaps (22) (22) -
Shortfall of fair value of debt over book value (note 14) - - 313
Excess of fair value of trading properties over book value 25 25 25
Purchasers' costs((1)) 605 - -
Net assets used in per share calculation 7,005 6,398 6,735
EPRA NRV EPRA NTA EPRA NDV
Diluted net assets per share 940p 859p 904p
31 March 2023
EPRA NRV EPRA NTA EPRA NDV
£m £m £m
Net assets attributable to shareholders 7,005 7,005 7,005
Shortfall of fair value over net investment in finance lease book value (6) (6) (6)
Deferred tax liability on intangible asset 1 1 -
Goodwill on deferred tax liability (1) (1) (1)
Other intangible asset - (2) -
Fair value of interest-rate swaps (42) (42) -
Shortfall of fair value of debt over book value (note 14) - - 324
Excess of fair value of trading properties over book value 12 12 12
Purchasers' costs((1)) 617 - -
Net assets used in per share calculation 7,586 6,967 7,334
EPRA NRV EPRA NTA EPRA NDV
Diluted net assets per share 1,020p 936p 986p
1. EPRA NTA and EPRA NDV reflect IFRS values which are net of purchasers'
costs. Purchasers' costs are added back when calculating EPRA NRV.
Table 16: EPRA performance measures
31 March 2024
Measure Definition for EPRA measure Notes EPRA
measure
EPRA earnings Recurring earnings from core operational activity 4 £371m
EPRA earnings per share EPRA earnings per weighted number of ordinary shares 4 50.1p
EPRA diluted earnings per share((1)) EPRA diluted earnings per weighted number of ordinary shares 4 50.1p
EPRA Net Tangible Assets (NTA) Net assets adjusted to exclude the fair value of interest-rate swaps, 4 £6,398m
intangible assets and excess of fair value over net investment in finance
lease book value
EPRA Net Tangible Assets per share Diluted Net Tangible Assets per share 4 859p
EPRA net disposal value (NDV) Net assets adjusted to exclude the fair value of debt and goodwill on deferred 4 £6,735m
tax and to include excess of fair value over net investment in finance lease
book value
EPRA net disposal value per share Diluted net disposal value per share 4 904p
EPRA loan-to-value (LTV)((2)) Ratio of adjusted net debt, including net payables, to the sum of the net 13 36.3%
assets, including net receivables, of the Group, its subsidiaries and joint
ventures, all on a proportionate basis, expressed as a percentage
Table
Voids/vacancy rate ERV of vacant space as a % of ERV of Combined Portfolio excluding the 17 3.5%
development programme(3)
Net initial yield (NIY) Annualised rental income less non-recoverable costs as a % of market value 19 5.4%
plus assumed purchasers' costs(4)
Topped-up NIY NIY adjusted for rent free periods(4) 19 6.2%
Cost ratio(5) Total costs as a percentage of gross rental income (including direct vacancy 20 25.0%
costs)(5)
Total costs as a percentage of gross rental income (excluding direct vacancy 20 20.3%
costs)(5)
1. In the year ended 31 March 2024, share options are excluded from the
weighted average diluted number of shares when calculating EPRA diluted
earnings per share because they are not dilutive, based on IFRS loss for the
year.
2. EPRA LTV differs from the Group LTV presented in note 13 as it includes net
payables and receivables and includes trading properties at fair value and
debt instruments at nominal value rather than book value.
3. This measure reflects voids in the Combined Portfolio excluding only
properties under development.
4. This measure relates to the Combined Portfolio, excluding properties
currently under development, and are calculated by our external valuer.
Topped-up NIY reflects adjustments of £82m for rent free periods and other
incentives.
5. This measure is calculated based on gross rental income after rents payable
and excluding costs recovered through rents but not separately invoiced of
£9m.
Table 17: EPRA vacancy rate
The EPRA vacancy rate is based on the ratio of the estimated market rent for
vacant properties versus total estimated market rent, for the Combined
Portfolio excluding properties under development. There are no significant
distorting factors influencing the EPRA vacancy rate.
