Land Securities Group PLC · LSE:LAND
Land Securities — Landsec — H1 FY2019 Earnings Presentation
59 slides from Land Securities's earnings presentation, November 2018
Slide 1: Half-yearly results
Half-yearly results For the six months ended 30 September 2018 @LandsecGroup Landsec.com Landsec
Slide 2: Focused on growth from a position of strength
Landsec — Half-yearly results 2018 2 Focused on growth from a position of strength — Near-term positioning unchanged — Quality portfolio, virtually full — Experience-led destinations in tough retail markets — Well placed with conservative gearing — Increasing pipeline of future development — Office-
Slide 3: Landsec portfolio
Landsec — Half-yearly results 2018 3 Landsec portfolio Quality assets focused on the future Assets 98.4% Focused Innovating well placed occupied on the future construction in their market customer
Slide 4: Growing our customer proposition
Landsec — Half-yearly results 2018 4 Growing our customer proposition Striving for greater efficiency — Expanding on provision of flexible space — Launching new flexible product in January 2019, starting at 123 Victoria Street — Expanding successful Landsec Lounge concept in common areas to more ass
Slide 5: Increasing our development pipeline
Landsec — Half-yearly results 2018 5 Increasing our development pipeline c.£3bn pipeline of opportunities — 530,000 sq ft redevelopment of Portland House in feasibility — Planning submission in 2019 — Earliest start on site March 2020 — London offices – committed, in planning and in feasibility pipe
Slide 6: Retail and leisure
Landsec — Half-yearly results 2018 6 Retail and leisure Focused on experience — Portfolio focused on destinations that provide great experiences — Hotel and leisure portfolio shows more resilience — Outlet asset plans underway — Less affected by CVAs than the market as a whole — Continuing to attrac
Slide 7: Agenda
Landsec — Half-yearly results 2018 7 Agenda Introduction Robert Noel Financial results Martin Greenslade London Portfolio Colette O'Shea Retail Portfolio Scott Parsons Outlook Robert Noel 21 Moorfields, EC2
Slide 8: Financial results
Financial results Martin Greenslade Chief Financial Officer
Slide 9: Financial summary
Landsec — Half-yearly results 2018 9 Financial summary Six months ended Six months ended Change 30 Sept 17 30 Sept 18 % £203m Revenue profit(1) £224m 10.3 £(19)m Valuation deficit(1) £(188)m (1.4)(2) £34m Profit before tax(3) £42m 25.7p Adjusted diluted earnings per share(1) 30.3p 17.9 1,403p(4) EPR
Slide 10: Revenue profit
Landsec — Half-yearly results 2018 10 Revenue profit Six months ended Six months ended Change 30 Sept 18 30 Sept 17 £m £m £m Gross rental income(1) 335 325 10 Net service charge expense (5) (5) - Net direct property expenditure (22) (17) (5) Net rental income 308 303 5 Indirect costs (18) (20) 2 Seg
Slide 11: Net rental income analysis
Landsec — Half-yearly results 2018 11 Net rental income analysis £m 350 4 2 - - 300 (6) (5) (1) 250 159 153 200 6 - - 150 14 - (8) (1) 100 144 155 50 0 Six months Like-for-like Proposed Development Completed Acquisitions Sales since Non-property Six months ended developments programme developments s
Slide 12: Like-for-like net rental income analysis Retail Portfolio
Landsec — Half-yearly results 2018 12 Like-for-like net rental income analysis Retail Portfolio £m £m 350 140 - 4 2 (1) - - 300 (5) (6) (1) (4) 250 (1) 159 153 130 140 200 134 6 - 150 14 - - - (8) (1) 120 100 Six months ended Rent reviews / Administrations / Bad debts Other Six months ended 30 Sept
Slide 13: Like-for-like net rental income analysis London Portfolio
Landsec — Half-yearly results 2018 13 Like-for-like net rental income analysis London Portfolio £m £m 350 140 4 2 1 - - 300 2(5) (6) (1) 130 5 250 159 6 153 200 136 120 6 - 150 14 - -122- (8) (1) 100 110 Six months ended Rent reviews / Piccadilly Lights Administrations / Other Six months ended 30 Se
Slide 14: Net rental income analysis
Landsec — Half-yearly results 2018 14 Net rental income analysis £m 350 4 2 - - 300 (5) (6) (1) 250 159 153 200 6 - - 150 14 - (8) (1) 100 144 155 50 0 Six months Like-for-like Proposed Development Completed Acquisitions Sales since Non-property Six months ended developments programme developments s
Slide 15: Combined Portfolio valuation
Landsec — Half-yearly results 2018 15 Combined Portfolio valuation Central — £14.0bn portfolio London retail — Valuation declined 1.4% Shopping — Two thirds of portfolio within ±1% range centres — 47% of retail assets in ±1% range Combined Offices — Offices values were up 0.2% Portfolio Retail parks
Slide 16: Development expenditure – significant capacity to develop and invest
Landsec — Half-yearly results 2018 16 Development expenditure – significant capacity to develop and invest Estimated future spend £m Impact 500 Potential cash spend on Sept 18 Group LTV(2) 450 400 350 Development programme £410m 28.3% 300 250 200 Proposed developments c.£330m 29.9% 150 100 50 0 In f
Slide 17: Financing
Landsec — Half-yearly results 2018 17 Financing — Group LTV(1) at 26.2% up from 25.8% at 31 March 2018 Debt and gearing 30 Sept 18 31 Mar 18 — Weighted average cost of debt unchanged Adjusted net debt(1) £3,675m £3,652m at 2.6% — Flexible debt and considerable balance Weighted average 12.6 years 13.
