Land Securities Group H2 2025 Earnings Report

Land Securities Group EPS Results

• Actual EPS: GBX 50.30
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Land Securities Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Land Securities Group Announcement Details

• Quarter: H2 2025
• Date: 5/16/2025
• Time: Before Market Opens
• Conference Call Date: Friday, May 16, 2025
• Conference Call Time: 4:00AM ET

At Landsec, we build and invest in buildings, spaces and partnerships to create sustainable places, connect communities and realise potential. We are one of the largest real estate companies in Europe, with a £12 billion portfolio of retail, leisure, workspace and residential hubs. Landsec is shaping a better future by leading our industry on environmental and social sustainability while delivering value for our shareholders, great experiences for our guests and positive change for our communities.

Land Securities Group H2 2025 Earnings Call Transcript

Key Takeaways

• Landsec delivered 5% like-for-like income growth in FY25 with occupancy rising to 97.2%, driven by high-quality London offices and major retail assets.
• EPS for the year increased by 0.4%, with guidance for a further 2–4% EPS growth in FY26 and an expected ~20% growth by FY30, after absorbing headwinds from rising finance costs and lease expiries.
• The group plans to invest an additional £1 billion into best-in-class retail at accretive yields and build a £2 billion+ residential platform to capture stable, inflation-linked income growth.
• Two speculative London office developments (30 High and Timber Square) are due to complete within 12 months and are expected to add ~£7 million to annual earnings when fully let.
• Balance-sheet metrics remain robust with net debt/EBITDA at 7.7x and loan-to-value in the mid-thirties, supporting strategic capital recycling and investment plans.

Presentation

[Operator]

Good morning, everyone, and welcome to the presentation of Land Securities Group 2025 full-year results.

[Mark Allan, CEO at Land Securities Group]

Now, I've been saying for some time that owning the right real estate has never been more important, and the performance of our portfolio and business over the past 12 months illustrates this point really clearly. Irrespective of sector, there is a clear focus from customers on the best space, and as this remains in short supply, rents are growing. As such, we are confident in how we have repositioned our portfolio over the past four years. The success of this strategy is reflected in our strong operational performance, with high like-for-like income growth across both London and retail, which combined make up 83% of our business. We expect this customer focus on quality to persist. As the reversionary potential in our portfolio is growing, we expect to continue to deliver continued strong like-for-like income growth.

[Mark Allan, CEO at Land Securities Group]

Over the medium term, this growth will be enhanced by the substantial opportunity that we have created in residential, which benefits from structural demand growth and offers attractive real income returns, with rents highly correlated to inflation over time. It is the attractive mix of these uses which creates successful urban places that can continue to adapt and grow over time, and Land Sec's ability to shape these places that gives us our competitive edge. Now, given our actions over the past few years, our outlook for EPS growth in the near term is positive. Executing our strategy will build further on this and deliver material shareholder value by moving to high income, higher income growth, and lower cyclicality over time.

[Mark Allan, CEO at Land Securities Group]

In the long run, it is income growth that is the main driver of value growth in both equity markets and in real estate, and our primary focus is on delivering sustainable income and EPS growth. For a GBP 11 billion REIT like us, materially shifting our portfolio mix takes time, which means we need to think differently about what drives EPS growth near term and what we believe will drive it longer term, as these are not necessarily the same. In the near term, most of our EPS growth will be driven by the assets we own today, not the assets we decide to buy or develop from here. Our portfolio positioning in recent years, our focus on places with real quality and scarcity value, together with our ongoing efficiency savings, mean that the near-term EPS growth outlook is firmly positive.

[Mark Allan, CEO at Land Securities Group]

The strategic decisions on development and capital recycling that we make from here are about making sure that in three to five years' time, our portfolio mix is such that we are still as confident about its income growth prospects at that point as we are about our current portfolio today. Alongside our assessment of risk, it is these two factors driving sustainable income and EPS growth in the near term and impact on desired portfolio mix in the longer term that are the primary guide for our capital allocation decisions. Each of the strategic implications that we set out at our strategy update in February, shown on the left of this slide, is directly linked to these two objectives.

[Mark Allan, CEO at Land Securities Group]

These targets remain underpinned by our aim to retain a strong capital base with net debt to EBITDA of less than eight times and a loan-to-value of around the mid-30s. As we deliver on this strategy, we see the potential to drive around 20% growth in EPS over the next five years, which is after absorbing a roughly 10% EPS headwind from rising interest costs and a finance lease expiry at Queen Anne's Mansions. As the impact of these headwinds is spread over several years, we expect EPS growth to be relatively linear and for this compounding in EPS to drive further growth in dividends. This positive outlook is underpinned by the continued strength in our operational performance. Our overall like-for-like income growth over the year was up 5%, with uplifts on relettings and renewals in retail and London rising to 8%.

[Mark Allan, CEO at Land Securities Group]

We delivered a 100 basis point increase in occupancy to 97.2%. In line with the capital allocation priorities that I set out earlier, we invested over GBP 600 million into two of the very best retail destinations in the U.K., Liverpool One and Bluewater, at highly accretive yields. Whilst we've sold around GBP 655 million of assets, mostly in subscale sectors where growth is more subdued. In line with a view that we set out a year ago that values for the best assets would return to growth, our portfolio value was up 1.1%, as our successful leasing activity drove 4.2% ERV growth and yields stabilized. This means that our capital base remains strong, and our positive operational momentum has continued into the new year. All this translated into solid financial results.

[Mark Allan, CEO at Land Securities Group]

Our EPS was up 0.4%, and that was ahead of our initial guidance, as the impact of our significant disposals early in the year was more than offset by stronger like-for-like growth and cost savings. Our dividend is up 2% in line with our guidance, and NTA per share is up 1.7%, meaning that our overall return on equity was positive at 6.4%. Whilst net debt increased as a result of acquisitions towards the end of the year, post our disposals since the year-end, our LTV is now just over 38%, net debt to EBITDA 7.7 times. We expect continued like-for-like income growth and cost savings to more than offset higher finance costs in the year ahead, meaning we expect EPS to grow by 2%-4% this year, which is well on track against our financial year 2030 potential. On now to our operational review.

