RNS Number:2305S
Land Securities Group Plc
19 November 2003
For immediate release
19 November 2003
LAND SECURITIES GROUP PLC ("Land Securities" / "Group" / "Company")
Interim results for the period 30 September 2003
HIGHLIGHTS
* Adjusted diluted net asset value increased 4.0% to 1264p (31 March
2003: 1215p)
* Investment portfolio valuation uplift of 2.0% (31 March 2003: 0.4%)
* Adjusted earnings per share increased by 9.7% to 26.65p (30 September
2002: 24.29p)
* Pre-tax revenue profit down 3.3% to #168.7m (30 September 2002:
#174.5m)
* Profit before tax increased by 15.7% to #181.7m (30 September 2002:
#157.1m)
* High level of investment portfolio activity demonstrated by
* #254.6m of investment property sales including FRS3 profits of
#11.7m
* #243.6m investment on property acquisitions, development and other
capital expenditure
* 149 rent review settlements completed at an average of 5.9% above
our valuers' ERVs
* Land Securities Trillium agrees extension to the DWP contract for an
additional 828,000 sq m
* Continued strong performance in retail portfolio substantially offset
impact of weak Central London office market
* Three completed developments at Bullring, Dundee and Portman House
showing an average profit on cost of 25%
* Interim dividend increased by 4.2% to 9.9p (30 September 2002: 9.5p)
Peter G Birch, Chairman, commented: "We have made good progress across all areas
of our business in the period under review. Our asset and property management
activities have resulted in a 2.0% increase in value of the total investment
portfolio; the Bullring, Birmingham opened amid much fanfare; we delivered the
first phase of White City to the BBC and we agreed terms with the Department for
Work and Pensions for the extension to our existing contract to include the
former Employment Services estate. These are notable successes in difficult
market conditions."
For further information:
Ian Henderson/Andrew Macfarlane/Emma Denne Steve Jacobs/Stephanie Highett
Land Securities Group PLC Financial Dynamics
020 7413 9000 020 7831 3113
FINANCIAL HIGHLIGHTS
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 % Change 2003
----------- ----------- ----------- -----------
Gross property income
----------- ----------- ----------- -----------
Property investment and trading #304.7m #285.4m 6.8% #579.3m
Total property outsourcing
(including 50% share of joint venture) #342.1m #296.4m 15.4% #660.2m
----------- ----------- ----------- -----------
Total #646.8m #581.8m 11.2% #1,239.5m
----------- ----------- ----------- -----------
Operating profit (total) #279.8m #277.4m 0.9% #550.2m
----------- ----------- ----------- -----------
Pre-tax profit #181.7m #157.1m 15.7% #319.6m
Add back: profit on fixed asset property
sales, bid costs and exceptional items
(pre-tax) (#13.0)m #17.4m #21.3m
----------- ----------- ----------- -----------
1 Revenue profit (pre-tax) #168.7m #174.5m -3.3% #340.9m
----------- ----------- ----------- -----------
Effective tax rate 27.9% 28.0% 28.1%
2 Adjusted diluted earnings per share 26.65p 24.29p 9.7% 50.36p
Earnings per share (basic) 28.10p 21.69p 29.6% 46.46p
Dividends per share 9.9p 9.5p 4.2% 35.50p
3 Interest cover (times) 2.15 2.50 2.42
----------- ----------- ----------- -----------
30 September 31 March
2003 2003 % Change
----------- ----------- -----------
4 Adjusted diluted net assets per share 1264p 1215p 4.0%
Diluted net assets per share 1238p 1188p 4.2%
5 Carrying value of investment properties #7,976.8m #7,823.9m
Net debt #2,647.4m #2,589.3m
Equity shareholders' funds #5,767.4m #5,532.7m
6 Gearing (net) 46.1% 47.3%
----------- ----------- -----------
1 Excludes results of fixed asset property sales, bid costs and exceptional
items (deficit on purchase and redemption of convertible bonds, cost of
cancellation of interest rate swaps and the costs of reorganising the Group)
2 Excludes results of fixed asset property sales, bid costs, exceptional items
and deferred tax arising from capital allowances on investment properties
3 Number of times gross interest payable (i.e. pre-capitalisation) is covered
by operating profit and interest receivable but excluding the activities of
Telereal and exceptional finance costs incurred in the six months to 30
September 2002
4 Excludes the additional deferred tax arising from capital allowances on
investment properties
5 Market value less UITF28 adjustment
6 Net debt (borrowings less short term deposits and cash), at book value, plus
non-equity B shares as a percentage of equity shareholders' funds
Corporate overview
We have made good progress across all areas of our business in the period under
review. Our asset and property management activities have resulted in a 2.0%
increase in value of the total investment portfolio; the Bullring, Birmingham
opened amid much fanfare; we delivered the first phase of White City to the BBC
and we agreed terms with the Department for Work and Pensions for the extension
to our existing contract to include the former Employment Services estate.
These are notable successes in difficult market conditions.
Total shareholder returns
% return for twelve months to % return for period since
30 September 2003 31 March 2000
Land Securities 19.0 31.5
FTSE 100 14.0 (30.8)
FTSE Real Estate 18.9 32.0
Source: Datastream
The strong appeal of commercial property as an investment remains undiminished.
This, we believe, is being increasingly recognised by Government and we
understand that it is examining the potential for creating a UK real estate
investment trust. We see this as a positive step since it would provide a
liquid, tax transparent vehicle for property investment, accessible to both
private and institutional investors. However, we still remain cautious about
how and when the Government might introduce such a vehicle and do not expect an
announcement earlier than the budget in 2005.
Results
During the six months to 30 September 2003, revenue profits were marginally down
at #168.7m (30.9.2002: #174.5m). The pre-tax profits were up 15.7% to #181.7m.
Adjusted diluted earnings per share rose by 9.7% to 26.65p (30.9.2002: 24.29p)
and adjusted diluted net assets per share have increased since 31 March 2003 by
4.0% to 1264p per share.
The Group realised a profit of #11.8m from property disposals and received
distributions of #25.5m from Telereal. It expended #343.6m on property
acquisitions, development and other capital expenditure.
The Board has declared an interim dividend of 9.9p per share, an increase of
4.2%, which will be paid on 5 January 2004 to shareholders on the register at 5
December 2003.
Board appointments and Corporate Governance
We were pleased to announce that Stuart Rose joined the Board as a non-executive
Director on 21 May 2003. Previously he was Chief Executive of Arcadia Group
plc, the owner of several well-known high street retailers including Dorothy
Perkins, Evans, Miss Selfridge, Top Shop and Top Man. Stuart brings to the
Board substantial retail experience and an excellent understanding of retailers
and their customers' needs.
At the year-end the Board said it was assessing the impact of the Higgs and
Smith recommendations on corporate governance. As a result, in light of the
Combined Code on Corporate Governance issued in July 2003, David Rough, who
joined the Board as a non-executive director in January 2002, has been appointed
to the role of senior independent director. In due course the Board will seek
to appoint two further non-executive directors.
At the same time the board has reviewed the composition and terms of reference
of its Nominations and Audit Committees. Minor amendments have been made to the
terms of reference of the Audit Committee.
In the past the entire board of Land Securities formed the Nominations
Committee. In future this will be an ad-hoc committee, comprising a mixture of
executive and non-executive directors, with, typically, non-executive directors
as a majority. The Chairman will be the chairman of the Nominations Committee,
unless the Committee is considering the appointment of the Chairman or Group
Chief Executive, in which case the Nominations Committee will be chaired by the
senior independent director.
Valuation
Total investment portfolio
The total investment portfolio covers four principal sectors of the UK
commercial property market and benefits from inherent diversification in terms
of both occupier covenant and business sector risk. It comprises 248 assets,
more than 4,500 tenancies and over 2,000 occupiers. The average lot size is
#32.2m.
On 30 September 2003 Knight Frank valued the total investment portfolio at just
under #8.0bn. A detailed analysis of the portfolio is included in the schedule
at the end of the Corporate Review. The six months to 30 September 2003 saw
continued strong investor demand from both international and domestic
institutions, as well as leveraged investors taking advantage of the debt
markets.