Slide 18: Financial summary
Landsec — Half-yearly results 2018 18 Financial summary — Continued earnings growth — Resilience for diverse income streams — Significant balance sheet capacity for next investment phase
Slide 19: London Portfolio
London Portfolio Colette O’Shea Managing Director
Slide 20: London Portfolio
Landsec — London Portfolio 20 London Portfolio Well positioned for today and the future — 99% occupancy — £6m of letting activity — 2m sq ft of development opportunities with a £2bn total development cost and an estimated rental value of c. £130m Nova, SW1
Slide 21: Flexible Office Space
Landsec — London Portfolio 21 Flexible Office Space Targeted specialist providers 3% 6 of contracted buildings rent 198,000 sq ft of floor space London Executive Offices at Nova, SW1 The Office Group at 20 Eastbourne Terrace, W2
Slide 22: Landsec Lounge
Landsec — London Portfolio 22 Landsec Lounge Providing informal work areas and meeting space — Attractive F&B offering — Popular with existing customers — Attracting new customers Rise café at 20 Eastbourne Terrace, W2 V Café, 80 Victoria Street, SW1
Slide 23: Landsec Lounge expansion
Landsec — London Portfolio 23 Landsec Lounge expansion Meeting our customers’ needs New Street Square, EC4 Dashwood House, EC2 62 Buckingham Gate, SW1 One New Change, EC4
Slide 24: Landsec Flexible Offer
Landsec — London Portfolio 24 Landsec Flexible Offer Launching new brand in January — Attracting growth businesses — Providing quality space and service — Ability for customers to customise offer, selecting the look and feel Starting with 36,000 sq ft in 123 Victoria Street opening in April 2019 123
Slide 25: Progressing 2m sq ft pipeline of development opportunities
Landsec — London Portfolio 25 Progressing 2m sq ft pipeline of development opportunities Compares to 3m sq ft, £3bn TDC (100%), just completed Total = 2m sq ft Circa Mar 2020 Portland House, SW1 £130m Including Castle Lane, SW1 Oct 2023 Portland House Estimated 570k sq ft rental value Oct 2019 105 S
Slide 26: Nova East
Landsec — London Portfolio 26 Nova East Refining structure and design improving returns — Floor area 166,000 sq ft — Floor plates 12,000 sq ft — Increased floor area of consented scheme by 19% — Requisite approvals required — Potential start on site April 2019 with delivery 2022 Nova East, SW1
Slide 27: 1 Sherwood Street
Landsec — London Portfolio 27 1 Sherwood Street New mixed use building at iconic London site 144,000 sq ft Potential office and retail start on site development April 2019 111,000 sq ft offices 30,000 sq ft retail Delivery 2022 20,000 sq ft floorplates Affordable housing at Wardour Street 1 Sherwood
Slide 28: 1 Sherwood Street
Landsec — London Portfolio 28 1 Sherwood Street Flexibility, wellness experience, and sense of community — Large open plan floorplates to accommodate flexible and diverse workplaces — Wellness at heart of the design — Landsec Lounge concept on first floor, rooftop restaurant and ground floor retail
Slide 29: Southwark estate
Landsec — London Portfolio 29 Southwark estate Two developments Ownership of 4 buildings 14-22 Southwark Bridge Road totalling 227,000 sq ft 105 Sumner Street Red Lion Court 24 Southwark Bridge Road
Slide 30: Sumner Street
Landsec — London Portfolio 30 Sumner Street Opportunity to use off-site manufacture techniques — Consent for 135,000 sq ft in 2 buildings — Existing building home to Landsec Lab — Potential start on site October 2019 Sumner Street, SE1
Slide 31: Landsec Lab
Landsec — London Portfolio 31 Landsec Lab Challenging new ways of working — Successful testing of prototypes for Nova and our own fit-out — Landsec Lab became a hub in April 2018 — Sustainable business incubator start up community — A place to challenge established thinking, knowledge and test new i
Slide 32: Red Lion Court