[Mark Allan, CEO at Land Securities Group]

Customers remained focused on the best space in each of our key markets, so our high-quality London and major retail portfolios continue to outperform. For both, our relative outperformance widened further during the year as markets continued to polarize, as shown here in the first two charts on this slide. With their occupancy in London up to 98% and retail up to 97%, the growing competition for space means rental uplifts continue to rise, in particular for major retail, which now makes up over a third of our income. Capturing this growing reversionary potential is a key driver for our near-term EPS growth. Turning to London in more detail, the positive outlook for rents in the best assets has started to attract new investor demand, which is reflected in a steady pickup in investment activity, as shown here on the right, albeit from a low base.

[Mark Allan, CEO at Land Securities Group]

Still, the strong growth in occupier demand for the very best space, as shown on the left, continued growth in rents, for example, in Victoria, where half of our London offices sit, and the relatively stable political backdrop mean that London offices look relatively attractive in a global context. As such, we expect a further steady recovery in activity, which supports our plans to start to release around GBP 2 billion of capital from FY 2027 onwards. In our own portfolio, we continue to see growth in utilization rates, with turnstile tappings up 11% over the three months to April compared to the same period last year. That is even though TFL tube traffic was broadly flat over the same period. Combined with the fact that customers are planning for more space per person to facilitate increased collaboration space, well-being, or other amenities, this means that operational performance has been strong.

[Mark Allan, CEO at Land Securities Group]

Like-for-like income is up 6.6%, with uplifts on relettings and renewals up 10%. We signed or in solicitors' hands on GBP 24 million of lettings on average 7% ahead of ERV. This drove 5.2% ERV growth, and that was the top end of our guidance. We expect these trends to persist with broadly similar ERV growth, further like-for-like income growth in the year ahead. This positive demand also bodes well for our two on-site developments in Victoria and the South Bank. Both are set to complete in the next 12 months, which means that we are delivering into an attractive window, as speculative supply over the next two years is around half of the typical new build take-up.

[Mark Allan, CEO at Land Securities Group]

Both schemes are designed to be multi-let, which means that we expect the majority of leasing to happen post-completion, although we are seeing encouraging interest emerge and expect to see some progress in terms of pre-letting in the second half of this year. The exact timing of lease-up will have an influence on FY2027 earnings, but overall, these schemes should add around GBP 7 million to earnings once fully let, based on current interest rates. In retail, brands continue to focus on the best locations, as these provide the best access to consumer spend. As the chart on the left shows, the top 1% of all U.K. shopping destinations capture 30% of all in-store retail spend. It is no surprise that this 1% is where around 90% of all stores of leading brands such as Apple or Inditex are located.

[Mark Allan, CEO at Land Securities Group]

As the chart in the middle here shows, it is also where around 90% of our own portfolio is focused. The value of these assets is around half of their replacement costs, so new supply is zero. As sales continue to grow and hence demand for space continues to grow, rents are rising. This is very clear in our own portfolio performance. Sales and footfall both continue to outperform the wider market, and as a result, rental uplifts continue to trend higher. This resulted in another year of strong operational performance, with like-for-like income up 5.1% and occupancy up 110 basis points. That means occupancy is now ahead of where it was pre-COVID. We signed GBP 26 million of leases on average 8% above ERV.

[Mark Allan, CEO at Land Securities Group]

Our leasing pipeline is up compared to this time last year, with another GBP 12 million of deals in solicitors' hands, on average 20% ahead of ERV and 10% ahead of previous passing rents. All that drove 4% growth in ERVs across the portfolio, which was comfortably in line with our guidance. We expect to see similar growth in ERVs this year, with continued growth in like-for-like income as reversion continues to build. Turning now to capital allocation. As I've already said, our primary focus is on delivering sustainable income and EPS growth. We base our capital allocation decisions on their impact on income and EPS growth in the near term and on positioning our portfolio mix such that this EPS growth can be sustained longer term.

[Mark Allan, CEO at Land Securities Group]

Now, this slide sets out how, at a high level, the investment opportunities available to us compare on this basis. Major retail is accretive to EPS day one, given its high yield, and we believe it can sustain attractive growth over time for the very best destinations, given that this is where demand is concentrated and new supply is non-existent. This, therefore, remains our highest conviction call, although there is a limit to the number of assets that fit the bill. We expect our London offices to see good like-for-like growth in the near term, but in the longer term, supply and demand will likely remain cyclical, and there is a cost of keeping up with evolving customer demands. Residential net yields are broadly similar to the net effective income returns in offices after taking account of lease incentives.

[Mark Allan, CEO at Land Securities Group]

However, income growth in residential closely tracks inflation and is captured annually. Rotating capital out of office into residential should be broadly EPS neutral day one, but offer higher EPS growth and lower risk over time. In development, the near-term benefit to income growth is limited given the time it takes to develop. We will continue to limit our overall development exposure and focus on those projects that provide an attractive margin and move our portfolio mix towards our medium-term goals. Each of the capital allocation objectives we outlined as part of our strategy update in February link directly to these priorities. On a one- to three-year view, we aim to invest a further GBP 1 billion into best-in-class retail at yields that are highly accretive, with rents that can deliver sustained growth.

[Mark Allan, CEO at Land Securities Group]

As we monetize half our capital employed in pre-development assets where income returns are minimal, and exit our retail and leisure parks where yields are reasonable but income growth is well below that of major retail. This also underpins our objective to, on a two- to five-year view, establish a sizable residential platform where income returns are real, given that rents are highly correlated to inflation. To scale back office-led development by at least half and release GBP 2 billion of capital out of offices to facilitate this. Our investments over the past year are very much aligned to this. We invested over GBP 600 million in two of the top 10 retail destinations in the U.K. at an average net income return of 7.7% and a low double-digit IRR.

