Land Securities Group Plc · LSE:LAND
Land Securities — FY2017 Earnings Presentation
51 slides from Land Securities's earnings presentation, May 2017
Slide 1: Preliminary Results 2017
PRELIMINARY x. RESULTS ") 2017 LandSecurities
Slide 2: Welcome
Welcome Robert Noel Chief Executive 2
Slide 3: Delivering on a clear plan to strengthen the business
Delivering on a clear plan to strengthen the business 2014 2017 Developments on site Westgate Oxford London office 2010 9.0 years 2017 10.3 years WAULT Aberdeen, Bristol, Derby, Bluewater, Trinity Leeds, Retail Dundee, Exeter, Gateshead, Westgate Oxford, transformed Liverpool, Livingston, X-Leisure
Slide 4: Performance – creating shareholder value while strengthening the balance sheet
Performance – creating shareholder value while strengthening the balance sheet 250 50% 240 230 45% 220 210 200 40% March 2010 = 100 190 180 35% 170 160 150 30% 140 130 25% 120 110 100 20% Mar 10 Sept 10 Mar 11 Sept 11 Mar 12 Sept 12 Mar 13 Sept 13 Mar 14 Sept 14 Mar 15 Sept 15 Mar 16 Sept 16 Mar 17
Slide 5: Agenda
Agenda Martin Greenslade Colette O’Shea Scott Parsons Robert Noel Q&A Victoria, SW1 5
Slide 6: Financial Results
Financial Results Martin Greenslade Chief Financial Officer 6
Slide 7: Financial summary
Financial summary Year ended Year ended Change 31 Mar 16 31 Mar 17 % £1,336m Profit before tax £112m £907m Valuation (deficit)/surplus(1) £(147)m -1.0(2) 1,434p Adjusted diluted net assets per share 1,417p -1.2 £362m Revenue profit(1) £382m 5.5 45.7p Adjusted diluted earnings per share(1) 48.3p 5.7
Slide 8: Revenue profit
Revenue profit Year ended Year ended Change 31 Mar 17 31 Mar 16 £m £m £m Gross rental income(1) 637 648 (11) Net service charge expense (5) (3) (2) Net direct property expenditure (32) (41) 9 Net rental income 600 604 (4) Indirect costs (39) (44) 5 Segment profit before interest 561 560 1 Net unallo
Slide 9: Revenue profit
Revenue profit Net finance expense saving Year ended Year ended Year ended Change 31 Mar 17 31 Mar 17 31 Mar 16 £m Net finance expense movement – Group and JVs £m 25 £m £m Gross rental income(1) Exclude impact of lower capitalised interest 637 6 648 (11) Net service charge expense (5) (3) (2) Net fi
Slide 10: Net rental income analysis
Net rental income analysis £m 650 1 11 17 4 600 (2) (21) 550 500 275 285 450 400 350 6 - 1 (1) 300 (19) (1) 250 200 150 329 315 100 50 - Year Like-for-like Development Completed Acquisitions Sales Non-property Year ended investment programme developments since since related ended 31 Mar 16 propertie
Slide 11: Combined Portfolio valuation
Combined Portfolio valuation Market value Combined Valuation deficit at 31 Mar 17 Portfolio by value year to 31 Mar 17 £m % % £m Like-for-like 11,360 78.7 -1.4 (151) Proposed developments 6 - -33.2 (3) Development programme 1,138 7.9 1.3 14 Completed developments 1,841 12.8 -0.4 (7) Acquisitions 94
Slide 12: Adjusted net debt
Adjusted net debt(1) Year-on-year comparison by month Adjusted net debt £4.4bn £4.2bn £4.0bn £3.8bn £3.6bn £3.4bn £3.2bn £3.0bn Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2015/16 2016/17 (1) On a proportionate basis 12
Slide 13: Financing
Financing Activity Gearing 31 Mar 17 31 Mar 16 • Redeemed £400m bond in March 2016 • Purchased £690m bonds – £635m tender exercise in February 2017 % % • Issued £400m 7 year bond, £300m 12 year bond • Redeemed £273m Queen Anne’s Gate bond Group LTV(1) 22.2 22.0 in May 2017 Group LTV(1) at 22.2%
Slide 14: Financial summary
Financial summary Resilient assets Robust financial position Good earnings growth Nova, SW1 14
Slide 15: London Portfolio
London Portfolio Colette O’Shea Managing Director 15
Slide 16: Quality portfolio
Quality portfolio Speculative development programme complete Average office lease length 10.3 years our longest ever Diverse customer base from a range of sectors 16
Slide 17: Our focus
Our focus Letting the remaining space in the development programme Extracting reversion from the portfolio Anticipating our customers’ changing needs Advancing our new pipeline of developments and restocking the portfolio with new product 17
Slide 18: Central London supply