The valuation change over the period was 2.0% demonstrating the benefits of a
diversified portfolio. Retail and retail warehouse assets, which now represent
52.3% of our total investment portfolio, produced a 5.9% uplift in value and
this performance more than outweighed the negative performance of 2.9% for our
central London offices which represents 38.4% of our portfolio.
The valuation improvement can partly be accounted for by 54 assets that
benefited from Disadvantaged Areas status and Stamp Duty relief resulting in an
uplift of #68m, 0.85% of the total value change. The current legislation is in
place only until 2006 and therefore the benefit is temporary and only
crystallised on sale.
Like-for-like portfolio
In order to improve the clarity of our reporting about the total investment
portfolio we are providing a more detailed analysis about the like-for-like
performance of our properties. This is included in the analysis at the end of
the Corporate Review. The like-for-like portfolio comprises investment
properties which have been in the portfolio throughout the current and prior
financial year and which have not been part of the development programme during
that time. It also excludes sales and purchases.
This portfolio was valued at #6.42bn and showed a 2.3% increase in value since
31 March 2003. The annual rent roll, net of ground rent, of the like-for-like
portfolio was #440.2m.
In the like-for-like portfolio, retail assets have shown good growth with a 5.2%
uplift in value as a result of both strong investment demand and rental growth.
Retail warehouses have shown the best performance, with a 6.3% increase over the
period. In central London offices, values overall have experienced a small
decline of 1.1%. This softening varied considerably depending on the market
sub-sectors.
Investment activity
In the six months under review we purchased #62.7m of assets. The largest of
these was 120 Cheapside, a property in the City of London, which produces a 9.4%
yield and provides medium term development opportunities. As we have
demonstrated in the past, we can benefit from adverse market conditions to make
opportunistic acquisitions for future value creation and will continue to do so
as opportunities arise.
Investor appetite for property shows no signs of diminishing and we have taken
advantage of this by selling a further 13 investment properties for #254.6m, the
largest of which was Grand Buildings, London WC2 which realised #136.8m. From
the sales completed this year, we have generated FRS3 profits of #11.7m, 4.8%
ahead of value.
We have continued to sell mature assets over the last 18 months, taking
advantage of the buoyant market for investment properties. The capital released
is partly being recycled into other areas of the business as the keen pricing of
investment assets currently makes the sourcing of suitable properties more
difficult. However, through our development pipeline we are able to create new
assets for the portfolio, as exemplified at Bullring Birmingham, which we are
confident will continue to show strong performance on top of the value already
created by development.
The strategy for our investment portfolio remains to focus on core sectors of
the UK property market that we believe will benefit from long-term constraints
in the supply of land. We continue to be active managers of our portfolio, and
since the year-end we have concluded 149 rent reviews at an average of 5.9%
above estimated rental value and negotiated 39 lease renewals at an average 5.3%
above estimated rental value.
Central London offices
Market overview - total investment portfolio
Demand for well-let investment property in central London continues to be strong
but occupier demand remains subdued. We are becoming increasingly optimistic
about certain sub-sectors of this market, particularly the West End, which
represents 48% of our Central London portfolio, and which we believe could show
signs of improvement as early as next year. However, in the short term, the
outlook continues to be difficult for the City. The office vacancy rate in the
central London market is currently running at 13.2% of total stock, although
much of this space is surplus to occupiers' requirements rather than landlord
supply. During the period there has been an improvement in take-up of
accommodation and we are beginning to see some cases of this surplus occupiers'
space being withdrawn from the market.
With more positive signs on the horizon, we believe that the steps we have taken
to restructure the Central London portfolio and position our development
pipeline leave us well placed to benefit as market conditions improve.
It was recently announced that the Chancellor of the Exchequer has commissioned
Sir Michael Lyons to undertake a review of the potential for decentralising some
Civil Service jobs from London and the south east. The interim report has now
been produced and identifies the potential for relocation of 20,000 jobs or more
out of a total of 230,000 in London and the south east. The report recognises
that support teams or more specialist or technical departments such as the
Highway Agency may be best suited for relocation. Policy related jobs in the
large Ministries, however, are less likely to be relocated. As our government
let office buildings are predominantly in Victoria within the 'division bell'
area for Parliament, we consider it unlikely they will be at greatest risk from
this initiative. The initiative may also generate some opportunities for the
Group in terms of property outsourcing.
Portfolio management
The like-for-like decrease in value of our central London office portfolio was
1.1%, representing a much slower rate of decline than the prior six months. Our
West End portfolio held up well showing a nominal valuation decline of only 0.1%
over the six-month period. This is partly attributable to the preponderance of
holdings in Victoria, where our void rate is 0.7% as compared to a market
vacancy rate of around 6.0%. In addition, as described below, our West End
portfolio has also benefited in performance terms from lease restructurings on
properties in Victoria. Partly due to a change in the way we calculate our
voids to include certain pre-development properties, as explained in the notes
accompanying the total investment portfolio analysis, voids in the central
London office portfolio have increased to 3.1%.
The average weighted lease length for this portfolio is 9.3 years. There are
10.7 years remaining on our West End portfolio, with 9.0 years remaining on our
City portfolio. This has decreased slightly over the last three years as a
result of our strategy of selling properties with medium-term income and low
growth prospects and reinvesting into properties with shorter term income and
opportunities to create value. The running yield on this portfolio is 7.8%.
We continue to work closely with the Government to meet its various occupational
needs. During the half year, we concluded a lease extension at the current Home
Office building, Queen Anne's Mansions, 50 Queen Anne's Gate, London SW1, a
28,310 sq m office block which we have owned since 1977. This is to be
refurbished as the future headquarters of the Department for Constitutional
Affairs (formerly the Lord Chancellor's Department), and the new lease
arrangement will give a clear 20-year term with an indexed rent throughout the
lease.
Landflex
Landflex has met with a positive response from occupiers and we are very pleased
that 7 Soho Square is 85% let, with only one floor remaining. Soho Square was
launched in May this year and the speed at which it has let and the terms we
have achieved confirm our view that providing customers with greater flexibility
and price certainty successfully differentiates our product.
The contracts that are currently agreed range from one to three years in length.
Rents are at or slightly above market rates for conventional leases, but we
have agreed significantly shorter rent free periods, which result in a better
contribution to our profit and loss account. Our customers include Expedia and
the Metropolitan Police.
We also completed and launched Empress State, SW6, in the summer and we are
pleased with the response we have had to date. We currently have interest from
potential customers for a total of 18 floors or approximately 28,000 sq m of
accommodation, representing just over 70% of the building.
Development
We have progressed well with our plans for the central London development
pipeline. Our strategy has been to position the pipeline so that we are able to
respond to any major occupier that has a requirement for new accommodation
between now and 2008. In addition to schemes already under construction, we
have planning consents for approximately 150,000 sq m of office-led development
that can be delivered in stages over the next six years, depending on occupier
demand.
We are pleased with the progress made on lettings and letting enquiries over the
last six months. Of our completed schemes, Portman House and 190 High Holborn
are now fully let and, as stated above, 7 Soho Square is now 85% let. The
letting at 190 High Holborn at approximately 8,500 sq m is reported to have been
the largest to date in the West End and Mid-Town markets during 2003. The
agreement with Pearson plc was finalised shortly after our 30 September
reporting date and is for a 20-year lease without break clauses. A substantial
rent-free period was agreed to secure the long lease duration.
Since 1 April this year, we have let 12,500 sq m of offices within our London
development programme and we are in discussions on over 56,000 sq m of
accommodation at Empress State and 30 Gresham Street in the City. The property
at 30 Gresham Street is due for completion in December this year and will
provide 35,150 sq m of offices with ancillary retail accommodation. In
addition, we are in discussions on over 55,000 sq m of potential pre-lettings
for our sites in New Street Square, EC4 and Bankside 123, SE1.
