HY 2020 Results
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Note: Photographic content has been commissioned post-impact of Covid-19 Landsec – Half-yearly results 2020/21 2 Overview Mark Allan Financial review Martin Greenslade Portfolio review Colette O’Shea Outlook Mark Allan Landsec – Half-yearly results 2020/21 3 An extraordinary six months but… — Managing the impact of Covid-19 proactively and responsibly — Business fundamentals remain strong — London remains attractive — Reinstating dividend alongside interim results — Looking beyond Covid-19 to medium and longer-term opportunities — New strategy positions Landsec for growth Gunwharf Quays, Portsmouth Landsec – Half-yearly results 2020/21 4 Managing the impact of Covid-19 proactively and responsibly — Safety is our number one priority — Strengthened customer relationships through collaborative dialogue — Measured approach to development — Neutral debt position over the period — Financially prudent with cautious provisioning Gunwharf Quays, Portsmouth Landsec – Half-yearly results 2020/21 5 Business fundamentals remain strong — Low LTV — Good portfolio liquidity — London, in particular, defined by quality, resilience and liquidity — Long held focus on sustainability creating value — Significant medium-term regeneration potential within urban opportunities — Strong track record, reputation and relationships — Team characterised by experience, expertise and capability Dashwood, EC2 Landsec – Half-yearly results 2020/21 6 Looking beyond Covid-19 to medium and longer-term opportunities — How offices are used will change — Expect increased obsolescence of older office stock in London to provide development opportunities — Urban mixed-use/regeneration to deliver the change the built environment needs — Financial and human resources in place 123 Victoria Street, SW1 Landsec – Half-yearly results 2020/21 7 Central London office market m sq ft % 18 36 16 32 Bifurcation of the central London 14 28 12 24 10 Forecast 20 8 16 occupational market continues 6 12 4 8 2 4 0 0 -2 -4 -4 -8 -6 -12 — Take-up was 2.2m sq ft, 67% below the -8 -16 -10 -20 -12 -24 long-term average -14 -28 -16 -32 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 — Availability increased by c.45% since Q1: 1984 Early 90’s recession Dotcom GFC Referendum Transition vacancy rate increased to 6.5% period ends New space take-up Completions Forecast speculative completions Rental growth (RHS) — Demand and supply balanced in run up to Covid-19 London office market availability – grade A vs secondhand space (1) — Only 26% of available space is grade A Proportion of total 80% 74% 70% — 46% of space under construction is already 60% pre-let(2) 50% 50% 40% 30% (3) 26% — New space represents 48% of total take-up 20% compared with a LTA of 39% 10% 0% Sources: 1) CBRE Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Q4 2015 Q2 2016 Q4 2016 Q2 2017 Q4 2017 Q2 2018 Q4 2018 Q2 2019 Q4 2019 Q2 2020 2) CBRE, Knight Frank, Landsec 3) CBRE, Landsec Share of grade A space Share of secondhand space Landsec – Half-yearly results 2020/21 8 Central London investment market robust despite short-term Covid-19 pressures Investment market — Investment activity in calendar Q2 significantly below the long-term average but began to recover in Q3 and Q4 has started strongly — Low rate environment and yield premium for London vs other global cities provides support for yields/values Three themes emerging — Strong investor demand for quality assets — Obsolescence of older stock accelerating — Evolution of how space is secured and utilised Nova, SW1 Landsec – Half-yearly results 2020/21 9 Structural trends in retail accelerating, but outlets remain resilient — Covid-19 has accelerated structural trends, but affecting different assets in different ways Bluewater, Kent — Outlets remain resilient — Retailers likely to have fewer full price stores in future, but the physical store has a clear role to play in an omnichannel world — Investment market for shopping centres remains stalled — Establishing sustainable rents key to investment market stabilising — c.15% below September ERVs Xscape Yorkshire Landsec – Half-yearly results 2020/21 11 Financial summary 30 Sept 2019 30 Sept 2020 % change £225m Revenue profit(1) £115m -48.9 £(368)m Valuation deficit(1) £(945)m -7.7(2) £(147)m Loss before tax £(835)m 30.4p Adjusted diluted earnings per share(1) 15.5p -49.0 1,192p(3) EPRA net tangible assets per share 1,079p -9.5 23.2p Dividend per share 12.0p -48.3 (1) Including our proportionate share of subsidiaries and joint ventures (2) The percentage change for the valuation deficit represents the fall in value of the Combined Portfolio over the period, adjusted for net investment (3) As at 31 March 2020 Landsec – Half-yearly results 2020/21 12 Revenue profit £m Net rental income movement £(118)m - 225 115 Revenue profit Gross rental Net Bad debt Net direct property Net indirect Net finance Revenue profit six months ended income service charge expense expenditure expenses expense six months ended 30 Sept 2019 30 Sept 2020 Landsec – Half-yearly results 2020/21 13 Analysis of bad debt provisions By activity £m By segment £m Provisions related to customer support fund concessions 20 Central London 8 Other provisions for rents receivable 45 Regional retail 44 Provisions for service charge receivables 12 Urban opportunities 6 Tenant lease incentive provisions 10 Subscale sectors 29 Bad debt expense charged to revenue profit in the period 87 87 Landsec – Half-yearly results 2020/21 14 Rent collection by activity Period ended 29 September 30 Sept 2020(1) quarter day Amounts received to date Amounts received to date Offices 99% 96% Rest of Central London 74% 50% Regional retail 51% 50% Urban opportunities 54% 60% Subscale sectors 69% 47% Total 77% 78% (1) Due dates from 25 March to 28 September 2020 Landsec – Half-yearly results 2020/21 15 Combined Portfolio valuation Subscale Central sectors London Urban Retail parks Leisure opportunities 3% 5% Hotels £11.8bn portfolio 4% 3% Regional Outlets retail 7% Regional £11.8bn Offices Valuation declined 7.7% or £945m shopping centres 57% and shops portfolio 11% Other London central retail London 6% 3-month to 6-month rent concessions 4% assumed for certain sectors: £72m impact Landsec – Half-yearly results 2020/21 16 Combined Portfolio valuation Central London Central London £7.9bn portfolio, Valuation declined Retail parks Leisure 3% 67% of Combined Portfolio 3.8% 5% Hotels 4% 3% Offices (-2.3%) Outlets 7% — Like-for-like rental values down 1.0% — +2bps like-for-like equivalent yield shift to 4.6% Regional Offices shopping centres 57% — Like-for-like assets down 1.9% and shops 11% — Developments decreased by 3.9% Other London central retail London retail (-16.7%) London 6% 4% — Like-for-like rental values down 16.5% — +12bps like-for-like equivalent yield shift to 4.4% Other central London (0.2%) — Like-for-like rental values are flat — Like-for-like equivalent yield flat at 4.3% Landsec – Half-yearly results 2020/21 17 Combined Portfolio valuation Regional retail £2.1bn portfolio, Valuation declined Retail parks Leisure 3% 18% of Combined Portfolio 16.4% 5% Hotels 4% 3% Regional Outlets Like-for-like rental values retail 7% down 10.1% Regional Offices shopping centres 57% and shops Regional shopping centres and shops (-20.4%) 11% Other London — Like-for-like rental values down 14.4% central retail London 6% — +42bps like-for-like equivalent yield shift to 6.6% 4% Outlets (-8.8%) — Like-for-like rental values down 1.3% — +38bps like-for-like equivalent yield shift to 6.3% Landsec – Half-yearly results 2020/21 18 Combined Portfolio valuation Urban opportunities Urban Retail parks Leisure opportunities 3% 5% Hotels £0.4bn portfolio, Valuation declined 4% 3% 4% of Combined 9.8% Outlets Portfolio 7% Regional Offices shopping centres 57% and shops 11% Like-for-like +15bps like-for-like Other London rental values equivalent yield central retail London 6% down 5.8% shift to 5.3% 4% Landsec – Half-yearly results 2020/21 19 Combined Portfolio valuation Subscale sectors Subscale sectors Retail £1.4bn portfolio, Valuation declined parks Leisure 3% 11% of Combined Portfolio 12.4% 5% Hotels 4% 3% Outlets Leisure (-15.3%) 7% — Like-for-like rental values down 3.9% Regional Offices shopping centres 57% — +70bps like-for-like equivalent yield shift to 7.1% and shops 11% Hotels (-13.1%) Other London central retail — London 6% Like-for-like rental values down 13.2% 4% — +27bps like-for-like equivalent yield shift to 5.4% Retail parks (-7.3%) — Like-for-like rental values down 6.1% — +16bps like-for-like equivalent yield shift to 7.6% Landsec – Half-yearly results 2020/21 20 Financing position A strong position with available 30 September 2020 resources £m — Group LTV 33.2% Bond debt 2,350 — Weighted average cost of net debt 2.1% Bank debt 476 — Next bond expected debt maturity: Commercial paper 1,079 £10m in September 2023 — Cash and available facilities £1.2bn Other 59 Net cash (24) Adjusted net debt 3,940 Landsec – Half-yearly results 2020/21 21 Reinstating the dividend — Reinstating the dividend at 12p per share representing two quarterly dividends — Retaining quarterly payments — Dividend will be c.1.2x-1.3x covered by underlying earnings Cardinal Place, SW1 Landsec – Half-yearly results 2020/21 22 Looking ahead — Retail and leisure sectors remain challenging — Disciplined approach to capital investment — Resilient balance sheet with firepower CGI of Timber Square, SE1 Landsec