LONDON, UNITED KINGDOM--(Marketwired - Nov 11, 2014) - Land Securities Group PLC (LSE: LAND) (PINKSHEETS: LSGOF) -- "During a busy six months, we have made significant progress executing our strategy to transform our Retail Portfolio and deliver our 2.9m sq ft London development programme into a supply constrained market," said Chief Executive Robert Noel. "And our strategy is generating good results. We delivered a valuation surplus of £880.2m across the portfolio with adjusted diluted NAV up 11.5%. Revenue profit is up 8.6% with adjusted diluted earnings per share up 7.5% on the same period last year.

"We have continued to transform our shopping centre portfolio -- selling in Bristol, Exeter and Sunderland and buying Bluewater, Kent and Buchanan Galleries, Glasgow. The acquisition of the Bluewater stake exemplifies the scale and pace of change and together with major assets in Glasgow, Cardiff, Oxford, Leeds, Greater London and Portsmouth, we now own a higher quality shopping centre portfolio. We believe this focus on dominance, experience and convenience will serve customers and shareholders well. At the operational level, we have continued to drive performance -- actively managing our tenant mix and keeping voids low.

"In London, we are in the construction and delivery phase of our sizeable speculative development programme. During the period we secured £21.6m of development lettings with an average lease length of 19 years. 20 Fenchurch Street, EC3 is 90% let, while 1 & 2 New Ludgate, EC4 is 61% pre-let, six months ahead of practical completion. In Victoria, SW1, 123 Victoria Street is now fully let, 62 Buckingham Gate is 69% let and The Zig Zag Building is 35% pre-let, nine months before completion. Nova, the largest piece in the Victoria masterplan, is progressing well with practical completion expected in July 2016.

"Our focus remains on the continued reshaping of the Retail Portfolio along with completion of our London development programme, and funding this activity by recycling capital. Simply put, this ensures we have better assets, let on longer leases, with lower gearing, as we move through the cycle."

Results summary

    30 September 2014   31 March 2014   Change
Valuation surplus (1)   £880.2m   n/a   Up 7.5% (2)
Basic NAV per share   1,183p   1,069p   Up 10.7%
Adjusted diluted NAV per share (3)   1,129p   1,013p   Up 11.5%
Group LTV ratio (1)   33.6%   32.5%    
    6 months ended
30 September 2014
  6 months ended
30 September 2013
Profit before tax   £1,031.1m   £397.9m    
Revenue profit (1)   £170.0m   £156.5m   Up 8.6%
Basic EPS   130.6p   50.8p    
Adjusted diluted EPS   21.4p   19.9p   Up 7.5%
Dividend   15.8p   15.2p   Up 3.9%

1. Including our proportionate share of subsidiaries and joint ventures.
2. The % change represents the valuation movement as a percentage of the net book value of the combined portfolio at the beginning of the period.
3. Our key valuation measure.

High levels of activity

  • Sales of £185.8m during the period and £468.9m since 30 September
  • Acquisitions of £697.0m during the period and £137.5m since 30 September
  • 3.0m sq ft development programme
  • Development and refurbishment expenditure of £220.4m (1)
  • £21.8m of development lettings
  • £10.3m of investment lettings
  • Completed a sustainability strategic review

Delivering results

  • Ungeared total property return 9.9%, outperforming the IPD Quarterly Universe at 9.3%
  • Total business return (dividends and adjusted diluted NAV growth) of 13.0%
  • Combined portfolio valued at £13.2bn, with a valuation surplus of 7.5%
  • Valuation surplus on properties in the development programme of 14.0%
  • Profit before tax £1,031.1m, up from £397.9m
  • Revenue profit £170.0m, up 8.6%
  • Voids in the like-for-like portfolio remain low at 2.6% (31 March 1.9%)
  • Improved our performance against Environmental, Social and Governance (ESG) benchmarks
  • Progressed 85 disadvantaged people into jobs through our London Employment Strategy

With a strong financial structure

  • Group LTV ratio at 33.6%, based on adjusted net debt of £4.6bn
  • Weighted average maturity of debt at 8.2 years
  • Weighted average cost of debt at 4.5%
  • Cash and available facilities of £0.8bn
  • First half dividend of 15.8p per share, up 3.9%

1. Includes trading properties.

All measures above are presented on a proportionate basis.

Chief Executive's statement

We are executing our strategy at pace, transforming the quality of our Retail Portfolio, delivering a sizeable development programme in London and making a positive contribution to the communities in which we operate. By funding this activity through recycling capital, our objective is to have better assets let on longer leases and lower gearing as we move through the property cycle.

We have delivered a strong financial performance; revenue profit increased by 8.6% when compared to the same period last year and our adjusted diluted NAV per share was up 116p at 1,129p -- an increase of 11.5% over the first half. The second quarterly dividend is 7.9p, making the first half dividend 15.8p, up 3.9% on the same period last year. The total business return for the six months was 13.0%.

In Retail we have continued to reshape the portfolio, acting decisively in response to rapid changes in consumer behaviour, with over £1.4bn of transactions since 1 April. Our focus is on assets that offer dominance, experience and convenience.