Central London supply – Mar 2016, Sept 2016, Mar 2017 Total 30 forecast supply 35.6 33.5 24.7 25 Million sq ft 32.3 2016-2019 20 Mar 16 Sep 16 Mar 17 17.0 16.1 14.3 Million sq ft 15 13.0 10.4 10.8 10.0 9.7 10.2 9.5 10 8.4 8.6 8.4 8.9 8.1 7.1 7.0 7.1 7.1 5.8 5 0 Mar 16 Mar 17 Mar 16 Mar 17 Mar 16 Mar
Slide 19: Central London annual take-up and vacancy
Central London annual take-up and vacancy 30 16 14 25 12 20 Vacancy rate (%) 10 Million sq ft 15 8 12.4 million sq ft 4.7% 6 10 4 5 2 0 0 Q1 2017 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Annual take-up 10-y
Slide 20: Investment market held up well
Investment market held up well Investment volumes are down 17% over the last 12 months Assets that have traded are high quality buildings in core locations with longer income streams Anticipating a different outlook for short-let more risky assets Nova, SW1 20
Slide 21: Development lettings virtually complete
Development lettings virtually complete 17% of the 3.1 million sq ft development programme, equating to 540,000 sq ft left to let at start of year 259,000 sq ft now let or in solicitors’ hands City lettings now complete 242,000 sq ft let or in solicitors’ hands in the West End • Achieved an
Slide 22: Nova – exceptional office space
Nova – exceptional office space Focus remains on Nova, which completed in April Nova Food now open Scheme now 54% let Average office lease term 15 years Confident about letting the remaining 283,000 sq ft in the year, which equates to 9% of our development programme Nova Food Quarter, SW1
Slide 23: Residential – steady progress
Residential – steady progress Sold 18 units in the year at an average of £1,846 per sq ft Equates to £51m, £41m our share 5 units left to sell at Kings Gate Sold 148 out of 170 units at Nova Kings Gate, SW1 to date and completions progressing well Our remaining exposure of £77m across Lond
Slide 24: Asset management – meeting all our targets
Asset management – meeting all our targets Office WAULT has increased to 10.3 years Voids have risen from 2.9% to 7.0% Voids are 3.3% excluding Piccadilly Lights, primarily made up of Cardinal Place, 10 Eastbourne Terrace and Portland House Completed £13m of investment lettings at 40% above
Slide 25: Asset management – working efficiently and effectively
Asset management – working efficiently and effectively Cardinal Place Second rent review cycle with £15.5m (67%) subject to review as at 1 April 2016 over a 20 month period Created good evidence through a regear Reviewed £11.1m (48%) increased office passing rent by 14% and retail passing rent
Slide 26: Asset management – working efficiently and effectively
Asset management – working efficiently and effectively One New Change £26.9m (92%) of rent subject to review as at 1 April 2016 over a 24 month period Reviewed £18.8m (65%), increased the office passing rent by 3% and One New Change, EC4 retail passing rent by 18% 140 Aldersgate Street Reviewe
Slide 27: Piccadilly Lights – implementing a plan to create value
Piccadilly Lights – implementing a plan to create value Completed freehold ownership of island site in October 2012 Unlocking series of accretive deals Piccadilly Lights, W1 27
Slide 28: Piccadilly Lights – moved souvenir shop
Piccadilly Lights – moved souvenir shop Piccadilly Lights, W1 28
Slide 29: Piccadilly Lights – created new retail units and additional screen
Piccadilly Lights – created 3 new retail units and additional screen Piccadilly Lights, W1 29
Slide 30: Piccadilly Lights – created new retail units and additional screen
Piccadilly Lights – created 3 new retail units and additional screen Piccadilly Lights, W1 30
Slide 31: Piccadilly Lights – cutting edge technology
Piccadilly Lights – cutting edge technology Negotiated a block vacant possession date of December 2016 Secured planning consent for digital screen which uses cutting edge technology but retains historic image Pre-let 50% of the space to Coca Cola, Samsung and Hyundai at 17% above the passing r
Slide 32: Future development
Future development 1.4 million sq ft 5 schemes KEY: 3 London boroughs Sq ft to scale 32
Slide 33: Future development – Moorfields