31 March 2024
£m
ERV of vacant properties 22
ERV of Combined Portfolio excluding properties under development 632
EPRA vacancy rate (%) 3.5
Table 18: Change in net rental income from the like-for-like portfolio
2024 2023 Change
£m £m £m %
Central London 230 229 1 0%
Major retail 131 122 9 7%
Subscale sectors 111 108 3 3%
472 459 13 3%
Table 19: EPRA Net initial yield (NIY) and Topped-up NIY
31 March 2024
£m
Combined Portfolio 9,963
Trading properties 125
Less: Properties under development, trading properties under development and (1,087)
land
Like-for-like investment property portfolio, proposed and completed 9,001
developments, and completed trading properties
Plus: Allowance for estimated purchasers' costs 546
Grossed-up completed property portfolio valuation (a) 9,547
EPRA annualised cash passing rental income(1) 603
Net service charge expense(2) (16)
Void costs and other deductions (73)
EPRA Annualised net rent(1) (b) 514
Plus: Rent-free periods and other lease incentives (annualised) 82
Topped-up annualised net rents (c) 596
EPRA NIY (b/a) 5.4%
EPRA Topped-up NIY (c/a) 6.2%
1. EPRA Annualised cash passing rental income and EPRA annualised net rent
as calculated by the Group's external valuer.
2. Including costs recovered through rents but not separately invoiced.
Table 20: Cost analysis
2024 2023
Total Cost ratio %(1) Total Cost ratio %(1)
£m £m
Gross rental income (before rents payable) 653 659
Costs recovered through rents but not separately invoiced (9) (9)
Adjusted gross rental income 644 650
£m Rents payable (12) (12)
Gross rental income (before rents payable) 653 EPRA gross rental income 632 638
Rents payable (12)
Gross rental income (after rents payable) 641 Direct Managed operations 10 10
Net service charge expense (16) property Tenant default (6) (3)
Net direct property expenditure (81) costs Void related costs 30 27
Movement in bad and doubtful debts provision 6 £90m Other direct property costs 54 48
Segment net rental income 550 Development expenditure 9 14
Net indirect expenses (77) Net indirect
Segment profit before finance expense 473 expenses Asset management, 70 74
administration and
compliance
Net finance expense - Group (91) £77m
Net finance expense - joint ventures (11)
EPRA earnings 371 Total (incl. direct vacancy costs) 167 170
Costs recovered through rents (9) (9)
EPRA costs (incl. direct vacancy costs) 158 25.0 161 25.2
Less: Direct vacancy costs (30) (27)
EPRA (excl. direct vacancy costs) 128 20.3 134 21.0
1. Percentages represent costs divided by EPRA gross rental income.
Table 21: Acquisitions, disposals and capital expenditure
Year ended Year ended
31 March 2024
31 March 2023
Investment properties Group (excl. joint ventures) Joint Adjustment for non-wholly owned subsidiaries(1) Combined Combined
ventures
Portfolio
Portfolio
£m
£m
£m £m £m
Net book value at the beginning of the year 9,658 601 (139) 10,120 11,833
Transfer from joint venture - - - - 11
Acquisitions 144 - - 144 223
Capital expenditure 374 3 (1) 376 340
Capitalised interest 19 - - 19 22
Net movement in head leases capitalised (30) - - (30) (25)
Disposals (207) - - (207) (1,430)
Net deficit on revaluation of investment properties (628) (19) (22) (625) (848)
Transfer to trading properties - - - - (6)
Net book value at the end of the year 9,330 585 (118) 9,797 10,120
Loss on disposal of investment properties (16) - - (16) (144)
Trading properties £m £m £m £m £m
Net book value at the beginning of the year 118 - - 118 146
Transfer from investment properties - - - - 6
Capital expenditure 13 - - 13 3
Capitalised interest 1 - - 1 -
Disposals (21) - - (21) (18)
Movement in impairment (11) - - (11) (19)
Net book value at the end of the year 100 - - 100 118
Profit on disposal of trading properties - - - - 1
Acquisitions, development and other capital expenditure Investment Trading Combined Combined
properties(1) properties Portfolio Portfolio
£m £m £m £m
Acquisitions(2) 144 - 144 223
Development capital expenditure(3) 220 6 226 278
Other capital expenditure 156 7 163 65
Capitalised interest 19 1 20 22
Acquisitions, development and other capital expenditure 539 14 553 588
Disposals £m £m
Net book value - investment property disposals 207 1,430
Net book value - trading property disposals 21 18
Net book value - other net assets 3 52
Loss on disposal - investment properties (16) (144)
Profit on disposal - trading properties - 1
Other 1 (3)
Total disposal proceeds 216 1,354
1. See EPRA analysis of capital expenditure table 22 for further details.
2. Properties acquired in the year.
Development capital expenditure for investment properties comprises
expenditure on the future development pipeline and completed developments.