We submitted a revised planning application for the New Fetter Lane site in
order to broaden the scheme's appeal to occupiers and to increase the overall
office accommodation by offering a range of building sizes. The revised scheme
brings increased access and street life to the location and is centred round a
new London square, to be called New Street Square. Our proposals include a
variety of uses at ground level and office buildings of various sizes ranging
from 3,600 sq m to 21,400 sq m with a total office floor area of 62,500 sq m.
At Bankside 123 on Southwark Street, SE1, where we have planning consent for
75,300 sq m of offices and 10,000 sq m of ancillary uses, we are demolishing the
existing building and preparing the site so that we can start work promptly when
a pre-let is secured.
Construction continues at Cardinal Place, Victoria, SW1, which will provide
50,750 sq m of offices in two buildings and 9,250 sq m of retail accommodation,
with the majority completing in mid-2005. With the low current vacancy rate in
Victoria, and the anticipation of a shortage of new buildings across the West
End market as a whole, we consider that the completion date will be well timed.
We have also started to prepare development schemes for our holdings at One New
Change in EC4, Bankside Industrial Estate in SE1, Bowater House in SW1 and Park
House, Oxford Street, W1. At this stage, these potential schemes are not yet
included in our formal Development Pipeline, but they represent development
opportunities for the second half of this decade totalling in excess of 150,000
sq m.
Shopping centres, shops and central London retail
Market overview - total investment portfolio
Investor demand continues to be strong for all types of retail property.
Capital growth has accelerated since the year-end, but as predicted the rate of
rental growth slowed. With further interest rates rises possible this could
impact adversely on consumer spending, which in turn could result in occupier
demand softening in 2004/05.
The occupational market remains strong however for the best locations, as
demonstrated at the Bullring in Birmingham which opened in September virtually
fully let.
Portfolio management
The like-for-like increase in the value of our in-town retail portfolio was
4.7%, slightly ahead of the prior six months. Voids remain low at 1.9% and we
continue to be proactive in the management of our shopping centre assets in
order to create opportunities that will both satisfy retailer demand and
establish market evidence in advance of rent reviews. The average weighted
lease length for this portfolio is 10 years, with more than 8.9 years remaining
on our central London shops and 10.7 years on our shopping centres. The running
yield is 6.4%.
We estimate that more than 400 million shoppers visit our retail assets every
year. To ensure that we maximise this footfall, encourage dwell-time and
customer spend we continue to focus on effective management of the retail
environment, local promotion and marketing initiatives in order to assist
retailers to maximise their profitability.
We have been very active during the period as we continue our focus on the
customer. Our achievements include relocating New Look in The Bridges,
Sunderland to a 1,700 sq m unit in a less prime position and re-letting their
previous unit to Warner Bros and French Connection, thereby adding to the number
and quality of fascias while giving all these retailers units that conform to
their preferred occupational requirement.
At White Rose Centre, Leeds, the surrender of the Mothercare unit has enabled us
to upgrade Clinton Cards to their optimum 1,010m sq m unit size, while splitting
their former unit to accommodate two new retailers to the centre. Similarly in
Almondvale, Livingston, we have used the insolvency of What Everyone Wants to
reconfigure the unit and increase the rental value by 60%.
Development
We were delighted with the public recognition of the tremendous success of the
Bullring in Birmingham, which nearly five million people visited in its first
month of opening. This 110,000 sq m scheme, which was developed in partnership
with Hammerson and Henderson Global Investors (The Birmingham Alliance), was 95%
let on opening and is now 97% let. Our share of the annual rent roll income
exceeds #13.0m, which represents a material addition to Group rental income.
The Birmingham Alliance is now assessing options for a further phase of
retail-led, mixed-use development at Martineau Galleries.
Whitefriars in Canterbury, a 37,685 sq m retail scheme, is now 57% let or in
solicitors' hands to retailers including Marks & Spencer, Boots and Tesco. The
first phase is due to open in Summer 2004 with the entire scheme due for
completion in Summer 2005. In Exeter, we have planning consent for a 37,512 sq
m retail-led scheme comprising an anchor department store, four large stores and
50 new shops as well as leisure and residential accommodation. We have started
preliminary enabling works and the main construction work is due to commence
early in 2005.
We continue to make progress with our retail developments in Bristol and
Cardiff. In Bristol, working in conjunction with Hammerson and Morley Fund
Management, we have outline consent for a 125,700 sq m retail led development
together with 260 residential units and we are in discussions for the letting of
the anchor store. In Cardiff, we are working in conjunction with Capital
Shopping Centres and have achieved an outline planning consent for approximately
70,000 sq m of retail accommodation and 39,750 sq m (gross) of hotel and
residential space.
We were disappointed to have received notification from the Office of the Deputy
Prime Minister that our proposals for a 27,000 sq m scheme at York had been
rejected. The principle of development on this historically sensitive site was
established in the Inspector's Report and the decision letter. However, we
have now removed this scheme from our development pipeline while we re-evaluate
the situation. In the meantime, our current investment in the site is small at
under #10m and continues to generate an income return at or slightly in excess
of our weighted average cost of capital. While disappointing, this decision
must be viewed in the context of our retail development programme where we have
planning consent to deliver a total of approximately 150,000 sq m of new retail
accommodation (based on our effective share of schemes being undertaken in
partnership) across the United Kingdom.
Retail warehouses
Market overview - total investment portfolio
The retail park market continues to be one of the most dynamic in the retail
sector. While the traditional bulky goods retailers are becoming more cautious
in their expansion plans, new high street entrants continue to see opportunities
in this sector and overall occupier demand remains strong. We believe that the
very strong rental and capital growth of prior years may slow but we still
expect this sector to show sustained good performance.
Portfolio management
The like-for-like increase in the value of our retail warehouse portfolio was
6.3%, demonstrating the strength of this market. Voids remain relatively low at
2.2% and the running yield is 5.5%. We are working with retailers to reposition
a number of our retail parks towards high street type shopping, taking advantage
of the high percentage of open A1 consents within the portfolio.
At West Thurrock we have taken back five stores that we are combining to form a
10,000 sq m Marks & Spencer Lifestore. At Retail World in Gateshead, Boots is
joining Next, Holiday Hypermarket and TK Maxx. Elsewhere in the portfolio we
have planning permission for a further 29,233 sq m of development, of which
8,650 sq m is currently under construction.
South east industrial premises
Market overview - total investment portfolio
As we have seen in central London, the relationship between the occupational and
investment sectors of the industrial property market remains disconnected. It
is still difficult to purchase quality standing investments due to the
competitive investment market, but occupier demand remains muted. However since
there is limited supply through new development we are still able to secure
satisfactory lease and rental terms. With a development programme of over
100,000 sq m on prime sites around the south east, we are seeing satisfactory
occupier interest although it is taking longer for potential occupiers to
commit. In response to this we will be holding back on further new construction
until late 2004 when we anticipate stronger tenant demand.
Portfolio management
The like-for-like increase in the value of our industrial portfolio was 2.1% and
the running yield is 7.3%. Investment voids are 7.1% (#1.7m per annum by rental
value). We continue to add to our portfolio through the development of new
stock with the completion of 35,750 sq m at Oxford, Croydon and Basildon, but
have also decided to take advantage of strong investor demand to sell a 106,000
sq m portfolio of industrial and warehouse properties, which no longer fulfill
our investment criteria. At same time we will continue to acquire sites in the
South east, focusing on properties that are self-financing with future
opportunities for development.
Kent Thameside
We continue to progress well with our plans at Kent Thameside. At Eastern
Quarry, we submitted an outline planning application for 7,250 residential units
and approximately 200,000 sq m of leisure, retail, office and community
accommodation in January this year. At Ebbsfleet, where we already have outline
planning consent, we have now received approval for the Quarter Master Plan for
the first phase of office and residential development, which is the precursor to
our submitting detailed planning applications next year. Where residential
development is already under way at Waterstone Park in partnership with
Copthorne Homes, a subsidiary of Countryside Properties, 91% of the units in the
first phase have now been sold. Planning consent has been obtained for the
second phase of up to 450 units, subject to completion of a Section 106
Agreement.
