SOURCE: Land Securities Group PLC

May 17, 2016 02:00 ET

Land Securities Group PLC: Annual Results for the Year Ended 31 March 2016

LONDON, UNITED KINGDOM--(Marketwired - May 17, 2016) - Land Securities Group PLC (LSE: LAND) (PINKSHEETS: LSGOF)

OTC: LSGOF

Forward-looking statements

These annual results, the Annual Report and the Land Securities' 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, strategy, 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 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 IFRSs, and changes in interest and exchange rates.

Any forward-looking statements, made in these annual results, the Annual Report or the Land Securities' 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 annual results, the Annual Report or the Land Securities website should be construed as a profit forecast or an invitation to deal in the securities of the Company.

Annual results for the year ended 31 March 2016

17 May 2016

"We are pleased to report a strong performance for the year. Revenue profit and net asset value per share are up, lease terms are longer and, as planned, speculative development exposure and net debt are lower. Continued leasing momentum in our development programme combined with smart asset management and balance sheet discipline has put the business in a strong position. Our confidence is demonstrated by a proposed 9.9% increase to the dividend," said Chief Executive Robert Noel.

"In London, we continued to lease up our well timed and well executed speculative development programme with over 0.5m sq ft of new lettings and made progress on our future pipeline with 0.9m sq ft of planning consents. We also took advantage of the strong market conditions during the year to sell some assets.

"In Retail, we have sold selectively. Our operational focus is delivering results, with voids down and both footfall and same store retailer sales up in contrast to national benchmarks. Our development at Westgate Oxford looks very promising with a healthy level of retailer support and is almost 50% pre-let 18 months ahead of opening.

"Our strategy is delivering value for our shareholders, great space for our customers and positive change for our communities. We have a strong balance sheet with better assets and longer income streams. Despite the current political and economic uncertainty, Land Securities is well placed."

Results summary

    31 March 2016   31 March 2015   Change
Valuation surplus(1)   £907.4m   £2,036.9m   Up 7.0%(2)
Basic NAV per share   1,482p   1,343p   Up 10.3%
Adjusted diluted NAV per share(3)   1,434p   1,293p   Up 10.9%
Group LTV ratio(1)   22.0%   28.5%    
Profit before tax   £1,335.6m   £2,416.5m    
Revenue profit(1)   £362.1m   £329.1m   Up 10.0%
Basic EPS   169.4p   306.1p    
Adjusted diluted EPS(1)   45.7p   41.5p   Up 10.1%
Dividend   35.0p   31.85p   Up 9.9%

1. Including our proportionate share of subsidiaries and joint ventures, as explained in the notes to the financial statements included within the Annual Report.
2. The % change for the valuation surplus represents the increase in value of the Combined Portfolio over the year, adjusted for net investment.
3. Our key valuation measure.

Activity

  • £37.6m of investment lettings
  • £33.8m of development lettings
  • Acquisitions, development and refurbishment expenditure of £496.0m
  • Disposals of £1,493.1m
  • Supported a further 196 people from disadvantaged backgrounds into jobs through our Community Employment Programme

Performance

  • Ungeared total property return 11.5% (IPD Quarterly Universe 11.3%)
  • Total business return(1) of 13.4%
  • Combined Portfolio valued at £14.5bn, with a valuation surplus of 7.0%
  • Disposals(2) completed at a surplus of 9.1% to book value
  • Voids in the like-for-like portfolio 2.3% (31 March 2015: 2.6%)

Financials

  • Group LTV ratio at 22.0%, based on adjusted net debt of £3.2bn
  • Weighted average maturity of debt at 9.6 years
  • Weighted average cost of debt at 4.9%
  • Cash and available facilities of £1.5bn
  • Final dividend recommended at 10.55p, bringing the dividend for the year to 35.0p, up 9.9%

Development

  • 1.0m sq ft being delivered in London in the next financial year, now 62% pre-let or in solicitors' hands
  • 0.8m sq ft Westgate Oxford, due to open in October 2017, now 51% pre-let or in solicitors' hands
  • 0.8m sq ft of retail opportunities including a retail park at Selly Oak, Birmingham; a leisure extension at White Rose, Leeds; and the conversion of the Glow exhibition space at Bluewater, Kent to provide additional leisure and catering units
  • 1.2m sq ft future London pipeline including 21 Moorfields, EC2; Nova East, SW1; 1 Sherwood Street, W1; and Southwark Street, SE1

Recognition

  • Winner of the 2015 Business in the Community Work Inclusion Award
  • Maintained EPRA gold status for sustainability reporting, membership of FTSE4Good and the DOW Jones Sustainability Index
  • Achieved ISO 50001 certification for energy management
  • Re-certification of ISO14001 for environmental management
  • Shortlisted for 2016 Better Society Awards for National Commitment to the Community

1. Dividend paid per share, plus the change in adjusted diluted net asset value per share, divided by the adjusted diluted net asset value per share at the beginning of the year.
2. Excludes trading properties and Times Square, EC4, an asset the Group held for sale at the contracted price of £284.6m at 31 March 2015.

All measures above are presented on a proportionate basis, as explained in the notes to the financial statements included within the Annual Report

Chief Executive's statement

Our results

Total business return 13.4%
Ungeared total property return 11.5%
Increase in adjusted diluted NAV per share 10.9%

Our highlights

  • £37.6m of investment lettings
  • £33.8m of development lettings
  • Acquisitions of £123.4m
  • Development and refurbishment expenditure of £372.6m
  • Disposals of £1,493.1m

Over the last six years, Land Securities has worked at pace to create value and resilience through disciplined buying, selling, development and management of space. In London, we have delivered a well timed, well executed, speculative development programme into a supply-constrained market. And in Retail, we have responded to growing demand for great experiences, transforming our portfolio so it is dominated by destination centres.