Table 22: EPRA analysis of capital expenditure
Year ended 31 March 2024
Other capital expenditure
Acquisitions(1) Development capital expenditure(2) Incremental lettable space(3) No incremental lettable space((4)) Tenant improvements Total Capitalised interest Total capital expenditure - Combined Portfolio Total capital expenditure - joint ventures Adjustment for non-wholly owned subsidiaries Total capital expenditure -
£m £m £m £m £m £m £m £m (Group share) £m Group
£m
£m
Central London
West End offices - 42 - 11 1 12 7 61 1 - 60
City offices - - - 66 - 66 1 67 - - 67
Retail and other 8 - - 11 - 11 - 19 - - 19
Developments 123 155 - - - - 11 289 - - 289
Total Central London 131 197 - 88 1 89 19 436 1 - 435
Major retail
Shopping centres 2 - 1 24 - 25 - 27 - - 27
Outlets - - - 9 1 10 - 10 - - 10
Total Major retail 2 - 1 33 1 35 - 37 - - 37
Mixed-use urban
London - 11 - 1 - 1 - 12 - - 12
Major regional cities - 12 - 6 - 6 - 18 2 (1) 17
Total Mixed-use urban - 23 - 7 - 7 - 30 2 (1) 29
Subscale sectors
Leisure 11 - - 16 - 16 - 27 - - 27
Hotels - - - 2 - 2 - 2 - - 2
Retail parks - - - 7 - 7 - 7 - - 7
Total Subscale sectors 11 - - 25 - 25 - 36 - - 36
Total capital expenditure 144 220 1 153 2 156 19 539 3 (1) 537
Timing difference between accrual and cash basis (70) 2 - (72)
Total capital expenditure on a cash basis 469 5 (1) 465
1. Investment properties acquired in the year.
2. Expenditure on the future development pipeline and completed developments.
3. Capital expenditure where the lettable area increases by at least 10%.
4. Includes £35m of expenditure relating to Myo.
Table 23: Top 12 occupiers at 31 March 2024
% of Group rent(1)
Accor 5.6
Central Government 5.5
Deloitte 2.2
Taylor Wessing 1.6
Cineworld 1.5
Boots 1.4
Peel 1.3
Qube RT 1.3
BBC 1.2
Sainsburys 1.0
H&M 1.0
Cheil 0.9
24.5
1. On a proportionate basis.
Table 24: Committed and future development pipeline and trading property
development schemes at 31 March 2024
Central London
Property Description Ownership Size Letting Market value Net income/ ERV Estimated completion Total development costs to date Forecast total development cost
of use
interest
status
£m
date
% sq ft
% £m £m £m
Committed development pipeline
Thirty High, SW1 Office 100 299,000 - 238 30 Aug-2025 229 412
Timber Square, SE1 Office 100 381,000 - 137 29 Dec-2025 160 411
Property Description of use Ownership interest % Proposed sq ft Potential start date
Future development pipeline
Liberty of Southwark, SE1 Office/ Residential 100 225,000 2025
Red Lion Court, SE1 Office 100 250,000 2024
Property Description Ownership Size Number Sales exchanged by unit Estimated completion Total development costs to date Forecast total development cost
of use
interest
date
% sq ft of units % £m £m
Trading property development schemes
Castle Lane, SW1 Residential 100 52,000 89 99 Jul-2024 38 47
Mixed-use urban
Property Ownership interest % Proposed sq ft Potential start date
Future development pipeline
Mayfield, Manchester 50-100 2,500,000 2024
Finchley Road, NW3 100 1,400,000 2025
Where the property is not 100% owned, floor areas and letting status shown
above represent the full scheme whereas all other figures represent our
proportionate share. Letting % is measured by ERV and shows letting status at
31 March 2024. Trading property development schemes are excluded from the
future development pipeline.
Total development cost
Refer to the Glossary for definition.
Net income/ERV
Net income/ERV represents headline annual rent on let units plus ERV at 31
March 2024 on unlet units, both after rents payable.