Landsec — London Portfolio 32 Red Lion Court A riverside destination Finalised Combining Progressing feasibility for best-in-class planning a 324,000 offices with Potential sq ft office new public start on site building realm to July 2020 river Red Lion Court, SE1
Slide 33: Portland House
Landsec — London Portfolio 33 Portland House A new tower concept for the West End Feasibility Plans increase Creation for 530,000 floor area whilst of public space sq ft building – maintaining linking Victoria potential start existing height estate on site March 2020 Affordable housing at Castle Lan
Slide 34: 21 Moorfields
Landsec — London Portfolio 34 21 Moorfields De-risking the development — Deutsche Bank deal now unconditional — Successfully completed test piling — Tendered work on main building contract within projected £581m TDC Construction site at 21 Moorfields, EC2
Slide 35: 21 Moorfields
Landsec — London Portfolio 35 21 Moorfields New approach to procurement — Worked with 4 specialists gaining Envelope 14% greater insight into design Other 28% and costs of 70% of project — Improved efficiency of process Total Vertical construction resulted in tender with no extra cost transportation
Slide 36: Building Information Modelling (BIM)
Landsec — London Portfolio 36 Building Information Modelling (BIM) Upping the tech Created 3D model of entire building
Slide 37: Investment
Landsec — London Portfolio 37 Investment Actively pursuing £1.4bn of assets — Gap in underwriting has shifted from 20-30% below pricing 12 months ago to 10-15% today — Submitted £0.3bn of bids since April — £40m spent in last six months to enable 1 Sherwood Street — £29m, 116 -126 Wardour Street — £
Slide 38: Quality and resilience
Landsec — London Portfolio 38 Quality and resilience Letting activity by sector Reflected in 99% occupancy Not-for-profit Lifestyle & services and other and F&B £1m £1m — Like-for-like voids 0.7% £6m — Long WAULT of 9.1 years Energy £2m £2m Financial services & commodities — 5% (£16m) reversionary p
Slide 39: Rent reviews
Landsec — London Portfolio 39 Rent reviews At 30 September 2018 — Completed £20m of rent reviews at 19% above passing rent, 6% above ERV — Significant reviews in New Street Square — Valuation increase of New Street Square estate of 5%, £39m New Street Square, EC4
Slide 40: Bridge at New Street Square
Landsec — London Portfolio 40 Bridge at New Street Square Future proofing space — Completed agreement for Deloitte to construct two bridges to link buildings 1 & 2 New Street Square — Greater flexibility for Deloitte across their 700,000 sq ft campus for the next 15 years Bridge link at 1 & 2 New St
Slide 41: Portfolio in great shape
Landsec — London Portfolio 41 Portfolio in great shape Strong pipeline — Diverse customer mix, long leases and good reversionary potential — Actively pursuing new acquisitions — Expanding flexible office offering — Deploying new technologies — Progressing 2m sq ft of future development opportunities
Slide 42: Retail Portfolio
Retail Portfolio Scott Parsons Managing Director
Slide 43: Well positioned portfolio
Landsec — Retail Portfolio 43 Well positioned portfolio More than a retail business Experience-led and diversified — Reshaped the portfolio to focus Home, MSUs garden Electrical & DIY & mobile on experience Outlets Department stores — Sold secondary shopping centres Supermarket & grocery — Sold half
Slide 44: Performance summary
Landsec — Retail Portfolio 44 Performance summary Robust performance in challenging markets c Footfall down Sales down 97.4% occupied 82 exchanged Outperforming 2.3% 1.4% lettings the wider Like-for-like market Outperformed Outperformed voids 3% £6.4m during on CVAs benchmark by benchmark by Adminis
Slide 45: Regional shopping centres
Landsec — Retail Portfolio 45 Regional shopping centres Best destinations attracting occupiers History of occupancy High Healthy deal Westgate Landsec like-for-like shopping centre occupancy (excl. outlets) occupancy flow Oxford at 97.3% line-up complete 96.0% 98.0% 97.3% 96.7% 97.0% 97.5% 97.2% 97.