And to what end? In March 2010, our Combined Portfolio was valued at £9.5bn and adjusted net debt was £4.2bn. Today, our Combined Portfolio is valued at £14.5bn and adjusted net debt has been reduced to £3.2bn. Our adjusted diluted net asset value per share has more than doubled and our balance sheet is in terrific shape, with low gearing and plenty of financial capacity.

This year, revenue profit was up 10.0% to £362.1m and adjusted diluted net asset value per share was up 10.9% to 1,434p. Total business return (the increase per share in adjusted net assets plus dividends paid) was 13.4%.

We've transformed more than the numbers. We now have a higher quality portfolio of first-class assets let on longer leases. And across the company we are working hard to realise our vision of being the best property company in the UK in the eyes of our customers, communities, partners and employees. More on that in a moment.

Raising the dividend

Since 2010, we have built and let 1.4m sq ft of space in our Retail Portfolio. At the same time we committed to 3.1m sq ft of speculative commercial development in our London Portfolio - a huge leasing challenge. After another strong year of lettings, we now have just 0.5m sq ft left to let in London and interest in this remaining space is healthy.

Given the success of our development lettings, the higher quality of our rental income and reduced speculative risk in our development programme, we have recommended a final dividend of 10.55p per share taking the total dividend for the year to 35.0p per share, up 9.9%. We aim to maintain our progressive dividend policy from this level.

Balance sheet discipline

As those of you who have followed us for some time will know, we have funded our activity since 2010 through a net debt neutral approach. Put simply, by September 2015 we had invested £4.4bn and funded this through disposals. At the half year, we signalled we would be net sellers in the second half and we were, taking advantage of great market conditions to sell £1.1bn of assets as we saw wider economic and political uncertainty increasing. As a result, our balance sheet gearing is now at its lowest level for many years. Though no asset is sacrosanct, we are not expecting to make any material disposals over the coming year.

Customers

Shopping is more and more about spending time as well as spending money. People want to enjoy a fantastic day out in a place that offers great brands, food, entertainment and atmosphere. While cost and convenience continue to drive growth in online retailing - at the expense of physical stores - the most successful shopping destinations offer a unique experience. And the best retailers need to be in those locations.

Over the last few years, we have sold all of our standalone superstores and secondary regional assets and reinvested proceeds into buying and building truly premium destinations such as Bluewater, Trinity Leeds and Westgate Oxford. We have also stepped up the offer at Gunwharf Quays, St David's and our retail parks. The retail sector moves fast so we will continue to anticipate and respond to changing needs.

In London, we have been providing the outstanding spaces and places today's leading companies - and their employees - require and expect. With construction largely complete, we are focused on letting our remaining space and giving our customers the best occupier experience. We will continue to seed our portfolio with opportunities for the future, although we are unlikely to resume building at scale in London in the near term.

Communities and partners

Our properties help to generate and sustain local economic activity. Our shopping centres are major employers and our offices create demand for local services. In turn, a vibrant local economy and environment is more attractive to the customers who support our business.

Support from our communities and partners is key to Land Securities' sustainability. This year we have consolidated our sustainability approach under three broad themes - creating jobs and opportunities, efficient use of natural resources, and sustainable design and innovation. This is about being smart in the way we minimise disruptive impacts while maximising the benefits our assets create for everyone who encounters them. As part of this, we have continued to set ourselves stretching social and environmental targets.

Our approach also brings together partners to extend the benefits of our activity. For example, 779 people have gained training and job opportunities through our groundbreaking Community Employment Programme. I was delighted that this team effort was recognised with the Business in the Community Work Inclusion Award for 2015. We are now applying what we have learnt in London to Oxford, where we are working with partners on the Westgate Oxford scheme to deliver construction training and jobs.

Employees

I would like to thank my colleagues for their consistently impressive contribution. To be the best property company in the UK, we need to keep attracting and developing exceptional people. Land Securities should stand out as a place where individuals from diverse backgrounds are united by talent, values, ambition and opportunity.

Employee engagement is high and we expect it to go higher over the next 12 months as, due to an approaching lease expiry at our current head office, we move into a new office with a more collaborative and flexible work environment. The relocation will mark the start of an exciting new chapter in the life of our company.

Outlook

Some have suggested our current market positioning is more prudent than exciting. I am happy with that description. As risk has been rising outside the business, we have been reducing risk inside the business. Ongoing challenges include appropriately managing the changing balance between supply and demand in London offices and responding to the evolution of consumer habits in retail. And next month, we face the prospect of a UK exit from the European Union.

We believe a vote to leave the EU would lead to business uncertainty while negotiations take place on an exit treaty. Uncertainty slows decision-making. Over the short term, we anticipate this would drive down occupational demand in our market. In turn, this would lead to falling rental values and a reduction in construction commitments, particularly in London. So an exit could be painful for the property industry and those it supports. But there is a higher principle at play here. This is a decision for the British people, not businesses. It is up to individuals - including those amongst our customers, communities and partners - to decide what's best. As guardians of shareholder capital, our responsibility is to position the company so it can thrive whatever the outcome. That's what we have done.

After another strong performance, the business is in terrific shape with the financial resources needed to address future opportunities. And we have a team of great people who are imaginative, but disciplined, in the way they manage assets - a team that is absolutely focused on our core purpose of providing the right space for our customers and communities.

Robert Noel
Chief Executive

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