Table 25: Combined Portfolio analysis
Total portfolio analysis
Market value(1) Valuation Rental income(1) Annualised rental income(2) Net estimated rental value(3)
movement(1)
31 March 2024 31 March 2023 (Deficit)/ surplus Surplus/ (deficit) 31 March 2024 31 March 2023 31 March 2024 31 March 2023 31 March 2024 31 March 2023
£m £m £m % £m £m £m £m £m £m
Central London
West End offices 3,109 2,653 (111) (3.6) 148 140 160 134 186 146
City offices 1,192 1,304 (188) (13.9) 68 76 70 61 93 87
Retail and other 991 1,095 (48) (4.7) 58 76 43 42 55 56
Developments(4) 926 1,190 (102) (9.9) 20 21 8 5 93 57
Total Central London 6,218 6,242 (449) (6.9) 294 313 281 242 427 346
Major retail
Shopping centres 1,226 1,196 1 0.1 131 120 121 114 122 123
Outlets 605 684 (21) (3.3) 57 59 48 56 49 60
Total Major retail 1,831 1,880 (20) (1.1) 188 179 169 170 171 183
Mixed-use urban
London 191 285 (23) (10.3) 17 19 11 16 16 22
Major regional cities 510 530 (93) (15.3) 41 39 37 36 38 35
Total Mixed-use urban((5)) 701 815 (116) (14.0) 58 58 48 52 54 57
Subscale sectors
Leisure 423 476 (35) (8.2) 48 51 46 51 42 50
Hotels 400 408 2 0.6 35 30 35 31 29 28
Retail parks 390 418 (7) (1.8) 30 28 27 28 29 30
Total Subscale sectors 1,213 1,302 (40) (3.2) 113 109 108 110 100 108
Combined Portfolio 9,963 10,239 (625) (6.0) 653 659 606 574 752 694
Properties treated as finance leases - - - - (1) (2)
Combined Portfolio 9,963 10,239 (625) (6.0) 652 657
Represented by:
Investment portfolio 9,347 9,603 (606) (6.2) 613 603 569 536 712 655
Share of joint ventures 616 636 (19) (3.2) 39 54 37 38 40 39
Combined Portfolio 9,963 10,239 (625) (6.0) 652 657 606 574 752 694
Total portfolio
analysis
Notes:
Net initial yield(6) Equivalent yield(7) 1. Refer to Glossary for definition.
31 March 2024 Movement in like-for-like((8)) 31 March 2024 Movement in like-for-like((8))
% bps % bps 2. Annualised rental income is annual 'rental income' (as defined in the
Central London Glossary) at the balance sheet date, except that car park and
West End offices 4.2 24 5.3 37 commercialisation income are included on a net basis (after deduction for
City offices 3.9 64 6.0 78 operational outgoings). Annualised rental income includes temporary lettings.
Retail and other 4.6 42 4.9 30
Developments(4) (0.0) n/a 5.4 n/a 3. Net estimated rental value is gross estimated rental value, as
Total Central London 4.2 39 5.4 46 defined in the Glossary, after deducting expected rent payable.
Major retail
Shopping centres 8.1 3 8.1 23 4. Comprises the development pipeline - refer to Glossary for
Outlets 6.3 13 7.0 17 definition.
Total Major retail 7.5 8 7.8 22
Mixed-use urban 5. The prior year data has been restated to align with the updated
London 4.2 (108) 6.6 22 categories disclosed.
Major regional cities 6.7 64 7.7 106
Total Mixed-use urban((5)) 6.1 21 7.3 85 6. Net initial yield - refer to Glossary for definition. This
Subscale sectors calculation includes all properties including those sites with no income.
Leisure 8.7 51 8.8 26
Hotels 7.3 61 7.2 54 7. Equivalent yield - refer to Glossary for definition. Future
Retail parks 6.0 (63) 6.8 38 developments are excluded from the calculation of equivalent yield on the
Total Subscale sectors 7.4 17 7.6 38 Combined Portfolio.
Combined Portfolio 5.4 31 6.2 45
8. The like-for-like portfolio - refer to Glossary for definition.
Represented by:
Investment portfolio 5.4 n/a 6.2 n/a
Share of joint ventures 6.0 n/a 6.0 n/a
Combined Portfolio 5.4 n/a 6.2 n/a
1. Refer to Glossary for definition.
2. Annualised rental income is annual 'rental income' (as defined in the
Glossary) at the balance sheet date, except that car park and
commercialisation income are included on a net basis (after deduction for
operational outgoings). Annualised rental income includes temporary lettings.
3. Net estimated rental value is gross estimated rental value, as
defined in the Glossary, after deducting expected rent payable.
4. Comprises the development pipeline - refer to Glossary for
definition.
5. The prior year data has been restated to align with the updated
categories disclosed.
6. Net initial yield - refer to Glossary for definition. This
calculation includes all properties including those sites with no income.
7. Equivalent yield - refer to Glossary for definition. Future
developments are excluded from the calculation of equivalent yield on the
Combined Portfolio.
