Member Article

Profits soar at Land Securities as it hits ‘peak construction activity’ in London

Pre-tax profit at Land Securities has more-than-doubled to £2.4bn for the year ending 31st March, compared to £1.1bn for the same period last year.

The property company has seen construction activity in London increase substantially, while it continued to implement its ‘net debt neutral approach’ as its development programme and acquisitions were broadly matched with disposals.

The Stats

In advance of its annual report and AGM notice due 18 June, Land Securities has produced a glowing balance sheet boasting £42.6m of development lettings, £36.8m of investment lettings and acquisitions totalling £951.4m including its managing stake in Bluewater shopping centre.

With record leasing levels across its London development programme, combined with a reshaped retail portfolio and continued financial discipline, Land Securities has delivered ‘very strong results’.

The firm saw revenue profit increase 3.0% to £329.1m. Adjusted diluted net asset value per share was up 27.6% to 1,293p driven by a particularly strong rise in the valuation of our assets. While total business return - the increase in adjusted net asset value plus dividend paid per share - was 30.7%.

Key events included the opening of 20 Fenchurch Street, EC3, which is 92% let and pre-letting the entirety of 1 New Street Square, EC4, to Deloitte. Elsewhere, the firm achieved significant letting progress at The Zig Zag Building, SW1, and 1 & 2 New Ludgate, EC4.

The Analysis

In his statement, chief executive Robert Noel highlighted that Land Securities reached “the peak of its construction activity” in its committed programme, just as the vacancy rate of quality office space in London was heading towards all-time lows.

Noel said the strategic disposal of shopping centres ‘less well equipped for future’ has helped the firm focus on the more ‘dominant’ retail properties, including Bluewater in Kent, in which it acquired a further 30% interest.

The Comment

Robert Noel commented: “In London, we reached the peak of construction activity in our development programme during the year. Our programme has been sized and timed to deliver highly efficient and technically resilient office space into a supply-constrained market.

“The success of the programme is increasingly evident. At 20 Fenchurch Street, the amazing Sky Garden opened to the public, and the development is now 92% let. In March, we pre-let 1 New Street Square in its entirety to Deloitte on a 20 year lease and 1 & 2 New Ludgate is already 84% let or in solicitors’ hands.

“In Retail, we took decisive action and have transformed our shopping centre portfolio, focusing our capital and expertise on those assets that fit in with our strategic themes of dominance, experience and convenience, and by selling those that do not.

“Our focus will remain on creating, owning and managing great destinations.

“We are determined to maintain our financial strength during this programme of significant investment and continued to implement our net debt neutral approach, with our development programme and acquisitions broadly matched with disposals.

“We are also investing to build a pipeline of future opportunities. In addition to our development plans at Westgate and Buchanan Galleries, we took advantage of a rare opportunity to acquire an important City site at an attractive price with the purchase of 21 Moorfields in February.

“Our strategy is delivering for our customers, our communities and our shareholders. Crucially, it is a strategy which recognises the cyclicality of the markets we operate in, ensuring we build a sustainable business for the long term. Looking ahead, we have a robust balance sheet and are confident our portfolios are well matched to customer demand.”

The Summary

Land Securities has continued to adapt to the ever-changing landscape of London’s property market, and its success can be attributed to its ability to react quickly to even the most acute changes in the economy.

This was posted in Bdaily's Members' News section by Ellen Forster .