Land Securities Group PLC · LSE:LAND
Land Securities — Landsec — H1 2022 Earnings Presentation
37 slides from Land Securities's earnings presentation, November 2021
Slide 1: Half year results
Half year results Mark Allan CHIEF EXECUTIVE OFFICER
Slide 2: Agenda
Landsec — Half year results 2021 Agenda Overview MARK ALLAN Financial & operational update VANESSA SIMMS Strategic update & outlook MARK ALLAN Q&A
Slide 3: Building operational and strategic momentum
Landsec — Half year results 2021 3 Robust London leasing Strong retail leasing Positive business performance, investor performance. performance, building demand driving down strategic momentum Rents and values stabilising prime yields BUILDING OPERATIONAL AND STRATEGIC MOMENTUM Leading the way Accel
Slide 4: Positive business performance, building strategic momentum
Landsec — Half year results 2021 4 Positive business performance, building strategic momentum EPRA NTA Recovery in performance at stronger and more 3.7% 2.7% sustained end of expectations Total business return 1,012pps Good progress against new strategy in first 12 months We have been decisive with
Slide 5: Robust London leasing performance, investor demand driving down prime yields
Landsec — Half year results 2021 5 Central London supply as at 30 September 2021 Robust London leasing m sq ft Vacancy rate % 18 16 performance, investor demand 16 14 14 12 12 driving down prime yields 9.1% 10 10 8 8 6 6 4 4 2 2 0 0 12 office leases completed or agreed in the period 1993 2003 2013 2
Slide 6: Strong retail leasing performance – rents and values stabilising
Landsec — Half year results 2021 6 Strong retail leasing performance – rents and values stabilising Catchment dominant destinations are set to be long-term winners Clear evidence of sustainable rents as we have completed or agreed 181 lettings on average 3.3% above ERV (£16m rent) Like-for-like sale
Slide 7: Accelerating our mixed-use development strategy
Landsec — Half year results 2021 7 Accelerating our mixed-use development strategy Acquisition of 75% stake in MediaCity accelerates strategy and enhances optionality — Blend of income, growth and development returns — £750m GDV in phase 2 Recommended all cash offer for U+I adds complementary skills
Slide 8: Continued focus on capital discipline
Landsec — Half year results 2021 8 Medium term plan announced in October 2020 Continued focus on capital c.£4bn of capital recycling discipline c.£2.5bn c.£4bn INVESTMENT disposal of London investment DISPOSAL offices with in focus areas limited value with value creation potential creation Comfortab
Slide 9: Leading the way to net zero
Landsec — Half year results 2021 9 Leading the way to net zero Fully costed net zero transition investment plan Our science-based target requires a announced today 70% reduction in carbon emissions — £135m investment into existing portfolio by 2030 against a 2013/14 baseline aligning Meets or exceed
Slide 10: Financial & Operational update
Financial & Operational update Vanessa Simms CHIEF FINANCIAL OFFICER
Slide 11: Performance summary
Landsec — Half year results 2021 11 Performance summary Increase in EPRA earnings and robust balance sheet position 30 September 2021 30 September 2020 % change Gross rental income(1) £282m £293m -3.8% EPRA earnings(1) £180m £115m 56.5% EPRA earnings per share(1) 24.3p 15.5p 56.8% Dividend per share
Slide 12: EPRA earnings
Landsec — Half year results 2021 12 EPRA earnings Strong recovery from the pandemic 30 September 30 September 2021 2020 Change £m £m % Gross rental income(1) 282 293 -3.8 Gross rental income £11m lower Net service charge (6) (2) n/a CVA and administrations Disposals (£15m) (£12m) Net direct property
Slide 13: Central London operational performance
Landsec — Half year results 2021 13 Central London operational performance Resilient office lettings, London retail recovery slower Offices OFFICES LONDON RETAIL Prime office space remains resilient with letting momentum increasing and supportive of ERVs Vacancy 4.4% September 2021, 11.9% September
Slide 14: Regional retail operational performance
Landsec — Half year results 2021 14 Regional retail operational performance High level of leasing activity broadly in line with ERVs Broad range of occupiers taking space, with lettings REGIONAL RETAIL supportive of March ERVs Vacancy down, reflecting strong letting momentum Vacancy 7.5% September 2
Slide 15: Subscale sectors operational performance
Landsec — Half year results 2021 15 Subscale sectors operational performance Stronger than expected recovery in hotels and leisure Subscale sectors LEISURE RETAIL PARKS Occupiers willing to commit to longer leases with £6m regears and renewals in the period Vacancy 6.1% September 2021, 2.4% Septembe
Slide 16: Gross rental income progression
Landsec — Half year results 2021 16 Gross rental income progression Achieving income growth while recycling capital Operational performance Net investment Potential £m +£27m +£42m growth 700 +£69m £26m £74m Central London Regional retail Subscale +£17m broadly flat +£10m 600 £(58)m 612 500 543 400 A
Slide 17: Combined Portfolio valuation
Landsec — Half year results 2021 17 Combined Portfolio valuation Valuation up 0.8% with a valuation surplus of £81m Like-for-like equivalent yields broadly URBAN OPPORTUNITIES SUBSCALE flat at 5.4% 12.2% 3.6% Development profit £33m, with more to come in H2 REGIONAL RETAIL 15.6% £11bn £40m Covid-19
Slide 18: Central London valuation
Landsec — Half year results 2021 18 Central London valuation Offices resilient with a positive outlook, slower recovery in London retail SUBSCALE CENTRAL LONDON Offices +1.6%, +£97m URBAN Like-for-like rental values up 1.2% OPPORTUNITIES Like-for-like equivalent yield flat at 4.6% 21 Moorfields deve