8. The like-for-like portfolio - refer to Glossary for definition.
Table 26: Floor Areas
31 March 2024
Million sq ft
Central London
West End offices 2.7
City offices 1.6
Retail and other 1.1
Total Central London 5.4
Major retail
Shopping centres 6.7
Outlets 1.0
Total Major retail 7.7
Mixed-use urban
London 0.8
Major regional cities 2.0
Total Mixed-use urban 2.8
Subscale sectors
Leisure 3.3
Hotels 1.9
Retail parks 1.7
Total Subscale sectors 6.9
Total 22.8
Table 27: Reconciliation of segmental information note to statutory reporting
for the year ended 31 March 2023
Year ended 31 March 2023
Group income statement Joint Adjustment for non-wholly owned subsidiaries(2) Total EPRA Capital and other items
£m ventures(1) £m £m earnings £m
£m £m
Rental income 612 53 (8) 657 657 -
Finance lease interest 2 - - 2 2 -
Gross rental income (before rents payable) 614 53 (8) 659 659 -
Rents payable (10) (2) - (12) (12) -
Gross rental income (after rents payable) 604 51 (8) 647 647 -
Service charge income 91 10 (3) 98 98 -
Service charge expense (100) (12) 2 (110) (110) -
Net service charge expense (9) (2) (1) (12) (12) -
Other property related income 29 2 - 31 31 -
Direct property expenditure (100) (10) 2 (108) (108) -
Movement in bad and doubtful debt provision 2 1 - 3 3 -
Segment net rental income 526 42 (7) 561 561 -
Other income 3 - - 3 3 -
Administrative expenses (80) (2) - (82) (82) -
Depreciation (5) - - (5) (5) -
EPRA earnings before interest 444 40 (7) 477 477 -
Share of post-tax profit from joint ventures (1) 1 - - - -
Profit on disposal of trading properties 1 - - 1 - 1
Loss on disposal of investment properties((3)) (144) - - (144) - (144)
Net deficit on revaluation of investment properties (827) (30) 9 (848) - (848)
Net development contract expenditure (9) - - (9) - (9)
Loss on changes in finance leases (6) - - (6) - (6)
Impairment of goodwill (5) - - (5) - (5)
Impairment of trading properties (19) - - (19) - (19)
Depreciation (3) - - (3) - (3)
Operating (loss)/profit (569) 11 2 (556) 477 (1,033)
Finance income 34 - 1 35 11 24
Finance expense (87) (11) - (98) (95) (3)
(Loss)/profit before tax (622) - 3 (619) 393 (1,012)
Taxation - - - -
(Loss)/profit for the year (622) - 3 (619)
1. Reallocation of the share of post-tax loss from joint ventures reported in
the Group income statement to the individual line items reported in the
segmental information note.
2. Removal of the non-wholly owned share of results of the Group's
subsidiaries. The non-wholly owned subsidiaries are consolidated at 100% in
the Group's income statement, but only the Group's share is included in EPRA
earnings reported in the segmental information note.
3. Included in the loss on disposal of investment properties is a £9m charge
related to the provision for fire safety remediation works on properties no
longer owned by the Group but for which the Group is responsible for
remediating under the Building Safety Act 2022.
Table 28: Property Income Distribution (PID) calculation
Year ended Year ended
31 March 2024
31 March 2023
£m £m
Loss before tax per income statement (341) (622)
Accounting loss on residual operations (23) (67)
Prior year adjustment - 77
Loss attributable to tax-exempt operations (364) (612)
Adjustments
Capital allowances (55) (43)
Capitalised interest (20) (22)
Revaluation deficit 649 848
Tax exempt disposals 12 142
Capital expenditure 6 5
Other tax adjustments (27) (27)
Goodwill amortisation and impairment - 5
Estimated tax-exempt income for the year 201 296
PID thereon (90%) 181 266
As a REIT, our income and capital gains from qualifying activities are exempt
from corporation tax. 90% of this income must be distributed as a Property
Income Distribution and is taxed at the shareholder level to give a similar
tax position to direct property ownership. Non-qualifying activities, such as
sales of trading properties, are subject to corporation tax. This year, there
was no net tax charge (2023: £nil).
The table above provides a reconciliation of the Group's loss before tax to
its estimated tax exempt income, 90% of which the Company is required to
distribute as a PID to comply with REIT regulations.
The Company has 12 months after the year end to make the minimum distribution.
Accordingly, PID dividends paid in the year may relate to the distribution
requirements of previous periods. The table below sets out the dividend
allocation for the years ended 31 March 2024 and 31 March 2023:
PID allocation Ordinary Total
dividend
dividend
Year ended Year ended Pre-31
31 March 2024
31 March 2023
March 2023
£m £m
£m £m £m
Dividends paid in year to 31 March 2023 - 156 134 - 290
Dividends paid in year to 31 March 2024 181 110 - - 291
Minimum PID to be paid by 31 March 2025 - - n/a n/a -
Total PID required 181 266
The Group has met all the REIT requirements, including the payment by 31 March
2024 of the minimum Property Income Distribution (PID) for the year ended 31
March 2023. The forecast minimum PID for the year ended 31 March 2024 is
£181m, which must be paid by 31 March 2025. The Group has already made PID
dividends relating to 31 March 2024 of £181m.