Total property outsourcing
Market overview
We are seeing interest in Land Securities Trillium's property outsourcing
continuing to grow. In the last six months we negotiated the transfer of a
further government portfolio in the form of the former Employment Services
estate and other new client opportunities are now in the public domain.
In the corporate sector, companies are seeking new ways of achieving property
cost reduction, capital release or reconfiguring their estates and are exploring
how the property outsourcing model can deliver on these objectives. In
particular, Aviva plc has invited a number of companies to tender for the
acquisition and maintenance of a range of major properties in its UK occupied
property portfolio. We expect to see further activity in this area before the
financial year-end.
In the public sector, our marketing activities with local authorities are now
generating opportunities and we are assessing how the property partnership model
can work for a number of local authorities. Land Securities Trillium has been
short-listed by Bradford City Council for its Asset Management project. They
are seeking a long-term agreement encompassing asset transfer, facilities
services delivery and strategic estate management and development. On
completion of a successful procurement by Bradford, other local authorities
might follow the example.
Review of activity
Land Securities Trillium continues to perform strongly and is now making a
robust contribution to Group profits. In the first six months, it generated
income of #342.1m, some 15% up on the equivalent period last year (30.09.02:
#296.4m). This growth in revenue was generated from the existing Department for
Work and Pensions ("DWP") and BBC contracts and represents uplifts in both the
underlying accommodation charge and the provision of additional space and
capital expenditure projects.
As anticipated, vacations and lower disposal proceeds meant that our share of
revenue from Telereal (which operates the BT contract) fell to #82.2m from
#84.5m as compared to the same period last year.
In addition to our existing portfolio, Land Securities Trillium secured a
significant new contract since the period end. We recently announced that we
had successfully concluded negotiations to acquire the former Employment
Services estate that is to be merged with our existing DWP portfolio and managed
under one expanded contract expiring in 2018. This will add 828,000 sq m to our
holdings and generate additional revenue averaging #147m per annum over the
first five years. Approximately 30% of the new properties are freehold and we
will make a transfer payment to DWP of #100m. The contract effectively mirrors
the terms of the existing contract and gives the DWP the ability to vacate
228,000 sq m of the former Employment Services estate over three years.
We anticipate that the contract will be completed in December so that we will be
fully operational next year, with the new contract starting to contribute to
profits from 2005.
Further business growth has been achieved on the BBC contract where, in
conjunction with Land Securities Development, Land Securities Trillium has
extended its existing relationship with the BBC to include redevelopment of the
landmark 50,000 sq m Broadcasting House in the West End of London.
Department for Work and Pensions
As we continue to work with the DWP to finalise contract terms for the
Employment Services estate, we are preparing to mobilise the expanded contract
by the end of the year. This mobilisation is being planned jointly with DWP and
the process is well underway and on programme. On the existing estate continued
good progress has been made in supporting the DWP's ongoing modernisation
programme with the completion in September 2003 of the Pensions Service roll-out
which encompassed 32,000 sq m of accommodation.
Following the successful delivery of year one of the Jobcentre Plus roll out, we
are now well underway with year two which includes Land Securities Trillium
managing 124 major capital refurbishment schemes with a value of circa #115m,
with another 500 schemes due in years three and four. Elsewhere, the contract
has performed well in terms of both earnings and customer feedback. A recent
customer satisfaction census recorded an overall satisfaction level of 90%
across the PRIME estate with a 99% rating being achieved for the performance of
our Customer Service Call centre.
BBC
In addition to the project management of Broadcasting House in London, our
national relationship with the BBC continues to evolve. We are working with
the BBC to plan and support its development programme, notably on Pacific Quay,
the BBC's new Broadcasting Centre facility in Glasgow, and on the development of
proposals for a possible new broadcasting facility in Manchester.
The BBC's new media village at White City in London, developed and fully
serviced by Land Securities Trillium, is nearing completion. The BBC will
occupy the building in phases and the site is expected to be fully operational
by mid May 2004.
In the first year of operation, the facilities management services which we
provide to the BBC have generated a significant increase in customer
satisfaction levels. We were also delighted to receive ISO 9001 accreditation
in October 2003.
Telereal
Telereal, our joint venture with the Pears Group, made a #16.4m contribution to
half-year pre-tax profits, including #2.9m from property sales. In addition
Telereal has exchanged contracts (conditional on BT vacation) to sell on three
central London telephone exchanges. These have a floor area of 10,000 sq m and
should realise some #42m. Such opportunities are created by the Telereal
corporate real estate team which works closely with BT to reconfigure its
occupational portfolio. This helps reduce costs for BT while realising profits
for Telereal in which BT also shares.
Our People
We have made excellent progress in the past six months, under Ian Henderson's
continued leadership, and we are on track to meet the Group's objectives. We
would like to thank all our colleagues for their contribution to our success to
date.
Group Objectives and Outlook
At the year-end, we set certain objectives for the business as follows:
* To maximise returns from the investment portfolio
* To complete and let the development programme
* To grow total property outsourcing
* To focus on customers with products that meet their needs
* To build and retain the best team in the property industry; and
* To focus on earnings generation from our capital investment to drive
total returns.
We are very pleased with the results for the first half of the year, which
demonstrate that we are making good progress towards achieving these objectives.
We believe that we have positioned our business units well, to benefit from
their respective market conditions.
Peter G Birch Ian Henderson
Chairman Group Chief Executive
19 November 2003
Financial Review
Headline profits before tax for the six months to 30 September 2003 increased by
15.7% to #181.7m (30.09.02: #157.1m). Last year's figures were, however,
distorted by various exceptional costs incurred in redeeming our convertible
bonds and preparing for the return of capital to shareholders.
Revenue profits, which exclude the distortions caused by exceptional items and
certain potentially non-recurring costs and revenues were #168.7m for the
period, as compared to #174.5m last year. However, we returned #511m of capital
to shareholders in September 2002 and subsequent results reflect the full
interest cost of financing that outlay. If this factor is also taken into
consideration, underlying revenue profits in the first six months were some 3.2%
higher than the same period last year. Our business is not seasonal and the
comparison of revenue profits in the first half of this year with the
immediately preceding six months to 31 March 2003 shows growth of 1.4%.
Headline earnings per share were up by 29.6% reflecting the increase in profits
before tax and the accretive impact of last year's return of capital. Adjusted
diluted earnings per share, which are based on revenue profits rose by 9.7%, and
were significantly influenced by the return of capital.
The revaluation surplus on our investment properties has increased by #153.0m
since last year-end, representing a 2.0% increase across the portfolio. This
includes a one-time benefit of #68m arising from the new Stamp Duty regime for
property in Disadvantaged Areas. Together with retained profits of #84.7m
(30.09.02: #67.4m) this has resulted in a 4.0% increase in adjusted diluted net
assets per share, which have risen to 1264p compared with 1215p at 31 March
2003.
Total investment portfolio
Rental income in the first half decreased by 0.5% from #258.5 to #257.2m, but by
1.5% when compared with the second half of last year.
As previously outlined we are disclosing more detailed information about the
like-for-like performance of our properties. The table below analyses the
reasons for the changes in rental income over the last three six month periods.
Gross rental income for 30.09.03 30.09.03 31 03.03 31 03.03 30.09.02
the 6 months ended
% %
#m change #m change #m
Like-for-like portfolio:
Offices 105.4 -2.0 107.5 +3.4 104.0
Retail 110.2 +2.0 108.0 +3.6 104.2
Industrial & other 15.0 -5.7 15.9 +9.7 14.5
--------- --------- --------- --------- ---------
Total like-for-like portfolio 230.6 -0.3 231.4 +3.9 222.7
Property purchases 3.2 0.4 0.0
Property sales 6.4 12.5 22.1
Developments 17.0 16.9 13.7
--------- --------- --------- --------- ---------
Total investment portfolio 257.2 -1.5 261.2 +1.0 258.5
====== ====== ====== ====== ======
The like-for-like properties have shown modest rental income growth over the
last eighteen months, principally on the retail part of the portfolio. The
office portfolio has shown very little income growth due to the difficult
conditions in the London office market. While we have achieved some increases
in rent from reviews, this has been offset partly by voids and partly by the
loss of some income on certain office properties that are being prepared for
development. Voids in the like-for-like portfolio, which are actively managed,
have increased from 2.5% at September 2002 to 2.9% at September 2003.