[Mark Allan, CEO at Land Securities Group]

Operational momentum in both destinations is strong, with, for example, Next tripling their space at Bluewater to over 130,000 sq ft and new openings of Sephora, Pull & Bear, and Bershka during the year. Whilst at Liverpool One, Uniqlo enjoyed a record new store opening in April, and Sephora are set to follow suit next week. At Media City, we have already started to see a turnaround in operational performance now that we have taken full control of the estate, with several new F&B lettings and office lettings well ahead of ERVs. Whilst we now also have full control over the phase two land, which has an allocation for 2,700 new homes. This also formed the basis for our disposals on the past year. We sold just under GBP 500 million of assets during the year, of which 80% was our hotel portfolio.

[Mark Allan, CEO at Land Securities Group]

Whilst the yield on this was over 7% and the immediate EPS impact, therefore, was down, around 70% of that portfolio was over 25 years old and required significant CapEx to sustain this income. Since the year-end, we have sold a further GBP 159 million of assets, including 40% of our residual retail parks, where like-for-like income over the past year was flat, well below, therefore, the 5.1% income growth that we saw in major retail. Looking ahead, we anticipate further disposals in the near term as we exit further non-core assets and start to reduce our capital employed in pre-development assets. In terms of future developments, our success in planning over the last two years means we now have more projects nearing potential commencement than we have the risk appetite or balance sheet capacity for.

[Mark Allan, CEO at Land Securities Group]

With around GBP 730 million of capital employed in pre-development assets, which produces a current income return of around 1%, the holding cost of this is significant. We will look to release around half of this capital employed over the next one to three years by exiting those badged other opportunities, such as strategic land, and potentially JVing or exiting some of our office-led projects. We will be reasonably pragmatic about value, but expect this to improve earnings by around GBP 15 million per annum and add around 25-50 basis points to our annual return on equity when taking into account the lower capitalized costs. In terms of new development, we will not start any new office-led schemes until our current projects are substantially de-risked.

[Mark Allan, CEO at Land Securities Group]

Returns on new office development are similar to residential development, but the risks are different. We plan to scale back office-led development by at least half post the completion of our current pipeline. That is to shift activity towards residential from 2026 onwards. On that front, we continue to progress the valuable opportunity that we have created across our three key schemes in London and Manchester, each of which benefits from strong transport links and substantial scale in their own right. During the year, we submitted a revised planning application for the first 600 homes at Finchley Road, which already benefits from an outline and part detail consent. We secured vacant possession and completed demolition of the former Homebase unit on this site.

[Mark Allan, CEO at Land Securities Group]

We also submitted a detailed planning application for the first 879 homes at Mayfield after agreeing a renegotiation of the development agreement at that site. We are considering the potential start of a small GBP 150 million office development here, which would unlock the delivery of a further 1,700 homes around the new park that we have already created. We expect a planning decision on both schemes over the next six months, and that would pave the way for a potential start on site by late 2026. That would be around a year ahead of Lewisham, where we submitted an application for an outline and part detail consent for our new 2,800 homes master plan in October, with a decision expected in the second half.

[Mark Allan, CEO at Land Securities Group]

With a substantial upside in our existing portfolio and pipeline, and a clear strategy in terms of capital allocation, we are well placed to deliver sustainable income and EPS growth over time. With that, I'll now hand you over to Vanessa.

[Vanessa Simms, CFO at Land Securities Group]

Thank you, Mark. Good morning. We have delivered solid financial results for the year. EPS was ahead of the guidance that we gave this time last year, and that was driven by stronger like-for-like income growth and further reduction in overhead costs. Our dividend is up 2% in line with our guidance, and at 1.25 times, our dividend cover sits comfortably in the middle of our target range of 1.2-1.3 times. Our strong leasing activity drove 4.2% growth in ERVs, which supported a 1.1% uplift in the external valuation of our portfolio and a 1.7% increase in NTA per share.

[Vanessa Simms, CFO at Land Securities Group]

Our return on equity increased to 6.4%. Our strong capital base allowed us to take advantage of the opportunity to invest in rare and high-quality and accretive acquisitions, which will further enhance our future income growth. Whilst our borrowings increased as a result, pro forma for disposals since the year-end, our LTV is 38.4%, and net debt to EBITDA is 7.7 times. Combined with our long debt maturity, our balance sheet remains robust. As our operational momentum remains strong and the outlook is positive, we expect to deliver 2-4% growth in EPS for the year to March 2026. Turning to EPS earnings in more detail. Overall, our net rental income was up GBP 2 million despite a GBP 24 million reduction from the timing difference between our disposals at the start of the year and acquisitions at the end.

[Vanessa Simms, CFO at Land Securities Group]

This was more than offset by the income from new developments, which added GBP 12 million, and our strong like-for-like income growth, which added GBP 23 million. We saw a GBP 14 million reduction in surrender receipts from the elevated level in the prior year. Combined with a GBP 5 million increase in the recovery of bad debts as a result of bringing the management to certain assets in-house and collecting the cash that we had previously provided for, this meant net rental income was up slightly to GBP 552 million. We also made further progress in reducing our overhead costs, which were down 5% for the year, and we're on track to further reduce this by more than 10% over the next two years. Finance costs increased slightly, and that's reflecting a small increase in the weighted average cost of debt and increase in borrowings following the acquisitions in the second half.

