Land Securities Group PLC · LSE:LAND
Land Securities — Landsec — FY2018 Earnings Presentation
54 slides from Land Securities's earnings presentation, May 2018
Slide 1: Preliminary Results, Year ended 31 March 2018
PRELIMINARY RESULTS Year ended 31 March 2018
Slide 2: Introduction
Introduction Robert Noel Chief Executive Officer
Slide 3: Agenda
Landsec — Preliminary Results 2018 2 Agenda Introduction Robert Noel Financial results Martin Greenslade London Portfolio Colette O'Shea Retail Portfolio Scott Parsons Outlook Robert Noel
Slide 4: Optionality for a range of conditions
Landsec — Preliminary Results 2018 3 Optionality for a range of conditions Anticipating markets — Speculative development programme complete — Healthy investment and leasing volumes in London — Low investment volumes in retail and weaker leasing in retail markets — Optionality into practice — Commit
Slide 5: Fast changing customer landscape
Landsec — Preliminary Results 2018 4 Customer Fast changing customer landscape — Office occupiers driven by efficiency and flexibility Westgate Oxford — Retailers facing profound change in shopping habits — Delivering relevant product — Westgate Oxford — 21 Moorfields 21 Moorfields, EC2 — Densificat
Slide 6: Focused on NAV per share and EPS
Landsec — Preliminary Results 2018 5 Efficiency Focused on NAV per share and EPS — Sale of 20 Fenchurch Street combined with capital return — Further reduced cost of debt and increased duration — Positioned to grow earnings through development and acquisition
Slide 7: Sustainability
Landsec — Preliminary Results 2018 6 Sustainability Customers, communities, employees and partners — Relevant product — Economic impact — Social impact Landsec’s Construction Academy, HMP Brixton — Environmental impact Building trust Trinity, Leeds
Slide 8: Actions translating into results
Landsec — Preliminary Results 2018 7 Actions translating into results Pence % Pence 1,600 50 60 Adjusted diluted NAV per share LTV Adjusted diluted earnings per share Dividend per share 1,400 1,434 1,417 53.1 45 1,403 43.5 50 1,293 48.3 1,200 45.7 40 44.2 41.5 40 40.5 39.0 1,000 38.0 38.55 38.5 1,01
Slide 9: Financial results
Financial results Martin Greenslade Chief Financial Officer
Slide 10: Financial summary
Landsec — Financial results 2018 9 Financial summary Year ended Year ended Change 31 Mar 17 31 Mar 18 % £382m Revenue profit(1) £406m 6.3 £(147)m Valuation deficit(1) £(91)m -0.7(2) £112m (Loss) / profit before tax £(251)m 48.3p Adjusted diluted earnings per share(1) 53.1p 9.9 1,417p Adjusted dilute
Slide 11: Revenue profit
Landsec — Financial results 2018 10 Revenue profit Year ended Year ended Change 31 Mar 18 31 Mar 17 £m £m £m Gross rental income(1) 661 637 24 Net service charge expense (11) (5) (6) Net direct property expenditure (39) (32) (7) Net rental income 611 600 11 Indirect costs (39) (39) - Segment profit
Slide 12: Net rental income analysis
Landsec — Financial results 2018 11 Net rental income analysis £m 700 650 20 5 - 600 - - (2) (16) 550 500 450 315 322 400 350 13 300 2 - - - - 250 (11) 200 150 285 289 100 50 0 Year ended Like-for-like Proposed Development Completed Acquisitions Sales since Non-property Year ended 31 Mar 17 developm
Slide 13: Combined Portfolio valuation
Landsec — Financial results 2018 12 Combined Portfolio valuation Market value Combined Portfolio Valuation deficit at 31 Mar 18 by value year to 31 Mar 18 £m % % £m Like-for-like 11,500 81.5 -1.5 (169) Development programme 447 3.2 18.3 68 Completed developments 1,816 12.9 1.0 17 Acquisitions 340 2.