We also continue to control tenant receivables carefully, and the cost of bad
and doubtful debts during the six months to 30 September 2003 was some #1.2m,
equivalent to approximately 0.2% of the net rent roll (30.09.02: 0.2%).
As the table shows, new rents from property acquisitions and developments have
offset the loss of rent from disposals. The main contributors to development
rents in the year to 31 March 2003 were:
* Designer Outlet Mall, Livingston;
* Lakeside Retail Park West Thurrock;
* Racecourse Retail Park, Liverpool;
* Juniper Site, Basildon;
* The Gate, Newcastle upon Tyne.
In the current period, we have also completed and let The Bullring in
Birmingham, Portman House in W1 and Phase I of the Kingsway West Retail Park in
Dundee.
Since September 2002, the net reversionary potential of the like-for-like
portfolio has fallen from 10.4% to 2.2%. However, within the portfolio, retail
remains reversionary overall whereas the London office portfolio, and in
particular the City, is increasingly over rented. The mean weighted unexpired
lease term for the total portfolio is 10.6 years (30.09.02: 11.6 years) on the
assumption that all lease breaks and expiries occur.
During the period, we sold investment properties with a book value of #242.9m
(30.09.02: #294.1m) at an average rental yield of 7.2%. We realised profits on
sales of #11.7m and crystallised #94.8m of previous valuation surpluses.
Development
Projects that comprise the current development programme are listed in the
pipeline schedule above. To be included in the programme, a project must have,
or be close to obtaining, final approval to proceed. For reporting purposes, we
retain properties in the development programme until they are 95% let, when we
transfer responsibility to the Portfolio Management business unit.
The carrying value of development programme assets (which excludes the BBC
construction project at White City, trading properties, proposed developments
and the project at Kent Thameside) was #706.8m (31.03.03: #967.4m). During the
period, we spent #119m on the development programme and capitalised associated
finance costs of #16.9m. The estimated future cash spend required to complete
the development programme, excluding interest, is approximately #326m. Proposed
developments (excluding Kent Thameside) have a current carrying value of #137.5m
and the estimated future cash spend required to complete these schemes, if we
proceed with them, is approximately #840m, excluding interest.
During the period, we completed and let our schemes at The Bullring in
Birmingham (where we have a one-third share), Portman House on Oxford Street,
W1, and Phase I of Kingsway West retail park in Dundee. At 30 September 2003,
these schemes had an aggregate value of #393.7m and generated development
profits of #78.8m over the lives of the projects. On a profit and loss basis,
we recognised rental income from these schemes of #5.3m in the six months to 30
September 2003. They will contribute some #24.0m of gross rental income
annually.
Total property outsourcing
Land Securities Trillium, including our share of Telereal, generated 52.9% of
the Group's gross property income in the period (30.09.02: 50.9%). This
business unit continues to make good progress towards its target of representing
25% of our operating profit in the medium term, having contributed 13.1% in the
current period. Excluding Telereal, Land Securities Trillium's underlying
profits were #19.1m for the first half, similar to 2002. At the contract level,
PRIME and BBC have both continued to perform in line with expectations.
In the first six months of this year, Land Securities Trillium incurred costs of
some #2m, in addition to bid costs, in preparation for the Employment Services
extension to the PRIME contract. We expect to assume responsibility for this
estate around the end of the calendar year and anticipate that it will reduce
pre-tax profits this year by #15-20m in total. However, we expect that
Employment Services will generate up to #5m of pre-tax profits in the next
financial year, although it is likely to be loss making in the first half.
We completed construction at White City II on 4 October 2003 and our unitary
charge on that project will increase by #24m per annum with effect from 1
October 2003. We continue to expect that the BBC contract will broadly break
even for 2003/04 as a whole. During the period, we incurred a further #82m on
the White City II building, including interest. Our investment in White City II
at 30 September 2003 was #237m, (including interest) with estimated cash costs
of #25m still to be incurred.
Telereal continues to make a good contribution to earnings, despite a small
reduction in the unitary charge reflecting the sale of investment properties
during last year. Telereal produced revenue profits in the first half in excess
of those for the whole of last year as a result of lower contract costs, partly
attributable to property sales last year. Telereal has continued to be cash
positive allowing it to make distributions to the Group and our joint venture
partners. As a result, our investment in Telereal has reduced and was #89.0m at
30 September 2003 (30.09.02: #131.7m) and #106.8m at 31 March 2003. Telereal is
generating very attractive leveraged returns for the Group.
Taxation
The requirement in FRS 19 (Deferred Tax) to make full provision for timing
differences means that, in profit and loss account terms, our reported tax rate
for the period was 27.9% (30.09.02: 28.0%). The factors causing this are
explained in note 4 to the Accounts. We estimate that our current tax charge
for the period was 23.8% (30.09.02: 24.3%) of profit on ordinary activities and
this reflects the benefit of capital allowances from developments,
refurbishments and acquisitions, and financing transactions during the year. We
also benefit from a lower tax rate payable on profits on properties that we have
sold. The full year current tax charge last year was 12.1% of profit on
ordinary activities and, as indicated last year-end, was influenced by
particular factors that are unlikely to recur. We estimate that the current tax
rate for the year as a whole will be in the range of 25.0 to 30.0%.
Following the latest property valuation and, on the hypothetical assumption that
all properties are sold at their revalued amounts without any tax mitigation,
the Group has an estimated potential capital gains tax liability in the region
of #490m (30.09.02: #450m). However, it is unlikely that such an amount would
be payable even in the event of a sale of all investment property assets. In
particular, the sale of certain property portfolios by means of the disposal of
various asset-owning companies could reduce this liability significantly.
Cash flow and debt
Our operating cash inflow after interest, tax and distributions from Telereal,
was #128.3m, compared with #63.4m for the corresponding period last year. The
increase over last year is due to the phasing of #46m of interest payments due
around 31 March 2002, and to the exceptional costs incurred last year. We spent
#316.2m (30.09.02: #277.3m) on additions to properties including capital
expenditure on developments. This was offset by receipts of #279.9m (30.09.02:
#221.0m) from the sale of properties so that we had net capital expenditure of
#46.7m for this period compared with net expenditure of #62.3m for the
corresponding period last year.
After payment of equity dividends of #121.7m in the first half (which was the
final dividend for last year) and the loan repayments received from Telereal,
the Group had a cash outflow (before financing) of #40.1m for the first half
compared with #106.0m for the corresponding period last year. This cash
outflow, together with the payment of #18.8m to redeem B shares earlier this
year, accounts for the increase in net debt from #2,589.3m at 31 March 2003 to
#2,647.4m at 30 September 2003.
Although net debt has increased by only #58.1m since 31 March 2003, gross debt
has increased by #145.2m because we had #169.7m (31.03.03: #82.6m) of cash and
short-term deposits at the period end. This includes cash deposited with
debenture trustees as security in lieu of mortgaged properties that had been
sold close to the period end. This deposit has now been released.
At 30 September 2003 the fair values of the Group's financial liabilities
exceeded book value by #685.0m (31.03.03: #598.5m) reflecting the reduction in
long term interest rates since the Group's fixed rate borrowings and interest
rate hedges were taken out. However, the increase in the size of this liability
since 31 March 2003 reflects the recent improvement in the credit spreads on our
bonds which has more than offset the favourable impact of rising long-term
interest rates.
During the period, the Group launched a Euro Commercial Paper ("ECP") programme
to reduce the cost of short-term borrowing. At 30 September 2003 total
outstandings under the ECP programme were #236.8m. It is our policy to maintain
a level of undrawn committed bank facilities at least equal to, and with a
maturity no shorter than, our ECP outstandings.