[Vanessa Simms, CFO at Land Securities Group]

Together, these factors drove EPS earnings up GBP 3 million. This chart shows how this translates into movements in EPS per share. Our strong operational performance meant that like-for-like net rental income growth of 5% was well ahead of our initial guidance of circa 2.8%. Central London was up 6.6% and retail up 5.1%, and that is reflecting the strong demand for our high-quality assets and our focus on driving operational efficiencies. Mixed-use income was up 2.8%, whilst our retail and leisure parks were flat. In total, like-for-like growth drove a 3.1 pence or 6.2% increase in EPS for the year. Combined with overhead savings, which added 0.5 pence, this more than offset the increase in finance costs.

[Vanessa Simms, CFO at Land Securities Group]

For financial year 2025, this was partly offset by the movement in surrender receipts and bad debt recovery that I mentioned earlier, but neither of these are expected to be material factors in the current year. The net impact from investment activity was down 1.1 pence due to the timing differences between our acquisitions and disposals. This was more than offset by our strong operational performance. EPS for the year was up slightly to 50.3 pence. As our leasing pipeline remains strong, we expect like-for-like income to grow a further 3-4% this year, which underpins our positive outlook for EPS. This is further enhanced by our continued overhead savings. As I mentioned at our capital markets event in February, we are seeing the benefits from our focus on improving efficiency on our cost base.

[Vanessa Simms, CFO at Land Securities Group]

Following a GBP 7 million reduction in financial year 2024, overhead costs were down a further GBP 4 million last year, and that's despite continued inflation. Looking ahead, we're on track to deliver a further reduction of at least GBP 8 million over the next two years as the benefits from our investments in data and technology come through. Combined with further savings on resourcing and procurement, this means that we expect overheads to be below GBP 65 million by 2027. That is down circa GBP 20 million or 23% over four years. Turning to portfolio valuation, our successful leasing drove 4.2% growth in ERVs, which was towards the high end of our guidance. Yields were up marginally, and taking account of CapEx movements and the lease expiry at Queen Anne's Mansions, our portfolio value was up 1.1%.

[Vanessa Simms, CFO at Land Securities Group]

In line with our view a year ago that values for the best assets would return to growth. As previously highlighted, the existing leases at Queen Anne's Mansions will expire in late 2026 and late 2028. As these dates are getting nearer, the MPV of the residual finance lease income decreases. This reduced our overall valuation growth by around 0.5%. There is a similar impact for the CapEx that was spent on pre-development assets, as this has not yet been reflected in valuation uplifts. This CapEx will reduce significantly over the next few years as we reduce our capital employed in this part of the portfolio. Our central London portfolio was up 1% as ERV growth was strong at 5.2% and yields rose slightly.

[Vanessa Simms, CFO at Land Securities Group]

Developments were up 2.5%, and that's due to the growth in ERVs and progress on our two on-site schemes, which complete in about 12 months. The valuation of our major retail assets was up 3.4%, with ERV growth rising to 4%, and yields compressed 22 basis points. That is largely due to the value that was created from our asset management activity, and that's in White Rose in Leeds and St. David's in Cardiff. This means retail was again the best-performing segment of our portfolio with a 10% total return. Having already invested nearly GBP 1 billion of capital in this segment over the last three years, we aim to invest a further GBP 1 billion in retail over the next three years.

[Vanessa Simms, CFO at Land Securities Group]

Our mixed-use assets were down 5% in value for the year, and this partly reflects the reduction in value at Media City in the first half and partly the pre-development CapEx that has been incurred at our other mixed-use schemes, as I mentioned earlier. Following the sale of our hotel portfolio, our remaining subscale assets were up slightly. We have sold one-fifth of this portfolio since the year-end, effectively in line with book value, and we expect to progress further disposals in the near future. We continue to see a steady pickup in investment activity in both London and retail, and the outlook for rental growth for the best assets remains positive. We expect values for such assets to be well underpinned. The stabilization in the valuation yields and the strong operational performance meant that our overall return on equity increased to 6.4% for the year.

[Vanessa Simms, CFO at Land Securities Group]

Our income return was 5.8%, whilst valuation growth, excluding the yield movements, contributed 2.1% to our total return on equity. The positive impact of this was partly offset by the fact that we wrote off GBP 22 million of goodwill, which arose on the acquisition of the studio's operating business at Media City. This merely represents an accounting policy impact rather than any reduction in value since acquisition. There were also a number of small one-off adjustments in respect of transaction costs, valuation impairment on trading assets, and certain property provisions, together totaling GBP 24 million. Overall, our net tangible asset value per share was up 1.7%.

[Vanessa Simms, CFO at Land Securities Group]

Our focus on sustainable income and EPS growth has a number of strategic implications in terms of capital allocation, as Mark set out earlier, which will be attractive to our total return on equity and reduce the cyclicality of our returns over time, adding further to the positive outlook. This remains underpinned by our strong capital base. Our average debt maturity is long at 9.6 years, with no need to refinance any debt until 2027. During the year, we strengthened our financial position with the issue of a GBP 350 million 10-year bond at a 4.6% coupon. We refinanced GBP 2.3 billion of revolving credit facilities, retaining the low margins. At our half-year results, we said that we expected LTV to increase in the short term as we'd look to capitalize on the attractive acquisition opportunities. This happened with the acquisition of Liverpool One.

[Vanessa Simms, CFO at Land Securities Group]

Pro forma for disposals since the year-end, our LTV is now 38.4%, and we expect this to reduce to the mid-30s over time as we anticipate further disposals in the near future. We continue to target net debt to EBITDA of eight times or less. However, we expect to slightly exceed this in the current year as our two on-site developments are nearing full investment but do not produce income until they complete in the next 12 months. This will therefore be temporary, and our net debt to EBITDA ratio will reduce again once both schemes are let. In addition, our aim to reduce our capital employed in low and non-yielding pre-development will further reduce our net debt to EBITDA by 0.7 times.