Our latest tax strategy can be found on our corporate website. In the year,
the total taxes we incurred and collected were £136m (2023: £134m), of which
£37m (2023: £38m) was directly borne by the Group including environmental
taxes, business rates and stamp duty land tax. The Group has a low tax risk
rating from HMRC.
Investor information
1. Company website: landsec.com (http://www.landsec.com)
The Group's half-yearly and annual reports to shareholders, results
announcements and presentations, are available to view and download from the
Company's website. The website also provides details of the Company's current
share price, the latest news about the Group, its properties and operations,
and details of future events and how to obtain further information.
2. Registrar: Equiniti Group PLC
Enquiries concerning shareholdings, dividends and changes in personal details
should be referred to the Company's registrar, Equiniti Group PLC (Equiniti),
in the first instance. They can be contacted using the details below:
Telephone:
- 0371 384 2128 (from the UK)
- +44 121 415 7049 (from outside the UK)
- Lines are ordinarily open from 08:30 to 17:30, Monday to Friday,
excluding UK public holidays.
Correspondence address:
Equiniti Group PLC
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Information on how to manage your shareholding can be found at
https://help.shareview.co.uk (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 (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
(http://www.shareview.co.uk)
The Company's shares can be traded through most banks, building societies and
stockbrokers. They can also be traded through Equiniti. To use their service,
shareholders should contact Equiniti: 0345 603 7037 from the UK. Lines are
ordinarily open Monday to Friday 08:00 to 16:30 for dealing and until 18:00
for enquiries, excluding UK public holidays.
5. Dividends
The Board has recommended a final dividend for the year ended 31 March 2024 of
12.1p per ordinary share to be paid as Property Income Distribution (PID).
Subject to shareholders' approval at the Annual General Meeting, the final
dividend will be paid on 26 July 2024 to shareholders registered at the close
of business on 14 June 2024. The last date for Dividend Reinvestment Plan
(DRIP) elections will be 28 June 2024. The total dividend paid and payable in
respect of the year ended 31 March 2024 is 39.6p (2023: 38.6p).
The first quarterly dividend for the year ending 31 March 2025 will be paid in
October 2024 and will be announced in due course.
6. Dividend related services
Dividend payments to UK shareholders - Dividend mandates
Dividends are no longer paid by cheque. Shareholders whose dividends have
previously been paid by cheque will need to have their dividends paid directly
into their personal bank or building society account or alternatively
participate in our Dividend Reinvestment Plan (see below) to receive dividends
in the form of additional shares. To facilitate this, please contact Equiniti
or complete a mandate instruction available on our website: landsec.com
(http://www.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 (http://www.shareview.co.uk) .
Dividend Reinvestment Plan (DRIP)
A DRIP is available from Equiniti. This facility provides an opportunity by
which shareholders can conveniently and easily increase their holding in the
Company by using their cash dividends to buy more shares. Participation in the
DRIP will mean that your dividend payments will be reinvested in the Company's
shares and these will be purchased on your behalf in the market on, or as soon
as practical after, the dividend payment date.
You may only participate in the DRIP if you are resident in the UK.
For further information (including terms and conditions) and to register for
any of these dividend-related services, simply visit www.shareview.co.uk
(http://www.shareview.co.uk) .
7. Financial reporting calendar
2024
Financial year end 31 March
Preliminary results announcement 17 May
Annual General Meeting 11 July
8. Investor relations enquiries
For investor relations enquiries, please contact Edward Thacker, Head of
Investor Relations at Landsec, by telephone on +44 (0)20 7413 9000 or by email
at enquiries@landsec.com.
Glossary
Adjusted net cash inflow from operating activities
Net cash inflow from operating activities including the Group's share of our
joint ventures' net cash inflow from operating activities.
Adjusted net debt
Net debt excluding cumulative fair value movements on interest-rate swaps and
amounts payable under head leases. It generally includes the net debt of
subsidiaries and joint ventures on a proportionate basis.
Combined Portfolio
The Combined Portfolio comprises the investment properties of the Group's
subsidiaries, on a proportionately consolidated basis when not wholly owned,
together with our share of investment properties held in our joint ventures.
Developments/development pipeline
Development pipeline consists of future developments, committed developments,
projects under construction and developments which have reached practical
completion within the last two years but are not yet 95% let.