Slide 14: Movement in adjusted net assets
Landsec — Financial results 2018 13 Movement in adjusted net assets Pence per share 1,417p 53p (12)p 13p (40)p (51)p (8)p 0p (60)p 91p 1,403p £m 12,000 (91) 99 11,500 (314) 406 (390) 11,000 1 (62) 11,206 (475) 10,500 N/A 10,380 10,000 Adj. net assets Revenue Valuation Profits on Dividends Redemption
Slide 15: Adjusted net debt
Landsec — Financial results 2018 14 Adjusted net debt(1) Year-on-year comparison by month Adjusted net debt £3.8bn 2016/17 2017/18 £3.6bn £3.4bn £3.2bn £3.0bn Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (1) On a proportionate basis
Slide 16: Financing
Landsec — Financial results 2018 15 Financing — Group LTV(1) at 25.8% up from 22.2% Debt and gearing 31 Mar 18 31 Mar 17 at 31 March 2017 — Weighted average maturity of debt Adjusted net debt(1) £3,652m £3,261m extended to 13.1 years Weighted average maturity 13.1 years 9.4 years — Weighted average
Slide 17: Financial summary
Landsec — Financial results 2018 16 Financial summary — Increased earnings — Large dividend increase — Active balance sheet management — Opportunistic sales and acquisitions — £1.5bn of bonds repurchased — £475m return of capital — Financial flexibility
Slide 18: London Portfolio
London Portfolio Colette O’Shea Managing Director
Slide 19: A strong year with plenty of future opportunity
Landsec — London Portfolio 18 A strong year with plenty of future opportunity — £45m of development lettings — Sold 20 Fenchurch Street for record price — Finished letting 3m sq ft speculative development programme — Progressing a 1.4m sq ft pipeline of development opportunities of which 40% is alre
Slide 20: Occupational market
Landsec — London Portfolio 19 Occupational market — Rise in vacancy rate to 4.8% — Take-up of 14m sq ft over the financial year, up 15% on 2016/2017 and higher than the 10-year average — Serviced office sector accounted for 17% of total take-up during the financial year versus a 10-year average of 5
Slide 21: Our offices in demand
Landsec — London Portfolio 20 Our offices in demand — Voids down to 2% — 3m sq ft speculative development programme complete — Average rent of £68 per sq ft — 32% of rent subject to fixed uplifts — Average lease term of 16 years — Average rent free of 25 months — Pre-let minimum of 469,000 sq ft at
Slide 22: Investment market
Landsec — London Portfolio 21 Investment market — London remains a destination of choice — Prime rents declined in some submarkets, but offset by tightening yields — Strong demand, investment volumes reached £14bn in the financial year, 7% above the 10-year average — Demand remains underpinned by fo
Slide 23: Development activity
Landsec — London Portfolio 22 Development activity Readying the next phase of development — Achieved £45m of development lettings — Nova 97% let, average rent of £75 per sq ft and average lease term of 14 years — Pre-let to Deutsche Bank — Continued work on a 1.4m sq ft pipeline of development oppor
Slide 24: Pipeline of development opportunities
Landsec — London Portfolio 23 Pipeline of development opportunities Total = 1.4m sq ft Oct 2019 40% 105 Sumner Street, SE1 Jul 2022 105 Sumner Street & Red Lion Court pre-let to Jan 2020 492k sq ft Deutsche Red Lion Court, SE1 Sep 2023 Bank Nova Phase II & III Mar 2019 Nova East, SW1 Nova Place, SW1
Slide 25: Moorfields: building on a strong partnership
Landsec — London Portfolio 24 21 Moorfields Building on a strong partnership —1.9 acre development sitting above Liverpool Street Crossrail Station —Planning consent secured —TfL enabling works finished —On track to complete piling in March 2019 —Projected TDC of £583m and net ERV of £38m
Slide 26: Nova East
Landsec — London Portfolio 25 Nova East Continuing our success at Nova — Focused on Nova East, the second phase of Nova — 14 storey office building of 137,000 sq ft with 12,000 sq ft floorplates that sits behind Victoria Palace Theatre — The scheme will open up a route through the Victoria estate —
Slide 27: Sherwood Street
Landsec — London Portfolio 26 1 Sherwood Street Modern space where customers want to be — Planning and listed building consent secured for 142,000 sq ft — Combines historic listed buildings with modern architecture — Opportunity for large, flexible floorplates of 20,000 sq ft in the West End — Detai
Slide 28: Southwark Estate
Landsec – London Portfolio 27 Southwark Estate Responding to customers’ occupational needs 105 Sumner Street — Planning consent for two buildings totalling 135,000 sq ft — Focused on placemaking 105 Sumner Street, SE1 — Less conventional designs Red Lion Court — On the river — Aiming to submit plann
Slide 29: 1.4m sq ft pipeline of development opportunities
Landsec — London Portfolio 28 1.4m sq ft pipeline of development opportunities 40% de-risked and optionality — 564,000 sq ft on-site — 800,000 sq ft in design — Optionality over delivery plans — Opportunity to start from 2019
Slide 30: Asset management: driving the portfolio hard
Landsec — London Portfolio 29 Asset management Driving the portfolio hard —Office WAULT is 9.6 years and our voids are only 2% —Completed £10m of investment lettings in 27 transactions One New Change, EC4 —14% above passing rent and average lease length 10 years —Completed over £36m of rent reviews