[Vanessa Simms, CFO at Land Securities Group]

Taken together, the growing reversion in our existing portfolio, the further reduction in overheads and repositioning of our portfolio should drive circa 30% EPS growth by 2030. Against this, the lease expiry at Queen Anne's Mansions will likely reduce earnings by circa GBP 20 million, and based on the current yield curve, finance costs are expected to increase as we refinance maturing debt. The combined impact of this is around GBP 0.05 per share spread over the next five years. Overall, this means that we see the potential to deliver around 20% EPS growth by 2030, which adds further to our attractive 5.8% income return on NTA. For financial year 2026, we expect good progress on this trajectory as we expect like-for-like rental income growth to support around 2-4% growth in EPS, and with that, continued growth in dividends.

[Vanessa Simms, CFO at Land Securities Group]

With a strong capital base and a clear strategic focus on driving sustainable income and EPS growth, this means we are well placed to drive substantial shareholder value over time. With that, I'll hand back to Mark.

[Mark Allan, CEO at Land Securities Group]

Thanks, Vanessa. I'll now wrap up with our view on the current environment, what you can expect from us in the year ahead, and then we'll open for Q&A. Notwithstanding the recent increase in wider economic risk as a result of shifting U.S. trade policy, we are yet to see any impact from this on our business. Our outlook remains positive. Our focus on driving sustainable income and EPS growth over time to drive long-term shareholder value means that our strategic priorities for the next few years are clear.

[Mark Allan, CEO at Land Securities Group]

Our decisions over the last few years mean that we're well placed to continue to capture the growing reversion in our existing portfolio and to drive continued like-for-like income growth over the next three years, whilst we further reduce our cost base. We will also grow our retail platform by a further GBP 1 billion following our GBP 600 million acquisition of Liverpool One and Bluewater over the last 12 months, as we exit our remaining non-core assets and release significant capital from low or non-yielding pre-development assets, all of which positively impacts earnings and our overall return on equity. Over the next two to five years, we will then start our first residential development projects and begin to reallocate capital from offices to build a GBP 2 billion plus residential platform from 2026 onwards.

[Mark Allan, CEO at Land Securities Group]

This will ensure we build on our positive EPS growth in the near term by shifting our portfolio mix such that this growth can be sustained in the medium to longer term. To summarize, Land Securities Group today is well placed as a result of the successful execution of our 2020 strategy. At a time where quality has never been more important for customers, we have established a best-in-class office and retail portfolio, both of which are focused on areas of strong customer demand. We have created a GBP 3 billion residential pipeline, providing a valuable opportunity to grow in this attractive structural growth market, all of which is and will continue to be underpinned by a strong balance sheet. As we move to the next phase of our strategy, the opportunity to build on the success provides clear upside.

[Mark Allan, CEO at Land Securities Group]

Our portfolio is 97% full, and so ERVs are growing meaningfully. Office rents are already 12% reversionary, and ERV growth adds further upside to this, whilst in retail, uplifts on relettings and renewals are now up to 10% on recent deals. In addition, our focus on cost efficiencies will see overhead reduced by a further 10% from here, building on the 13% reduction over the last two years. Our capital recycling will drive further upside in income. All this means we see the potential to drive around 20% growth in EPS by financial year 2030, which will drive continued growth in dividends. With an existing income return at NTA of 5.8%, this compound growth in EPS will drive an attractive return on equity. As we move to higher income, higher income growth, and lower cyclicality, delivering our strategy will see us drive significant shareholder value.

[Mark Allan, CEO at Land Securities Group]

With that, we will now open the floor for Q&A. As usual in our Q&A, I'm going to start here in the room. We will have roving handheld mics, so please wait for a mic before asking your question. Once we're through questions in the room, I'll move to the conference call and then finally pick up any remaining unanswered questions via the webcast. Please, any questions from in the room? First question down here.

[Mark Allan, CEO at Land Securities Group]

Thanks for the presentation. This is Sam Knott from Citigroup. First of all, on your 2030 sort of target, I appreciate that it's a long way out and this is potential rather than strict guidance. What do you need to sort of hit that 60 pence target, and what do you currently see as the major risks to not getting to that point?

[Mark Allan, CEO at Land Securities Group]

Yeah, so I think that the key thing is the vast majority of that growth between now and 2030 is based on the portfolio we own today. That is capturing the reversion in the office portfolio, so 12% reversionary as things stand and likely to grow, and capturing rental growth within the retail portfolio, where, as we've mentioned, we're now seeing leases ahead of previous passing, you know, double digit, and that's a growth rate that's accelerating. We've then got the cost efficiencies. We've got very good visibility of the cost efficiencies. A lot of that is technology enabled from the systems that we successfully implemented at the end of last year. That's the vast majority.

[Mark Allan, CEO at Land Securities Group]

I would say towards the back end of the period, there's some aspect of capital recycling that would deliver an element of that, and that capital recycling will assume, and we do assume within that that there will be a gradual, steady recovery in investor demand for office assets to allow us to facilitate that rotation. The vast majority of that is about executing on growth in today's portfolio.

[Mark Allan, CEO at Land Securities Group]

That's clear. Thanks. Just on your residential development, you quote returns between 12-13%. What is the development yield that underlies that, and how does that compare to maybe a stabilized yield in the same markets?

[Mark Allan, CEO at Land Securities Group]

Yeah, the first thing I would say is these are projects that we're looking to start at the earliest late 2026.

[Mark Allan, CEO at Land Securities Group]

We do not have absolutely fixed numbers today as you would expect, but we would be looking on a net basis, so net of all operating costs, a yield on cost that is going to be somewhere in the low fives, high fours to low fives, depending on London versus Manchester within the pipeline. Stabilized yields, I mean, we are starting to see a bit more transactional activity in the market. Depending on where those assets are, they tend to be valued at the moment at somewhere in the region of 4.25%-4.75%, depending on exact location. You have factors such as the quality of the products and clearly what you are delivering in a new development pipeline in the context of a new building safety environment of dual staircases, and all these things mean I do not think they are necessarily quite apples and apples comparisons.