We were delighted to acquire a 30% stake in Bluewater, Kent, along with the management rights. Bluewater is the pre-eminent shopping centre outside London. Elsewhere, since 1 April, we have sold retail assets in Sunderland, Bristol, Exeter and Hull and acquired the remaining 50% in Buchanan Galleries, Glasgow. The portfolio is now in much stronger shape. We are also working on the final details of our plans for the development of Buchanan Galleries and Westgate, Oxford.

In London, we are seeing a more confident market and have achieved good lettings. We are focussed on the delivery of our developments with 1.4m sq ft of commercial space remaining to be let and 0.1m sq ft of residential space available for sale. We will have around 5,000 people working on our sites by the end of the financial year. I'm pleased to report our highly regarded London Employment Strategy has so far enabled 511 of the capital's most disadvantaged people to train for a trade and enter the construction industry.

20 Fenchurch Street, EC3 has gone well. The building is 90% let. 1,700 people are already in occupation and a further 2,300 will join them over the coming weeks and months. We will complete the final work on the brise soleil shading and public sky garden in the next few weeks. This scheme demonstrates the benefits of early cycle development. We procured contracts at the low point in the cost cycle and were able to market the building with relatively little competition. The fabulous, highly efficient and technically resilient space has enabled us to secure long lease lengths -- the weighted average lease term to first break is 17 years -- and average rents of £64 per sq ft. We expect the project to deliver a valuation surplus of over 60%.

The referendum in Scotland showed how an unexpected turn in the polls can affect market sentiment and business and political decision-making. No doubt the run up to the general election in May next year will bring similar uncertainty. However, extraordinary events aside, we do not expect to see a correction in the balance between supply and demand in London as we deliver our committed speculative schemes. With availability of office space nearing all-time lows, favourable conditions remain. In Retail, we expect consumer trends and customer demands to lead to rental growth in the best retail destinations and will continue to reshape our portfolio accordingly.

Robert Noel
Chief Executive

Financial review

Overview and headline results

Over the six months ended 30 September 2014, we delivered a profit before tax of £1,031.1m, compared with £397.9m for the same period last year, driven by a valuation surplus of £880.2m (including our proportionate share of subsidiaries and joint ventures). Basic earnings per share were 130.6p compared with 50.8p. Underlying earnings were also up; revenue profit was £170.0m compared with £156.5m in the comparative period and adjusted diluted earnings per share improved to 21.4p from 19.9p.

Our combined portfolio increased in value from £11.9bn at 31 March 2014 to £13.2bn as a result of net capital investment and our valuation surplus of £880.2m. Net assets per share increased by 10.7% to 1,183p at 30 September 2014. Adjusted diluted net assets per share were up by 11.5% over the six months, increasing from 1,013p to 1,129p. This 116p increase in adjusted diluted net assets per share together with the dividend paid in the period represents a 13.0% total business return.

Presentation of financial information

A number of our financial measures include the results of our joint ventures and subsidiaries on a proportionate basis. Measures that are described as being presented on a proportionate basis include the Group's share of joint ventures on a line by line basis, and are adjusted to exclude the non-owned elements of our subsidiaries. This is in contrast to the Group's statutory financial statements, where the Group's interest in joint ventures is presented as one line on the income statement and balance sheet, and all subsidiaries are consolidated at 100%. Joint operations are presented on a proportionate basis in all financial measures.

Revenue profit

Revenue profit is our measure of underlying pre-tax profit, which is used internally to assess the Group's income performance. It excludes all items of a capital nature, such as valuation movements and profits and losses on the disposal of investment properties, as well as one-off items. A full definition of revenue profit is given in the glossary. The main components of revenue profit are presented on a proportionate basis in the table below and a more detailed reconciliation of revenue profit to our IFRS profit before tax is included in note 3 to the financial statements.

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Forward-looking statements

These half-yearly results, our Annual Results, Annual Report and the Land Securities' website may contain certain "forward-looking statements" with respect to Land Securities Group PLC and the Group's financial condition, results of operations and business, and certain of Land Securities Group PLC and the Group's plans, strategy, objectives, goals and expectations with respect to these items and the economies and markets in which Land Securities operates.

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as "anticipates", "aims", "due", "could", "may", "should", "expects", "believes", "intends", "plans", "targets", "goal" or "estimates". By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Many of these assumptions, risks and uncertainties relate to factors that are beyond the Group's ability to control or estimate precisely. There are a number of such factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in the economies and markets in which the Group operates; changes in the legal, regulatory and competition frameworks in which the Group operates; changes in the markets from which the Group raises finance and changes in interest and exchange rates; the impact of legal or other proceedings against or which affect the Group; changes in accounting practices and interpretation of accounting standards under IFRS, and changes in our principal risks and uncertainties.

Any written or verbal forward-looking statements, made in these half-yearly results, our Annual Results, Annual Report, or the Land Securities' website or made subsequently, which are attributable to Land Securities Group PLC or any other member of the Group or persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. Each forward-looking statement speaks only as of the date of these half-yearly results, our Annual Results, Annual Report, or on the date the forward-looking statement is made. Land Securities Group PLC does not intend to update any forward-looking statements.

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