Slide 46: Regional shopping centres
Landsec — Retail Portfolio 46 Regional shopping centres Adapting to change through innovation — Innovative Black Box Revolution units ready at Trinity Leeds with short term Black Box Revolution at Trinity Leeds leases to help retailers test their model — Piloting car parking mobile app to improve th
Slide 47: Retail parks
Landsec — Retail Portfolio 47 Retail parks Selly Oak de-risked and profitable — Reduced our exposure to retail parks through c.£600m of sales over last 5 years — Livingston sold during first half — Let and completed Selly Oak retail park — Forward sold to M&G and Unite — Will generate an IRR in exce
Slide 48: Hotels
Landsec — Retail Portfolio 48 Hotels Steady income growth — 30% rental income growth since 2010 — Attractive vacant possession values — 35% higher than £580m book value £580m £786m September 2018 Vacant book values possession values Note: Data is for our 29 hotels – a mix of Accor and other brands M
Slide 49: Leisure
Landsec — Retail Portfolio 49 Leisure Cinema spend growth consistently outpaces admissions Spend continues to grow 140 120 — Engagement with our customers drives 100 investment within our centres 80 — Two cinema regears in H1 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 — White Rose u
Slide 50: Outlets
Landsec — Retail Portfolio 50 Outlets Retail sales density at Gunwharf Quays Brand churn over period and growth in retail sales density 14 £720 psf 13 12 10 £448 psf 7 7 6 6 3 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Sep-18 Retail trading density (£ psf) Brands added / upsized
Slide 51: Curating brand mix to drive growth in sales densities
Landsec — Retail Portfolio 51 Outlets Curating brand mix to drive growth in sales densities — We can churn brands to grow sales density… — Will apply same approach to the income is a mix of base and turnover rents three acquired outlets: average so this pays off density £380 psf — Polo Ralph Lauren
Slide 52: Suburban London
Landsec — Retail Portfolio 52 Suburban London Planning submissions for mixed use densification — Organic pipeline of mixed use c development within the portfolio O2 Finchley Road — O2 Finchley Road and West 12 planning applications in 2019 — Advanced feasibility at Lewisham with other West 12 shoppi
Slide 53: Summary
Landsec — Retail Portfolio 53 Summary Well positioned diversified portfolio — Experience-led destinations continuing to attract consumers and occupiers — Innovating and responding to changing market dynamics — Confidence in hotels and leisure Dominion Theatre, London Gunwharf Quays, Portsmouth — Gro
Slide 54: Outlook
Outlook Robert Noel Chief Executive
Slide 55: Mixed use development Finchley Road, NW3
Landsec — Half-yearly results 2018 55 Mixed use development Finchley Road, NW3 Finchley Road & Frognal Overground — Acquired O2 centre in 2010 West Hampstead Overground Thameslink — Site covers 5 acres — Adjacent to Jubilee Line, Metropolitan and Thameslink stations and London Overground Finchley Ro
Slide 56: Mixed use development West 12 shopping centre
Landsec — Half-yearly results 2018 56 Mixed use development West 12 shopping centre — Site of 3 acres — Scheme includes 700 homes — Adjacent to Central and Shepherd’s Bush Station Central Overground lines and numerous bus routes — Planning submission 2019 — Earliest start on site late 2021 Shepherd’
Slide 57: Mixed use development Further potential
Landsec — Half-yearly results 2018 57 Mixed use development Further potential Lewisham Station Thameslink Southeastern Lewisham Station — Working on feasibility for a number Lewisham Station DLR of sites in London Bakerloo line extension — Large scale potential at Lewisham — Deep experience with wor
Slide 58: Addressing key market forces and embracing opportunities
Landsec — Half-yearly results 2018 58 Addressing key market forces and embracing opportunities — Customer behaviour — Boundaries between home, work and leisure are disappearing — Uses are interconnected and interdependent — Sustainability — Driving better performance through the lifecycle — Driving
Slide 59: Outlook
Landsec — Half-yearly results 2018 59 Outlook Appropriately positioned today and excited about the future — Well prepared for short-term market risks — Virtually fully occupied — Committed development is pre-let — Good flexible financing — High quality portfolio — Widening our offer to customers in