[Mark Allan, CEO at Land Securities Group]

The most important feature for us is how strong the correlation of rental growth is to inflation. You have such strong political support to see houses being delivered, to see residential units being delivered, particularly in brownfield locations. For us, we see that political support ultimately easing the path to delivering viable projects in those brownfield locations, playing into what is non-questionably strong demand for residential.

[Mark Allan, CEO at Land Securities Group]

That's great. Thank you.

[Mark Allan, CEO at Land Securities Group]

Thank you. Zach, just hit the front.

[Zachary Gauge, Equity Research Analyst at UBS]

Thanks. Morning everyone. It's Zachary Gauge from UBS. A couple of questions from me. Firstly, on the under construction developments, unless I misheard you, Vanessa, I think you said they were completing in about 12 months' time. At the half-year results, I had 30 High completing October 2025 and Timber Square completing December 2025. Has there been any shift in the expected completion date on those assets?

[Zachary Gauge, Equity Research Analyst at UBS]

The second one on the return on equity, so the 6.4% for the year, obviously still a little bit below the 8-10% sort of guidance that you give, assuming stable yields, which they largely were. Appreciate there were the caveats that the Jacob on developments, Queen Anne's Mansions and the goodwill write-down this year, but going forward to sort of next year, assuming we have stable yields again, hypothetically, is there any other potential headwinds that would mean that we would not be at the 8-10% that you sort of guide to?

[Mark Allan, CEO at Land Securities Group]

Sure. So your second question, I will pass to probably Vanessa in a moment, just then just to talk on the under construction developments. We are expecting to see those complete around the end of this financial year.

[Mark Allan, CEO at Land Securities Group]

We talked at Timber Square of seeing some slippage and some cost overrun at the half year, and there has been no further deterioration on the cost side. Exact completion dates and leasing in this final sort of 12 months of development, there is a little bit of flexibility around that. There has probably been some slippage from when the projects were initially committed to. In terms of completion over the next 12 months, that is something that we are comfortable with. As I mentioned in my comments, we expect to get into the pre-letting window for those projects really in the second half of this year. They are multi-let projects. 30 High in particular is effectively 27 office floors of 10,000 sq ft each, you know, highest building in the West End with unrivaled views.

[Mark Allan, CEO at Land Securities Group]

We're going to get the best pricing for that by waiting until the product is more complete so people can see and imagine themselves in that space. That type of occupier tends to have shorter lead times. Timber Square, slightly bigger floor plates, that's probably going to see pre-let demand a little bit sooner. That's the one I think we would expect to sort of start to get traction on in the second half of the year. Just on the ROE guidance and some of the one-offs that we have identified this year, likelihood of what we might see in the year ahead.

[Vanessa Simms, CFO at Land Securities Group]

I think as I mentioned, I think we're in a position now where we see that the yields are in a stable position from a valuation perspective.

[Vanessa Simms, CFO at Land Securities Group]

I think we're in a good position now with around 5.8% income return on NTA and also seeing ERV growth coming through and expecting that to be again in a broadly similar way to what we've had this year of low to mid single digit growth. We're in a position to deliver a good return on equity going forwards. The adjustments that we referenced in the presentation around one-off costs in terms of development, the write down on Quam and the other write down on the goodwill, et cetera, was really a one-off situation. We don't see those reoccurring. That puts us in a good position that we should be able to be in a good position to deliver our target return of 8-10% going forward from here.

[Operator]

Thank you, Zach. If you wouldn't mind handing the microphone back to Max.

[Max Nimmo, Real Estate Equity Research Director at Deutsche Numis]

Thanks very much, Max Nimmo, Deutsche Numis. Just if you could talk a little bit about the retail investment market. There's obviously been a lot of focus on the pivot towards Rezi, but just kind of interested to see how that's kind of evolving. And, you know, have you looked at many more opportunities since Liverpool One? Has a lot come across your desk? I appreciate you're going to be very selective in what you're going to be looking at. Just with regards to that sort of GBP 1 billion over the next three years, you know, should we think about that as possibly one asset, maybe two? Is that the way to think about it?

[Mark Allan, CEO at Land Securities Group]

Yeah, so the GBP 1 billion that we've indicated over the next three years is roughly GBP 200 million is accretive CapEx into the existing portfolio, and that will be selectively expanding space and expanding the rent roll, so delivering a very clear return upside. That sort of development is viable with rents growing or when you're effectively adding to existing retail space rather than needing to put all of the sort of fundamental base in to build from. The development is clearly not viable for any new shopping centers, nor is it likely to be viable anytime soon, which is one of the really important things that underpins our sort of investment thesis.

[Mark Allan, CEO at Land Securities Group]

That chart that we've shared a couple of times now and was again in the presentation here of the top 1% of destinations effectively having access to 30% of all in-store spend, that's the other side of the investment thesis for us. That is where we are looking. To put that in context, that's 6,000 destinations that CACI are tracking that data. That is 60 locations is the top 1%. They're not all shopping centers, you know, that's going to have Bond Street, Regent Street, etc, those locations in there. It roughly equates to the top 30 shopping centers in the U.K. That is effectively where we are looking to add to our portfolio. We know that a number of those are held in capital structures that are unlikely to be the right long-term structures and long-term owners going forward.

[Mark Allan, CEO at Land Securities Group]

That's likely to offer the best opportunity to invest. I would say the other GBP 800 million is probably assuming probably two acquisitions over the next three or so years. Investment market more widely, there's certainly more coming forward in shopping centres. Most of the stuff that's coming forward at the moment is at the smaller end and is not stuff that I would see us being naturally interested in. We would expect to see over the next sort of two to three years more opportunity at that sort of top 30 end of the market. I mean, Liverpool as a transaction took roughly 18 months, I think, from sort of beginning to end. You get decent visibility of what's coming through.