Development gross yield on total development cost
Gross ERV, before adjustment for lease incentives, divided by total
development cost. Gross ERV reflects Landsec's or the valuer's view of
expected ERV at completion of the scheme.
EPRA earnings
Profit before tax, excluding profits on the sale of non-current assets and
trading properties, profits on development contracts, valuation movements,
fair value movements on interest-rate swaps and similar instruments used for
hedging purposes, debt restructuring charges, and any other items of an
exceptional nature.
EPRA loan-to- value (LTV)
Ratio of adjusted net debt, including net payables, to the sum of the net
assets, including net receivables, of the Group, its subsidiaries and joint
ventures, all on a proportionate basis, expressed as a percentage. The
calculation includes trading properties at fair value and debt at nominal
value.
EPRA net disposal value (NDV) per share
Diluted net assets per share adjusted to remove the impact of goodwill arising
as a result of deferred tax, and to include the difference between the fair
value and the book value of the net investment in tenant finance leases and
fixed interest rate debt.
EPRA net initial yield
EPRA net initial yield is defined within EPRA's Best Practice Recommendations
as the annualised rental income based on the cash rents passing at the balance
sheet date, less non-recoverable property operating expenses, divided by the
gross market value of the property. It is consistent with the net initial
yield calculated by the Group's external valuer.
EPRA Net Reinstatement Value (NRV) per share
Diluted net assets per share adjusted to remove the cumulative fair value
movements on interest-rate swaps and similar instruments, the carrying value
of deferred tax on intangible assets and to include the difference between the
fair value and the book value of the net investment in tenant finance leases
and add back purchasers' costs.
EPRA Net Tangible Assets (NTA) per share
Diluted net assets per share adjusted to remove the cumulative fair value
movements on interest-rate swaps and similar instruments, the carrying value
of goodwill arising as a result of deferred tax and other intangible assets,
deferred tax on intangible assets and to include the difference between the
fair value and the book value of the net investment in tenant finance leases.
Equivalent yield
Calculated by the Group's external valuer, equivalent yield is the internal
rate of return from an investment property, based on the gross outlays for the
purchase of a property (including purchase costs), reflecting reversions to
current market rent and such items as voids and non-recoverable expenditure
but ignoring future changes in capital value. The calculation assumes rent is
received annually in arrears.
ERV - Gross estimated rental value
The estimated market rental value of lettable space as determined biannually
by the Group's external valuer. For investment properties in the development
programme, which have not yet reached practical completion, the ERV represents
management's view of market rents.
Gearing
Total borrowings, including bank overdrafts, less short-term deposits,
corporate bonds and cash, at book value, plus cumulative fair value movements
on financial derivatives as a percentage of total equity. For adjusted
gearing, see note 13.
Gross market value
Market value plus assumed usual purchaser's costs at the reporting date.
Interest Cover Ratio (ICR)
A calculation of a company's ability to meet its interest payments on
outstanding debt. It is calculated using EPRA earnings before interest,
divided by net interest (excluding the fair value movement on interest-rate
swaps, foreign exchange swaps, capitalised interest and interest on the
pension scheme assets and liabilities). The calculation excludes joint
ventures.
Investment portfolio
The investment portfolio comprises the investment properties of the Group's
subsidiaries on a proportionately consolidated basis where not wholly owned.
Lease incentives
Any incentive offered to occupiers to enter into a lease. Typically, the
incentive will be an initial rent-free period, or a cash contribution to
fit-out or similar costs. For accounting purposes, the value of the incentive
is spread over the non-cancellable life of the lease.
Like-for-like portfolio
The like-for-like portfolio includes all properties which have been in the
portfolio since 1 April 2021 but excluding those which are acquired or sold
since that date. Properties in the development pipeline and completed
developments are also excluded.
Loan-to-value (LTV)
Group LTV is the ratio of adjusted net debt, including subsidiaries and joint
ventures, to the sum of the market value of investment properties and the book
value of trading properties of the Group, its subsidiaries and joint ventures,
all on a proportionate basis, expressed as a percentage. For the Security
Group, LTV is the ratio of net debt lent to the Security Group divided by the
value of secured assets.
Market value
Market value is determined by the Group's external valuer, in accordance with
the RICS Valuation Standards, as an opinion of the estimated amount for which
a property should exchange on the date of valuation between a willing buyer
and a willing seller in an arm's-length transaction after proper marketing.
Net initial yield
Net initial yield is a calculation by the Group's external valuer of the yield
that would be received by a purchaser, based on the Estimated Net Rental
Income expressed as a percentage of the acquisition cost, being the market
value plus assumed usual purchasers' costs at the reporting date. The
calculation is in line with EPRA guidance. Estimated Net Rental Income is
determined by the valuer and is based on the passing cash rent less rent
payable at the balance sheet date, estimated non-recoverable outgoings and
void costs including service charges, insurance costs and void rates.