International Financial Reporting Standards ("IFRS")
All quoted companies in the United Kingdom will be required to adopt IFRS for
accounting periods ending on or after 31 December 2005 as part of an
international drive to harmonise financial reporting. We will continue to apply
UK Accounting Standards up to and including our year ending 31 March 2005, but
will adopt IFRS for the year to 31 March 2006. We will also restate information
for the year to March 2005 to the new basis, to aid comparison.
The International Accounting Standards Board intends to finalise the accounting
standards that must be adopted from 2005 by next spring. If these new standards
are substantially in line with the exposure drafts that are currently being
discussed, they are likely to have a significant impact on our financial
statements. We are following developments closely and have an active project to
manage the transition. We will provide more information about the impact of the
changes on our accounts as the deadline for transition approaches.
Going concern
After reviewing detailed cash flow projections and taking into account available
bank facilities and making such further enquiries as they consider appropriate,
the directors are satisfied that the Group has adequate resources to continue to
operate for the foreseeable future. For this reason, we have continued to adopt
the going concern basis when preparing these interim financial statements.
Andrew Macfarlane
Group Finance Director
TOTAL INVESTMENT PORTFOLIO ANALYSIS
P & L P & L P & L
basis basis basis
Gross Gross Gross
Open Open Open Rental Rental Rental
Market Market Market Valuation Valuation Income Income Income Annual
Value Value Value Surplus Surplus 6 months 6 months 6 months Net
(6) (6) (6) to to to rent(7)
------- ------- ------- ------- ------- ------- ------- ------- --------
30-Sep 31-Mar 30-Sep 30-Sep 30-Sep 30-Sep 31-Mar 30-Sep 30-Sep
-03 -03 -02 -03 -03 -03 -03 -02 -03
The like-for-like portfolio (1) #m #m #m #m % #m #m #m #m
------------------------------
London offices
West end 1278.2 1267.3 1262.9 (0.8) (0.1)% 46.8 45.0 45.3 89.4
City 764.6 792.2 894.0 (27.7) (3.5)% 37.9 39.1 37.6 71.3
Midtown 323.7 320.8 349.6 2.9 0.9% 14.0 14.2 14.0 26.6
Inner London 133.6 126.0 184.8 (3.3) (2.4)% 3.7 6.9 4.2 7.0
------- ------- ------- ------- ------- ------- ------- ------- --------
2500.1 2506.3 2691.3 (28.9) (1.1)% 102.4 105.2 101.1 194.3
Regional offices 64.3 66.4 68.1 (2.6) (3.9)% 3.0 2.3 2.9 6.0
------- ------- ------- ------- ------- ------- ------- ------- --------
2564.4 2572.7 2759.4 (31.5) (1.2)% 105.4 107.5 104.0 200.3
======= ======= ======= ======= ======= ======= ======= ======= ========
Shops and shopping centres
Shopping centres 1229.2 1172.1 1102.0 54.9 4.7% 44.5 42.4 41.3 79.1
London shops 671.6 641.4 615.4 29.6 4.6% 21.3 21.2 20.3 42.1
Other in-town shops 585.4 554.7 536.9 28.0 5.0% 19.1 19.6 19.2 36.7
------- ------- ------- ------- ------- ------- ------- ------- --------
2486.2 2368.2 2254.3 112.5 4.7% 84.9 83.2 80.8 157.9
======= ======= ======= ======= ======= ======= ======= ======= ========
Retail warehouses
Retail parks 735.9 682.1 638.1 43.0 6.2% 18.0 18.1 17.0 37.3
Other 208.2 195.0 169.5 13.0 6.7% 7.3 6.7 6.4 14.9
------- ------- ------- ------- ------- ------- ------- ------- --------
944.1 877.1 807.6 56.0 6.3% 25.3 24.8 23.4 52.2
======= ======= ======= ======= ======= ======= ======= ======= ========
Industrial
South east 263.1 258.6 254.6 3.5 1.3% 9.4 10.1 8.9 18.8
Other 34.9 32.4 31.9 2.5 7.7% 1.5 1.4 1.3 3.1
------- ------- ------- ------- ------- ------- ------- ------- --------
298.0 291.0 286.5 6.0 2.1% 10.9 11.5 10.2 21.9
======= ======= ======= ======= ======= ======= ======= ======= ========
Other 130.8 137.5 136.2 1.4 1.1% 4.1 4.4 4.3 7.9
------- ------- ------- ------- ------- ------- ------- ------- --------
Like-for-like portfolio 6423.5 6246.5 6244.0 144.4 2.3% 230.6 231.4 222.7 440.2
Completed developments (2) 687.5 587.4 516.5 52.6 8.3% 13.1 12.7 8.9 25.2
------- ------- ------- ------- ------- ------- ------- ------- --------
Total 7111.0 6833.9 6760.5 197.0 2.8% 243.7 244.1 231.6 465.4
Purchases (3) 124.8 65.5 9.2 (9.5) (7.1)% 3.2 0.4 0.0 9.4
Sales and restructured (4) 0.0 241.7 350.9 (0.2) (100.0)% 6.4 12.5 22.1 NA
interests
Ongoing developments (5) 760.3 702.9 622.5 (34.3) (4.3)% 3.9 4.2 4.8 NA
(including Kent Thameside)
------- ------- ------- ------- ------- ------- ------- ------- --------
Total Portfolio 7996.1 7844.0 7743.1 153.0 2.0% 257.2 261.2 258.5 NA
---------------------
Total investment portfolio
analysis
------------------------------
London offices
West end 1470.5 1481.8 1434.1 (14.3) (1.0)% 50.2 49.2 49.0 94.4
City 975.2 945.7 1031.9 (41.5) (4.1)% 38.5 39.3 41.6 74.9
Midtown 355.0 542.8 582.1 (8.4) (2.3)% 19.2 21.8 20.7 27.5
Inner London 268.2 264.3 294.4 (26.0) (8.8)% 5.4 7.1 4.0 10.8
------- ------- ------- ------- ------- ------- ------- ------- --------
3068.9 3234.6 3342.5 (90.2) (2.9)% 113.3 117.4 115.3 207.6
Regional offices 73.2 77.9 81.2 (3.0) (3.9)% 4.1 3.3 4.4 6.9
------- ------- ------- ------- ------- ------- ------- ------- --------
3142.1 3312.5 3423.7 (93.2) (2.9)% 117.4 120.7 119.7 214.5
======= ======= ======= ======= ======= ======= ======= ======= ========
Shops and shopping centres
Shopping centres 1594.7 1455.7 1366.9 77.3 5.1% 47.4 45.8 46.6 84.6
London shops 766.7 732.4 696.8 36.2 5.0% 23.3 23.3 23.1 44.1
Other in-town shops 601.1 589.1 576.3 30.2 5.3% 19.9 20.9 20.9 37.3
------- ------- ------- ------- ------- ------- ------- ------- --------
2962.5 2777.2 2640.0 143.7 5.1% 90.6 90.0 90.6 166.0
======= ======= ======= ======= ======= ======= ======= ======= ========
Retail warehouses
Retail parks 995.3 901.2 845.5 73.8 8.0% 24.3 24.1 21.9 51.3
Other 230.5 215.6 207.6 14.6 6.8% 7.3 7.2 6.9 14.9
------- ------- ------- ------- ------- ------- ------- ------- --------
1225.8 1116.8 1053.1 88.4 7.8% 31.6 31.3 28.8 66.2
======= ======= ======= ======= ======= ======= ======= ======= ========
Industrial
South east 367.0 350.2 339.0 6.6 1.8% 10.9 11.7 10.2 22.3
Other 38.4 35.7 46.8 2.7 7.6% 1.7 2.1 2.0 3.4
------- ------- ------- ------- ------- ------- ------- ------- --------
405.4 385.9 385.8 9.3 2.3% 12.6 13.8 12.2 25.7
======= ======= ======= ======= ======= ======= ======= ======= ========
Other 260.3 251.6 240.5 4.8 1.9% 5.0 5.4 7.2 9.7
------- ------- ------- ------- ------- ------- ------- ------- --------
Total portfolio 7996.1 7844.0 7743.1 153.0 2.0% 257.2 261.2 258.5 482.1
Annual Annual Annual Lease Lease
Annual net Annual Gross Gross Gross Voids Length Length
Estimated Yield on Estimated Estimated Estimated By As at As at
Rental Present Rental Rental Rental ERV 30-Sep-03 30-Sep-03
Value (8) Income Value (9) Value (9) Value (9) (10) (11) (11)
-------- -------- -------- -------- -------- --------- --------- ---------
30-Sep 30-Sep 30-Sep 31-Mar 30-Sep 30-Sep Mean Median