[Max Nimmo, Real Estate Equity Research Director at Deutsche Numis]

Great. Thank you.

[Mark Allan, CEO at Land Securities Group]

Thank you, Max.

[Paul May, Director and Head Real Estate Equity Research at Barclays]

Hi, Paul May from Barclays. Just a couple from me.

[Paul May, Director and Head Real Estate Equity Research at Barclays]

First one, on the strategy, you know, a lot of it is the office selling and the residential investment, which, as you mentioned, does not necessarily generate much income differential. We are probably looking at a 10-year plus before you start to get the real income growth being a beneficiary. Just wondered, have you or did you consider selling those schemes given the strong operating performance you mentioned in the office portfolio and the retail portfolio versus that risk of execution of selling and investing in residential? Why not just sell those residential schemes and what is the issue there? I will do the second one in a minute.

[Mark Allan, CEO at Land Securities Group]

Okay. I will take that one first. Exactly how we capitalize those three, I mean, those three projects together are roughly, you know, GBP 4 billion-GBP 5 billion of investment.

[Mark Allan, CEO at Land Securities Group]

I do not think we are necessarily sat here today saying we are going to put GBP 4-5 billion of our balance sheet, which is kind of half getting off half the portfolio, into those three projects. At some point going forward, we are likely to be looking to bring other forms of capital into those. Exactly when and how we bring that capital in and the extent to which it might participate in some aspects of development or it may be taking out stabilized assets, I think those are things that we will consider and still need to consider. We have to look at ultimately when we nail down the build cost, we are absolutely clear on the rents and the operating costs in these projects. We have to be absolutely confident that the return we are going to make on those justifies the shift across to that.

[Mark Allan, CEO at Land Securities Group]

What we're signaling very clearly is an expectation that will be the case, but not an absolute commitment that we're going to press ahead with those projects sort of come what may. What however makes residential developments for build to rent in principle so attractive is the political support to see homes built in urban locations, the very significant shortage in housing, the very significant correlation with inflation over many decades. We think that combination of factors is a relatively rare confluence of things that will support us positively on those projects.

[Mark Allan, CEO at Land Securities Group]

Selling them now and continuing to focus on something that is retail where we've got very clear long-term confidence in the sector, office where we can see very clearly short-term, but on a medium to longer term, judging where supply is, being able to consistently capture uplift through the lease model within the U.K., those are all things which we think are quite challenging to translate into a consistent sustainable EPS growth story in a way that residential is not. Residential very clearly aligns to that. As our focus is EPS growth, income growth, and demonstrating the sustainability of that for the long term, that is what underpins the steady rotation towards residential on a five-year view.

[Paul May, Director and Head Real Estate Equity Research at Barclays]

Feeds quite nicely into my second question around the, I suppose, the impact on the shares today. I think coming from that slight miss on the NTA that we talked about on the one-offs that have come through versus the strong operating results that you highlight and outlook for earnings growth, which must be quite frustrating for you seeing as that's what you want to focus on, and yet the market doesn't seem to want to. At what point do you just drop reporting NTA?

[Mark Allan, CEO at Land Securities Group]

I think it's rather difficult in the context of accounting standards and accounting priorities.

[Paul May, Director and Head Real Estate Equity Research at Barclays]

It's very possible

[Mark Allan, CEO at Land Securities Group]

for us to do that. Look, we've said NTA is not irrelevant.

[Mark Allan, CEO at Land Securities Group]

I mean, you've got to be clear what the underlying value of your assets are, and it should be a function of the ability of those assets to generate cash flows and returns over the long term. They're just valued with a different investment market in mind, which is much less liquid than the real estate market, which I think often contributes to the differential between the two. Whether it's real estate or whether it's equities for the long term, if you take away some of the variability in multiples, it's income growth longer term that drives value. At the end of the day, we are managing a business for the long term. We're confident that that long-term strategy is what's going to deliver value.

[Mark Allan, CEO at Land Securities Group]

What we can't do is be unduly swayed by how a market might respond to things from one sort of year to the next. There's a very high degree of conviction and confidence increasingly from investors and questions about why can't we invest more into retail. That's very different to the questions we were getting from the same investors two years ago about why would you do anything in retail. I think it's a decent illustration of we've got to be confident in what we're doing with our business and be prepared to set out clearly what we're trying to do so investors can judge for themselves ultimately their view on the strategic view that we tried to set out clearly.

[Paul May, Director and Head Real Estate Equity Research at Barclays]

Perfect. Thank you.

[Mark Allan, CEO at Land Securities Group]

I don't think there are any further questions in the room, so I'm going to open it up to the conference call now to see if there are any further questions to pick up from anyone who has dialed in this morning.

[Operator]

Adam Shapton from Green Street. Please go ahead.

[Adam Shapton, Senior Analyst at Green Street]

Good morning, Mark. And thanks for the presentation. Just one on disposals. I'm trying to make some comments on what sort of response you've had from the market at large since you publicly stated your intentions and willingness to dispose of various assets in February. And whether any sort of interest that you've received is more about full sales or interest in JVing on some of those assets. Just trying to get a sense of if the right offer comes along, could we see some of these disposals happen more quickly than some of your commentaries maybe implied so far?

[Mark Allan, CEO at Land Securities Group]

Yeah, thank you. Perhaps I'll provide a little bit of sort of general comment on what we're seeing happening in the investment market and in particular the London investment market. I'll try and put a bit more color around the sort of conversations, discussions that we've had post our strategy announcement in February. As I mentioned in my remarks, we're seeing a steady, it's not spectacular, but it is a steady return of investor interest into the market. I think there's a whole range of different factors behind that. The one that underpins it the most is there is an increasing level of conviction and confidence in the underlying occupier markets and the ability to underwrite rental growth for best-in-class office assets.