Future development – 21 Moorfields Elizabeth line network Secured consent for 522,000 sq ft in two buildings above new Liverpool Street Crossrail station Demolition is finished Committed to build to grade starting August 2017 Scheduled to complete below grade works by June 2018 enabling comp
Slide 34: Future development – Nova East
Future development – Nova East (Phase II of Nova) 196,000 sq ft mixed use scheme in two buildings Site cleared and ready to start Continuing to secure LUL approvals for below ground works Nova East, SW1 34
Slide 35: Future development – Sherwood Street
Future development – 1 Sherwood Street Secured consent for 142,000 sq ft Plan to start detailed design later this year Earliest construction start date July 2018 1 Sherwood Street, W1 35
Slide 36: Future development – Southwark estate
Future development – Southwark estate Resolution to grant planning consent for 134,000 sq ft at Sumner Street. Earliest construction start date October 2019 Underway with feasibility study for 360,000 sq ft directly overlooking the Thames at Red Lion Court Southwark estate, SE1 36
Slide 37: A sustainable business
A sustainable business Development programme is complete with only 9% of the 3.1 million sq ft left to let equating to 283,000 sq ft Transformed the portfolio to one that’s well positioned for current market conditions and short-term outlook Focused on the future with 1.4 million sq ft in the
Slide 38: Retail Portfolio
Retail Portfolio Scott Parsons Managing Director 38
Slide 39: Focus on destination leisure
Focus on destination leisure Sold Last remaining wet-led schemes of £171m – c.5% > book value Focus All-day, family-friendly offer The Cornerhouse, Nottingham Dominant cinemas The Printworks, Manchester 39
Slide 40: Accor – crystallising valuation upside
Accor – crystallising valuation upside Sold 7 Accor hotels at vacant possession value – 8.7% above book values Remaining income secured until 2031 c.70% of the portfolio value in London 40
Slide 41: Active asset managers
Active asset managers 50% stake in Clapham Junction Shopstop sold to Delancey 50/50% JV with Invesco on Southside We manage all assets – no third parties Shopstop, Clapham Junction Southside, Wandsworth 41
Slide 42: Acquiring experience led assets
Acquiring experience led assets £333m acquisition post 31 March of 3 retail outlet centres Freeport, Braintree Junction 32, Castleford Clarks Village, Street 200,000 sq ft 250,000 sq ft 200,000 sq ft Major brands include: Major brands include: Major brands include: 42
Slide 43: Delivering experience at Westgate
Delivering experience at Westgate On time and on budget 71% pre-let and 9% in solicitors’ hands Delivering skills and job outcomes to the local community Westgate Oxford 43
Slide 44: Everything is experience
Everything is experience White Rose, Leeds Plaza, Bluewater, Kent Selly Oak, Birmingham Cinema plus Cinema extension, 200,000 sq ft retail 6 restaurants 3 restaurants and student housing and 2 leisure units 100% pre-let Retail 91% pre-let or 80% pre-let or in in solicitors’ hands solicit
Slide 45: Strong brand partnerships
Strong brand partnerships 45
Slide 46: Strong brand partnerships
Strong brand partnerships Westgate Oxford 46
Slide 47: Solid performance
Solid performance Over 120 investment lettings > £15m Like-for-like voids: 2.8% (31 March 2016: 2.0%) rent per annum Units in administration: 0.4% 3.9% 31 Mar 2016 (31 March 2016: 0.5%) 31 Mar 2017 2% growth in like-for-like rental 2.9% income 0.7% 0.5% 0.0% 0.0% Shopping centres Retail parks
Slide 48: Outperforming the benchmarks
Outperforming the benchmarks Same centre retail sales 52 weeks to 2 April 2017 1.7% 380bps 140bps 0.3% BRC all retail sales Land Securities -1.9% including online BRC physical retail store sales 48
Slide 49: Summary
Summary Solid performance Sold in line with our strategy and business plans Acquiring and developing selectively with strong retailer support Westgate Oxford 49
Slide 50: Outlook
Outlook Robert Noel Chief Executive 50
Slide 51: Outlook
Outlook London Short-term uncertainty during EU negotiations Vacancy rate peak key to next development push 1.4 million sq ft of developments being prepared Retail Inflation headwinds Strong retail destinations will continue to outperform Land Securities positioned well to buy but will be