-03 -03 -03 -03 -02 -03 Years Years
The like-for-like portfolio (1) #m % #m #m #m % (i) (ii)
-----------------------------
London offices
West end 92.9 7.0% 94.4 102.1 109.3 1.2% 10.7 7.0
City 59.6 9.3% 60.7 67.0 77.0 6.6% 9.0 3.3
Midtown 26.4 8.2% 27.1 29.8 32.9 3.0% 6.2 5.8
Inner London 8.2 5.2% 8.5 9.1 15.6 - 6.5 10.0
-------- -------- -------- -------- -------- --------- --------- ---------
187.1 7.8% 190.7 208.0 234.8 3.1% 9.3 6.0
Regional offices 6.0 9.3% 6.1 6.0 6.4 19.7% 3.7 2.0
-------- -------- -------- -------- -------- --------- --------- ---------
193.1 7.8% 196.8 214.0 241.2 3.6% 9.2 5.8
======== ======== ======== ======== ======== ======== ======== ========
Shops and shopping centres
Shopping centres 86.6 6.4% 93.5 92.8 90.3 1.4% 10.7 9.8
London shops 47.9 6.3% 48.9 47.9 46.0 1.8% 8.9 7.8
Other in-town shops 40.5 6.3% 43.1 42.9 42.9 3.0% 9.8 8.0
-------- -------- -------- -------- -------- --------- --------- ---------
175.0 6.4% 185.5 183.6 179.2 1.9% 10.0 8.5
======== ======== ======== ======== ======== ======== ======== ========
Retail warehouses
Retail parks 42.6 5.1% 42.7 41.8 40.5 3.0% 14.7 16.8
Other 16.0 7.2% 16.0 15.6 14.3 - 14.5 16.5
-------- -------- -------- -------- -------- --------- --------- ---------
58.6 5.5% 58.7 57.4 54.8 2.2% 14.7 16.8
======== ======== ======== ======== ======== ======== ======== ========
Industrial
South east 21.3 7.1% 21.3 21.1 21.3 8.0% 6.9 7.3
Other 2.8 8.9% 2.8 2.8 2.7 - 11.3 9.0
-------- -------- -------- -------- -------- --------- --------- ---------
24.1 7.3% 24.1 23.9 24.0 7.1% 7.5 7.3
======== ======== ======== ======== ======== ======== ======== ========
Other 8.2 6.0% 8.2 9.7 9.6 2.4% 27.0 11.8
-------- -------- -------- -------- -------- --------- --------- ---------
Like-for-like portfolio 459.0 6.9% 473.3 488.6 508.8 2.9% 10.3 7.5
Completed developments (2) 43.9 3.7% 43.9 42.2 34.8 4.3% 13.9 14.3
-------- -------- -------- -------- -------- --------- --------- ---------
Total 502.9 6.5% 517.2 530.8 543.6 3.0% 10.6 8.0
Purchases (3) 9.8 7.5% 10.3 2.6 0.2 12.6% 5.7 7.0
Sales and restructured (4) NA NA NA NA NA NA NA NA
interests
Ongoing developments (5) NA NA NA NA NA NA NA NA
(including Kent Thameside)
-------- -------- -------- -------- -------- --------- --------- ---------
Total Portfolio NA NA NA NA NA NA NA NA
---------------------
Total investment portfolio
analysis
----------------------------------
London offices
West end 132.8 6.4% 134.3 143.2 125.5
City 79.2 7.7% 80.8 84.5 77.1
Midtown 29.8 7.7% 30.6 45.9 46.2
Inner London 24.1 4.0% 24.3 20.5 15.6
-------- -------- -------- -------- --------
265.9 6.8% 270.0 294.1 264.4
Regional offices 6.8 9.4% 6.9 7.0 7.5
-------- -------- -------- -------- --------
272.7 6.8% 276.9 301.1 271.9
======== ======== ======== ======== ========
Shops and shopping centres
Shopping centres 112.9 5.3% 119.8 119.1 114.2
London shops 52.8 5.8% 53.8 52.6 55.2
Other in-town shops 42.6 6.2% 45.2 46.6 46.6
-------- -------- -------- -------- --------
208.3 5.6% 218.8 218.3 216.0
======== ======== ======== ======== ========
Retail warehouses
Retail parks 62.5 5.2% 62.5 59.9 57.0
Other 16.0 6.5% 16.0 15.6 15.2
-------- -------- -------- -------- --------
78.5 5.4% 78.5 75.5 72.2
======== ======== ======== ======== ========
Industrial
South east 30.7 6.1% 30.7 30.5 27.8
Other 3.1 8.9% 3.1 3.0 4.3
-------- -------- -------- -------- --------
33.8 6.3% 33.8 33.5 32.1
======== ======== ======== ======== ========
Other 11.8 3.7% 11.9 13.4 20.9
-------- -------- -------- -------- --------
Total portfolio 605.1 6.0% 619.9 641.8 613.1
======== ======== ======== ======== ========
Notes
(1) The like-for-like portfolio includes all properties which have been in the portfolio since 1 April 2002 but
excluding those which were acquired, sold or included in the development programme at any time during that
period. Capital expenditure on refurbishment, acquisition of head leases and similar capital expenditure has
been allocated to the like-for-like portfolio in preparing this table. Changes in valuation from period to
period reflect this capital expenditure as well as the disclosed valuation of surpluses.
(2) Completed developments represent those properties, previously included in the development programme, which have
been completed, let and removed from the development programme in the period since 1 April 2002.
(3) Includes all properties acquired in the period since 1 April 2002. Approximately #50m of purchases over the
18 month period have been included in the like-for-like analysis as they consist of superior interest
acquisitions or part acquisitions relating to existing holdings as explained in note (1). This also includes
site assembly acquisitions for pre-development schemes.
(4) Includes all properties sold (other than directly out of the development programme), or where the ownership
interest has been restructured, in the period since 1 April 2002.
(5) Ongoing developments are properties in the development programme and Kent Thameside. They exclude completed
developments as defined in note (2) above.
(6) The open market value figures include the group share of the various joint ventures and exclude properties
owned by Land Securities Trillium and Telereal.
(7) Annual net rent is annual rents in payment at 30 September 2003 after deduction of ground rents. It excludes
the value of voids and current rent free periods.
(8) Annual net estimated rental value includes vacant space, rent-frees and estimated future estimated rental
values for properties in the development programme and is calculated after deducting expected ground rents.
(9) Annual gross estimated rental value is calculated in the same way as net estimated rental value before the
deduction of ground rents.
(10) Voids represent all unlet space in the properties, including voids where refurbishment work is being carried
out and voids in respect of pre-development properties. Voids are calculated based on their gross estimated
rental value as defined in (9) above.
(11) The definition for the figures in each column is:
(i) Mean is rent-weighted average remaining term on leases subject to lease expiry/break clauses.
(ii) Median is the number of years until half of income is subject to lease expiry/break clauses.
(12) Differs from the value for total sales at book value as given in the financial statements at 30 September 2003
of #242.9 due to UITF 28 adjustments.
(13) Differs from the value for total sales per the financial statements due to disposals made directly out of the
development programme.
Total investment portfolio analysis
% Portfolio by value and number of properties at 30 September 2003
#m Value No of
% properties
0 - 9.99 5.1% 96
10 - 24.99 10.7% 53
25 - 49.99 23.5% 54
Over 50 60.7% 45
Total 100.0% 248
Top 10 properties by value
Total value #1.8 bn (22.8% of portfolio). Values in excess of #125m.