Slide 31: Strand and Victoria Street
Landsec — London Portfolio 30 40 Strand and 123 Victoria Street Working in partnership 40 Strand — Principal occupier is Bain — Reviewed £5m increasing passing rent by 12% 40 Strand, WC2 123 Victoria Street — Successfully settled 5 rent reviews totalling £6m — Average of 10% ahead of passing rent 12
Slide 32: Working in partnership with our customers
Landsec — London Portfolio 31 Asset management Working in partnership with our customers —Intuit has taken 38,000 sq ft at 80 Victoria Street, moving from 123 Victoria Street —Doubled their space and lease length LEO at Nova, SW1 – Fit-out to 10 years —LEO (London Executive Offices) offers flexibili
Slide 33: Cardinal Place
Landsec — London Portfolio 32 Cardinal Place More services more activity —V Café offers flexibility to our customers —Completed second rent review cycle —£15m reviewed, office rents increased by 12% and retail by 19% V Café, 80 Victoria Street, SW1 —Refurbished and let 81,000 sq ft at an average ren
Slide 34: London Portfolio Summary
Landsec — London Portfolio 33 Summary Focused on Continually Anticipating Progressing brilliant looking for our development basics opportunities customers’ opportunities to drive value needs
Slide 35: Retail Portfolio
Retail Portfolio Scott Parsons Managing Director
Slide 36: A diversified, experiential destination business
Landsec — Retail Portfolio 35 A diversified, experiential destination business
Slide 37: Balanced portfolio by capital value
Landsec — Retail Portfolio 36 Balanced portfolio by capital value Retail parks 13.3% Leisure 12.6% Shopping centres Retail Portfolio 44.4% March 2018 Hotels 7.8% Outlets 13.9% Suburban London 8.0%
Slide 38: Diversified customer base
Landsec — Retail Portfolio 37 Diversified customer base Fashion 26% Other Contracted Retail rent 42% Leisure & hotels 32%
Slide 39: Curating brand mix
Landsec — Retail Portfolio 38 Curating brand mix Outlets MSUs 5% 10% — Anchors driving footfall — Sales growth Shop units Other fashion Fashion at outlets 10% 26% — Depth of brand mix Contracted rent — Importance of physical stores
Slide 40: Healthy mix of non-fashion retail
Landsec — Retail Portfolio 39 Healthy mix of non-fashion retail Home, garden & DIY Electrical & mobile 6% Department stores 4% 2% Supermarket & grocery 6% Other retail Contracted rent
Slide 41: Growing subsectors
Landsec — Retail Portfolio 40 Growing subsectors Other retail Contracted Lifestyle rent & services 16% Health & beauty 4% Jewellery & 4% accessories
Slide 42: Balancing supply and demand
Landsec — Retail Portfolio 41 Balancing supply and demand Contracted rent Casual dining 6% Cinema Leisure & hotels 5% 32% Leisure experience 4% F&B Hotels 7% 9%
Slide 43: Strength and resilience
Landsec — Retail Portfolio 42 Strength and resilience Home, Electrical & mobile garden & MSUs Department stores DIY Outlets Supermarket & grocery Other Fashion fashion Other retail Contracted Lifestyle & rent services Casual dining Cinema Health Leisure & hotels & beauty Leisure Jewellery experience
Slide 44: Limited impact of CVAs
Landsec — Retail Portfolio 43 Limited impact of CVAs Home, Electrical & mobile garden & MSUs Department stores DIY Outlets Supermarket & grocery Other Fashion fashion Other retail Contracted Lifestyle & rent services Casual dining Cinema Health Leisure & hotels & beauty Leisure Jewellery experience
Slide 45: Outperforming the benchmarks
Landsec — Retail Portfolio 44 Outperforming the benchmarks Footfall down Sales down 1.9% 0.5% Outperformed Outperformed benchmark benchmark by by 60bps 170bps
Slide 46: Consistent lettings and low voids
Landsec — Retail Portfolio 45 Consistent lettings and low voids — 141 lettings, £13.4m rent — Lettings 7% ahead of previous passing rents — Voids down to 2.7% Bluewater, Kent
Slide 47: Asset management wins
Landsec — Retail Portfolio 46 Asset management wins
Slide 48: Westgate's brand appeal
Landsec — Retail Portfolio 47 Westgate’s brand appeal 9 million 96% footfall since let or ISH opening
Slide 49: Outlets: growing sales densities
Landsec — Retail Portfolio 48 Outlets Growing sales densities Junction 32 Castleford Braintree Essex Galleria Hatfield Clarks Village Gunwharf Quays Street Portsmouth
Slide 50: Mixed-use development potential
Landsec — Retail Portfolio 49 Mixed-use development potential W12 shopping centre, London O2 centre, London Great North Leisure, London Lewisham shopping centre, London Brighton Marina Easton Park, Essex Ebbsfleet, Kent
Slide 51: Conclusion: a destination business
Landsec — Retail Portfolio 50 Conclusion More than a retail business… a destination business
Slide 52: Outlook
Outlook Robert Noel Chief Executive Officer
Slide 53: Outlook
Landsec — Preliminary Results 2018 52 Outlook — Positioned for growth — Development continues with pre-lets — Growing pipeline of future schemes — Monitoring market for buying opportunities
Slide 54: Important notice
Landsec — Preliminary Results 2018 53 Important notice This presentation may contain certain ‘forward-looking’ statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materiall