[Mark Allan, CEO at Land Securities Group]

There are still question marks, of course, about what's the right cap rate and where are rates going, which I think will act as that will be a key factor in how quickly we see further activity recover from here. Where the demand is strongest at the moment, really, I think two areas. Firstly, private equity style investment, which is more at the value-add end of the spectrum, as you would expect. That does fit pretty well with our intention to reduce the capital employed in non-yielding or low-yielding assets because those tend to be development opportunities. There is a lot of activity in that end of the market. The response we've seen from the market to those opportunities, I think, has been a positive one. As you alluded to in your question, there's quite a wide range of ways in which people want to participate.

[Mark Allan, CEO at Land Securities Group]

Whether that's to put capital in and work alongside Landsec, whether that's to do that themselves. That's, I think, the things we need to work through. Unquestionably, the demand at that end of the market, I think, is pretty healthy. The other interest, of course, that we've seen across the wider market activity we've seen is at the very prime end and probably the Nord deals with Grove and Shaftesbury are good examples. I think there is an increasing number of global investors with very long-term investment horizons that see this as an opportunity to acquire truly scarce assets in central London at an attractive point in the cycle. We have assets within our own portfolio that I think also fit that sort of liquidity as well.

[Mark Allan, CEO at Land Securities Group]

We're not looking to rush quickly into disposals, certainly at that end of the spectrum, but we've got to make sure that our strategy to sell can be adapted to where liquidity is in the market at any particular point in time. There isn't a lot of core capital around at the moment. I think that will start to come back, is starting to come back, but that's still very low. Now, Toby does a much better job than I do on going through all of the numbers that sit behind investment liquidity. If you look at the most recent sort of CBRE Global Equities study, which looks at capital that is targeting the London office market at current pricing, I think that peaked in 2021 at around GBP 44 billion. It troughed in around this time last year, I think, down at GBP 19 billion.

[Mark Allan, CEO at Land Securities Group]

Most recently, I think that's now reported at something in the order of GBP 21.5 billion. It's off of the trough. It's improving steadily, and that's very much aligned with what we're seeing. The last point I would then make, which is just a bit more of color for ourselves, is that when you stand up as a business and talk about what you're trying to do strategically and what you might be wanting to sell, etc., or what you're wanting to buy, perhaps unsurprisingly, that tends to generate a significant amount of inbound inquiries. A lot of that can lead to interesting opportunities and options that we or others might not have thought of. I think it's an important part of stimulating recovery in the investment market.

[Adam Shapton, Senior Analyst at Green Street]

Thank you. Maybe just one small follow-up if that's okay.

[Adam Shapton, Senior Analyst at Green Street]

Does the timing or the nature of those disposals have much impact on your overheads? If it's a JV rather than a clean sale, for example, could a sort of surprising timing or structure impact what you're guiding in terms of overhead progression?

[Mark Allan, CEO at Land Securities Group]

Not with respect to the income statement, because that's not overhead, that's dealing with development activity. The guidance we provided on the reduction in costs through the P&L, through the EPRA earnings number, is not presupposing any particular set level of development activity. That's all about efficiencies within the wider central overhead functions of the business off the back of primarily the technology investment that we've successfully made and implemented.

[Adam Shapton, Senior Analyst at Green Street]

Okay. Perfect. Thank you.

[Mark Allan, CEO at Land Securities Group]

Thank you. Any other conference call questions?

[Operator]

No further questions.

[Mark Allan, CEO at Land Securities Group]

Perfect. I'm going to go to questions from the webcast. First one from Mike Prue concerning EPRA cost ratio.

[Mark Allan, CEO at Land Securities Group]

We expressed the view that the EPRA cost ratio isn't important in isolation. Why is that? Surely it's a cost component trickling down to earnings and dividend-paying capacity. I'll take this one if I may. The first thing I would say is that for the avoidance of doubt, cost and efficiency is incredibly important in a business, and we are laser-like focused on that. The best way I can talk about why we say the EPRA cost ratio itself in isolation is not so important is I'll give you examples across our shopping center portfolio of car parks. We could lease a car park to a third-party operator who would deal with everything and get GBP 1 million a year of income and a cost ratio of effectively zero.

[Mark Allan, CEO at Land Securities Group]

Or we can run them ourselves, get GBP 1.5 million of revenue in, spend GBP 200,000 running it, and have a cost ratio of 15%-20%, but make GBP 300,000 more income at the bottom line. That is more dividend-paying capacity and more earnings. That is what we mean when we distinguish between an operating cost ratio and the importance of cost and efficiency. You can scale that up to operational businesses such as shopping centers, residential going forward. The cost ratio will always be higher than a net lease model, but it gives the opportunity to drive higher earnings and higher growth through operational execution over time. The second question from Marcus Fairmudge: Did we bid on Aberdeen's ownership at Brent Cross? We did not. Obviously, that is a very long-standing joint venture interest between Aberdeen and Hammerson.

[Mark Allan, CEO at Land Securities Group]

I know Hammerson responded recently to press speculation on it. Those types of interests, of course, tend to have a very narrow market and tend to lead to transactions taking place between partners, as we have done very successfully in increasing our stakes at Bluewater and Cardiff. No further questions on the webcast. We have covered the questions in the room and on the conference call. All that leaves me to do is to thank you very much for taking the time to attend our results presentation this morning and wish you all a good day and weekend when it comes. Thank you.

[Vanessa Simms, CFO at Land Securities Group]

This presentation has now ended.

Participants

Executives

• Mark Allan, CEO
• Vanessa Simms, CFO

Analysts

• Adam Shapton, Senior Analyst at Green Street
• Paul May, Director and Head Real Estate Equity Research at Barclays
• Zachary Gauge, Equity Research Analyst at UBS
• Analyst
• Max Nimmo, Real Estate Equity Research Director at Deutsche Numis