1 White Rose Centre, Leeds
2 The Bullring, Birmingham
3 St David's Centre, Cardiff
4 Queen Anne's Mansions, London SW1
5 Almondvale Centre and Designer Outlet, Livingston
6 30 Gresham Street, London EC2
7 The Bridges, Sunderland
8 Eland House,London SW1
9 New Change, London EC4
10 Team Valley, Gateshead
Top 10 investment portfolio tenants
Current rents
%
1 Central Government 9.5
2 Allen & Overy 2.9
3 Dresdner Bank 2.3
4 Dixons Group 2.1
5 J Sainsbury 1.6
6 Metropolitan Police 1.4
7 Marks & Spencer 1.2
8 Homebase Limited 1.2
9 Institute of London Underwriters 1.0
10 Virgin Retail Limited 0.9
Total 24.1
Average Rents - excludes properties in the development programme and voids
Average Average
rent ERV
#/sq m #/sq m
Offices
Central and inner London 340 317
Rest of UK 99 95
Retail
Shopping centres n/a n/a
Shops n/a n/a
Retail warehouses (including supermarkets) 145 167
Industrial premises and warehouses
London, south east and eastern 65 68
Rest of UK n/a n/a
Hotels, leisure, residential and other n/a n/a
Note: Average rents and estimated rental values (ERVs) have not been provided
where it is considered that the figures would be potentially misleading (i.e.
where there is a combination of analysis of rents on an overall and Zone A basis
in the retail sector; or where there is a combination of uses; or small sample
sizes).
This is not a like-for-like analysis with the previous year.
Like-for-like reversionary potential at 30.09.03
30.09.03 30.09.02
% of rent roll % of rent roll
Reversionary potential
(Ignoring additional income from the letting of voids)
Gross reversions 9.7 13.3
Over-rented 7.5 2.9
Net reversionary potential 2.2 10.4
The reversion is calculated with reference to the gross secure rent roll and
those properties which fall under the like-for-like definition as set out in
note 1 in the Total Investment Portfolio Analysis above.
Only 41.3% of the over-rented income is subject to a lease expiry or break
clause in the next five years.
Development pipeline schedule
Central London
Planning - OPR = outline planning received, PR = planning received; AS =
application submitted; MG = minded to grant; PI = planning inquiry.
Estimated/
Size Status actual Cost
Sq m Status letting completion #m
Property Description (Note 1) planning (Note 2) date (Note 3)
Developments completed, let and removed from the development programme
Portman House, W1 Offices 9,249 100% Oct 2001 44
Retail 2,521
Developments completed
Empress State Building, SW6 Offices 41,291
Retail/Leisure 2,040 July 2003 102
7 Soho Square, W1 Offices 4,214 85% Mar 2003 9
Retail 1,095
190 High Holborn, WC1 Offices 8,560 100%* Sep 2002 41
Developments approved and in progress
30 Gresham Street, EC2 Offices 35,147
Retail 1,304 Dec 2003 208
Cardinal Place, SW1 Offices 50,750
Retail 9,250 Jun 2005 251
Proposed Developments
Old scheme
New Fetter Lane, EC4 Offices 58,389 PR
Retail/Leisure 8,400 2007
New scheme
New Street Square, EC4 Offices 62,526
(previously New Fetter Lane) Retail/Leisure 2,783 AS 2007
Bankside 123, SE1 Offices 75,326 PR
Retail 8,080 2006
Leisure 1,957
*fully let since 30 September 2003
Shopping Centres and Retail
Estimated/
Size Status actual Cost
Sq m Status letting completion #m
Property Description (Note 1) planning (Note 2) date (Note 3)
Developments completed, let and removed from the development programme
Bullring Birmingham Retail 111,484 97% Sep 2003 141
The Birmingham Alliance
- a limited partnership
with Hammerson plc and
Henderson Global
Investors
Developments completed
Sidwell Street, Exeter Retail 2,420 73% Mar 2003 3
Developments approved and in progress
Whitefriars, Canterbury Retail 37,685 30% Apr 2005 103
+ Residential 2,614
Caxtongate Phase III, Retail 2,238 100% Nov 2004 5
New Street, Birmingham
Cheeke Street, Exeter Retail 5,359 55% Dec 2004 11
Rose Lane, Canterbury - Retail 1,638 76% Aug 2004 3
a limited partnership
Proposed developments
Broadmead, Bristol Retail 87,881 OPR 2007
The Bristol Alliance - a Leisure 3,953
limited partnership Offices 24,585
with
Hammerson plc, and + Residential 18,196
Morley Fund Management
Princesshay, Exeter Retail 37,512 PR 2007
+ Residential 7,432
St Davids, Cardiff Retail 70,000 OPR 2008
St David's Partnership - a + Residential/
partnership with Leisure 39,750
Capital Shopping
Centres
Retail warehouses
Estimated/
Size Status actual Cost
Sq m Status letting completion #m
Property Description (Note 1) planning (Note 2) date (Note 3)
Developments completed, let and removed from the development programme
Kingsway Retail Park, Retail 9,893 100% Jan 2003 29
Dundee, Phase I Warehousing
Developments approved and in progress
Bexhill Retail Park Retail 3,112 Sept 2004 11
Warehousing
Kingsway Retail Park, Retail 8,649 43% May 2004 12
Dundee, Phase II Warehousing
Proposed Developments
Almondvale Retail Park, Retail 9,383 PR 2004/
Livingston, Phase II Warehousing 2005
Industrial
Developments completed
Juniper Phase I, Industrial 21,823 84% Nov 2001 18
Basildon
Refurbishment Offices 3,660 100%
Juniper Phase II, Industrial 11,148 26% April 2003 8
Basildon
Horizon Point, Hemel
Hempstead Phase I Industrial 10,384 Mar 2002 10
Zenith, Basildon Industrial 15,128 30% Jun 2002 12
Oxonian Park, Industrial 11,796 Sep 2003 9
Kidlington
Cobbett Park, Guildford Industrial 11,440 41% Aug 2002 12
Developments approved and in progress
Commerce Way, Croydon Industrial 12,617 Oct 2003 12
Concorde Way, Industrial 11,617 May 2004 9
Segensworth, Fareham
Other
Developments completed
The Gate, Newcastle Leisure 18,556 79% Nov 2002 64
upon Tyne
Note 1 The floor areas shown above represent the total areas of the
developments. Our effective share of these areas are 33% for the Birmingham and
Bristol Partnerships and 50% for the Cardiff and Rose Lane, Canterbury
Partnerships.
Note 2 Letting % is measured by ERV and shows letting status at 30 September
2003
Note 3 Cost (#m) shows Land Securities share of costs and refers to estimated
capital expenditure including the cost of third party land acquisitions and
excluding finance costs.
Development pipeline - financial statistics
Valuation Cumulative
surplus/ valuation Net
Book Capital Estimated Estimated (deficit) surplus / income/
value expenditure total capital total 6 mth to (deficit) to ERV
at start to date expenditure cost 30.09.03 date
(1) (1) (2) (3)
Project #m #m #m #m #m #m #m
---------- ---------------- ---------------- ------------ ------------ ----------------- ---------
Completed,
let and
transferred
out of
Development
programme
or sold
during
the year
ended
30.9.03 86 181 210 315 19 79 24
Active
development
programme
(schemes
in
progress,
completed
but not
let,
committed
and
authorised) 188 626 923 1195 (34) (166) 91
Proposed 147 19 921 1180 n/a n/a 96
schemes (4)
Notes
(1) Excludes capitalised interest.
(2) Includes land costs / book value of land and capitalised
interest, but excludes any allowances for rent free periods. Stated net of
other receipts (eg sales of residential units).
(3) Net headline annual rental payable on let units plus net
estimated rental value (ERV) at 30 September 2003 on unlet units.
(4) The book value of the proposed schemes is the value as at 31
March 2003 which reflects any value attributable to expenditure incurred prior
to 31 March 2003. Therefore the capital expenditure shown in the to date column
represents only that expenditure incurred in the period from 1 April 2003.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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