Net rental income
Net rental income is the net operational income arising from properties, on an
accruals basis, including rental income, finance lease interest, rents
payable, service charge income and expense, other property related income,
direct property expenditure and bad debts. Net rental income is presented on a
proportionate basis.
Net zero carbon building
A building for which an overall balance has been achieved between carbon
emissions produced and those taken out of the atmosphere, including via offset
arrangements. This relates to operational emissions for all buildings while,
for a new building, it also includes supply-chain emissions associated with
its construction.
Passing rent
The estimated annual rent receivable as at the reporting date which includes
estimates of turnover rent and estimates of rent to be agreed in respect of
outstanding rent review or lease renewal negotiations. Passing rent may be
more or less than the ERV (see over-rented, reversionary and ERV). Passing
rent excludes annual rent receivable from units in administration save to the
extent that rents are expected to be received. Void units at the reporting
date are deemed to have no passing rent. Although temporary lets of less than
12 months are treated as void, income from temporary lets is included in
passing rents.
Property Income Distribution (PID)
A PID is a distribution by a REIT to its shareholders paid out of qualifying
profits. A REIT is required to distribute at least 90% of its qualifying
profits as a PID to its shareholders.
Rental income
Rental income is as reported in the income statement, on an accruals basis,
and adjusted for the spreading of lease incentives over the term certain of
the lease in accordance with IFRS 16 (previously, SIC-15). It is stated gross,
prior to the deduction of ground rents and without deduction for operational
outgoings on car park and commercialisation activities.
Reversionary or under-rented
Space where the passing rent is below the ERV.
Reversionary yield
The anticipated yield to which the initial yield will rise (or fall) once the
rent reaches the ERV.
Security Group
Security Group is the principal funding vehicle for the Group and properties
held in the Security Group are mortgaged for the benefit of lenders. It has
the flexibility to raise a variety of different forms of finance.
Topped-up net initial yield
Topped-up net initial yield is a calculation by the Group's external valuer.
It is calculated by making an adjustment to net initial yield in respect of
the annualised cash rent foregone through unexpired rent-free periods and
other lease incentives. The calculation is consistent with EPRA guidance.
Total return on equity
Dividend paid per share in the year plus the change in EPRA Net Tangible
Assets per share, divided by EPRA Net Tangible Assets per share at the
beginning of the year.
Total cost ratio
Total cost ratio represents all costs included within EPRA earnings, other
than rents payable, financing costs and provisions for bad and doubtful debts,
expressed as a percentage of gross rental income before rents payable adjusted
for costs recovered through rents but not separately invoiced.
Total development cost (TDC)
Total development cost refers to the book value of the site at the
commencement of the project, the estimated capital expenditure required to
develop the scheme from the start of the financial year in which the property
is added to our development programme, together with capitalised interest,
being the Group's borrowing costs associated with direct expenditure on the
property under development. Interest is also capitalised on the purchase cost
of land or property where it is acquired specifically for redevelopment. The
TDC for trading property development schemes excludes any estimated tax on
disposal.
Trading properties
Properties held for trading purposes and shown as current assets in the
balance sheet.
Vacancy rates
Vacancy rates are expressed as a percentage of ERV and represent all unlet
space, including vacant properties where refurbishment work is being carried
out and vacancy in respect of pre-development properties, unless the scale of
refurbishment is such that the property is not deemed lettable. The screen at
Piccadilly Lights, W1 is excluded from the vacancy rate calculation as it will
always carry advertising although the number and duration of our agreements
with advertisers will vary.
Valuation surplus/deficit
The valuation surplus/deficit represents the increase or decrease in the
market value of the Combined Portfolio, adjusted for net investment and the
effect of accounting for lease incentives under IFRS 16 (previously SIC-15).
The market value of the Combined Portfolio is determined by the Group's
external valuer.
Voids
Voids are expressed as a percentage of ERV and represent all unlet space,
including voids where refurbishment work is being carried out and voids in
respect of pre-development properties. Temporary lettings for a period of one
year or less are also treated as voids. The screen at Piccadilly Lights, W1 is
excluded from the void calculation as it will always carry advertising
although the number and duration of our agreements with advertisers will vary.
Commercialisation lettings are also excluded from the void calculation.
Weighted average unexpired lease term
The weighted average of the unexpired term of all leases other than short-term
lettings such as car parks and advertising hoardings, temporary lettings of
less than one year, residential leases and long ground leases.
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