Slide 19: Regional retail valuation
Landsec — Half year results 2021 19 Regional retail valuation Shopping centre valuations stabilising, strong recovery in outlets SUBSCALE CENTRAL LONDON Regional shopping centres -4.1%, -£42m URBAN Like-for-like rental values down 1.8% OPPORTUNITIES Like-for-like equivalent yield increased by 16bps
Slide 20: Urban opportunities and Subscale sectors valuation
Landsec — Half year results 2021 20 Urban opportunities and Subscale sectors valuation Urban opportunities positioned for redevelopment. Recovery in Subscale SUBSCALE CENTRAL LONDON Urban opportunities -3.4%, -£14m RETAIL Like-for-like rental values flat HOTELS PARKS 3.7% 3.7% URBAN OPPORTUNITIES LE
Slide 21: Central London development programme
Landsec — Half year results 2021 21 Central London development programme 1m sq ft programme with optionality on two further London schemes Existing programme Gross yield on Estimated Market value as at Capex to Market value + market value Sector Sq ft completion date Net income/ERV 30 September 2021
Slide 22: Financing position
Landsec — Half year results 2021 22 Financing position Strong balance sheet to support execution of strategy £1.6bn cash headroom 30 September 2021 31 March 2021 Adjusted net debt £3,505m £3,489m Continue to balance increased operational leverage, with lower financial leverage Group LTV 31.8% 32.2%
Slide 23: Net zero transition investment plan
Landsec — Half year results 2021 23 Landsec transition investment plan – phasing of expenditure £m Net zero transition 35 30 investment plan 25 20 Fully costed: £135m by 2030 15 10 5 0 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 31 Dec Actions 2030 Continue to reduce our operational energy use Landsec P
Slide 24: Summary
Landsec — Half year results 2021 24 Summary Strong recovery from High levels the pandemic and of operational activity sustainable dividend policy to support our customers Asset recycling Expanded development programme underway pipeline to enhance with a continued focus total returns on capital disci
Slide 25: Strategic update
Strategic update Mark Allan CHIEF EXECUTIVE OFFICER
Slide 26: Our strategy is grounded in our core purpose
Landsec — Half year results 2021 26 Our strategy is grounded in our core purpose Sustainable places. Connecting communities. Realising potential A clear focus on three key areas MAJOR CENTRAL LONDON MIXED-USE RETAIL OFFICES URBAN DESTINATIONS NEIGHBOURHOODS We strive to create, curate and activate p
Slide 27: Central London: Optimising value
Landsec — Half year results 2021 27 Central London Optimising value MARKET VIEW OUR PLAN Clear evidence of occupier demand for the best space Continue capital recycling out of low yield assets, — Quality, flexibility, sustainability taking advantage of strong investor demand Supply of grade-A space
Slide 28: Central London: Optimising value
Landsec — Half year results 2021 28 Central London Optimising value OUR PLAN PROGRESS SINCE 1 APRIL 2021 FOCUS MOVING FORWARD Continue capital recycling Harbour Exchange disposal Further disposals matched to reinvestment opportunities across the Group Deliver committed developments; Programmes and b
Slide 29: Major retail destinations
Landsec — Half year results 2021 29 Major retail destinations Potential increasing as rents stabilise MARKET VIEW OUR PLAN Structural change has been profound and accelerated Build stronger, strategic relationships with brands by the pandemic to drive lower vacancy c.25% of space will be obsolete ov
Slide 30: Major retail destinations
Landsec — Half year results 2021 30 Major retail destinations Potential increasing as rents stabilise OUR PLAN PROGRESS SINCE 1 APRIL 2021 FOCUS MOVING FORWARD Build stronger, strategic Vacancy reduced from 8.8% to 7.5% Reduce vacancy further and build on momentum relationships with brands 181 letti
Slide 31: Mixed-use urban neighbourhoods
Landsec — Half year results 2021 31 Mixed-use urban neighbourhoods Potential to deliver a strong blend of returns MARKET VIEW OUR PLAN Lines between live, work and play increasingly blurred. Identify and progress opportunities within our own Mixed-use urban neighbourhoods with a clear sense of portf
Slide 32: Mixed-use urban neighbourhoods
Landsec — Half year results 2021 32 Mixed-use urban neighbourhoods Potential to deliver a strong blend of returns OUR PLAN PROGRESS SINCE 1 APRIL 2021 FOCUS MOVING FORWARD Identify and progress O2 Finchley Road on track for planning Progress priority projects while mobilising other opportunities opp
Slide 33: A clear perspective on relative value
Landsec — Half year results 2021 33 Unlevered return expectations (constant cap rates) A clear perspective on relative value CENTRAL LONDON OFFICES Net initial yield Unlevered IRR on prime, long let on speculative London office development Visibility of potential returns across our own portfolio and
Slide 34: More decisive in capital allocation
Landsec — Half year results 2021 34 Our strategy’s impact on portfolio weighting Portfolio split (%) More decisive in Central London capital allocation Regional retail Urban opportunities 3.6% 12.2% Subscale sectors 20-25% Modest reduction in London weighting over time 15.6% September 2021 Medium te
Slide 35: Summary
Landsec — Half year results 2021 35 Positive business A clear perspective Building operational and performance across on relative value and strategic momentum all segments capital allocation SUMMARY Targeting mid-to-high Cultural changes single digit return improving agility on equity with a and pac
Slide 36: Landsec
Landsec
Slide 37: Half year results
Half year results